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 N.C. LEXIS 67 (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 N.C. LEXIS 237 (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 N.C. LEXIS 155 (1893).

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 N.C. LEXIS 174 (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 N.C. App. LEXIS 3092 (1980), aff'd in part and rev'd in part, 302 N.C. 357 , 275 S.E.2d 439, 1981 N.C. LEXIS 1055 (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).

§ 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. [Repealed]

§§ 105-2 through 105-32. [Repealed]

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. [Repealed]

§§ 105-32.1 through 105-32.8. [Repealed]

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. Ss. 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. s. 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. s. 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.

§ 105-33. Taxes under this Article.

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 Repealed by Session Laws 1998-95, s. 2, effective July 1, 1999.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 Repealed by Session Laws 1989, c. 584, s. 1.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 , (g) Repealed by Session Laws 1998-95, s. 2, effective July 1, 1999.

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

    (i), (j) Repealed by Session Laws 1998-95, s. 2, effective July 1, 1999.

    (k) 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 N.C. LEXIS 186 (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 N.C. LEXIS 301 (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 N.C. LEXIS 511 (1963).

§ 105-33.1. Definitions.

The following definitions apply in this Article:

  1. City. — Defined in G.S. 105-228.90 . (1a) Code. — Defined in G.S. 105-228.90 .
  2. Repealed by Session Laws 1998-95, s. 3, effective July 1, 1999.
  3. Person. — Defined in G.S. 105-228.90 .
  4. 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]

Repealed by Session Laws 1979, c. 63.

§ 105-35. [Repealed]

Repealed by Session Laws 1979, c. 72.

§§ 105-36 through 105-37. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-37.1. [Repealed]

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. 105-164.4 G, 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]

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]

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

§ 105-38.1. [Repealed]

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. 105-164.4 G, 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]

Repealed by Session Laws 1987 (Regular Session, 1988), c. 1082, s. 1.

§ 105-40. [Repealed]

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.

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. 105-164.4 G, regardless of when the initial sale of a ticket to the event occurred.”

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

  1. 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. (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.
    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.
  2. 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.
  3. 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.
  4. Repealed by Session Laws 1998-95, s. 7, effective July 1, 1999.
  5. 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.
  6. Repealed by Session Laws 1981, c. 17.
  7. Repealed by Session Laws 1998-95, s. 7, effective July 1, 1999.
  8. Counties and cities may not levy any license tax on the business or professions taxed under this section.
  9. 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.

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, 1974 N.C. App. LEXIS 1731 , aff'd, 285 N.C. 530 , 206 S.E.2d 203, 1974 N.C. LEXIS 1008 (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, 1974 N.C. App. LEXIS 1731 , aff'd, 285 N.C. 530 , 206 S.E.2d 203, 1974 N.C. LEXIS 1008 (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, 1974 N.C. App. LEXIS 1731 , aff'd, 285 N.C. 530 , 206 S.E.2d 203, 1974 N.C. LEXIS 1008 (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, 1974 N.C. App. LEXIS 1731 , aff'd, 285 N.C. 530 , 206 S.E.2d 203, 1974 N.C. LEXIS 1008 (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, 1974 N.C. App. LEXIS 1731 , aff'd, 285 N.C. 530 , 206 S.E.2d 203, 1974 N.C. LEXIS 1008 (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, 1974 N.C. App. LEXIS 1731 , aff'd, 285 N.C. 530 , 206 S.E.2d 203, 1974 N.C. LEXIS 1008 (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, 1936 U.S. Dist. LEXIS 1282 (D.N.C.), aff'd, 86 F.2d 394, 1936 U.S. App. LEXIS 3752 (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, 1936 U.S. Dist. LEXIS 1282 (D.N.C.), aff'd, 86 F.2d 394, 1936 U.S. App. LEXIS 3752 (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 N.C. LEXIS 2 (1937).

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. Op. Att'y Gen. 286 (1973).

See opinion of Attorney General to Mr. John R. Parker, 42 N.C. Op. Att'y Gen. 286 (1973).

§ 105-41.1. [Repealed]

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]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-43. [Repealed]

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]

Repealed by Session Laws 1981 (Regular Session, 1982), c. 1228.

§§ 105-45, 105-46. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-47. [Repealed]

Repealed by Session Laws 1979, c. 69.

§ 105-48. [Repealed]

Repealed by Session Laws 1979, c. 67.

§ 105-48.1. [Repealed]

Repealed by Session Laws 1981, c. 7.

§ 105-49. [Repealed]

Repealed by Session Laws 1989, c. 584, s. 10.

§ 105-50. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-51. [Repealed]

Repealed by Session Laws 1989, c. 584, s. 12.

§ 105-51.1. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-52. [Repealed]

Repealed by Session Laws 1979, c. 16, s. 1.

§§ 105-53 through 105-55. [Repealed]

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]

Repealed by Session Laws 1981, c. 5.

§ 105-57. [Repealed]

Repealed by Session Laws 1987 (Regular Session, 1988), c. 1081, s. 1.

§ 105-58. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-59. [Repealed]

Repealed by Session Laws 1981 (Regular Session, 1982), c. 1282, s. 44.

§§ 105-60, 105-61. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-61.1. [Repealed]

Repealed by Session Laws 1989, c. 584, s. 17.

§ 105-62. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-63. [Repealed]

Repealed by Session Laws 1979, c. 65.

§ 105-64. [Repealed]

Repealed by Session Laws 1989, c. 584, s. 19.

§ 105-64.1. [Repealed]

Repealed by Laws 1989, c. 584, s. 19.

§ 105-65. [Repealed]

Repealed by Session Laws, 1996, Second Extra Session, c. 14, s. 17.

§ 105-65.2. [Repealed]

Repealed by Session Laws 1989, c. 584, s. 19.

§ 105-66. [Repealed]

Repealed by Session Laws 1989, c. 584, s. 19.

§ 105-66.1. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-67. [Repealed]

Repealed by Session Laws 1991 (Reg. Sess., 1992), c. 965, s. 1.

§ 105-68. [Repealed]

Repealed by Session Laws 1981 (Regular Session, 1982), c. 1229.

§ 105-69. [Repealed]

Repealed by Session Laws 1973, c. 1200, s. 1.

§ 105-70. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-71. [Repealed]

Repealed by Session Laws 1979, c. 70.

§ 105-72. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-73. [Repealed]

Repealed by Session Laws 1957, c. 1340, ss. 2, 9.

§ 105-74. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-75. [Repealed]

Repealed by Session Laws 1979, 2nd Session, c. 1304, s. 1.

§ 105-75.1. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-76. [Repealed]

Repealed by Session Laws 1979, c. 62.

§ 105-77. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-78. [Repealed]

Repealed by Session Laws 1979, c. 66.

§ 105-79. [Repealed]

Repealed by Session Laws 1979, c. 150, s. 4.

§ 105-80. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-81. [Repealed]

Repealed by Session Laws 1947, c. 501, s. 2.

§ 105-82. [Repealed]

Repealed by Session Laws 1989, c. 584, s. 24.

§ 105-83. Installment paper dealers.

  1. 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.
  2. Repealed by Session Laws 1998-95, s. 9, effective July 1, 1999.
  3. 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.
  4. This section does not apply to the following:
    1. Banks. For purposes of this subdivision, the term “bank” has the same meaning as defined in G.S. 105-130.7 B(b).
    2. Savings and loan associations.
  5. 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); 2021-180, s. 42.13B(a).

Editor's Note.

Session Laws 2021-180, s. 42.13B(g), made the rewriting of subsection (d) of this section by Session Laws 2021-180, s. 42.13B(a), effective November 18, 2021, and applicable retroactively for taxable years beginning on or after July 1, 2016.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.13B(a), rewrote subsection (d). For effective date and applicability, see editor's note.

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, 1961 N.C. LEXIS 393 (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 N.C. App. LEXIS 605 (2000).

Bank Distinguished from Installment Paper Dealer. —

See Lenoir Fin. Co. v. Currie, 254 N.C. 129 , 118 S.E.2d 543, 1961 N.C. LEXIS 393 (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 N.C. App. LEXIS 605 (2000).

§ 105-84. [Repealed]

Repealed by Session Laws 1979, c. 150, s. 5.

§§ 105-85, 105-86. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-87. [Repealed]

Repealed by Session Laws 1981, c. 6.

§ 105-88. Loan agencies.

  1. 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.
  2. 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.
  3. 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.
  4. A loan made by a person who does not comply with this section is not collectible at law under G.S. 105-269.13 .
  5. 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 N.C. LEXIS 1086 (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 N.C. LEXIS 1086 (1967).

§§ 105-89 through 105-90. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-90.1. [Repealed]

Repealed by Session Laws 1989 (Regular Session, 1990), c. 814, s. 4.

§ 105-91. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-92. [Repealed]

Repealed by Session Laws 1981 (Regular Session, 1982), c. 1227.

§ 105-93. [Repealed]

Repealed by Session Laws 1979, c. 68.

§ 105-94. [Repealed]

Repealed by Session Laws 1947, c. 501, s. 2.

§ 105-95. [Repealed]

Repealed by Session Laws 1947, c. 831, s. 2.

§ 105-96. [Repealed]

Repealed by Session Laws 1981 (Regular Session, 1982), c. 1231.

§§ 105-97 through 105-99. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-100. [Repealed]

Repealed by Session Laws 1979, c. 64.

§ 105-101. [Repealed]

Repealed by Session Laws 1979, c. 85, s. 1.

§ 105-102. [Repealed]

Repealed by Session Laws 1981 (Regular Session, 1982), c. 1230.

§ 105-102.1. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-102.2. [Repealed]

Repealed by Session Laws 1981 (Regular Session, 1982), c. 1213.

§ 105-102.3. [Repealed]

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]

Repealed by Session Laws 1989, c. 584, s. 35.

§ 105-102.5. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 17.

§ 105-102.6. [Repealed]

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]

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]

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.

  1. Repealed by Session Laws 1998-95, s. 13, effective July 1, 1999.
  2. License Required. —  Before a person may engage in a business, trade, or profession for which a license is required under this Article, the person must be licensed by the Department. To obtain a license, a person must submit an application to the Department for the license and pay the required tax. An application for a license is considered a return.The Department must issue a license to a person who files a completed application and pays the required tax. A license must be displayed conspicuously at the location of the licensed business, trade, or profession.
  3. Repealed by Session Laws 1998-212, s. 29A.14(a), effective January 1, 1999.
  4. 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.
  5. Repealed by Session Laws 2014-3, s. 12.3(b), effective July 1, 2015. See note for applicability.

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.

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.”

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 N.C. App. LEXIS 291 (2012), rev'd, 366 N.C. 456 , 738 S.E.2d 156, 2013 N.C. LEXIS 271 (2013).

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 N.C. App. LEXIS 593 (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 N.C. App. LEXIS 593 (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 N.C. App. LEXIS 593 (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 N.C. LEXIS 271 (2013).

§ 105-109.1. [Repealed]

Repealed by Session Laws 1999-337, s. 16, effective July 22, 1999.

§ 105-110. [Repealed]

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

§ 105-111. [Repealed]

Repealed by Session Laws 2001-414, s. 2, effective September 14, 2001.

§ 105-112. [Repealed]

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

§ 105-113. [Repealed]

Repealed by Session Laws 1999-337, s. 17, effective July 22, 1999.

§ 105-113.1. [Repealed]

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.

§ 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.

“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.

§ 105-113.3. Scope of tax; administration.

  1. 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.
  2. 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. [Effective until July 1, 2022]

The following definitions apply in this Article:

  1. Affiliate. — A person who directly or indirectly controls, is controlled by, or is under common control with another person. (1a) Affiliated manufacturer. — A manufacturer licensed under G.S. 105-113.12 who is an affiliate of a manufacturer licensed under G.S. 105-113.12 .

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

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

    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.

      (1k) Consumable product. — Any nicotine liquid solution or other material containing nicotine that is depleted as a vapor product is used.

      (1n) Consumer. — An individual who purchases, receives, or possesses tobacco products for personal consumption and not for resale.

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

    (2d) 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.

      (2e) Delivery seller. — A person that makes a delivery sale.

      (2f) Delivery service. — A person engaged in the commercial delivery of letters, packages, or other containers.

  3. 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.
  4. Repealed by Session Laws 1991, c. 689, s. 267.

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

  5. Licensed distributor. — A distributor licensed under Part 2 of this Article.
  6. Manufacturer. — A person who produces tobacco products or a person who contracts with another person to produce tobacco products and is the exclusive purchaser of the products under the contract.
  7. Package. — The individual packet, can, box, or other container used to contain and to convey tobacco products to the consumer.
  8. Person. — Defined in G.S. 105-228.90 .
  9. Retail dealer. — A person who sells a tobacco product to the ultimate consumer of the product.
  10. Sale. — A transfer of possession, transfer of ownership, a trade, an exchange, or a barter, in any manner or by any means, with or without consideration.

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

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

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

  12. Repealed by Session Laws 1993, c. 442, s. 1, effective January 1, 1994.
  13. Use. — The exercise of any right or power over cigarettes, incident to the ownership or possession thereof, other than the making of a sale thereof in the course of engaging in a business of selling cigarettes. The term includes the keeping or retention of cigarettes for use.

    (13a) 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.

  14. 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).

§ 105-113.4. Definitions. [Effective July 1, 2022]

The following definitions apply in this Article:

  1. Affiliate. — A person who directly or indirectly controls, is controlled by, or is under common control with another person. (1a) Affiliated manufacturer. — A manufacturer licensed under G.S. 105-113.12 who is an affiliate of a manufacturer licensed under G.S. 105-113.12 .

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

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

    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.

      (1k) Consumable product. — Any nicotine liquid solution or other material containing nicotine that is depleted as a vapor product is used.

      (1n) Consumer. — An individual who purchases, receives, or possesses tobacco products for personal consumption and not for resale.

  2. Cost price. — The actual price paid for an item subject to the tax imposed by Part 3 of this Article by the person liable for the tax. The actual price paid for an item may be either of the following:
    1. The actual price paid for an item identified as a stock keeping unit by a unique code or identifier representing the item.
    2. If the actual price paid for an item is not available, the average of the actual price paid for the item over the 12 calendar months before January 1 of the year in which the sale occurs.

      (2d) Delivery sale. — A sale of cigarettes, smokeless tobacco, or vapor products to a consumer in this State in which either of the following apply:

      a. 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.

      b. The cigarettes, smokeless tobacco, or vapor products are delivered via mail or a delivery service.

      (2e) Delivery seller. — A person located within or outside this State who makes a delivery sale.

      (2f) Delivery service. — A person engaged in the commercial delivery of letters, packages, or other containers.

  3. Distributor. — Any of the following:
    1. A person, wherever resident or located, who purchases nontax-paid cigarettes directly from the manufacturer of the cigarettes and stores, sells, or otherwise disposes of the cigarettes.
    2. A manufacturer of cigarettes.
    3. A delivery seller of cigarettes.
  4. Repealed by Session Laws 1991, c. 689, s. 267.

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

  5. Licensed distributor. — A distributor licensed under Part 2 of this Article.
  6. Manufacturer. — A person who produces tobacco products or a person who contracts with another person to produce tobacco products and is the exclusive purchaser of the products under the contract.
  7. Package. — The individual packet, can, box, or other container used to contain and to convey tobacco products to the consumer.
  8. Person. — Defined in G.S. 105-228.90 . (8a) Remote sale. — A sale of tobacco products other than cigarettes, smokeless tobacco, or vapor products to a consumer in this State in which either of the following applies:
    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 other than cigarettes, smokeless tobacco, or vapor products are delivered via mail or a delivery service.

      (8b) Remote seller. — A person located within or outside this State who makes a remote sale.

  9. Retail dealer. — A person who sells a tobacco product to the ultimate consumer of the product, including a remote seller or a delivery seller.

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

  10. 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.

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

    (10b) Smokeless tobacco. — Any finely cut, ground, powdered, or leaf tobacco, or other product containing tobacco, that is intended to be placed in the oral or nasal cavity or otherwise consumed without being combusted.

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

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

  12. Repealed by Session Laws 1993, c. 442, s. 1, effective January 1, 1994.
  13. Use. — The exercise of any right or power over cigarettes, incident to the ownership or possession thereof, other than the making of a sale thereof in the course of engaging in a business of selling cigarettes. The term includes the keeping or retention of cigarettes for use.

    (13a) 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.

  14. 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; 2021-180, s. 42.9(a).

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.

Session Laws 2021-180, s. 42.9(i), made the amendments to this section by Session Laws 2021-180, s. 42.9(a), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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).

Session Laws 2021-180, s. 42.9(a), rewrote subdivision (2); in subdivision (2d), substituted “cigarettes, smokeless tobacco, or vapor products” for “tobacco products” twice; in subdivision (2e), substituted “located within or outside this State who” for “that”; in subdivision (3), substituted “Any” for “Either” and added sub-subdivision (3)c.; added subdivisions (8a) and (8b); in subsection (9), added “including a remote seller or a delivery seller” at the end; and added subdivision (10b). For effective date and applicability, see editor's note.

§ 105-113.4A. Licenses.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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. 105-241.13 A.”

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. 105-113.4 A 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.

  1. 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. (a1) Summary Revocation and Procedure. — The Secretary may summarily revoke a license issued under this Article when the Secretary determines that the licensee is incurring liability for the tax imposed under this Article after failing to pay a tax when due under this Article. The Secretary must send a revoked licensee a notice of the revocation and a notice of hearing. The hearing must be held within 10 days after the date of the notice of revocation unless the revoked licensee requests, before the day of the hearing, that the hearing be rescheduled. Upon receipt of a timely request, the Secretary must reschedule the hearing and provide at least 10 days’ notice of the rescheduled hearing. The revocation is not stayed pending the hearing decision. A notice of hearing under this subsection must be in writing and indicate the date, time, and place of the hearing. A hearing must be conducted as prescribed by the Secretary. The Secretary must issue a final decision and notify the revoked licensee in writing within 10 days of the hearing. The final decision must state the basis for the decision. The statement of the basis of a revocation does not limit the Department from changing the basis.

    (a2) Non-Summary Revocation. — The Secretary may revoke the license of a licensee that commits one or more of the following acts after affording the licensee an opportunity to have a hearing as provided in subsections (a3) through (b2) of this section:

    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. 105-113.4 A(b).

      (a3) Notice of Proposed Revocation. — The Secretary must provide a licensee with a notice of proposed revocation that includes all of the following information:

      (1) The basis for the proposed revocation. The statement of the basis for the proposed revocation does not limit the Department from changing the basis.

      (2) The effective date of the revocation, which must be one of the following:

      1. Forty-five days from the date of the notice of proposed revocation if the licensee does not file a timely request for hearing.
      2. The tenth day after the date an adverse final decision is issued if the adverse final decision is mailed.
      3. The date an adverse final decision is delivered if the adverse final decision is delivered in person.

        (3) The circumstances, if any, under which the Secretary will not revoke the license.

        (4) An explanation of how the licensee may contest the proposed revocation.

        (a4) Request for Hearing and Decision. — A licensee may contest a proposed revocation by filing a written hearing request within 45 days of the date the notice of proposed revocation was mailed, if the notice was delivered by mail, or delivered to the licensee, if the notice was delivered in person. A hearing request is considered filed as provided under G.S. 105-241.11(b) . If the licensee does not file a timely hearing request, the license is revoked as provided in the notice of proposed revocation and the revocation is final and not subject to further administrative or judicial review.

  2. Hearing Procedure.    — The Secretary must give a licensee who filed a timely hearing request in accordance with subsection (a4) of this section at least 20 days’ written notice of the date, time, and place of the hearing, unless the Department and the licensee agree to a shorter period. A hearing must be conducted as prescribed by the Secretary. The Secretary must issue a final decision and notify the licensee in writing within 60 days of the hearing. The Department and the licensee may extend this time by mutual agreement. Failure to issue a final decision within the required time does not affect the validity of the decision. The final decision must state the basis for the decision and, if the final decision includes revocation of the license, the effective date of the revocation in accordance with subdivision (2) of subsection (a3) of this section. The statement of the basis of a revocation does not limit the Department from changing the basis.

    (b1) Delivery of Notice. — The Secretary must deliver a notice in accordance with G.S. 105-241.20(b). In lieu of providing notice by United States mail, the Secretary may give notice by email or other electronic means if the licensee has consented to receiving notices via electronic means.

    (b2) Return of Credentials. — If a license is revoked, the revoked licensee must return to the Secretary, within 10 days of the issuance of the final decision, all licenses previously issued. If a license is unable to be returned, the revoked licensee must include a written statement of the reasons, satisfactory to the Secretary, why the license cannot be returned.

  3. 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); 2021-180, s. 42.13D(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. 105-241.13 A.”

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. 105-113.4 A before June 30, 2020.”

Session Laws 2021-180, s. 42.13D(e), made the amendments to this section by Session Laws 2021-180, s. 42.13D(a), effective January 1, 2022, and applicable to summary revocations and non-summary revocations initiated by the Department on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, 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).

Session Laws 2021-180, s. 42.13D(a), rewrote subsection (a1); rewrote the introductory paragraph of subsection (a2); added subsections (a3) and (a4); rewrote subsection (b); and added subsections (b1), and (b2). For effective date and applicability, see editor's note.

§ 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:

  1. The Office of the Attorney General must give to the Secretary of Revenue a list of the nonparticipating manufacturers under the Master Settlement Agreement and the brand names of the products of the nonparticipating manufacturers.
  2. The Office of the Attorney General must update the list provided under subdivision (1) of this section when a nonparticipating manufacturer becomes a participating manufacturer, another nonparticipating manufacturer is identified, or more brands or products of nonparticipating manufacturers are identified.
  3. The Secretary of Revenue must require the taxpayers of the tobacco excise tax to identify the amount of tobacco products of nonparticipating manufacturers sold by the taxpayers, and may impose this requirement as provided in G.S. 66-290(10).
  4. The Secretary of Revenue must determine the amount of State tobacco excise taxes attributable to the products of nonparticipating manufacturers, based on the information provided by the taxpayers, and must report this information to the Office of the Attorney General.

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. 105-113.4 B.

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. 105-113.4 C, 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 N.C. App. LEXIS 1757 (2008).

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. 105-113.4 C 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. 105-113.4 C 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 N.C. App. LEXIS 1757 (2008).

§ 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. 105-113.4 D 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.

  1. 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.
  2. 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).
  3. 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.
  4. 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. [Effective until July 1, 2022]

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

§ 105-113.4F. Delivery sales of certain tobacco products; age verification. [Effective July 1, 2022]

  1. Scope.    — This section applies to delivery sales. For purposes of this section, the term “tobacco product” means cigarettes, smokeless tobacco, or vapor products.
  2. Delivery Seller Requirements.    — A delivery seller must do all of the following with respect to a delivery sale:
    1. Obtain a license from the Secretary as required by 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 applicable taxes as set out in this Article and Article 5 of this Chapter.
  3. 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 must, 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 must 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.
  4. 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.
  5. Repealed by Session Laws 2021-180, s. 42.9(b), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date.
  6. Delivery Sellers as Retailers.    — A delivery seller that meets the definition of a “retailer” as defined in Article 5 of this Chapter is subject to all State laws that apply to a retailer in this State.

History. 2019-169, s. 4.7(b); 2021-180, s. 42.9(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.

Session Laws 2021-180, s. 42.9(i), made the amendments to this section by Session Laws 2021-180, s. 42.9(b), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.9(b), in subsection (a), deleted “of tobacco products, other than cigars, to consumers in this State regardless of whether the delivery seller is located inside or outside this State” at the end of the first sentence, and substituted “means cigarettes, smokeless tobacco, or vapor products” for “is as defined in G.S. 105-113.4 , except that it does not include cigars” at the end of the second sentence; in subsection (b), substituted “must” for “shall” in the introductory language, substituted “as required by” for “pursuant to the requirements of” in subdivision (b)(1), and substituted “applicable taxes” for “taxes levied on tobacco products” in subdivision (b)(d); substituted “must” for “shall” twice in subsection (c); deleted subsection (e); and rewrote subsection (f). For effective date and applicability, see editor’s note.

§ 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.

§ 105-113.4H. 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; from N.C. Gen. Stat. § 105-113.8 by 2021-180, s. 42.13E(a).

Editor's Note.

This section is former G.S. 105-113.8 . It was recodified as this section by Session Laws 2021-180, s. 42.13E(a), effective November 18, 2021.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.13E(a), effective November 18, 2021, recodified G.S. 105-113.8 as this section.

§ 105-113.4I. Licenses required.

A person may not engage in business as a distributor, wholesale dealer, or retail dealer in this State, without having first obtained from the Secretary the appropriate license for that purpose as prescribed in this Article. A license required by this Article is in addition to any other licenses that may be required by law.

History. 1969, c. 1075, s. 2; 1973, c. 476, s. 193; from N.C. Gen. Stat. § 105-113.11 by 2021-180, s. 42.13E(b), (c).

Editor's Note.

This section is former G.S. 105-113.11 . It was recodified as this section by Session Laws 2021-180, s. 42.13E(b), effective November 18, 2021.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.13E(b), (c), effective November 18, 2021, recodified and rewrote G.S. 105-113.11 as this section.

§ 105-113.4J. 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 tobacco products without first obtaining all licenses required by this Article.

History. 1969, c. 1075, s. 2; 2017-39, s. 10; 2019-169, s. 4.14(a); from N.C. Gen. Stat. § 105-113.29 by 2021-180, s. 42.13E(d), (e).

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.

This section is former G.S. 105-113.29 . It was recodified as this section by Session Laws 2021-180, s. 42.13E(d), effective November 18, 2021.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

Session Laws 2021-180, s. 42.13E(d), (e), effective November 18, 2021, recodified G.S. 105-113.29 as this section; and substituted “tobacco products without first obtaining all licenses required by this Article” for “cigarettes or other tobacco products without first obtaining the licenses.”

§ 105-113.4K. 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); from N.C. Gen. Stat. § 105-113.33 by 2021-180, s. 42.13E(f).

Editor's Note.

This section is former G.S. 105-113.33 . It was recodified as this section by Session Laws 2021-180, s. 42.13E(f), effective November 18, 2021.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.13E(f), effective November 18, 2021, recodified G.S. 105-113.33 as this section.

Part 2. Cigarette Tax.

§ 105-113.5. Tax on cigarettes. [Effective until July 1, 2022]

  1. 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.
  2. 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).

§ 105-113.5. Tax on cigarettes. [Effective July 1, 2022]

  1. 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.
  2. Primary Liability.    — A licensed distributor who meets any of the following conditions is liable for the tax imposed by this section:
    1. Is the first person to possess or acquire cigarettes in this State.
    2. Is the first person to bring into this State cigarettes made outside the State.
    3. Is the original consignee of cigarettes made outside the State that are shipped into the State.
    4. Makes a delivery sale of cigarettes for which the delivery seller is required to collect sales and use tax under Article 5 of this Chapter.

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); 2021-180, s. 42.9(c).

Editor’s Note.

Session Laws 2021-180, s. 42.9(i), made the amendments to this section by Session Laws 2021-180, s. 42.9(c ), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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).

Session Laws 2021-180, s. 42.9(c), rewrote subsection (b). For effective date and applicability, see editor's note.

§ 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. 105-113.4 D by Session Laws 2009-451, s. 27A.5(b), effective September 1, 2009.

§ 105-113.8. Recodified as G.S. 105-113.4H, effective November 18, 2021.

History. 1969, c. 1075, s. 2; Recodified as N.C. Gen. Stat. 105-113.4H by 2021-180, s. 42.13E(a).

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 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:

  1. 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.
  2. 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.

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.

  1. 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. (a1) 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.
  2. 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. Recodified as G.S. 105-113.4I, effective November 18, 2021.

History. 1969, c. 1075, s. 2; 1973, c. 476, s. 193; Recodified as N.C. Gen. Stat. 105-113.4I by 2021-180, s. 42.13E(b).

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.12. Distributor must obtain license. [Effective until July 1, 2022]

  1. 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.
  2. For the purposes of this section, a “place of business” is a place where a distributor receives or stores non-tax-paid cigarettes.
  3. An out-of-state distributor may obtain a distributor’s license upon compliance with the provisions of G.S. 105-113.4 A 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. 105-113.4 A 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.

§ 105-113.12. License required. [Effective July 1, 2022]

  1. A distributor must obtain a license for each of the locations listed in this subsection, as applicable, and must pay a tax of twenty-five dollars ($25.00) for each 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 is renewable upon signed application with no renewal license tax, unless applied for after the June 30 expiration date. The locations are:
    1. Each location where a distributor receives or stores non-tax-paid cigarettes in this State.
    2. For a distributor that is a delivery seller, each location from which the distributor ships delivery sales of cigarettes if the location is a location other than the location described in subdivision (1) of this subsection.
  2. Repealed by Session Laws 2021-180, s. 42.9(d), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date.
  3. An out-of-state distributor that is not a delivery seller may obtain a distributor’s license upon compliance with the provisions of G.S. 105-113.4 A 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); 2021-180, s. 42.9(d).

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. 105-113.4 A before June 30, 2020.”

Session Laws 2021-180, s. 42.9(i), made the amendments to this section by Session Laws 2021-180, s. 42.9(d), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

Session Laws, 2021-180, s. 42.9(d), substituted “License required” for “Distributor must obtain license” in the section heading; rewrote subsection (a); deleted subsection (b); and, in subsection (c), inserted “that is not a delivery seller.” For effective date and applicability, see editor's note.

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

  1. Repealed by Session Laws 2013-414, s. 22(c), effective September 1, 2013.
  2. 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]

Repealed by Session Laws 1991 (Regular Session, 1992), c. 955, § 6.

§ 105-113.16. [Repealed]

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. [Effective until July 1, 2022]

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

  1. Distributor’s Report. —  A 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.

    (1a) Repealed by Session Laws 2019-169, s. 4.3(a), effective July 26, 2019.

  2. Use Tax Report. —  Every other person who has acquired non-tax-paid cigarettes for sale, use, or consumption subject to the tax imposed by this Part shall, within 96 hours after receipt of the cigarettes, file a report in the form prescribed by the Secretary showing the amount of cigarettes so received and any other information required by the Secretary. The report shall be accompanied by payment of the full amount of the tax.
  3. Shipping Report. —  Any person, except a licensed distributor, who transports cigarettes upon the public highways, roads, or streets of this State, upon notice from the Secretary, shall file a report in the form prescribed by the Secretary and containing the information required by the Secretary.
  4. Repealed by Session Laws 1981 (Regular Session, 1982), c. 1209, s. 1.

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”.

§ 105-113.18. Payment of tax; reports. [Effective July 1, 2022]

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

  1. Distributor’s Report.   — A licensed distributor must 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 must 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 must identify any transactions to which the tax does not apply. A licensed distributor that is a delivery seller must also comply with the filing requirement under G.S. 105-113.4 F. (1a) Repealed by Session Laws 2019-169, s. 4.3(a), effective July 26, 2019.
  2. Use Tax Report.    — A person who is not a licensed distributor and has acquired non-tax-paid cigarettes for sale, use, or consumption subject to the tax imposed by this Part must, 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 must be accompanied by payment of the full amount of the tax.
  3. Shipping Report.    — Any person, except a licensed distributor, who transports, or causes to transport, cigarettes upon the public highways, roads, or streets of this State, upon notice from the Secretary, must file a report in the form prescribed by the Secretary and containing the information required by the Secretary.
  4. Repealed by Session Laws 1981 (Regular Session, 1982), c. 1209, s. 1.

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); 2021-180, s. 42.9(e).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made the amendments to this section by Session Laws 2021-180, s. 42.9(e ), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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”.

Session Laws, 2021-180, s. 42.9(e), in subdivision (1), substituted “must” for “shall” in the first and third sentences, and added the last sentence; in subdivision (2), in the first sentence, substituted “A person who is not a licensed distributor and” for “Every other person who” at the beginning, and substituted “this Part must” for “this Part shall” near the middle; and, in subdivision (3), substituted “transports, or causes to transport,” for “transports” near the beginning, and substituted “must file a report” for “shall file a report” near the middle. For effective date and applicability, see editor’s note.

§§ 105-113.19, 105-113.20. [Repealed]

Repealed by Session Laws 1993, c. 442, s. 8.

§ 105-113.21. Discount; refund.

  1. Repealed by Session Laws 2003-284, s. 45A.1(a), effective for reporting periods beginning on or after August 1, 2003. (a1) 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.
  2. 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]

Repealed by Session Laws 1993, c. 442, s. 8.

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

  1. 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.
  2. 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 .
  3. 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.
  4. 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]

Repealed by Session Laws 1993, c. 442, s. 8.

§ 105-113.26. [Repealed]

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.

  1. 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.
  2. Except as otherwise provided in this Article, no person shall sell or offer for sale non-tax-paid cigarettes.
  3. 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]

Repealed by Session Laws 1993, c. 442, s. 8.

§ 105-113.29. Recodified as G.S. 105-113.4J, effective November 18, 2021.

History. 1969, c. 1075, s. 2; 2017-39, s. 10; 2019-169, s. 4.14(a); Recodified as N.C. Gen. Stat. 105-113.4J by 2021-180, s. 42.13E(d).

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.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

  1. 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.
    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.

§ 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. Recodified as G.S. 105-113.4K, effective November 18, 2021.

History. 1969, c. 1075, s. 2; 1993, c. 539, s. 700; 1994, Ex. Sess., c. 24, s. 14(c); Recodified as N.C. Gen. Stat. 105-113.4K by 2021-180, s. 42.13E(f).

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.34. [Repealed]

Repealed by Session Laws 1993, c. 442, s. 8.

Part 3. Tax on Other Tobacco Products. [Effective until July 1, 2022]

§ 105-113.35. Tax on tobacco products other than cigarettes. [Repealed effective July 1, 2022]

  1. 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. (a1) 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.

      (a2) 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).
  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.
  3. 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.
  4. 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.Permission granted under this subsection to a manufacturer to be relieved of paying the tax imposed by this section applies to an integrated wholesale dealer with whom the manufacturer is an affiliate. A manufacturer must notify the Secretary of any integrated wholesale dealer with whom it is an affiliate when the manufacturer applies to the Secretary for permission to be relieved of paying the tax and when an integrated wholesale dealer becomes an affiliate of the manufacturer after the Secretary has given the manufacturer permission to be relieved of paying the tax.If a person is both a manufacturer of cigarettes and a wholesale dealer of tobacco products other than cigarettes and the person is granted permission under G.S. 105-113.10 to be relieved of paying the cigarette excise tax, the permission applies to the tax imposed by this section on tobacco products other than cigarettes. A cigarette manufacturer who becomes a wholesale dealer after receiving permission to be relieved of the cigarette excise tax must notify the Secretary of the permission received under G.S. 105-113.10 when applying for a license as a wholesale dealer. (d1) Limitation. — Except as otherwise provided in this Article, 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.
  5. Repealed by Session Laws 2009-451, s. 27A.5(c), effective September 1, 2009.

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.

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.”

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.”

§ 105-113.35. (Repealed effective July 1, 2022, and applicable to sales or purchases occurring on or after that date) Tax on tobacco products other than cigarettes.

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; repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.”

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. [Repealed effective July 1, 2022]

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).

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

§ 105-113.35A. (Repealed effective July 1, 2022, and applicable to sales or purchases occurring on or after that date) Use tax levied.

History. 2019-169, s. 4.6(a); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

§ 105-113.36. Wholesale dealer and retail dealer must obtain license. [Repealed effective July 1, 2022]

  1. 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.

      Click to view

  2. 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.
  3. 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. 105-113.4 A 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).

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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. 105-113.4 A before June 30, 2020.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, 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.

§ 105-113.36. (Repealed effective July 1, 2022, and applicable to sales or purchases occurring on or after that date) Wholesale dealer and retail dealer must obtain license.

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); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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. 105-113.4 A before June 30, 2020.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, 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. [Repealed effective July 1, 2022]

  1. 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.
  2. Repealed by Session Laws 2019-169, s. 4.3(b), effective July 26, 2019.
  3. Repealed by Session Laws 1991 (Regular Session, 1992), c. 955, s. 12.
  4. 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).

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.”

§ 105-113.37. (Repealed effective July 1, 2022, and applicable to sales or purchases occurring on or after that date) Payment of tax.

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); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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. [Repealed effective July 1, 2022]

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).

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

§ 105-113.38. (Repealed effective July 1, 2022, and applicable to sales or purchases occurring on or after that date) Bond or irrevocable letter of credit.

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); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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. [Repealed effective July 1, 2022]

  1. 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.
  2. 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).

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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.

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 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).

§ 105-113.39. Discount; refund. [Repealed]

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); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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.

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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]

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. [Repealed effective July 1, 2022]

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

  1. An amount equal to three percent (3%) of the cost price of the products to the General Fund. (1a) An amount equal to the revenue generated by the tax on vapor products under G.S. 105-113.35(a1) to the General Fund.
  2. 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).

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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.”

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).

§ 105-113.40A. Use of tax proceeds. [Repealed]

History. 2009-451, s. 27A.5(d); 2010-95, s. 1; 2014-3, s. 15.1(e); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

Delayed Repeal of Section.

Session Laws 2021-180, s. 42.9(f), repealed this section effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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).

Part 3. Tax on Tobacco Products Other Than Cigarettes. [Effective July 1, 2022]

§ 105-113.35. Tax on tobacco products other than cigarettes. [Repealed]

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; repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

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.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.”

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. Use tax levied. [Repealed]

History. 2019-169, s. 4.6(a); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

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.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Subpart 1. General Provisions. [Effective July 1, 2022]

§ 105-113.35B. Applicability. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

As used in this Part, the term “tobacco product” means a tobacco product other than cigarettes.

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, rewrote the Part 3 heading, which formerly read: “Tax on Other Tobacco Products.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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

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); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

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. 105-113.4 A before June 30, 2020.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, 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.

Subpart 2. Tax Rates and Liability. [Effective July 1, 2022]

§ 105-113.36A. Tax rates; liability for tax. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

  1. Tax Imposed.    — An excise tax is levied on the sale, use, consumption, handling, or distribution of tobacco products at the following rates:
    1. On vapor products, 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.
    2. On cigars, the rate of twelve and eight-tenths percent (12.8%) of the cost price, subject to a cap of thirty cents (30¢) per cigar.
    3. On all other tobacco products, the rate of twelve and eight-tenths percent (12.8%) of the cost price.
  2. Primary Liability for Tax.    — A wholesale dealer that has not been relieved of paying tax under G.S. 105-113.37 A or a retail dealer is primarily liable for the tax imposed by this section if the dealer meets any of the following conditions:
    1. Is the first person to possess or acquire the tobacco product in this State.
    2. Is the first person to bring a tobacco product made outside the State into this State.
    3. Is the original consignee of a tobacco product made outside the State that is shipped into the State.
    4. Makes a remote sale or a delivery sale for which the dealer is required to collect sales and use tax under Article 5 of this Chapter.
  3. Secondary Liability.    — A retail dealer located in this State who acquires from a wholesale dealer non-tax-paid tobacco products subject to the tax imposed by this section is liable for any tax due on the tobacco products.
  4. Exemptions.    — 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 distributed without charge. A sample tobacco product may only be distributed in a “qualified adult-only facility” as that term is defined in 21 C.F.R. § 1140.16(d)(2).
  5. Use Tax.    — A tax is levied upon the sale or possession for sale by a person other than a licensed wholesale dealer or a licensed retail dealer and upon the use, consumption, or possession for use or consumption of tobacco products within this State at the rate set in this section. This tax does not apply to tobacco products for which the tax levied in this section has been paid.
  6. Documentation.    — If a person liable for the tax imposed by this Part cannot produce to the Secretary’s satisfaction documentation of the cost price of the items subject to tax, the Secretary may determine a value based on the cost price of comparable items.

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021’.”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.37. Payment of tax. [Repealed]

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); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.”

Subpart 3. Wholesale and Retail Dealers. [Effective July 1, 2022]

§ 105-113.37A. Manufacturer’s option. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

  1. Shipping to Other Licensed Dealers.    — A manufacturer who is not a retail dealer and who ships tobacco products to either a wholesale dealer or a retail dealer licensed under this Part may, upon application to the Secretary and upon compliance with requirements prescribed by the Secretary, be relieved of paying the tax on tobacco products imposed by this Part but is not relieved from filing a report as required by this Part.
  2. Integrated Wholesale Dealers.    — If a manufacturer has been relieved of paying tax under this section, the permission granted to be relieved of paying the tax also 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.
  3. Dual Exemption.    — If a person is both a manufacturer of cigarettes and a wholesale dealer of tobacco products, 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 Part on tobacco products. 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. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.37B. Non-tax-paid products. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

Except as otherwise provided in this Part, a licensed wholesale dealer may not sell, borrow, loan, or exchange non-tax-paid tobacco products 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 to, from, or with another integrated wholesale dealer.

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.37C. Discount; refund. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

  1. Discount.    — A wholesale dealer or a retail dealer who is primarily liable for the excise taxes imposed by this Part, who files a timely report under this Part, 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. This subsection does not apply with respect to the excise tax levied on vapor products.
  2. Refund.    — A wholesale dealer or retail dealer who is primarily liable 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 must be in the form prescribed by the Secretary and 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 must refund the tax paid, less the discount allowed, on the listed products.

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.38. Bond or irrevocable letter of credit. [Repealed]

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); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

Subpart 4. Remote Sellers. [Effective July 1, 2022]

§ 105-113.38A. Remote seller requirements. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

A remote seller must do all of the following with respect to a remote sale:

  1. Obtain a license from the Secretary as required by this Part before accepting an order.
  2. Report, collect, and remit to the Secretary all applicable taxes as set out in this Part and Article 5 of this Chapter. A remote seller that meets the definition of a “retailer” as defined in Article 5 of this Chapter is subject to all State laws that apply to a retailer in this State.

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.38B. Records. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

In addition to the records required to be kept under G.S. 105-113.4 G, a remote seller must maintain the following:

  1. A list, updated annually, showing the cost price paid by the remote seller for each stock keeping unit of tobacco products.
  2. Invoices documenting remote or delivery sales to consumers in this State.
  3. Records necessary to document the cost price of purchases of all tobacco products sold to consumers in this State.

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.38C. Penalties. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

A remote seller who violates G.S. 105-113.38 A 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.

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.39. Discount; refund. [Repealed]

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); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

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.

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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).

Subpart 5. Administrative Provisions. [Effective July 1, 2022]

§ 105-113.39A. License required. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

  1. Requirement.    — A wholesale dealer or a retail dealer must obtain from the Secretary a license for each of the locations listed in this subsection, as applicable, and must pay the required license tax for each 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 is renewable upon signed application with no renewal license tax, unless applied for after the June 30 expiration date. The locations are:
    1. Each location where a wholesale dealer makes tobacco products.
    2. Each location where a wholesale dealer or a retail dealer receives or stores non-tax-paid tobacco products.
    3. Each location from where a retail dealer that is a delivery seller or remote seller ships delivery sales or remote sales if the location is a location other than the location described in subdivision (2) of this subsection.
  2. License Tax Amount.    — The license tax amounts are as follows:
    1. Wholesale dealer $25.00
    2. Retail dealer $10.00
  3. Out-of-State Wholesale Dealers.    — An out-of-state wholesale dealer of tobacco products that is not a delivery seller or a remote seller may obtain a wholesale dealer’s license upon compliance with the provisions of G.S. 105-113.4 A and payment of a tax of twenty-five dollars ($25.00).

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.39B. Payment of tax. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

  1. Monthly Report.    — Taxes levied by this Part are payable by the entity that is primarily liable for the tax 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 must be filed on a form provided by the Secretary and must contain the information required by the Secretary.
  2. Use Tax Report.    — A person who is not a licensee under this Part and has acquired non-tax-paid tobacco products for sale, use, or consumption subject to the tax imposed by this Part must, within 96 hours after receipt of the tobacco products, file a report in the form prescribed by the Secretary showing the amount of tobacco products received and any other information required by the Secretary. The report must be accompanied by payment of the full amount of the tax.
  3. Shipping Report.    — A person who transports, or causes to transport, 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. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.39C. Bond or irrevocable letter of credit. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

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 Part, 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, 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 Part, and in the amounts stipulated in this section.

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.39D. Use of tax proceeds. [Effective July 1, 2022, and applicable to sales or purchases occurring on or after that date]

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

  1. Six and four-tenths percent (6.4%) to the University Cancer Research Fund established under G.S. 116-29.1 .
  2. The remainder to the General Fund.”

History. 2021-180, s. 42.9(g).

Editor's Note.

Session Laws 2021-180, s. 42.9(i), made this Subpart, as added by Session Laws 2021-180, s. 42.9(g), effective July 1, 2022, and applicable to sales or purchases occurring on or after that date, and further provides: “This section does not affect the rights or liabilities of a taxpayer or another person arising under the law as it existed before the effective date of this section, nor does it affect the right to any refund or credit of a tax that accrued under the law as it existed before the effective date of this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-113.40. [Repealed]

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. [Repealed]

History. 2009-451, s. 27A.5(d); 2010-95, s. 1; 2014-3, s. 15.1(e); repealed by 2021-180, s. 42.9(f), effective July 1, 2022.

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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. [Repealed]

§§ 105-113.41 through 105-113.67. [Repealed]

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.

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.”

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.

§ 105-113.68. Definitions; scope.

  1. 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 . (4a) Antique spirituous liquor. — Defined in G.S. 18B-101.

      (4b) Distillery permittee. — A distillery that holds a distillery permit issued by the ABC Commission under G.S. 18B-1105 .

    5. Fortified wine. — Defined in G.S. 18B-101.
    6. License. — A certificate, issued pursuant to this Article by a city or county, that authorizes a person to engage in a phase of the alcoholic beverage industry.
    7. Malt beverage. — Defined in G.S. 18B-101.
    8. Person. — Defined in G.S. 105-228.90 .
    9. Sale. — Defined in G.S. 18B-101.
    10. Secretary. — The Secretary of Revenue.
    11. Spirituous liquor or liquor. — Defined in G.S. 18B-101.
    12. Unfortified wine. — Defined in G.S. 18B-101.
    13. Wholesaler or importer. — When used with reference to 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 .
    14. Wine. — Unfortified and fortified wine.
    15. Wine shipper permittee. — A winery that holds a wine shipper permit issued by the ABC Commission under G.S. 18B-1001.1 .
  2. 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.

  1. 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 required 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; provided, the city in that county has not declined to require a license pursuant to G.S. 105-113.71(c).
  2. Duration. —  All licenses issued under this section are annual licenses for the period from May 1 to April 30.
  3. Transfer. —  A license may not be transferred from one person to another or from one location to another.
  4. 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; 2021-150, s. 4.1.

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.

Session Laws 2021-150, s. 4.1, effective October 1, 2021, in subsection (a), inserted “required” near the beginning of the fourth sentence, and added the proviso at the end of the last sentence.

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, 1987 N.C. App. LEXIS 2600 (1987).

§ 105-113.71. Nonissuance of license.

  1. 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.
  2. Unfortified Wine 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.
  3. General Exception. —  The governing bodies of the municipalities listed in this subsection may decline requiring a person who receives an ABC permit to obtain the corresponding local license from the municipality to engage in the activity authorized by the ABC permit: the Town of Cary.

History. 1985, c. 114, s. 1; 2021-150, s. 4.2.

Effect of Amendments.

Session Laws 2021-150, s. 4.2, effective October 1, 2021, rewrote the section heading, which formerly read “Local government may refuse to issue license”; rewrote the subsection (b) heading, which formerly read “Local Exceptions”; and added subsection (c).

§ 105-113.72. [Repealed]

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]

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]

Repealed by Session Laws 1998-95, s. 19, effective May 1, 1999.

§ 105-113.76. [Repealed]

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.

  1. License and Tax. —

    Except in cities declining to require a license pursuant to G.S. 105-113.71(c), 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.

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  2. 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; 2021-150, s. 4.3.

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.

Session Laws 2021-150, s. 4.3, effective October 1, 2021, added the exception at the beginning of subsection (a), and made minor stylistic changes.

§ 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

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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.

  1. 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.
  2. 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.
  3. 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

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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]

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.

  1. Amount. —  The Secretary must distribute annually a percentage of the net amount of excise taxes collected on the sale of malt beverages and wine during the preceding 12-month period ending March 31 to the counties or cities in which the retail sale of these beverages is authorized in the entire county or city. The percentages to be distributed are as follows:
    1. Of the tax on malt beverages levied under G.S. 105-113.80(a), twenty and forty-seven hundredths percent (20.47%).
    2. Of the tax on unfortified wine levied under G.S. 105-113.80(b), forty-nine and forty-four hundredths percent (49.44%).
    3. Of the tax on fortified wine levied under G.S. 105-113.80(b), eighteen percent (18%).

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

  2. Repealed by Session Laws 2000, c. 173, s. 3, effective August 2, 2000.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Use of Funds. —  Funds distributed to a county or city under this section may be used for any public purpose.
  8. 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.

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.

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. 105-113.81 A” 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. 105-113.81 A. 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. 105-113.81 A.”, 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. 105-113.81 A.”

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.

  1. 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.
  2. 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 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. (b1) Brewery and Winery Option. — A brewery or winery may be relieved of paying the tax levied under G.S. 105-113.80(a) and (b) if all of the following apply:
    1. The brewery or winery holds a permit issued under G.S. 18B-1101 , 18B-1102, or 18B-1104.
    2. The brewery or winery transfers malt beverages or wine to a wholesaler permitted under G.S. 18B-1107 or G.S. 18B-1109 .
    3. The wholesaler agrees in writing to be responsible for the tax due on the transferred malt beverages or wine.
    4. The brewery or winery files a report when the tax would otherwise be due reporting the transfer of malt beverages or wine to the wholesaler.

      (b2) Backup Tax Liability. — If a brewery or winery is relieved of paying the excise tax as provided under subsection (b1) of this section, the wholesaler receiving the malt beverages or wine is liable for any tax due under this section.

      (b3) Wine Shipper Permittee. — A wine shipper permittee must pay the excise tax levied under G.S. 105-113.80(b) on wine shipped directly to consumers in this State pursuant to G.S. 18B-1001.1 . A wine shipper permittee must submit verified reports once a year on forms provided by the Secretary detailing sales records for the year taxes are paid. The verified report is due on or before the fifteenth day of the first month of the following calendar year.

  3. 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; 2021-180, s. 42.13E(g).

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 (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.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

Session Laws 2021-180, s. 42.13E(g), effective November 18, 2021, in subsection (b), deleted the former second and last sentences; and added subsections (b1) through (b3).

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, 2002 U.S. Dist. LEXIS 6045 (W.D.N.C. 2002), aff'd in part, vacated in part, 325 F.3d 506, 2003 U.S. App. LEXIS 6603 (4th Cir. 2003).

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

  1. 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.
    12. Nonresident spirituous liquor vendor.
  2. 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.
  3. 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.
  4. 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); 2021-150, s. 6.2(d).

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.

Session Laws 2021-150, s. 6.2(i), made subdivision (a)(12) of this section, as added by Session Laws 2021-150, s. 6.2(d), effective December 9, 2021, and applicable to events held on or after that date.

Effect of Amendments.

Session Laws 2021-150, s. 6.2(d), added subdivision (a)(12). For effective date and applicability, see editor’s note.

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

  1. A resident brewery, resident winery, resident wine producer, and nonresident vendor must file a monthly informational report with the Secretary.
  2. A wine shipper permittee must file an annual report with the Secretary.
  3. 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).

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.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.

  1. Wholesalers and Importers.    — The Secretary may require a wholesaler or importer to furnish a bond in an amount that adequately protects the State from a wholesaler’s or importer’s failure to pay taxes due under this Article. The amount of the bond shall not be less than five thousand dollars ($5,000).

    (a1) Distilleries. — The Secretary may require a distillery to furnish a bond in an amount that adequately protects the State from a distillery’s failure to pay taxes under this Article. The amount of the bond shall not be less than two thousand dollars ($2,000).

    (a2) Periodic Review. — The Secretary should periodically review the sufficiency of the bonds required under this section. The Secretary may increase the amount required, not to exceed fifty thousand dollars ($50,000), if the bond no longer covers the taxpayer’s anticipated tax liability. The Secretary may decrease the 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.

  2. 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.
  3. Letter of Credit.    — For purposes of this section, a wholesaler or importer, a nonresident vendor, or a distillery 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); 2021-180, s. 42.13E(h).

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, 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).

Session Laws 2021-180, s. 42.13E(h), effective November 18, 2021, rewrote subsection (a); added subsection (a1); in subsection (a2), at the beginning, added “Periodic Review. –,” in the second sentence, deleted “proportionate” preceding “amount” and deleted “furnished” following “if the bond,” and, in the third sentence, deleted “proportionate” preceding “amount”; and, in subsection (c), substituted “wholesaler or importer, a nonresident vendor, or a distillery” for “wholesaler or importer or a nonresident vendor.”

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

  1. 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.
  2. 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.
  3. 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.

§§ 105-113.90, 105-113.91. [Repealed]

Repealed by Session Laws 1985, c. 114, s. 1.

§ 105-113.92. [Repealed]

Repealed by Session Laws 1981, c. 747, s. 25.

§ 105-113.93. [Repealed]

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]

Repealed by Session Laws 1975, c. 53, s. 3.

§§ 105-113.95 through 105-113.104. [Repealed]

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.

§ 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, 2000 U.S. App. LEXIS 10610 (4th Cir. May 15, 2000), cert. denied, 532 U.S. 981, 121 S. Ct. 1622, 149 L. Ed. 2d 484, 2001 U.S. LEXIS 3053 (2001).

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, 2000 U.S. App. LEXIS 29523 (4th Cir. 2000), cert. denied, 533 U.S. 952, 121 S. Ct. 2596, 150 L. Ed. 2d 754, 2001 U.S. LEXIS 5009 (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 N.C. App. LEXIS 274 , cert. denied, 528 U.S. 1022, 120 S. Ct. 534, 145 L. Ed. 2d 414, 1999 U.S. LEXIS 7830 (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 N.C. App. LEXIS 538 (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 N.C. App. LEXIS 4 (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 N.C. App. LEXIS 685 (1996), aff'd, 345 N.C. 626 , 481 S.E.2d 84, 1997 N.C. LEXIS 37 (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 N.C. App. LEXIS 1234 (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, 1998 U.S. App. LEXIS 403 (4th Cir.), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36, 1998 U.S. LEXIS 4799 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330, 1999 N.C. App. LEXIS 1234 (1999), cert. denied, 531 U.S. 819, 121 S. Ct. 60, 148 L. Ed. 2d 26, 2000 U.S. LEXIS 5099 (2000)).

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 N.C. LEXIS 694 (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, 1998 U.S. App. LEXIS 403 (4th Cir.), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36, 1998 U.S. LEXIS 4799 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330, 1999 N.C. App. LEXIS 1234 (1999), cert. denied, 531 U.S. 819, 121 S. Ct. 60, 148 L. Ed. 2d 26, 2000 U.S. LEXIS 5099 (2000)).

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 N.C. App. LEXIS 1794 (2003), aff'd in part and rev'd in part, 359 N.C. 474 , 614 S.E.2d 504, 2005 N.C. LEXIS 694 (2005).

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:

  1. Controlled Substance. — Defined in G.S. 90-87 .
  2. Repealed by Session Laws 1995, c. 340, s. 1.
  3. Dealer. — Any of the following:
    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.
  4. Repealed by Session Laws 1995, c. 340, s. 1. (4a) Illicit mixed beverage. — A mixed beverage, as defined in G.S. 18B-101 , composed in whole or in part from spirituous liquor on which the charge imposed by G.S. 18B-804(b)(8) has not been paid, but not including a premixed cocktail served from a closed package containing only one serving.

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

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

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

    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.
  5. Repealed by Session Laws 1995, c. 340, s. 1.
  6. Marijuana. — All parts of the plant of the genus Cannabis, whether growing or not; the seeds of this plant; the resin extracted from any part of this plant; and every compound, salt, derivative, mixture, or preparation of this plant, its seeds, or its resin.

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

  7. Person. — Defined in G.S. 105-228.90 .
  8. Secretary. — Defined in G.S. 105-228.90 . (8a) State law enforcement agency. — Any State agency, force, department, or unit responsible for enforcing criminal laws.
  9. Unauthorized substance. — A controlled substance, an illicit mixed beverage, illicit spirituous liquor, or mash.

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, 1996 U.S. Dist. LEXIS 21765 (W.D.N.C. 1996).

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 N.C. LEXIS 694 (2005).

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, 1996 U.S. Dist. LEXIS 21765 (W.D.N.C. 1996).

§ 105-113.107. Excise tax on unauthorized substances.

  1. Controlled Substances. —  An excise tax is levied on controlled substances possessed, either actually or constructively, by dealers at the following rates:
    1. At the rate of forty cents (40¢) for each gram, or fraction thereof, of harvested marijuana stems and stalks that have been separated from and are not mixed with any other parts of the marijuana plant.

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

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

      (1c) 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.

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

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

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

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

  2. 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.
  3. 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.
  4. 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 N.C. App. LEXIS 235 (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, 2008 U.S. Dist. LEXIS 29659 (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, 2008 U.S. Dist. LEXIS 29659 (W.D.N.C. Mar. 31, 2008).

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 N.C. App. LEXIS 685 (1996), aff'd, 345 N.C. 626 , 481 S.E.2d 84, 1997 N.C. LEXIS 37 (1997).

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 N.C. LEXIS 694 (2005).

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 N.C. App. LEXIS 345 (2016).

§ 105-113.107A. Exemptions.

  1. 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.
  2. 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.

§ 105-113.108. Reports; revenue stamps.

  1. 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.
  2. 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

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 N.C. LEXIS 694 (2005).

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, 2004 U.S. Dist. LEXIS 28903 (W.D.N.C. Aug. 5, 2004), aff'd, 128 Fed. Appx. 983, 2005 U.S. App. LEXIS 7145 (4th Cir. 2005).

§ 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

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 N.C. App. LEXIS 685 (1996), aff'd, 345 N.C. 626 , 481 S.E.2d 84, 1997 N.C. LEXIS 37 (1997).

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 N.C. LEXIS 694 (2005).

§ 105-113.110. [Repealed]

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

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 N.C. LEXIS 694 (2005).

§ 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

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, 1996 U.S. Dist. LEXIS 21765 (W.D.N.C. 1996).

§ 105-113.112. Confidentiality of information.

  1. 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 .
  2. 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

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 N.C. LEXIS 694 (2005).

§ 105-113.113. Use of tax proceeds.

  1. 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.
  2. 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.
  3. 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

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 N.C. LEXIS 694 (2005).

Article 3. Franchise Tax.

§ 105-114. Nature of taxes; definitions.

  1. Repealed by Session Laws 2017-204, s. 1.1, effective August 11, 2017. (a1) 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.

      (a2) 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.

      (a3) Tax Year. — The tax levied in this Article is for the income year of the corporation in which the taxes become due.

      (a4) No Double Taxation. — G.S. 105-122 does not apply to holding companies taxed under G.S. 105-120.2 .

  2. Definitions. —  The following definitions apply in this Article:
    1. City. — Defined in G.S. 105-228.90 . (1a) Code. — Defined in G.S. 105-228.90 .
    2. Corporation. — A domestic corporation, a foreign corporation, an electric membership corporation organized under Chapter 117 of the General Statutes or doing business in this State, or an association that is organized for pecuniary gain, has capital stock represented by shares, whether with or without par value, and has privileges not possessed by individuals or partnerships. The term includes a mutual or capital stock savings and loan association or building and loan association chartered under the laws of any state or of the United States. The term includes a limited liability company 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.
    3. Doing business. — Each and every act, power, or privilege exercised or enjoyed in this State, as an incident to, or by virtue of the powers and privileges granted by the laws of this State.
    4. Income year. — Defined in G.S. 105-130.2(10).
    5. (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.
  3. Recodified as G.S. 105-114.1 by Session Laws 2002-126, s. 30G.2(b), effective January 1, 2003.
  4. 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-19.70 A 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 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 N.C. App. LEXIS 4349 (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 N.C. App. LEXIS 4349 (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 N.C. App. LEXIS 4349 (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 N.C. App. LEXIS 4349 (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 N.C. App. LEXIS 4349 (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 N.C. LEXIS 445 (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 N.C. App. LEXIS 4349 (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 N.C. App. LEXIS 2162 (2004), cert. denied, 546 U.S. 821, 126 S. Ct. 353, 163 L. Ed. 2d 62, 2005 U.S. LEXIS 6033 (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 N.C. LEXIS 237 (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 N.C. LEXIS 1421 (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 N.C. LEXIS 237 (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 N.C. LEXIS 252 (1894).

§ 105-114.1. Limited liability companies. [Effective for taxable years beginning before January 1, 2023]

  1. 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.
  2. 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.
  3. 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).
  4. 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).
  5. 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.
  6. 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.
  7. 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.
  8. 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).

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.”

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.

§ 105-114.1. Limited liability companies. [Effective for taxable years beginning on or after January 1, 2023]

  1. 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.
  2. 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 tax base pursuant to G.S. 105-122 the same percentage of the noncorporate limited liability company’s net worth.
  3. 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).
  4. 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).
  5. 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.
  6. 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.
  7. 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.
  8. 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); 2021-180, s. 42.3(b).

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 2021-180, s. 42.3(d), made the amendments to subsection (b) of this section by Session Laws 2021-180, s. 42.3(b), effective for taxable years beginning on or after January 1, 2023, and applicable to the calculation of franchise tax reported on the 2022 and later corporate income tax return.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, 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.

Session Laws 2021-180, s. 42.3(b), rewrote subsection (b). For effective date and applicability, see editor's note.

§ 105-115. [Repealed]

Repealed by Session Laws 1989 (Regular Session, 1990), c. 1002, s. 1.

§ 105-116. [Repealed]

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 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 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. 105-164.44 K 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. 105-164.44 K(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. 105-164.44 K.

“(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. 105-164.44 L 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. 105-164.44 L(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. 105-164.44 L.”

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]

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. 105-164.44 K 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. 105-164.44 K(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. 105-164.44 K.

“(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. 105-164.44 L 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. 105-164.44 L(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. 105-164.44 L.”

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]

Repealed by Session Laws 1995 (Regular Session, 1996), c. 646, s. 3.

§ 105-119. [Repealed]

Repealed by Session Laws 2000-173, s. 7, effective August 2, 2000.

§ 105-120. [Repealed]

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. 105-164.4 B.

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

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]

Repealed by Session Laws 2000-173, s. 7, effective August 2, 2000.

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

  1. 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.
  2. (Effective for taxable years beginning before January 1, 2023) 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).

        (b) (Effective for taxable years beginning on or after January 1, 2023) Tax Rate. — 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 one hundred fifty thousand dollars ($150,000) nor less than two hundred dollars ($200.00).

  3. (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.

      (c) (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.
  4. Repealed by Session Laws 1985, c. 656, s. 39.
  5. 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.
  6. 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); 2021-180, s. 42.3(c).

Subsection (b) Set Out Twice.

The first version of subsection (b) set out above is effective for taxable years beginning before January 1, 2023. The second version of subsection (b) set out above is effective for taxable years beginning on or after January 1, 2023, and applicable to the calculation of franchise tax reported on the 2022 and later corporate income tax returns.

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 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.

Session Laws 2021-180, s. 42.3(d), made the amendments to subsection (b) of this section by Session Laws 2021-180, s. 42.3(c), effective for taxable years beginning on or after January 1, 2023, and applicable to the calculation of franchise tax reported on the 2022 and later corporate income tax return.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

Session Laws 2021-180, s. 42.3(c), rewrote subsection (b). For effective date and applicability, see editor's note.

§ 105-121. [Repealed]

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]

Repealed by Session Laws 2016-5, s. 1.1(a), effective for taxes due on or after April 1, 2017.

History. 1943, c. 60, s. 2; 1973, c. 476, s. 193.

Editor’s Note.

This section pertained to mutual burial associations.

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

  1. 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.
  2. 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. (1a) 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.

      (1b) 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.

    2. (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.

      (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. 105-130.7 B(b)(3), but does not create qualified interest expense, as defined in G.S. 105-130.7 B(b)(4).

      (2a) 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.

    3. 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.
    4. 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.

      (b1) 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.
  3. Repealed by Session Laws 2007-491, s. 2, effective January 1, 2008.

    (c1) (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.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. Repealed by Session Laws 2011-330, s. 5, effective June 27, 2011.

      (c1) (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.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) Repealed by Session Laws 2011-330, s. 5, effective June 27, 2011.

  4. (Effective for taxable years beginning before January 1, 2023) 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. (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.

      (d) (Effective for taxable years beginning on or after January 1, 2023) Tax Base. — A corporation’s tax base is the proportion of its net worth as set out in subsection (c1) of this section.

      (d1) 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.

      (d2) (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).

      (d2) (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).

  5. 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.
  6. 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.
  7. Local Prohibition. —  Counties, cities and towns shall not levy a franchise tax on corporations taxed under this section.
  8. Repealed by Session Laws 1981 (Regular Session, 1982), c. 1211, s. 5.

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. 21/2; 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, ss. 14.30(c), (u), 32.15(c), (d); 2015-268, s. 10.1(a); 2016-5, s. 1.7(a), (b); 2017-39, s. 2; 2017-57, s. 38.6(a); 2017-204, s. 1.3(a)-(c); 2018-5, s. 38.2(b); 2019-246, s. 3(d); 2020-58, ss. 5.1(a), 5.2(b); 2021-180, s. 42.3(a).

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 (d) set out above is effective for taxable years beginning before January 1, 2023. The second version of subsection (d) set out above is effective for taxable years beginning on or after January 1, 2023.

Subsection (d) Set Out Twice.

The first version of subsection (d) set out above is effective for taxable years beginning before January 1, 2023. The second version of subsection (d) set out above is effective for taxable years beginning on or after January 1, 2023.

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 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 .”

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:

“(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 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 .”

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 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.

Session Laws 2021-180, s. 42.3(d), made the amendments to subsection (d) of this section by Session Laws 2021-180, s. 42.3(a), effective for taxable years beginning on or after January 1, 2023, and applicable to the calculation of franchise tax reported on the 2022 and later corporate income tax return.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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. 105-130.4 A, shall not be less than two percent (2%).”

Session Laws 2021-180, s. 42.3(a), rewrote subsection (d). For effective date and applicability, see editor's note.

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 N.C. App. LEXIS 2238 (1976), rev'd, 291 N.C. 608 , 231 S.E.2d 656, 1977 N.C. LEXIS 1225 (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 N.C. LEXIS 225 (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. Pittsburg Life & Trust Co. v. Young, 172 N.C. 470 , 90 S.E. 568, 1916 N.C. LEXIS 322 (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 N.C. LEXIS 388 (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 N.C. LEXIS 1225 (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 N.C. LEXIS 1225 (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 N.C. LEXIS 1225 (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 N.C. LEXIS 1225 (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 N.C. LEXIS 252 (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, 1960 N.C. LEXIS 493 (1960)(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 N.C. LEXIS 1422 (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 N.C. App. LEXIS 2162 (2004), cert. denied, 546 U.S. 821, 126 S. Ct. 353, 163 L. Ed. 2d 62, 2005 U.S. LEXIS 6033 (2005).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. W.B. Matthews, North Carolina Revenue Department, 41 N.C. Op. Att'y Gen. 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]

Repealed by Session Laws 1991, c. 30, s. 1.

§ 105-124. [Repealed]

Repealed by Session Laws 1959, c. 1259, s. 9.

§ 105-125. Exempt corporations.

  1. Exemptions. —  The following corporations are exempt from the taxes levied by this Article. Upon request of the Secretary, an exempt corporation must establish its claim for exemption in writing:
    1. A charitable, religious, fraternal, benevolent, scientific, or educational corporation not operated for profit.
    2. An insurance company subject to tax under Article 8B of this Chapter.
    3. A mutual ditch or irrigation association, a mutual or cooperative telephone association or company, a mutual canning association, a cooperative breeding association, or a similar corporation of a purely local character deriving receipts solely from assessments, dues, or fees collected from members for the sole purpose of meeting expenses.
    4. A cooperative marketing association that operates solely for the purpose of marketing the products of members or other farmers and returns to the members and farmers the proceeds of sales, less the association’s necessary operating expenses, including interest and dividends on capital stock, on the basis of the quantity of product furnished by them. The association’s operations may include activities directly related to these marketing activities.
    5. A production credit association organized under the federal Farm Credit Act of 1933.
    6. A club organized and operated exclusively for pleasure, recreation, or other nonprofit purposes, a civic league operated exclusively for the promotion of social welfare, a business league, or a board of trade.
    7. A chamber of commerce or merchants’ association not organized for profit, no part of the net earnings of which inures to the benefit of a private stockholder, an individual, or another corporation.
    8. An organization, such as a condominium association, a homeowners’ association, or a cooperative housing corporation not organized for profit, the membership of which is limited to the owners or occupants of residential units in the condominium, housing development, or cooperative housing corporation. To qualify for the exemption, the organization must be operated exclusively for the management, operation, preservation, maintenance, or landscaping of the residential units owned by the organization or its members or of the common areas and facilities that are contiguous to the residential units and owned by the organization or by its members. To qualify for the exemption, no part of the net earnings of the organization may inure, other than through the performance of related services for the members of the organization, to the benefit of any person.
    9. Except as otherwise provided by law, an organization exempt from federal income tax under the Code.

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

  2. 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 .

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).

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.

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]

Repealed by Session Laws 1959, c. 1259, s. 9.

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

  1. 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 .
  2. Repealed by Session Laws 1998-98, s. 78, effective August 14, 1998.
  3. 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.
  4. , (e) Repealed by Session Laws 2002-72, s. 11, effective August 12, 2002.

    (f) After the end of the income year in which a domestic corporation is dissolved pursuant to Part 1 of Article 14 of Chapter 55 of the General Statutes, the corporation is no longer subject to the tax levied in this Article unless the Secretary of Revenue finds that the corporation has engaged in business activities in this State not appropriate to winding up and liquidating its business and affairs.

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.

§ 105-129.1. [Repealed]

Repealed by Session Laws 1989, c. 582, s. 1.

Article 3A. Tax Incentives for New and Expanding Businesses. [Repealed]

§§ 105-129.2 through 105-129.13. [Repealed]

Repealed effective for business activities occurring on or after January 1, 2007.

History. S. 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. s. 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. s. 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. s. 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. s. 105-129.3B; 2006-66, s. 24.16(a); repealed effective for business activities occurring on or after January 1, 2007. s. 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. s. 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. s. 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. s. 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. s. 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. s. 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. s. 105-129.9A; 1999-305, s. 2; 2001-476, s. 11(a); repealed effective for business activities occurring on or after January 1, 2007. s. 105-129.10; 1996, 2nd Ex. Sess., c. 13, s. 3.3; 1997-277, s. 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. s. 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. s. 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. s. 105-129.12A; 2001-476, s. 13(a); 2002-72, s. 13; repealed effective for business activities occurring on or after January 1, 2007. s. 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. 105-129.2 A(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. 105-129.2 A(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.

§ 105-129.15. Definitions.

The following definitions apply in this Article:

  1. Business property. — Tangible personal property that is used by the taxpayer in connection with a business or for the production of income and is capitalized by the taxpayer for tax purposes under the Code. The term does not include, however, a luxury passenger automobile taxable under section 4001 of the Code or a watercraft used principally for entertainment and pleasure outings for which no admission is charged.
  2. Cost. — In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code, subject to the limitation on cost provided in section 179 of the Code. In the case of property the taxpayer leases from another, cost is value as determined pursuant to G.S. 105-130.4(j)(2), unless the property is renewable energy property for which the taxpayer claims either a federal energy credit under section 48 of the Code or a federal grant in lieu of that credit and makes a lease pass-through election under the Code. In this circumstance, the cost of the leased renewable energy property is the cost determined under the Code.
  3. Recodified as G.S. 105-129.15(5).
  4. Hydroelectric generator. — A machine that produces electricity by water power or by the friction of water or steam.

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

    (4b) Installation of renewable energy property. — Renewable energy property that, standing alone or in combination with other machinery, equipment, or real property, is able to produce usable energy on its own.

  5. Purchase. — Defined in section 179 of the Code.
  6. Renewable biomass resources. — Organic matter produced by terrestrial and aquatic plants and animals, such as standing vegetation, aquatic crops, forestry and agricultural residues, spent pulping liquor, landfill wastes, and animal wastes.
  7. 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.
  8. 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. 105-129.15 A, 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.

Legal Periodicals.

For article, “Solar Energy for the People of North Carolina: Net Metering After the competitive Energy Solutions Act of 2017,” see 12 Elon L. Rev. 175 (2020).

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 N.C. App. LEXIS 38 (2016).

§§ 105-129.15A, 105-129.16. [Repealed]

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.

  1. 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.
  2. 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 .
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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%).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:
    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.

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]

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.

  1. Dispensing Credit. —  A taxpayer that constructs and installs and places in service in this State a qualified commercial facility for dispensing renewable fuel is allowed a credit equal to fifteen percent (15%) of the cost to the taxpayer of constructing and installing the part of the dispensing facility, including pumps, storage tanks, and related equipment, that is directly and exclusively used for dispensing or storing renewable fuel. A facility is qualified if the equipment used to store or dispense renewable fuel is labeled for this purpose and clearly identified as associated with renewable fuel.The entire credit may not be taken for the taxable year in which the facility is placed in service but must be taken in three equal annual installments beginning with the taxable year in which the facility is placed in service. If, in one of the years in which the installment of a credit accrues, the portion of the facility directly and exclusively used for dispensing or storing renewable fuel is disposed of or taken out of service, the credit expires and the taxpayer may not take any remaining installment of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105-129.17 .
  2. 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 .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:
    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. (b1) Alternative Production Credit. — In lieu of the credit allowed under subsection (b) of this section, a taxpayer that constructs and places in service in this State three or more commercial facilities for processing renewable fuel and that invests a total amount of at least four hundred million dollars ($400,000,000) in the facilities is allowed a credit equal to thirty-five percent (35%) of the cost to the taxpayer of constructing and equipping the facilities. In order to claim the credit, the taxpayer must obtain a written determination from the Secretary of Commerce that the taxpayer is expected to invest within a five-year period a total amount of at least four hundred million dollars ($400,000,000) in three or more facilities. The credit must be taken in seven equal annual installments beginning with the taxable year in which the first facility is placed in service. If, in one of the years in which the installment of credit accrues, a facility with respect to which the credit was claimed is disposed of or taken out of service and the investment requirements of this subsection are no longer satisfied, the credit expires and the taxpayer may take any remaining installment of the credit only to the extent allowed under subsection (b) of this section. The taxpayer may, however, take the portion of an installment under this subsection that accrued in a previous year and was carried forward to the extent permitted under G.S. 105-129.17 . Notwithstanding the provisions of G.S. 105-129.17, a taxpayer may carry forward unused portions of the credit allowed under this subsection for the succeeding 10 years.If a taxpayer that claimed a credit under this subsection fails to meet the requirements of this subsection but meets the requirements of subsection (b) of this section, the taxpayer forfeits the difference between the alternative credit claimed under this subsection and the credit allowed under subsection (b) of this section. A taxpayer that forfeits part of the alternative credit under this subsection is liable for the additional taxes avoided plus interest at the rate established under G.S. 105-241.21 , computed from the date the additional taxes would have been due if the credit had not been allowed. The additional taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer that fails to pay the additional taxes and interest by the due date is subject to penalties provided in G.S. 105-236 .
  3. 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.
  4. Sunset. —  This section is repealed effective for facilities placed in service on or after January 1, 2014.

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]

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. [Repealed]

Expired pursuant to 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.

  1. Credit. —  A taxpayer who donates money to a tax-exempt nonprofit organization or a unit of State or local government for the purpose of providing funds for the organization or government unit to construct, purchase, or lease renewable energy property is allowed a credit under this section if the donation is used for its intended purpose. A tax-exempt nonprofit organization is an organization that is exempt from tax under section 501(c)(3) of the Code.The amount of the credit allowed in this section is the taxpayer’s share of the credit the nonprofit organization or the unit of State or local government could claim under G.S. 105-129.16A if the nonprofit organization or government unit were subject to tax. The taxpayer’s share of the credit is calculated by dividing the taxpayer’s donation by the cost of the renewable energy property constructed, purchased, or leased by the nonprofit organization or government unit and placed in service during the taxable year and then multiplying this percentage by the amount of the credit the nonprofit organization or government unit could claim if it were subject to tax. A taxpayer must take the credit allowed by this section for the taxable year in which the property is placed in service. The installment requirements in G.S. 105-129.16A for nonresidential property do not apply to the credit allowed in this section.
  2. 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.
  3. 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.
  4. 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.

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.

  1. 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.
  2. 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 .
  3. 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.

  1. 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).
  2. 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.
  3. 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. 32.3, 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.

§ 105-129.17. Tax election; cap.

  1. 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.
  2. 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:

  1. The number of taxpayers that took the credits allowed in this Article.
  2. The cost of renewable energy property with respect to which credits were taken.

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

  3. The total cost to the General Fund of the credits taken.

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.

§ 105-129.25. Definitions.

The following definitions apply in this Article:

  1. Reserved.
  2. Reserved.
  3. Repealed by Session Laws 2010-166, s. 2.1, effective July 1, 2010.
  4. Machinery and equipment. — Engines, machinery, tools, and implements used or designed to be used in the business for which the credit is claimed. The term does not include real property as defined in G.S. 105-273 or rolling stock as defined in G.S. 105-333 .
  5. Major recycling facility. — A recycling facility that qualifies under G.S. 105-129.26(a) .
  6. Owner. — A person who owns or leases a recycling facility.
  7. Post-consumer waste material. — Any product that was generated by a business or consumer, has served its intended end use, and has been separated from the solid waste stream for the purpose of recycling. The term includes material acquired by a recycling facility either directly or indirectly, such as through a broker or an agent.
  8. Purchase. — Defined in section 179 of the Code.
  9. Recycling facility. — A manufacturing plant at least three-fourths of whose products are made of at least fifty percent (50%) post-consumer waste material measured by weight or volume. The term includes real and personal property located at or on land in the same county and reasonably near the plant site and used to perform business functions related to the plant or to transport materials and products to or from the plant. The term also includes utility infrastructure and transportation infrastructure to and from the plant.

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.

  1. 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.
  2. Repealed by Session Laws 2010-166, s. 2.1, effective July 1, 2010.
  3. 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 .
  4. 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.
  5. 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.”

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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 .
  6. 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]

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.)

§ 105-129.35. (See note for repeal) Credit for rehabilitating income-producing historic structure.

  1. 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.
  2. 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 .
  3. 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.

  1. 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.
  2. 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.
  3. Recodified as G.S. 105-129.36 A 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. 105-129.36 A.

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.

  1. 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.
  2. 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.

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. 105-129.36 A.

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.

  1. Tax Credited. —  The credits provided in this Article are allowed against the income taxes levied in Article 4 of this Chapter.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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:

  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.

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 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 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, 2014 Bankr. LEXIS 4840 (Bankr. W.D.N.C. 2014).

Article 3E. Low-Income Housing Tax Credits.

(See note for repeal of this Article.)

§ 105-129.40. (See note for repeal) Scope and definitions.

  1. 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.
  2. 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.

  1. Credit. —  A taxpayer that is allowed for the taxable year a federal income tax credit for low-income housing under section 42 of the Code with respect to a qualified North Carolina low-income building, is allowed a credit under this Article equal to a percentage of the total federal credit allowed with respect to that building. For the purposes of this section, the total federal credit allowed is the total allowed during the 10-year federal credit period plus the disallowed first-year credit allowed in the 11th year. For the purposes of this section, the total federal credit is calculated based on qualified basis as of the end of the first year of the credit period and is not recalculated to reflect subsequent increases in qualified basis. For buildings that meet condition (c)(1) or (c)(1a) of this section, the credit percentage is seventy-five percent (75%). For other buildings, the credit percentage is twenty-five percent (25%).

    (a1) Tax Election. — The credit allowed in this section is allowed against the franchise tax levied in Article 3 of this Chapter, the income taxes levied in Article 4 of this Chapter, or the gross premiums tax levied in Article 8B of this Chapter. The taxpayer must elect the tax against which the credit will be claimed when filing the return on which the first installment of the credit is claimed. This election is binding. Any carryforwards of the credit must be claimed against the same tax.

    (a2) Cap. — The credit allowed in this section may not exceed fifty percent (50%) of the tax against which it is claimed for the taxable year, reduced by the sum of all other credits made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this section against each tax for the taxable year. Any unused portion of the credit may be carried forward for the succeeding five years.

  2. Timing. —  The credit must be taken in equal installments over the five years beginning in the first taxable year in which the federal credit is claimed for that building. During the first taxable year in which the credit allowed under this section may be taken with respect to a building, the amount of the installment must be multiplied by the applicable fraction under section 42(f)(2)(A) of the Code. Any reduction in the amount of the first installment as a result of this multiplication is carried forward and may be taken in the first taxable year after the fifth installment is allowed under this section. (b1) Allocation. — Notwithstanding the provisions of G.S. 105-131.8 and G.S. 105-269.15 , a pass-through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner’s adjusted basis in the pass-through entity, as determined under the Code at the end of the taxable year in which the federal credit is first claimed, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass-through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass-through entity and the allocation that would have been required under G.S. 105-131.8 or G.S. 105-269.15 .
  3. Qualifying Buildings.—  As used in this section the term “qualified North Carolina low-income building” means a qualified low-income building that was allocated a federal credit under section 42(h)(1) of the Code, was not allowed a federal credit under section 42(h)(4) of the Code, and meets any of the following conditions:
    1. It is located in an area that, at the time the federal credit is allocated to the building, is a tier one or two enterprise area, as defined in G.S. 105-129.3.

      (1a) Expired pursuant to Session Laws 2000-56, s. 10(f), effective January 1, 2005.

    2. It is located in an area that, at the time the federal credit is allocated to the building, is a tier three or four enterprise area, and forty percent (40%) of its residential units are both rent-restricted and occupied by individuals whose income is fifty percent (50%) or less of area median gross income as defined in the Code.
    3. It is located in an area that, at the time the federal credit is allocated to the building, is a tier five enterprise area, and forty percent (40%) of its residential units are both rent-restricted and occupied by individuals whose income is thirty-five percent (35%) or less of area median gross income as defined in the Code.
  4. 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 .
  5. 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.
  6. 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.
  7. 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.

  1. 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.
  2. 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.
  3. 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.

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  4. Election. —  When a taxpayer to whom a federal low-income housing credit is allocated submits to the Housing Finance Agency a request to receive a carryover allocation for that credit, the taxpayer must elect a method for receiving the tax credit allowed by this section. A taxpayer may elect to receive the credit in the form of either a direct tax refund or a loan generated by transferring the credit to the Housing Finance Agency. Neither a direct tax refund nor a loan received as the result of the transfer of the credit is considered taxable income under this Chapter.Under the direct tax refund method, a taxpayer elects to apply the credit allowed by this section to the taxpayer’s liability under Article 4 of this Chapter. If the credit allowed by this section exceeds the amount of tax imposed by Article 4 for the taxable year, reduced by the sum of all other credits allowable, the Secretary must refund the excess. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before this credit. The provisions that apply to an overpayment of tax apply to the refundable excess of a credit allowed under this section.Under the loan method, a taxpayer elects to transfer the credit allowed by this section to the Housing Finance Agency and receive a loan from that Agency for the amount of the credit. The terms of the loan are specified by the Housing Finance Agency in accordance with the Qualified Allocation Plan.
  5. 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.
  6. 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.
  7. Return and Payment. —  A taxpayer may claim the credit allowed by this section on a return filed for the taxable year in which the taxpayer receives a carryover allocation of a federal low-income housing credit. The return must state the name and location of the qualified low-income housing development for which the credit is claimed.If a taxpayer chooses the loan method for receiving the credit allowed under this section, the Secretary must transfer to the Housing Finance Agency the amount of credit allowed the taxpayer. The Agency must loan the taxpayer the amount of the credit on terms consistent with the Qualified Allocation Plan. The Housing Finance Agency is not required to make a loan to a qualified North Carolina low-income housing development until the Secretary transfers the credit amount to the Agency.If the taxpayer chooses the direct tax refund method for receiving the credit allowed under this section, the Secretary must transfer to the Housing Finance Agency the refundable excess of the credit allowed the taxpayer. The Agency holds the refund due the taxpayer in escrow, with no interest accruing to the taxpayer during the escrow period. The Agency must release the refund to the taxpayer upon the occurrence of the earlier of the following:
    1. The Agency determines that the taxpayer has complied with the Qualified Allocation Plan and has completed at least fifty percent (50%) of the activities included in the development’s qualified basis.
    2. Within 30 days after the date the development is placed in service.
  8. 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.
  9. 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%)

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:

  1. The number of taxpayers that took the credit allowed in this Article.
  2. The location of each qualified North Carolina low-income building or housing development for which a credit was taken.
  3. The total cost to the General Fund of the credits taken.

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.)

§ 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:

  1. Development tier one area. — Defined in G.S. 143B-437.08 .
  2. Full-time job. — Defined in G.S. 105-129.81 .
  3. Reserved.
  4. North Carolina university research expenses. — Any amount the taxpayer paid or incurred to a research university for qualified research performed in this State or basic research performed in this State.

    (4a) Repealed by Session Laws 2013-316, s. 2.3(b), effective for taxable years beginning on or after January 1, 2014.

  5. Period of measurement. — Defined in the Small Business Size Regulations of the federal Small Business Administration.
  6. Qualified North Carolina research expenses. — Qualified research expenses, other than North Carolina university research expenses, for research performed in this State.
  7. Receipts. — Defined in the Small Business Size Regulations of the federal Small Business Administration.
  8. Related person. — Defined in G.S. 105-163.010 .
  9. Research university. — An institution of higher education that meets one or both of the following conditions:
    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.
  10. Small business. — A business whose annual receipts, combined with the annual receipts of all related persons, for the applicable period of measurement did not exceed one million dollars ($1,000,000).

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.

  1. 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.
  2. This Article is repealed for taxable years beginning on or after January 1, 2016.
  3. 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.

  1. 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.
  2. 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:

  1. 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.
  2. The amount of each credit taken in each category.
  3. 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) .

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.”

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.

  1. Qualified North Carolina Research Expenses. —  A taxpayer that has qualified North Carolina research expenses for the taxable year is allowed a credit equal to a percentage of the expenses, determined as provided in this section. Only one credit is allowed under this section with respect to the same expenses. If more than one subdivision of this section applies to the same expenses, then the credit is equal to the higher percentage, not both percentages combined. If part of the taxpayer’s qualified North Carolina research expenses qualifies under more than one subdivision of this section, the applicable percentages apply separately to each part of the expenses.
    1. Small business. —  If the taxpayer was a small business as of the last day of the taxable year, the applicable percentage is three and one-quarter percent (3.25%).
    2. Low-tier research. —  For expenses with respect to research performed in a development tier one area, the applicable percentage is three and one-quarter percent (3.25%). (2a) University research. — For North Carolina university research expenses, the applicable percentage is twenty percent (20%).

      (2b) Eco-Industrial Park. — For expenses with respect to research performed in an Eco-Industrial Park certified under G.S. 143B-437.08 , the applicable percentage is thirty-five percent (35%).

    3. Other research. —  For expenses not covered under another subdivision of this section, the percentages provided in the table below apply to the taxpayer’s qualified North Carolina research expenses during the taxable year at the following levels:

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  2. 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) .

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 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]

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. [Repealed]

§§ 105-129.60 through 105-129.66. [Repealed]

Repealed by Session Laws 2010-166, s. 2.2, effective July 1, 2010.

History. Ss. 105-129.60, 105-129.61; 2004-204, 1st Ex. Sess., s. 1, repealed by 2010-166, s. 2.2, effective July 1, 2010. s. 105-129.62; 2004-204, 1st Ex. Sess., s. 1; 2005-435, s. 29(a), (b), (c). s. 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. ss. 105-129.64, 105-129.65; 2004-204, 1st Ex. Sess., s. 1, repealed by 2010-166, s. 2.2, effective July 1, 2010. s. 105-129.6A5; 2005-429, s. 2.8, repealed by 2010-166, s. 2.2, effective July 1, 2010. s. 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.)

§ 105-129.70. (See note for repeal) Definitions.

The following definitions apply in this Article:

  1. Certified historic structure. — Defined in section 47 of the Code.
  2. Certified rehabilitation. — Defined in G.S. 105-129.36 .
  3. Cost certification. — The certification obtained by the State Historic Preservation Officer from the taxpayer of the amount of the qualified rehabilitation expenditures or the rehabilitation expenses incurred with respect to a certified rehabilitation of an eligible site. (3a) Development tier area. — Defined in G.S. 143B-437.08 .
  4. Eligibility certification. — The certification obtained from the State Historic Preservation Officer that the applicable facility comprises an eligible site.
  5. Eligible site. — A site located in this State that satisfies all of the following conditions:
    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.
  6. Repealed by Session Laws 2006-252, s. 2.22, effective January 1, 2007.
  7. Pass-through entity. — Defined in G.S. 105-228.90 .
  8. Qualified rehabilitation expenditures. — Defined in section 47 of the Code.
  9. Rehabilitation expenses. — Defined in G.S. 105-129.36 .
  10. State-certified historic structure. — Defined in G.S. 105-129.36 .
  11. State Historic Preservation Officer. — Defined in G.S. 105-129.36 .

History. 2006-40, s. 1; 2006-252, s. 2.22; 2008-107, s. 28.4(a); 2021-180, s. 42.7(a).

Reenactment of Article.

Session Laws 2021-180, s. 42.7(a), provides: “Effective for taxable years beginning on or after January 1, 2021, Article 3H of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal for rehabilitation projects for which an application for an eligibility certification was submitted on or after January 1, 2015, and reads as rewritten:”

Session Laws 2021-180, s. 42.7(b), provides: “The reenactment and extension of Article 3H of Chapter 105 of the General Statutes under this section does not require a taxpayer who obtained an eligibility certification prior to January 1, 2015, for a rehabilitation project under this Article to reapply for an eligibility certification for the same project.”

Article has a Delayed Repeal Date.

For repeal of Article 3H, see G.S. 105-129.75 .

Editor’s Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

  1. 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.

      (a1) 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 qualified rehabilitation expenditures must be incurred on or after January 1, 2019, and the credit cannot be claimed for a taxable year beginning prior to January 1, 2021. 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.For purposes of this subsection, the term “eligible railroad station” is a site located in this State that satisfies all of the following conditions:

      (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, 2027.
    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, 2029.
  2. 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 .
  3. 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.
  4. 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.
  5. 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. 2.23; 2006-259, s. 47.5; 2007-491, s. 44(1)a; 2008-107, s. 28.4(b); 2019-237, s. 3(b); 2021-180, s. 42.7(a).

Reenactment of Article.

Session Laws 2021-180, s. 42.7(a), provides: “Effective for taxable years beginning on or after January 1, 2021, Article 3H of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal for rehabilitation projects for which an application for an eligibility certification was submitted on or after January 1, 2015, and reads as rewritten:”

Session Laws 2021-180, s. 42.7(b), provides: “The reenactment and extension of Article 3H of Chapter 105 of the General Statutes under this section does not require a taxpayer who obtained an eligibility certification prior to January 1, 2015, for a rehabilitation project under this Article to reapply for an eligibility certification for the same project.”

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.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

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).

Session Laws 2021-180, s. 42.7(a), effective for taxable years beginning on or after January 1, 2021, in subsection (a1), rewrote former last four sentences of the first paragraph as the present last two sentences, in subdivision (a1)(4), substituted “2027” for “2019,” and, in subdivision (a1)(7), substituted “2029” for “2021.”

§ 105-129.72. (See note for repeal) Credit for nonincome-producing rehabilitated mill property.

  1. 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.
  2. 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 .
  3. 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.
  4. 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.
  5. 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); 2021-180, s. 42.7(a).

Reenactment of Article.

Session Laws 2021-180, s. 42.7(a), provides: “Effective for taxable years beginning on or after January 1, 2021, Article 3H of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal for rehabilitation projects for which an application for an eligibility certification was submitted on or after January 1, 2015, and reads as rewritten:”

Session Laws 2021-180, s. 42.7(b), provides: “The reenactment and extension of Article 3H of Chapter 105 of the General Statutes under this section does not require a taxpayer who obtained an eligibility certification prior to January 1, 2015, for a rehabilitation project under this Article to reapply for an eligibility certification for the same project.”

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

  1. 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.
  2. 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; 2021-180, s. 42.7(a).

Reenactment of Article.

Session Laws 2021-180, s. 42.7(a), provides: “Effective for taxable years beginning on or after January 1, 2021, Article 3H of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal for rehabilitation projects for which an application for an eligibility certification was submitted on or after January 1, 2015, and reads as rewritten:”

Session Laws 2021-180, s. 42.7(b), provides: “The reenactment and extension of Article 3H of Chapter 105 of the General Statutes under this section does not require a taxpayer who obtained an eligibility certification prior to January 1, 2015, for a rehabilitation project under this Article to reapply for an eligibility certification for the same project.”

Article has a Delayed Repeal Date.

For delayed repeal of Article 3H, see G.S. 105-129.75 .

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-129.74. (See note for repeal) 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. 105-129.36 A or G.S. 105-129.107 apply to this Article.

History. 2006-40, s. 1; 2019-237, s. 3(c); 2021-180, s. 42.7(a).

Reenactment of Article.

Session Laws 2021-180, s. 42.7(a), provides: “Effective for taxable years beginning on or after January 1, 2021, Article 3H of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal for rehabilitation projects for which an application for an eligibility certification was submitted on or after January 1, 2015, and reads as rewritten:”

Session Laws 2021-180, s. 42.7(b), provides: “The reenactment and extension of Article 3H of Chapter 105 of the General Statutes under this section does not require a taxpayer who obtained an eligibility certification prior to January 1, 2015, for a rehabilitation project under this Article to reapply for an eligibility certification for the same project.”

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.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

  1. Sunset. —  Except for credits allowed under G.S. 105-129.71(a1) , this Article expires, and a tax credit allowed under G.S. 105-129.71(a) may not be claimed, for rehabilitation projects not completed and placed in service prior to January 1, 2030.
  2. 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, 2030.
    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, 2030.

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); 2021-180, s. 42.7(a).

Reenactment of Article.

Session Laws 2021-180, s. 42.7(a), provides: “Effective for taxable years beginning on or after January 1, 2021, Article 3H of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal for rehabilitation projects for which an application for an eligibility certification was submitted on or after January 1, 2015, and reads as rewritten:”

Session Laws 2021-180, s. 42.7(b), provides: “The reenactment and extension of Article 3H of Chapter 105 of the General Statutes under this section does not require a taxpayer who obtained an eligibility certification prior to January 1, 2015, for a rehabilitation project under this Article to reapply for an eligibility certification for the same project.”

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.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

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:

  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.

History. 2010-166, s. 1.8; 2021-180, s. 42.7(a).

Reenactment of Article.

Session Laws 2021-180, s. 42.7(a), provides: “Effective for taxable years beginning on or after January 1, 2021, Article 3H of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal for rehabilitation projects for which an application for an eligibility certification was submitted on or after January 1, 2015, and reads as rewritten:”

Session Laws 2021-180, s. 42.7(b), provides: “The reenactment and extension of Article 3H of Chapter 105 of the General Statutes under this section does not require a taxpayer who obtained an eligibility certification prior to January 1, 2015, for a rehabilitation project under this Article to reapply for an eligibility certification for the same project.”

Article has a Delayed Repeal Date.

For repeal of this Article, see G.S. 105-129.75 .

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.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

Article 3I. [Repealed]

§§ 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.)

§ 105-129.80. (See notes) Legislative findings.

The General Assembly finds that:

  1. It is the policy of the State of North Carolina to stimulate economic activity and to create new jobs for the citizens of the State by encouraging and promoting the expansion of existing business and industry within the State and by recruiting and attracting new business and industry to the State.
  2. Both short-term and long-term economic trends at the State, national, and international levels have made the successful implementation of the State’s economic development policy and programs both more critical and more challenging, and the decline in the State’s traditional industries, and the resulting adverse impact upon the State and its citizens, have been exacerbated in recent years by adverse national and State economic trends that contribute to the reduction in the State’s industrial base and that inhibit the State’s ability to sustain or attract new and expanding businesses.
  3. The economic condition of the State is not static, and recent changes in the State’s economic condition have created economic distress that requires a reevaluation of certain existing State programs and the enactment of a new program as provided in this Article that is designed to stimulate new economic activity and to create new jobs within the State.
  4. The enactment of this Article is necessary to stimulate the economy and create new jobs in North Carolina, and this Article will promote the general welfare and confer, as its primary purpose and effect, benefits on citizens throughout the State through the creation of new jobs, an enlargement of the overall tax base, an expansion and diversification of the State’s industrial base, and an increase in revenue to the State and its political subdivisions.
  5. The purpose of this Article is to stimulate economic activity and to create new jobs within the State.
  6. The State is in need of a focused tax credit program that encourages and facilitates economic growth and development within the State.
  7. The resources of the State are not evenly distributed throughout the State and different communities have different abilities and needs in attracting and maintaining new and expanding business and industry.

History. 2006-252, s. 1.1.

Article has a Delayed Repeal Date.

For repeal of this Article, see G.S. 105-129.82(a) .

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:

  1. Agrarian growth zone. — Defined in G.S. 143B-437.010 .
  2. Air courier services. — Defined in G.S. 143B-437.01 .
  3. Aircraft maintenance and repair. — The provision of specialized maintenance or repair services for commercial aircraft or the rebuilding of commercial aircraft.
  4. Business property. — Tangible personal property that is used in a business and capitalized by the taxpayer for tax purposes under the Code.
  5. Company headquarters. — Defined in G.S. 143B-437.01 .
  6. Cost. — In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code. In the case of property the taxpayer leases from another, cost is value as determined pursuant to G.S. 105-130.4(j)(2).
  7. Customer service call center. — The provision of support service by a business to its customers by telephone or other electronic means to support products or services of the business. For the purposes of this definition, an establishment is primarily engaged in providing support services by telephone or other electronic means only if at least sixty percent (60%) of its calls are incoming or at least sixty percent (60%) of its other electronic communications are initiated by its customers.
  8. Development tier. — The classification assigned to an area pursuant to G.S. 143B-437.08 .
  9. Electronic shopping and mail order houses. — An industry in electronic shopping and mail order houses industry group 4541 as defined by NAICS. (9a) Environmental disqualifying event. — Any of the following occurrences:
    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. 143-215.6 B, 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.
  10. Establishment. — Defined in 29 C.F.R. § 1904.46, as it existed on January 1, 2002.
  11. Full-time job. — A position that requires at least 1,600 hours of work per year and is intended to be held by one employee during the entire year. A full-time employee is an employee who holds a full-time job.
  12. Hub. — Defined in G.S. 105-164.3 .
  13. Information technology and services. — Defined in G.S. 143B-437.01 .
  14. Long-term unemployed worker. — An individual that has been totally unemployed for at least the preceding 26 consecutive weeks as evidenced by records maintained by the Division of Employment Security (DES) of the Department of Commerce.
  15. Manufacturing. — Defined in G.S. 143B-437.01 .
  16. Motorsports facility. — A motorsports racetrack classified in the United States racetrack national industry 711212, as defined by NAICS.
  17. Motorsports racing team. — A professional racing team primarily engaged in the research and development, design, manufacture, repair, maintenance, and operation of motor vehicles used in live motorsports racing events before a paying audience.
  18. NAICS. — Defined in G.S. 105-228.90 .
  19. New job. — A full-time job that represents a net increase in the number of the taxpayer’s employees statewide. A new employee is an employee who holds a new job. The term does not include a job currently located in this State that is transferred to the business from a related member of the business.
  20. Overdue tax debt. — Defined in G.S. 105-243.1 . (20a) Port enhancement zone. — Defined in G.S. 143B-437.013 .
  21. Purchase. — Defined in section 179 of the Code.
  22. Related member. — Defined in G.S. 105-130.7 A.
  23. Research and development. — An industry in scientific research and development services industry group 5417 as defined by NAICS.
  24. Urban progress zone. — The classification assigned to an area pursuant to G.S. 143B-437.09 .
  25. Warehousing. — Defined in G.S. 143B-437.01 .
  26. 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.

  1. Sunset. —  This Article is repealed effective for business activities that occur on or after January 1, 2014.
  2. 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.
  3. 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.
  4. 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.

  1. 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.
  2. 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.
  3. Wage Standard. —  A taxpayer is eligible for a credit under this Article in a development tier two or three area only if the taxpayer satisfies a wage standard. The taxpayer is not required to satisfy a wage standard if the activity occurs in a development tier one area. Jobs that are located within an urban progress zone, a port enhancement zone, or an agrarian growth zone but not in a development tier one area satisfy the wage standard if they pay an average weekly wage that is at least equal to ninety percent (90%) of the lesser of the average wage for all insured private employers in the State and the average wage for all insured private employers in the county. All other jobs satisfy the wage standard if they pay an average weekly wage that is at least equal to the lesser of one hundred ten percent (110%) of the average wage for all insured private employers in the State and ninety percent (90%) of the average wage for all insured private employers in the county. The Department of Commerce shall annually publish the wage standard for each county.In making the wage calculation, the taxpayer shall include any jobs that were filled for at least 1,600 hours during the calendar year the taxpayer engages in the activity that qualifies for the credit even if those jobs are not filled at the time the taxpayer claims the credit. For a taxpayer with a taxable year other than a calendar year, the taxpayer shall use the wage standard for the calendar year in which the taxable year begins. Only full-time jobs are included when making the wage calculation.
  4. Health Insurance. —  A taxpayer is eligible for a credit under this Article only if the taxpayer provides health insurance for all of the full-time jobs at the establishment with respect to which the credit is claimed when the taxpayer engages in the activity that qualifies for the credit. For the purposes of this subsection, a taxpayer provides health insurance if it pays at least fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum provisions of the basic health care plan of coverage recommended by the Small Employer Carrier Committee pursuant to G.S. 58-50-125 .Each year that a taxpayer claims a credit or carryforward of a credit allowed under this Article, the taxpayer shall provide with the tax return the taxpayer’s certification that the taxpayer continues to provide health insurance for all the jobs at the establishment with respect to which the credit was claimed. If the taxpayer ceases to provide health insurance for the jobs during a taxable year, the credit expires, and the taxpayer may not take any remaining installment or carryforward of the credit.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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 .
  10. 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.
  11. 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.
  12. 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.
  13. 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.

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.

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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) .

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.”

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.

  1. 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.
  2. 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) .

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.”

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.

  1. 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.
  2. 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.

  1. 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. Click to view
  2. 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.

    Click to view

  3. 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.
  4. 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 .
  5. 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.
  6. 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.
  7. 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.

  1. 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: Click to view
  2. 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.
  3. 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.

    Click to view

  4. Expiration. —  As used in this subsection, the term “disposed of” means disposed of, taken out of service, or moved out of State. If, in one of the four years in which the installment of a credit accrues, the business property with respect to which the credit was claimed is disposed of, the credit expires, and the taxpayer may not take any remaining installment of the credit for that business property unless the cost of that business property is offset in the same taxable year by the taxpayer’s new investment in eligible business property placed in service in the same county, as provided in this subsection. If, during the taxable year, the taxpayer disposed of the business property for which installments remain, there has been a net reduction in the cost of all the taxpayer’s eligible business property that are in service in the same county as the business property that was disposed of, and the amount of this reduction is greater than twenty percent (20%) of the cost of the business property that was disposed of, then the credit for the business property that was disposed of expires. If the amount of the net reduction is equal to twenty percent (20%) or less of the cost of the business property that was disposed of, or if there is no net reduction, then the credit does not expire. In determining the amount of any net reduction during the taxable year, the cost of business property the taxpayer placed in service during the taxable year and for which the taxpayer claims a credit under Article 3A or Article 3B of this Chapter may not be included in the cost of all the taxpayer’s eligible business property that is in service. If in a single taxable year business property with respect to two or more credits in the same county are disposed of, the net reduction in the cost of all the taxpayer’s eligible business property that is in service in the same county is compared to the total cost of all the business property for which credits expired in order to determine whether the remaining installments of the credits are forfeited.The expiration of a credit does not prevent the taxpayer from taking the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105-129.84 .
  5. 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.
  6. 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.
  7. 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

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.

  1. 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.
  2. 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 .
  3. 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.
  4. Expiration. —  If, in one of the seven years in which the installment of a credit accrues, the property with respect to which the credit was claimed is no longer used in an eligible business, the credit expires, and the taxpayer may not take any remaining installment of the credit. If, in one of the seven years in which the installment of a credit accrues, part of the property with respect to which the credit was claimed is no longer used in an eligible business, the remaining installments of the credit shall be reduced by multiplying it by the fraction described in subsection (c) of this section. If, in one of the years in which the installment of a credit accrues and by which the taxpayer is required to have created 200 new jobs at the property, the total number of employees the taxpayer employs at the property with respect to which the credit is claimed is less than 200, the credit expires, and the taxpayer may not take any remaining installment of the credit.In each of these cases, the taxpayer may nonetheless take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105-129.84 .
  5. 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.

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 .)

§ 105-129.95. (Repealed for taxable years beginning on or after January 1, 2038 — see note) Definitions.

The following definitions apply in this Article:

  1. Costs of construction. — The costs of acquiring and improving land, constructing buildings and other structures, equipping the facility, and constructing and equipping rail tracks to the railroad intermodal facility that are necessary to access and support facility operations. In the case of property owned or leased by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code.
  2. Eligible railroad intermodal facility. — A railroad intermodal facility whose costs of construction exceed thirty million dollars ($30,000,000).
  3. Intermodal facility. — A facility where freight is transferred from one mode of transportation to another.
  4. Railroad intermodal facility. — An intermodal facility whose primary purpose is to transfer freight between a railroad and another mode of transportation.

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.

  1. 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.
  2. 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.
  3. (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).

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:

  1. The number of taxpayers that claimed a credit allowed in this Article.
  2. The amount of each credit claimed and the taxes against which it was applied.
  3. The total cost to the General Fund of the credits claimed.

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.)

§ 105-129.105. (See note for repeal) Credit for rehabilitating income-producing historic structure.

  1. 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:

      Click to view

    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.
    4. (Effective for taxable years beginning on or after January 1, 2021) Education 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 was originally used for an educational purpose, is used for an educational purpose following the rehabilitation, and remains used for an educational purpose for each year in which the credit, or a carryforward of the credit, is claimed. For a certified historic structure used for multiple purposes, the bonus provided in this subdivision shall be proportionate to the area of the certified historic structure used for an educational purpose.
  2. 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 .
  3. 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 . (2a) (Effective for taxable years beginning on or after January 1, 2021) Educational purpose. — A purpose that has as its objective the education or instruction of human beings; it comprehends the transmission of information and the training or development of the knowledge or skills of individual persons.
    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.
  4. 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).
  5. 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 Over Up to Rate 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; 2021-180, s. 42.7A(a).

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.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, 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.

Session Laws 2021-180, s. 42.7A(a), effective January 1, 2021, added subdivisions (a)(4) and (c)(2a).

§ 105-129.106. (See note for repeal) Credit for rehabilitating non-income-producing historic structure.

  1. 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.
  2. 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.
  3. 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 .

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.

  1. 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.
  2. 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 .

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 the second and last sentences in subsection (b).

§ 105-129.108. (See note for repeal) Tax credited; credit limitations.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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 .
  8. 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.
  9. 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.

  1. 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.
  2. 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, 2030. For qualified rehabilitation expenditures and rehabilitation expenses incurred prior to January 1, 2030, 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); 2021-180, s. 42.7A(b).

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.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

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.

Session Laws 2021-180, s. 42.7A(b), effective November 18, 2021, substituted “2030” for “2024” in the first and second sentences.

Article 4. Income Tax.

Part 1. Corporation Income Tax.

§ 105-130. Short title.

This Part of the income tax Article shall be known and may be cited as the Corporation Income Tax Act.

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.

“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 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.

  1. Purpose. —  The general purpose of this Part is to impose a tax for the use of the State government upon the net income of every domestic corporation and of every foreign corporation doing business in this State.The tax imposed upon the net income of corporations in this Part is in addition to all other taxes imposed under this Subchapter.
  2. 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-19.70 A apply in this subsection.

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:

  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. Code. — Defined in G.S. 105-228.90 .
  3. Corporation. — A joint-stock company or association, an insurance company, a domestic corporation, a foreign corporation, or a limited liability company.
  4. C Corporation. — A corporation that is not an S Corporation.
  5. Department. — The Department of Revenue.
  6. Domestic corporation. — A corporation organized under the laws of this State.
  7. 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.
  8. Foreign corporation. — Any corporation other than a domestic corporation.
  9. Gross income. — Defined in section 61 of the Code.
  10. 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.
  11. 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.
  12. 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.
  13. S Corporation. — Defined in G.S. 105-131(b).
  14. Secretary. — The Secretary of Revenue.
  15. 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 .
  16. 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.
  17. Taxable year. — Income year.
  18. 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).

§ 105-130.3. Corporations. [Effective for taxable years beginning before January 1, 2019]

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 Three Times.

The section above is in effect for taxable years beginning before January 1, 2019. For this section as in effect for taxable years beginning on or after January 1, 2019 and before January 1, 2025, and for this section as in effect for taxable years beginning on or after January 1, 2025, see the following sections, also numbered G.S. 105-130.3 .

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. 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 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 .”

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 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.

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.

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 N.C. LEXIS 969 (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 N.C. LEXIS 777 (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 N.C. LEXIS 540 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, 1959 U.S. LEXIS 1420 (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 N.C. LEXIS 540 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, 1959 U.S. LEXIS 1420 (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 N.C. App. LEXIS 2162 (2004), cert. denied, 546 U.S. 821, 126 S. Ct. 353, 163 L. Ed. 2d 62, 2005 U.S. LEXIS 6033 (2005).

§ 105-130.3. Corporations. [Effective for taxable years beginning on or after January 1, 2019, and before January 1, 2025]

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. 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), (b).

Section Set Out Three Times.

The section above is in effect for taxable years beginning on or after January 1, 2019. For this section is in effect for taxable years beginning before January 1, 2019, see the preceding section, also numbered G.S. 105-130.3 . For this section as in effect for taxable years beginning on or after January 1, 2025, see the following section, also numbered G.S. 105-130.3 .

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. 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 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 .”

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(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

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 N.C. LEXIS 969 (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 N.C. LEXIS 777 (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 N.C. LEXIS 540 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, 1959 U.S. LEXIS 1420 (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 N.C. LEXIS 540 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, 1959 U.S. LEXIS 1420 (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 N.C. App. LEXIS 2162 (2004), cert. denied, 546 U.S. 821, 126 S. Ct. 353, 163 L. Ed. 2d 62, 2005 U.S. LEXIS 6033 (2005).

§ 105-130.3. Corporations. [Effective for taxable years beginning on or after January 1, 2025]

A tax is imposed on the State net income of every C Corporation doing business in this State. An S Corporation is not subject to the tax levied in this section. The tax is a percentage of the taxpayer’s State net income computed as follows:

Taxable Years Beginning Tax In 2025 2.25% In 2026 2% In 2028 1% After 2029 0%.

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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), (b); 2021-180, s. 42.2(a).

Section Set Out Three Times.

The section above is in effect for taxable years beginning on or after January 1, 2025. For this section as in effect for taxable years beginning before January 1, 2019, and for this section as in effect on or after January 1, 2019 and before January 1, 2025, see the preceding sections, also numbered G.S. 105-130.3 .

The section above is in effect for taxable years beginning on or after January 1, 2025. For this section as in effect for taxable years beginning before January 1, 2019, and for this section as in effect on or after January 1, 2019 and before January 1, 2025, see the main volume.

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. 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 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 .”

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.

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.2(a), effective January 1, 2025, rewrote the section.

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 N.C. LEXIS 969 (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 N.C. LEXIS 777 (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 N.C. LEXIS 540 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, 1959 U.S. LEXIS 1420 (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 N.C. LEXIS 540 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, 1959 U.S. LEXIS 1420 (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 N.C. App. LEXIS 2162 (2004), cert. denied, 546 U.S. 821, 126 S. Ct. 353, 163 L. Ed. 2d 62, 2005 U.S. LEXIS 6033 (2005).

§ 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. 105-130.3 B pertained to income tax surtax.

§ 105-130.3C. [Repealed]

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. 105-130.3 C 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.

  1. 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.
  2. 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.
  3. 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.
  4. 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 year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the corporation, tangible personal property is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession.
  5. Gains and Losses. —  Gains and losses are allocable to this State as follows:
    1. Gains and losses from sales or other disposition of real property located in this State are allocable to this State.
    2. Gains and losses from sales or other disposition of tangible personal property are allocable to this State if
      1. The property had a situs in this State at the time of the sale, or
      2. The corporation’s commercial domicile is in this State and the corporation is not taxable in the state in which the property has a situs.
    3. Gains and losses from sales or other disposition of intangible personal property are allocable to this State if the corporation’s commercial domicile is in this State.
  6. Interest and Net Dividends. —  Interest and net dividends are allocable to this State if the corporation’s commercial domicile is in this State. For purposes of this section, the term “net dividends” means gross dividend income received less related expenses.
  7. Intangible Property. —  Intangible property is allocable to this State as follows:
    1. Royalties or similar income received from the use of patents, copyrights, secret processes and other similar intangible property are allocable to this State:
      1. If and to the extent that the patent, copyright, secret process or other similar intangible property is utilized in this State, or
      2. If and to the extent that the patent, copyright, secret process or other similar intangible property is utilized in a state in which the taxpayer is not taxable and the taxpayer’s commercial domicile is in this State.
    2. A patent, secret process or other similar intangible property is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, processing, or other use in the state or to the extent that a patented product is produced in the state. If the basis of receipts from such intangible property does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the intangible property is utilized in the state in which the taxpayer’s commercial domicile is located.
    3. A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer’s commercial domicile is located.
  8. Other Income. —  The income less related expenses from any other activities producing nonapportionable income or investments not otherwise specified in this section is allocable to this State if the business situs of the activities or investments is located in this State.
  9. (Effective for taxable years beginning on or after January 1, 2018) Apportionable Income. —  Except as otherwise provided in this section, all apportionable income of corporations shall be apportioned to this State by multiplying the income by the sales factor as determined under subsection (l) of this section.
    1. (Repealed effective for taxable years beginning on or after January 1, 2018)  The property factor is a fraction, the numerator of which is the average value of the corporation’s real and tangible personal property owned or rented and used in this State during the income year and the denominator of which is the average value of all the corporation’s real and tangible personal property owned or rented and used during the income year.
    2. Property owned by the corporation is valued at its original cost. Property rented by the corporation is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the corporation less any annual rental rate received by the corporation from subrentals except that subrentals shall not be deducted when they constitute apportionable income. Any property under construction and any property the income from which constitutes nonapportionable income shall be excluded in the computation of the property factor.
    3. The average value of property shall be determined by averaging the values at the beginning and end of the income year, but in all cases the Secretary of Revenue may require the averaging of monthly or other periodic values during the income year if reasonably required to reflect properly the average value of the corporation’s property. A corporation that ceases its operations in this State before the end of its income year because of its intention to dissolve or to relinquish its certificate of authority, or because of a merger, conversion, or consolidation, or for any other reason whatsoever shall use the real estate and tangible personal property values as of the first day of the income year and the last day of its operations in this State in determining the average value of property, but the Secretary may require averaging of monthly or other periodic values during the income year if reasonably required to reflect properly the average value of the corporation’s property.
    1. (Repealed effective for taxable years beginning on or after January 1, 2018)  The payroll factor is a fraction, the numerator of which is the total amount paid in this State during the income year by the corporation as compensation, and the denominator of which is the total compensation paid everywhere during the income year. All compensation paid to general executive officers and all compensation paid in connection with nonapportionable income shall be excluded in computing the payroll factor. General executive officers shall include the chairman of the board, president, vice-presidents, secretary, treasurer, comptroller, and any other officers serving in similar capacities.
    2. Compensation is paid in this State if:
      1. The individual’s service is performed entirely within the State; or
      2. The individual’s service is performed both within and without the State, but the service performed without the State is incidental to the individual’s service within the State; or
      3. Some of the service is performed in this State and (i) the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in this State, or (ii) the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual’s residence is in this State.
    1. (Effective for taxable years beginning before January 1, 2020)  The sales factor is a fraction, the numerator of which is the total sales of the corporation in this State during the income year, and the denominator of which is the total sales of the corporation everywhere during the income year. Notwithstanding any other provision under this Part, the receipts from any casual sale of property shall be excluded from both the numerator and the denominator of the sales factor. Where a corporation is not taxable in another state on its apportionable income but is taxable in another state only because of nonapportionable income, all sales shall be treated as having been made in this State.
    2. Sales of tangible personal property are in this State if the property is received in this State by the purchaser. In the case of delivery of goods by common carrier or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed shall be considered as the place at which the goods are received by the purchaser. Direct delivery into this State by the taxpayer to a person or firm designated by a purchaser from within or without the State shall constitute delivery to the purchaser in this State.
    3. Other sales are in this State if any of the following occur:
      1. The receipts are from real or tangible personal property located in this State, and includes receipts from incidental services sold as part of, or in connection with, the sale of tangible personal property in this State.
      2. The receipts are from intangible property and are received from sources within this State.
      3. The receipts are from services and the income-producing activities are in this State. For the purposes of this subdivision, an “income-producing activity” means an activity directly performed by the taxpayer or its agents for the ultimate purpose of generating the sale of the service. Receipts from income-producing activities performed within and without this State are attributed to this State in proportion to the income-producing activities performed in this State to total income-producing activities performed everywhere that generate the sale of service. ( l ) (Effective for taxable years beginning on or after January 1, 2020) Sales Factor. — The sales factor is a fraction, the numerator of which is the total sales of the corporation in this State during the income year, and the denominator of which is the total sales of the corporation everywhere during the income year. Notwithstanding any other provision under this Part, the receipts from any casual sale of property shall be excluded from both the numerator and the denominator of the sales factor. Where a corporation is not taxable in another state on its apportionable income but is taxable in another state only because of nonapportionable income, all sales shall be treated as having been made in this State.Receipts are in this State if the taxpayer’s market for the receipts is in this State. If the market for a receipt cannot be determined, the state or states of assignment shall be reasonably approximated. In a case in which a taxpayer cannot ascertain the state or states to which receipts of a sale are to be assigned through the use of a method of reasonable approximation, the receipts must be excluded from the denominator of a taxpayer’s sales factor. Except as otherwise provided by this section, a taxpayer’s market for receipts is in this State as provided below: (1) In the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this State.

        (2) In the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this State.

        (3) In the case of sale of tangible personal property, if and to the extent the property is received in this State by the purchaser. In the case of delivery of goods by common carrier or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed is considered the place at which the goods are received by the purchaser. Direct delivery into this State by the taxpayer to a person or firm designated by a purchaser from within or without the State constitutes delivery to the purchaser in this State.

    4. In the case of sale of a service, if and to the extent the service is delivered to a location in this State.
    5. In the case of intangible property that is rented, leased, or licensed, if and to the extent the property is used in this State. Intangible property utilized in marketing a good or service to a consumer is “used in this State” if that good or service is purchased by a consumer who is in this State.
    6. In the case of intangible property that is sold, if and to the extent the property is used in this State. A contract right, government license, or similar intangible property that authorized the holder to conduct a business activity in a specific geographic area is “used in this State” if the geographic area includes all or part of this State. Receipts from a sale of intangible property that is contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from the rental, lease, or licensing of the intangible property as provided under subdivision (5) of this subsection. All other receipts from a sale of intangible property shall be excluded from the numerator and denominator of the sales factor.

      ( l 1) (Effective for taxable years beginning on or after January 1, 2020) Wholesale Content Distributors. — A wholesale content distributor’s market for receipts is in this State as provided in G.S. 105-130.4 A. In no event may the amount of receipts sourced to this State be less than the amount determined under this subsection. The amount determined under this subsection is the total domestic gross receipts of the wholesale content distributor from advertising and licensing activities multiplied by two percent (2%). For purposes of this section, the term “wholesale content distributor” has the same meaning as defined in G.S. 105-130.4 A.

      ( l 2) (Effective for taxable years beginning on or after January 1, 2020) Banks. — A bank’s market for receipts is in this State as provided in G.S. 105-130.4B. For purposes of this section, the term “bank” has the same meaning as defined in G.S. 105-130.4B.

  13. Railroad Company. —  All apportionable income of a railroad company shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the “railway operating revenue” from business done within this State and the denominator of which is the “total railway operating revenue” from all business done by the company as shown by its records kept in accordance with generally accepted accounting principles.If the Secretary of Revenue finds, with respect to any particular company, that its accounting records are not kept so as to reflect with exact accuracy such division of revenue by State lines as to each transaction involving interstate revenue, the Secretary of Revenue may adopt such regulations, based upon averages, as will approximate with reasonable accuracy the proportion of interstate revenue actually earned upon lines in this State. Provided, that where a railroad is being operated by a partnership which is treated as a corporation for income tax purposes and pays a net income tax to this State, or if located in another state would be so treated and so pay as if located in this State, each partner’s share of the net profits shall be considered as dividends paid by a corporation for purposes of this Part and shall be so treated for inclusion in gross income, deductibility, and separate allocation of dividend income.The following definitions apply in this subsection:
    1. Equal mileage proportion. — The proportion which the distance of movement of property and passengers over lines in this State bears to the total distance of movement of property and passengers over lines of the company receiving such revenue.
    2. Interstate business. — Railroad operating revenue from the interstate transportation of persons or property into, out of, or through this State.
    3. Railway operating revenue from business done within this State. — Railroad operating revenue from business wholly within this State, plus the equal mileage proportion within this State of each item of railway operating revenue received from the interstate business of the company.
  14. Repealed by Session Laws 2017-204, s. 1.5, effective for taxable years beginning on or after January 1, 2017.
  15. Motor Carrier. —  All apportionable income of a motor carrier of property or a motor carrier of people shall be apportioned by multiplying the income by a fraction, the numerator of which is the number of vehicle miles in this State and the denominator of which is the total number of vehicle miles of the company everywhere. The words “vehicle miles” shall mean miles traveled by vehicles owned or operated by the company based upon one of the following:
    1. Miles on a scheduled route.
    2. Miles hauling property for a charge.
    3. Miles carrying passengers for a fare.
  16. , (q)Repealed by Session Laws 2017-204, s. 1.5, effective for taxable years beginning on or after January 1, 2017. (r) (Repealed effective for taxable years beginning on or after January 1, 2018) All apportionable income of an excluded corporation and of all other public utilities shall be apportioned by multiplying the income by the sales factor as determined under subsection ( l ) of this section.The following definitions apply in this subsection:
    1. Excluded corporation. — Any corporation engaged in business as a building or construction contractor, a securities dealer, or a loan company or a corporation that receives more than fifty percent (50%) of its ordinary gross income from intangible property.
    2. Public utility. — Any corporation that is subject to control of one or more of the following entities: the North Carolina Utilities Commission, the Federal Communications Commission, the Federal Energy Regulatory Commission, or the Federal Aviation Agency; and that owns or operates for public use any plant, equipment, property, franchise, or license for the transmission of communications, the transportation of goods or persons, or the production, storage, transmission, sale, delivery, or furnishing of electricity, water, steam, oil, oil products, or gas. The term also includes a motor carrier of property whose principal business activity is transporting property by motor vehicle for hire over the public highways of this State.

      (s) Transportation Corporation. — All apportionable income of an air transportation corporation or a water transportation corporation shall be apportioned by a fraction, the numerator of which is the corporation’s revenue ton miles in this State and the denominator of which is the corporation’s revenue ton miles everywhere. A qualified air freight forwarder shall use the revenue ton mile fraction of its affiliated air carrier. The following definitions apply in this subsection:

      (1) Air carrier. — A corporation engaged in the business of transporting any combination of passengers or property of any kind in interstate commerce, and the majority of the corporation’s revenue ton miles everywhere are attributed to transportation by aircraft.

      (2) Air transportation corporation. — One or more of the following:

      1. An air carrier that carries any combination of passengers or property of any kind.
      2. A qualified air freight forwarder.
    3. Qualified air freight forwarder. — A corporation that is an affiliate of an air carrier and whose air freight forwarding business is primarily carried on with the affiliated air carrier.
    4. Revenue ton mile. — One ton of passengers, freight, mail, or other cargo carried one mile by the air transportation corporation or water transportation corporation by aircraft, motor vehicle, or vessel. In making this computation, a passenger is considered to weigh two hundred pounds.

      (s1) (Repealed effective for taxable years beginning on or after January 1, 2018) All apportionable income of a qualified capital intensive corporation shall be apportioned by multiplying the income by the sales factor as determined under subsection ( l ) of this section. A “qualified capital intensive corporation” is a corporation that satisfies all of the conditions of this subsection. A corporation that is subject to this subsection must list on its return the property, payroll, and sales factors it used in determining whether it is a qualified capital intensive corporation. If the corporation fails to invest one billion dollars ($1,000,000,000) in private funds within nine years as required by subdivision (2) of this subsection, the benefit of this subsection expires and the corporation must apportion income as it would otherwise be required to do under this section absent this subsection. The conditions are:

      (1) The corporation’s property factor as a percentage of the sum of the factors in the formula set out in subsection (i) of this section, including the doubling of the sales factor, exceeds seventy-five percent (75%) or the corporation’s average property factor for the preceding three years as a percentage of the average sum of the factors in the formula set out in subsection (i) of this section, including the doubling of the sales factors, for the preceding three years exceeds seventy-five percent (75%).

      (2) The Secretary of Commerce makes a written determination that the corporation has invested or is expected to invest at least one billion dollars ($1,000,000,000) in private funds to construct a facility in this State within nine years after the time that construction begins. For the purposes of this subsection, costs of construction include costs of acquiring and improving land for the facility, costs for renovations or repairs to existing buildings, and costs of equipping or reequipping the facility.

      (3) The corporation maintains the average number of employees it has at the facility during the first two years after the facility is placed in service for the remainder of time in which the corporation must complete the investment required under subdivision (2) of this subsection.

      (4) The facility that satisfies the condition of subdivision (2) of this subsection is located in a county that was designated as a development tier one or two area at the time construction of the facility began.

    5. The corporation satisfies a wage standard at the facility that satisfies the condition of subdivision (2) of this subsection. For the purposes of this subdivision, the wage standard that must be satisfied is the one established under G.S. 105-164.3(201)a.
    6. The corporation provides health insurance for all of its full-time employees at the facility that satisfies the condition of subdivision (2) of this subsection. For the purposes of this subdivision, a company provides health insurance if it satisfies the provisions of G.S. 105-164.3(201)c.

      (s2) (Effective for taxable years beginning before January 1, 2020) Pipeline Company. — Receipts from transportation of a petroleum-based liquids pipeline company shall be apportioned by multiplying the income by a fraction, the numerator of which is the number of barrel miles in this State during the tax year and the denominator of which is the total number of barrel miles everywhere during the tax year. For purposes of this section, the term “barrel mile” means one barrel of liquid property transported one mile.

      (s2) (Effective for taxable years beginning on or after January 1, 2020) Pipeline Company. — Receipts from the transportation or transmission of petroleum-based liquids or natural gas by a company subject to rate regulation by the Federal Energy Regulatory Commission shall be apportioned by multiplying the income by a fraction, the numerator of which is the number of traffic units in this State during the tax year and the denominator of which is the total number of traffic units everywhere during the tax year. For purposes of this section, the term “traffic unit” means one or more of the following:

      (1) Barrel mile. — One barrel of liquid property transported one mile.

      (2) Cubic foot mile. — One cubic foot of gaseous property transported one mile.

      (s3) (Effective for taxable years beginning on or after January 1, 2020) Electric Power Company. — All apportionable income of an electric power company shall be apportioned by a fraction, the numerator of which is the average value of the real and tangible personal property owned or rented and used in this State by the electric power company during the income year and the denominator of which is the average value of all the real and tangible personal property owned or rented and used by the electric power company during the income year. For purposes of this subsection, the term “electric power company” is a company, including any of its wholly owned noncorporate limited liability companies, primarily engaged in the business of supplying electricity for light, heat, current, or power to persons in this State and that is subject to control of one or more of the following entities: the North Carolina Utilities Commission or the Federal Energy Regulatory Commission.For purposes of this subsection, the average value of real and tangible personal property owned or rented by an electric power company is determined as follows:

      (1) The average value of property shall be determined by averaging the values at the beginning and end of the income year, but in all cases the Secretary may require the averaging of monthly or other periodic values during the income year if reasonably required to reflect properly the average value of the corporation’s property.

      (2) An electric power company that ceases its operations in this State before the end of its income year because of its intention to dissolve or to relinquish its certificate of authority, or because of a merger, conversion, or consolidation, or for any other reason whatsoever shall use the real estate and tangible personal property values as of the first day of the income year and the last day of its operations in this State in determining the average value of property, but the Secretary may require averaging of monthly or other periodic values during the income year if reasonably required to reflect properly the average value of the electric power company’s property.

      (3) Property owned by an electric power company is valued at its original cost.

      (4) Property rented by an electric power company is valued at eight times the net annual rental rate.

      (5) Net annual rental rate is the annual rental rate paid by an electric power company less any annual rental rate received by the electric power company from sub-rentals except that sub-rentals shall not be deducted when they constitute apportionable income.

      (6) Any property under construction and any property the income from which constitutes nonapportionable income shall be excluded from the computation of the average value of an electric power company’s real and tangible personal property.

      (t) Repealed by Session Laws 2007-491, s. 2, effective January 1, 2008. For applicability, see Editor’s note.

      (t1) Alternative Apportionment Method. — A corporation that believes the statutory apportionment method that otherwise applies to it under this section subjects a greater portion of its income to tax than is attributable to its business in this State may make a written request to the Secretary for permission to use an alternative method. The request must set out the reasons for the corporation’s belief and propose an alternative method.The statutory apportionment method that otherwise applies to a corporation under this section is presumed to be the best method of determining the portion of the corporation’s income that is attributable to its business in this State. A corporation has the burden of establishing by clear, cogent, and convincing proof that the proposed alternative method is a better method of determining the amount of the corporation’s income attributable to the corporation’s business in this State.The Secretary must issue a written decision on a corporation’s request for an alternative apportionment method. If the decision grants the request, it must describe the alternative method the corporation is authorized to use and state the tax years to which the alternative method applies. A decision may apply to no more than three tax years. A corporation may renew a request to use an alternative apportionment method by following the procedure in this subsection. A decision of the Secretary on a request for an alternative apportionment method is final and is not subject to administrative or judicial review. A corporation authorized to use an alternative method may apportion its income in accordance with the alternative method or the statutory method. A corporation may not use an alternative apportionment method except upon written order of the Secretary, and any return in which any alternative apportionment method, other than the method prescribed by statute, is used without permission of the Secretary is not a lawful return.

      (t2) Repealed by Session Laws 2011-330, s. 5, effective June 27, 2011.

      (t3) (Effective for taxable years beginning on or after January 1, 2020) State Net Loss Apportionment Election. — Notwithstanding subdivision ( l )(4) of this section, a taxpayer with a State net loss balance as of the end of its 2019 taxable year may elect to apportion receipts from services based on the percentage of its income-producing activities performed in this State. The election must be made on the 2020 tax year return and must be in the form prescribed by the Secretary and contain any supporting documentation the Secretary may require. The election is binding and irrevocable until the earlier of the tax year in which (i) the existing State net loss balance is fully utilized or (ii) all of the existing State net loss balance has expired, as determined by applying the limitations set forth in G.S. 105-130.8 A(b). A taxpayer must apportion receipts from services in accordance with subdivision ( l )(4) of this section for tax years beginning on and after the tax year that the existing State net loss is fully utilized.For purposes of this subsection, a taxpayer’s State net loss balance is the total amount of State net losses computed under G.S. 105-130.8 A for taxable years beginning before January 1, 2020, and available to carry forward to taxable years beginning on or after January 1, 2020. A State net loss balance does not include a State net loss created in a taxable year beginning on or after January 1, 2020. A State net loss created in a taxable year beginning on or after January 1, 2020, must be determined using the apportionment rules in G.S. 105-130.4 ( l ).

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. 476, s. 193; c. 1287, s. 4; 1981 (Reg. Sess., 1982), c. 1212; 1987, c. 804, s. 2; 1987 (Reg. Sess., 1988), c. 994, s. 1; 1993, c. 532, s. 12; 1995, c. 350, s. 3; 1996, 2nd Ex. Sess., c. 14, s. 5; 1998-98, s. 69; 1999-369, s. 5.4; 2000-126, s. 5; 2001-327, s. 1(c); 2002-126, s. 30G.1(a); 2003-349, ss. 1.2, 1.3; 2003-416, ss. 5(a)-5(h); 2004-170, s. 15; 2005-435, s. 53; 2007-491, ss. 2, 12; 2009-54, ss. 1, 2, 6; 2009-445, ss. 4, 5; 2010-89, s. 2(a), (b); 2011-330, s. 5; 2013-414, s. 2(b); 2015-241, s. 32.14(a)-(d); 2015-268, s. 10.1(c); 2016-5, ss. 1.3(a), 1.6(a), 5.5(b); 2016-92, s. 1.1; 2017-204, s. 1.5(a); 2018-5, s. 38.2(c); 2018-97, s. 11.2(a); 2019-246, s. 3(a); 2020-58, s. 5.2(a).

Subsections (l) and (s2) Set Out Twice.

The first versions of subsections ( l ) and (s2) set out above are effective for taxable years beginning before January 1, 2020. The second versions of subsections ( l ) and (s2) set out above are effective for taxable years beginning on or after January 1, 2020.

Proposed Amendments to This Section.

Session Laws 2016-94, s. 38.4(a), (b), directed the Department of Revenue to draft administrative rules based on proposed amendments to this section and a new section, tentatively designated as G.S. 105-130.4 A by Session Laws 2016-94, s. 38.4(c), and to have these rules reviewed by the Rules Review Commission. Once approved by the Rules Review Commission, the rules were not to be entered into the Administrative Code until the General Assembly actually enacted the proposed legislation, which it did in Session Laws 2019-246, s. 3(a) and (c), effective for taxable years beginning on or after January 1, 2020. However, the new section, as enacted by Session Laws 2019-246, s. 3(c), is codified as G.S. 105-130.4 B, not G.S. 105-130.4A, as tentatively designated in Session Laws 2016-94, s. 38.4(c).

Session Laws 2019-246, s. 3(f), provides: “Under Section 38.4 of S.L. 2016-94, the Department of Revenue adopted and submitted to the Rules Review Commission rules regarding the implementation and administration of market-based sourcing principles based on legislation proposed in that section. The Department adopted the rules on January 4, 2017, and submitted the rules to the Rules Review Commission on January 18, 2017. The Rules Review Commission approved and delivered the rules to the Codifier of Rules on February 16, 2017. Pursuant to Section 38.4(b) of S.L. 2016-94, the Codifier of Rules did not enter the rules into the Administrative Code. The Codifier of Rules is hereby directed by the General Assembly to enter the rules into the Administrative Code on the effective date of this act, and the rules apply to taxable years beginning on or after January 1, 2020.

“The Department of Revenue shall adopt and submit to the Rules Review Commission rules regarding the implementation and administration of market-based sourcing principles, to the extent modifications are needed based on the statutory changes enacted by this section. In adopting rules pursuant to this subsection, the following provisions apply:

“(1) The exemption provided in G.S. 150B-1(d)(4) applies.

“(2) The provisions of G.S. 150B-21.3(b1) and (b2) do not apply.

“(3) The provisions of G.S. 150B-21.4 do not apply.”

Session Laws 2016-94, s. 38.4(a), provides: “Notwithstanding any provision of Chapter 150B of the General Statutes or any other provision of law prohibiting adoption of rules based on legislation not yet enacted into law, on or before January 20, 2017, the Department of Revenue shall adopt and submit to the Rules Review Commission rules regarding the implementation and administration of market-based sourcing principles as if the proposed statutory changes in subsection (c) of this section was law. In adopting rules pursuant to this subsection, the exemption provided by G.S. 150B-1(d)(4) shall not apply, and the Department shall observe the general provisions of Article 2A of Chapter 150B of the General Statutes, except as follows:

“(1) Notwithstanding G.S. 150B-21.2(f), the agency must accept comments on the text of the proposed rules for at least 90 days after the text is published.

“(2) The provisions of G.S. 150B-21.4 do not apply.

“(3) If House Bill 169 of the 2016 Regular Session of the 2015 General Assembly is enacted, the provisions of G.S. 150B-19.4, as enacted by Section 1.1 of House Bill 169 of the 2016 Regular Session of the 2015 General Assembly, do not apply.” House Bill 169 is Session Laws 2016-99.

Session Laws 2016-94, s. 38.4(b), provides: “In determining whether the rules adopted pursuant to subsection (a) of this section meet the standards for review, the Rules Review Commission shall apply the standards in G.S. 150B-21.9(a) as though the proposed statutory changes in subsection (c) of this section were law. If the Commission approves the rules adopted pursuant to subsection (a) of this section, the Commission shall deliver the approved rules to the Codifier of Rules. The Codifier of Rules shall not enter the rules into the Administrative Code until the General Assembly enacts the proposed statutory changes and directs the Codifier to do so. The rules become effective on the date they are entered in the Administrative Code.”

Session Laws 2016-94, s. 38.4(c), provides: “The proposed statutory changes referenced in subsection (a) of this section are as follows:

‘ § 105-130.4. Allocation and apportionment of income for corporations.

‘. . .

‘( l ) Sales Factor. — The sales factor is a fraction, the numerator of which is the total sales of the corporation in this State during the income year, and the denominator of which is the total sales of the corporation everywhere during the income year. Notwithstanding any other provision under this Part, the receipts from any casual sale of property shall be excluded from both the numerator and the denominator of the sales factor. Where a corporation is not taxable in another state on its apportionable income but is taxable in another state only because of nonapportionable income, all sales shall be treated as having been made in this State.

‘Receipts are in this State if the taxpayer’s market for the receipts is in this State. If the market for a receipt cannot be determined, the state or states of assignment shall be reasonably approximated. In a case in which a taxpayer cannot ascertain the state or states to which receipts of a sale are to be assigned through the use of a method of reasonable approximation, the receipts must be excluded from the denominator of a taxpayer’s sales factor. Except as otherwise provided by this section, a taxpayer’s market for receipts is in this State as provided below:

‘(1) In the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this State.

‘(2) In the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this State.

‘(3) In the case of sale of tangible personal property, if and to the extent the property is received in this State by the purchaser. In the case of delivery of goods by common carrier or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed is considered the place at which the goods are received by the purchaser. Direct delivery into this State by the taxpayer to a person or firm designated by a purchaser from within or without the State constitutes delivery to the purchaser in this State.

‘(4) In the case of sale of a service, if and to the extent the service is delivered to a location in this State.

‘(5) In the case of intangible property that is rented, leased, or licensed, if and to the extent the property is used in this State. Intangible property utilized in marketing a good or service to a consumer is ‘used in this State’ if that good or service is purchased by a consumer who is in this State.

‘(6) In the case of intangible property that is sold, if and to the extent the property is used in this State. A contract right, government license, or similar intangible property that authorized the holder to conduct a business activity in a specific geographic area is ‘used in this State’ if the geographic area includes all or part of this State. Receipts from a sale of intangible property that is contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from the rental, lease, or licensing of the intangible property as provided under subdivision (5) of this subsection. All other receipts from a sale of intangible property shall be excluded from the numerator and denominator of the sales factor.

‘( l 1) Banks. — A bank’s market for receipts is in this State as provided in G.S. 105-130.4 A. For purposes of this section, the term ‘bank’ has the same meaning as defined in G.S. 105-130.4 A.

‘. . .

‘ § 105-130.4A. Market-based sourcing for banks.

‘(a) Definitions. — The definitions in G.S. 105-130.4 apply to this section, and the following definitions apply to this section:

‘(1) Bank. — Defined in G.S. 105-130.7 B.

‘(2) Billing address. — The location indicated in the books and records of the taxpayer on the first day of the taxable year, or on the date in the taxable year when the customer relationship began, as the address where any notice, statement, or billing relating to the customer’s account is mailed.

‘(3) Borrower, card holder, or payor located in this State. — A borrower, credit card holder, or payor whose billing address is in this State.

‘(4) Card issuer’s reimbursement fee. — The fee a taxpayer receives from a merchant’s bank because one of the persons to whom the taxpayer has issued a credit, debit, or similar type of card has charged merchandise or services to the card.

‘(5) Credit card. — A card, or other means of providing information, that entitles the holder to charge the cost of purchases, or a cash advance, against a line of credit.

“(6) Debit card. — A card, or other means of providing information, that enables the holder to charge the cost of purchases, or a cash withdrawal, against the holder’s bank account or a remaining balance on the card.

‘(7) Loan. — Any extension of credit resulting from direct negotiations between the taxpayer and its customer, and/or the purchase, in whole or in part, of such an extension of credit from another. The term includes participations, syndications, and leases treated as loans for federal income tax purposes.

‘(8) Loan secured by real property. — A loan or other obligation of which fifty percent (50%) or more of the aggregate value of the collateral used to secure the loan or other obligation, when valued at fair market value as of the time the original loan or obligation was incurred, was real property.

‘(9) Merchant discount. — The fee, or negotiated discount, charged to a merchant by the taxpayer for the privilege of participating in a program whereby a credit, debit, or similar type of card is accepted in payment for merchandise or services sold to the card holder, net of any cardholder chargeback and unreduced by any interchange transaction or issuer reimbursement fee paid to another for charges or purchases made by its cardholder.

‘(10) Participation. — An extension of credit in which an undivided ownership interest is held on a prorated basis in a single loan or pool of loans and related collateral. In a loan participation, the credit originator initially makes the loan and then subsequently resells all or a portion of it to other lenders. The participation may or may not be known to the borrower.

‘(11) Payor. — The person who is legally responsible for making payment to the taxpayer.

‘(12) Real property owned. — Real property (i) on which the taxpayer may claim depreciation for federal income tax purposes or (ii) to which the taxpayer holds legal title and on which no other person may claim depreciation for federal income tax purposes or could claim depreciation if subject to federal income tax. Real property does not include coin, currency, or property acquired in lieu of or pursuant to a foreclosure.

‘(13) Syndication. — An extension of credit in which two or more persons fund and each person is at risk only up to a specified percentage of the total extension of credit or up to a specified dollar amount.

‘(14) Tangible personal property owned. — Tangible personal property (i) on which the taxpayer may claim depreciation for federal income tax purposes or (ii) to which the taxpayer holds legal title and on which no other person may claim depreciation for federal income tax purposes could claim depreciation if subject to federal income tax. Tangible personal property does not include coin, currency, or property acquired in lieu of or pursuant to a foreclosure.

‘(15) Transportation property. — Vehicles and vessels capable of moving under their own power as well as any equipment or containers attached to such property. Examples of transportation property include aircraft, trains, water vessels, motor vehicles, rolling stock, barges, and trailers.

‘(b) General Rule. — The receipts factor of a bank is a fraction, the numerator of which is the total receipts of the taxpayer in this State during the income year, and the denominator of which is the total receipts of the taxpayer everywhere during the income year. The method of calculating receipts for purposes of the denominator is the same as the method used in determining receipts for purposes of the numerator. The receipts factor includes only those receipts described herein that are apportionable income for the taxable year. Notwithstanding any other provision under this Part, the receipts from the following are excluded from both the numerator and the denominator of the receipts factor:

‘(1) Receipts from a casual sale of property.

‘(2) Receipts exempt from taxation.

‘(3) The portion of receipts realized from the sale or maturity of securities or other obligations that represents a return of principal.

‘(4) Receipts in the nature of dividends subtracted under G.S. 105-130.5(b)(3a) and (3b) and dividends excluded for federal tax purposes.

‘(5) The portion of receipts from financial swaps and other similar financial derivatives that represent the notional principal amount that generates the cash flow traded in the swap agreement.

‘(c) Receipts From the Sale, Lease, or Rental of Real Property. — The numerator of the receipts factor includes receipts from the sale, lease, or rental of real property owned by the taxpayer if the property is located within this State or receipts from the sublease of real property if the property is located within this State.

‘(d) Receipts From the Sale, Lease, or Rental of Tangible Personal Property. — The method for calculating receipts from the sale, lease, or rental of tangible personal property is as follows:

‘(1) Tangible personal property. — Except as provided in subdivision (2) of this subsection, the numerator of the receipts factor includes receipts from the sale, lease, or rental of tangible personal property owned by the taxpayer if the property is located within this State when it is first placed in service by the lessee.

‘(2) Transportation property. — Receipts from the lease or rental of transportation property owned by the taxpayer are included in the numerator of the receipts factor to the extent that the property is used in this State. The extent an aircraft will be deemed to be used in this State and the amount of receipts that is to be included in the numerator of this State’s receipts factor is determined by multiplying all the receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the number of landings of the aircraft in this State and the denominator of which is the total number of landings of the aircraft. If the extent of the use of any transportation property within this State cannot be determined, then the property will be deemed to be used wholly in the state in which the property has its principal base of operations. A motor vehicle will be deemed to be used wholly in the state in which it is registered.

‘(e) Interest, Fees, and Penalties From Loans Secured by Real Property. — The numerator of the receipts factor includes interest, fees, and penalties from loans secured by real property if the property is located within this State. If the property is located both within this State and one or more other states, the receipts described in this subsection are included in the numerator of the receipts factor if more than fifty percent (50%) of the fair market value of the real property is located within this State. If more than fifty percent (50%) of the fair market value of the real property is not located within any one state, then the receipts described in this subsection are included in the numerator of the receipts factor if the borrower is located in this State. The determination of whether the real property securing a loan is located within this State is made as of the time the original agreement was made and any and all subsequent substitutions of collateral are disregarded.

‘(f) Interest, Fees, and Penalties From Loans Not Secured by Real Property. — The numerator of the receipts factor includes interest, fees, and penalties from loans not secured by real property if the borrower is located in this State.

‘(g) Net Gains From the Sale of Loans. — The numerator of the receipts factor includes net gains from the sale of loans. Net gains from the sale of loans include income recorded under the coupon stripping rules of section 1286 of the Code. The amount of net gains from the sale of loans that is included in the numerator is determined as follows:

‘(1) Secured by real property. — The amount of net gains, but not less than zero, from the sale of loans secured by real property is determined by multiplying the net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (e) of this section, and the denominator of which is the total amount of interest, fees, and penalties from loans secured by real property.

‘(2) Not secured by real property. — The amount of net gains, but not less than zero, from the sale of loans not secured by real property is determined by multiplying the net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (f) of this section, and the denominator of which is the total amount of interest, fees, and penalties from loans not secured by real property.

‘(h) Receipts From Interest, Fees, and Penalties from Card Holders. — The numerator of the receipts factor includes interest, fees, and penalties charged to credit, debit, or similar card holders, including annual fees and overdraft fees, if the card holder is located in this State.

‘(i) Receipts From ATM Fees. — The numerator of the receipts factor includes receipts from fees from the use of an ATM owned or rented by the taxpayer, if the ATM is located in this State. The receipts factor includes all ATM fees that are not forwarded directly to another bank. Receipts from ATM fees that are not sourced under this subsection are sourced pursuant to subsection ( l ) of this section.

‘(j) Net Gains From the Sale of Credit Card Receivables. — The numerator of the receipts factor includes net gains, but not less than zero, from the sale of credit card receivables multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (h) of this section, and the denominator of which is the taxpayer’s total amount of interest, fees, and penalties charged to card holders.

‘(k) Miscellaneous Receipts. — The numerator of the receipts factor includes all of the following:

‘(1) Card issuer’s reimbursement fees. — Receipts from card issuer’s reimbursement fees if the payor is located in this State.

‘(2) Receipts from merchant’s discount. — Receipts from a merchant discount if the payor is located in this State.

‘(3) Loan servicing fees. — Receipts from loan servicing fees if the payor is located in this State.

‘(4) Receipts from services. — Receipts from services not otherwise apportioned under this section if the payor is located in this State.

‘(5) Receipts from investment assets and activity and trading assets and activity. — Receipts from one or more of the following:

‘a. Interest and dividends from investment assets and activities and trading assets and activities if the payor is located in this State.

‘b. Net gains and other income, but not less than zero, from investment assets and activities and trading assets and activities multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to sub-subdivision a. of this subdivision, and the denominator of which is the taxpayer’s total amount of interest and dividends from investment assets and activities and trading assets and activities.

“( l ) All Other Receipts. — All other receipts not specifically enumerated in this section are included in the numerator of the receipts factor if the payor is located in this State.’ ”

Contingent repeal of subsection (s1). Session Laws 2009-54, s. 6, repeals subsection (s1), effective for taxable years beginning January 1, 2019, if no corporation has qualified as a tax qualified capital intensive corporation under subsection (s1) prior to January 1, 2019.

Qualified Capital Intensive Corporation Ineligible for Certain Grants. Session Laws 2009-54, s. 4, provides: “A corporation that is a qualified capital intensive corporation under G.S. 105-130.4(s1) is not eligible for a grant under the Job Development Investment Grant Program established under Part 2G of Article 10 of Chapter 143B of the General Statutes or the One North Carolina Fund established under Part 2H of Article 10 of Chapter 143B of the General Statutes with respect to the facility that satisfies the condition of G.S. 105-130.4(s1)(2).”

Editor’s Note.

Session Laws 2001-327, s. 1(f), provides that: “This section is effective for taxable years beginning on or after January 1, 2001. Notwithstanding G.S. 105-163.41 , no addition to tax may be made under that statute for a taxable year beginning on or after January 1, 2001, and before January 1, 2002, with respect to an underpayment of corporation income tax by a payer of royalties who adds the payments to State net income pursuant to G.S.105-130.7A(c), to the extent the underpayment was created or increased by this section.”

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.”

Session Laws 2009-54, s. 5, provides: “The General Assembly encourages qualified capital intensive corporations that locate in this State to enter into a first source hiring agreement to utilize the State Employment Security Commission [now Division of Employment Security (DES) of the Department of Commerce] and any cooperating local agency as a first source for recruitment and referral of applicants for new and replacement employment associated with the applicable facility.”

Session Laws 2010-89, s. 2(a) and (b), which added “unless the provisions of subsection (t2) of this section apply” at the end of the third sentence in the last paragraph of subsection (t1), and added subsection (t2), was applicable to requests for alternative apportionment formulas filed on or after July 11, 2010.

Session Laws 2015-241, s. 32.14A(a)-(e), as amended by Session Laws 2015-268, s. 10.2, provides: “(a) The Revenue Laws Study Committee is directed to study the calculation of the sales factor under G.S. 105-130.4 (-it l) using market-based sourcing. To help the Committee determine the effect of market-based sourcing on State revenues and corporate taxpayers, each corporate taxpayer that satisfies the following requirements with respect to the taxable year beginning in 2014 is required to file an informational report with the Department of Revenue as provided in this section:

“(1) The taxpayer had apportionable income greater than ten million dollars ($10,000,000).

“(2) The taxpayer had a North Carolina apportionment percentage less than one hundred percent (100%).

“(3) The taxpayer was subject to apportionment of income based in whole or in part on the sales factor as determined under G.S. 105-130.4 ( l ).

“(b) On or before February 1, 2016, the Department of Revenue must publish guidelines for computing the sales factor based on market-based sourcing. The guidelines required by this subsection are not subject to the provisions of Chapter 150B of the General Statutes with respect to rule-making. The guidelines published by the Department of Revenue must be based on the following:

“(1) Market-based sourcing of receipts based on the following principles:

“a. In the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this State.

“b. In the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this State.

“c. In the case of sale of a service, if and to the extent the service is delivered to a location in this State.

“d. In the case of intangible property that is rented, leased, or licensed, if and to the extent the property is used in this State. Intangible property utilized in marketing a good or service to a consumer is “used in this State” if that good or service is purchased by a consumer who is in this State.

“e. In the case of intangible property that is sold, if and to the extent the property is used in this State. A contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is “used in this State” if the geographic area includes all or part of this State. Receipts from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from the rental, lease, or licensing of the intangible property as provided under sub-subdivision d. of this subdivision. All other receipts from a sale of intangible property shall be excluded from the numerator and denominator of the sales factor.

“(2) The most recent model regulations with respect to market-based sourcing drafted by the UDITPA Section 17 Work Group convened by the Multistate Tax Commission.

“(3) Any other model apportionment regulations and model statutes with respect to the allocation and apportionment of income consistent with those adopted by the Multistate Tax Commission and that are not inconsistent with the principles outlined in subdivision (1) of this subsection.

“(c) The guidelines required by subsection (b) of this section apply to the informational report required by this section only. These guidelines may not be used by the Department of Revenue for any other purpose without further legislative authorization and compliance with the provisions of Chapter 150B of the General Statutes with respect to rule-making.

“(d) The informational report must be in a form required by the Secretary of Revenue and contain the following information:

“(1) The apportionment percentage and sales factor used with respect to the corporation’s 2014 North Carolina corporate tax return.

“(2) The apportionment percentage and sales factor as calculated under subsection (b) of this section with respect to the corporation’s 2014 taxable year.

“(3) The primary economic sector under NAICS in which the corporation has business activities. The term ‘NAICS’ has the same meaning as defined in G.S. 105-228.90 .

“(4) Any other information prescribed by the Secretary.

“(e) The informational report is due by April 15, 2016. A taxpayer may not request an extension of time to file the informational report. The Secretary shall assess a civil penalty of five thousand dollars ($5,000) for failure to timely file an informational report required under this section. The Secretary may reduce or waive the penalty as provided in G.S. 105-237 .”

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. 33.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2015-2017 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2015-2017 fiscal biennium.”

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

Session Laws 2016-94, s. 38.4(d), provides: “If the General Assembly directs the Codifier of Rules to enter the rules into the Administrative Code pursuant to subsection (b) of this section, the Utilities Commission shall adjust the rates for public utilities, excluding water public utilities with less than two hundred thousand dollars ($200,000) in annual operating revenues, for the tax changes in subsection (c) of this section. Each utility shall calculate the cumulative net effect of the tax changes and file the calculations with proposed rate changes to reflect the net prospective tax changes in utility customer rates within 60 days of the enactment of this section. Any adjustments required to existing tax assets or liabilities reflected in the utility’s books and records required by the tax changes shall be deferred and reflected in customer rates in either the utility’s next rate case or earlier, if deemed appropriate by the Commission.”

Session Laws 2016-94, s. 38.4(e), provides: “This section is effective when it becomes law [July 14, 2016].”

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

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

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 2019-169, s. 3.1(c), provides, in part, that: “The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-164.3 to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory section.” At the direction of the Revisor of Statutes, a reference was conformed in subdivisions (s1)(5) and (s1)(6).

Session Laws 2019-246, s. 3(e), provides: “The Utilities Commission shall adjust the rates for public utilities, excluding water public utilities with less than two hundred thousand dollars ($200,000) in annual operating revenues, for the tax changes in subsection (a) of this section. Each utility shall calculate the cumulative net effect of the tax changes and file the calculations with proposed rate changes to reflect the net prospective tax changes in utility customer rates within 60 days of the enactment of this act. Any adjustments required to existing tax assets or liabilities reflected in the utility’s books and records required by the tax changes shall be deferred and reflected in customer rates in either the utility’s next rate case or earlier if deemed appropriate by the Commission.”

Effect of Amendments.

Session Laws 2003-349, ss. 1.2 and 1.3, effective for taxable years beginning on or after January 1, 2003, in subsection (c), deleted “less the portion deductible under G.S. 105-130.7 ” following “interest, dividends” and made a minor punctuation change; and in subsection (f), deleted “and less that portion of the dividends deductible under G.S. 105-130.7 ” following “expenses.”

Session Laws 2003-416, ss. 5.(a)-(h), effective August 14, 2003, substituted “apportionable income” for “business income” and “nonapportionable income” for “nonbusiness income” throughout the section; and in subsection (m), substituted “finds” for “shall find” in the fourth sentence of the second paragraph.

Session Laws 2004-170, s. 15, effective August 2, 2004, substituted “Energy Regulatory” for “Power” in subdivision (a)(6).

Session Laws 2005-435, s. 53, effective January 1, 2006, made a minor stylistic change in the introductory language of subdivision (a)(6).

Session Laws 2007-491, ss. 2 and 12, effective January 1, 2008, repealed subsection (t) and added subsection (t1). For applicability, see Editor’s note.

Session Laws 2009-54, ss. 1 and 2, effective for taxable years beginning on or after January 1, 2010, in subsection (i), in the first sentence, substituted “utilities, excluded corporations, and qualified capital intensive corporations” for “utilities and excluded corporations”, and in the second sentence, substituted “If the sales” for “Provided, that where the sales” at the beginning, and made related grammatical changes; and added subsection (s1).

Session Laws 2009-445, ss. 4 and 5, effective August 7, 2009, in subsection (h), substituted “activities producing nonapportionable income” for “nonbusiness activities” and “is located” for “are located”; and added the last sentence in the last paragraph of subsection (t1).

Session Laws 2010-89, s. 2(a) and (b), effective July 11, 2010, and applicable to requests for alternative apportionment formulas filed on or after that date, added “unless the provisions of subsection (t2) of this section apply” at the end of the third sentence in the last paragraph of subsection (t1); and added subsection (t2).

Session Laws 2011-, s. 5, effective June 27, 2011, repealed subsection (t2), pertaining to a 15-Year Alternative method of apportionment.

Session Laws 2013-414, s. 2(b), effective August 23, 2013, deleted “unless the provisions of subsection (t2) of this section apply” following “three tax years” at the end of the third sentence in the third paragraph of subsection (t1).

Session Laws 2015-241, s. 32.14(a), effective for taxable years beginning on or after January 1, 2016, in subsection (i), substituted “Apportionable Income. — Except as otherwise provided in this section all apportionable income of corporations shall” for “All apportionable income of corporations other than public utilities, excluded corporations, and qualified capital intensive corporations shall” at the beginning, and substituted “three times” for “twice” and “five” for “four” near the end of the first sentence, and substituted “two” for “one” at the end of the last sentence.

Session Laws 2015-241, s. 32.14(b), effective for taxable years beginning on or after January 1, 2017, in subsection (i), substituted “four” for “three” and “six” for “five” near the end of the first sentence, and substituted “three” for “two” at the end of the last sentence.

Session Laws 2015-241, s. 32.14(c), effective for taxable years beginning on or after January 1, 2018, rewrote subsection (i).

Session Laws 2015-241, s. 32.14(d), as amended by Session Laws 2015-268, s. 10.1(c), effective for taxable years beginning on or after January 1, 2018, repealed subdivisions (a)(4) and (6), and subsections (j), (k), (r), and (s1).

Session Laws 2016-5, ss. 1.3(a), 1.6(a), effective for taxable years beginning on or after January 1, 2016, added subdivisions (a)(7)e. and f. and rewrote subsection (s).

Session Laws 2016-5, s. 5.5(b), effective May 11, 2016, substituted “G.S. 105-164.3(33c)a” for “G.S. 105-129.83(c)” at the end of subdivision (s1)(5); and substituted “G.S. 105-164.3(33c)c” for “G.S. 105-129.83(d)” at the end of subdivision (s1)(6).

Session Laws 2016-92, s. 1.1, effective July 11, 2016, deleted “the Interstate Commerce Commission” following “the Federal Communications Commission” near the middle of the first sentence of subdivision (a)(6).

Session Laws 2017-204, s. 1.5(a), effective for taxable years beginning on or after January 1, 2017, rewrote the section.

Session Laws 2018-5, s. 38.2(c), effective June 12, 2018, in subdivision ( l )(3), added “any of the following occur” at the end of the introductory paragraph; in sub-subdivision ( l )(3)a., substituted “State, and includes receipts from incidental services sold as part of, or in connection with, the sale of tangible personal property in this State.” for “State; or”; in sub-subdivision ( l )(3)b., substituted “to the extent the intangible property is used within this State.” for “and are received from sources within this State; or”; and in sub-subdivision ( l )(3)c., added the last two sentences.

Session Laws 2018-97, s. 11.2(a), effective July 1, 2018, substituted “and are received from sources” for “to the extent the intangible property is used” in sub-subdivision ( l )(3)b.

Session Laws 2019-246, s. 3(a), effective for taxable years beginning on or after January 1, 2020, rewrote the section.

Session Laws 2020-58, s. 5.2(a), effective for taxable years beginning on or after January 1, 2020, substituted “receipts sourced” for “income apportioned” in the second sentence of subsection ( l 1).

Legal Periodicals.

For note on constitutionality of income allocation formulae under former G.S. 105-134 as applied to corporations, see 9 N.C.L. Rev. 470 (1931).

For note as to allocation of interstate corporate income, etc., under former G.S. 105-134 , see 36 N.C.L. Rev. 156 (1958).

For survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under provisions similar to this section appearing in G.S. 105-134 prior to the 1967 amendment thereto.

Taxpayer Barred From Challenging Constitutionality of Augmented North Carolina Tax Review Board’s Actions. —

As a taxpayer sought, received, and benefitted from a variance from G.S. 105-130.4(t)’s tax allocation formula, it could not challenge, on separation-of-powers grounds, orders of the augmented North Carolina Tax Review Board that granted the variance. Philip Morris USA, Inc. v. Tolson, 176 N.C. App. 509, 626 S.E.2d 853, 2006 N.C. App. LEXIS 536 (2006).

Purpose of Apportionment. —

The imposition of the income tax upon a base which reasonably represents the proportion of the trade or business carried on within the State is designed to meet the due process requirement that a state show a sufficient nexus between such a tax and the transaction within a state for which the tax is an exaction, and the proscriptions of the Commerce Clause of the federal Constitution which permit a state to tax only that part of a corporation’s net income from multistate operations which is attributable to earnings within the taxing state. Gulf Oil Corp. v. Clayton, 267 N.C. 15 , 147 S.E.2d 522, 1966 N.C. LEXIS 969 (1966).

Jurisdiction of Tax Review Board. —

As an administrative tribunal, the North Carolina Tax Review Board lacks the authority or jurisdiction to make a determination regarding the constitutionality of the tax resulting from the application of G.S. 105-130.4 . Cent. Tel. Co. v. Tolson, 174 N.C. App. 554, 621 S.E.2d 186, 2005 N.C. App. LEXIS 2488 (2005), cert. denied, 549 U.S. 1020, 127 S. Ct. 564, 166 L. Ed. 2d 411, 2006 U.S. LEXIS 8405 (2006).

Reversion of Funds from Pension Fund. —

Court must consider both transactional and functional tests in determining if the reversion of funds from a pension fund is business income the court must consider both the transactional test and the functional test. Union Carbide Corp. v. Offerman, 132 N.C. App. 665, 513 S.E.2d 341, 1999 N.C. App. LEXIS 256 (1999), aff'd, 351 N.C. 310 , 526 S.E.2d 167, 2000 N.C. LEXIS 2 (2000).

Reversion of funds from a corporation’s overfunded pension plan was not business income under the functional test, since the pension fund was not essential to the corporation’s regular course of manufacturing and selling chemicals. Union Carbide Corp. v. Offerman, 132 N.C. App. 665, 513 S.E.2d 341, 1999 N.C. App. LEXIS 256 (1999), aff'd, 351 N.C. 310 , 526 S.E.2d 167, 2000 N.C. LEXIS 2 (2000).

Plaintiff’s reversion of pension plan contributions was not business income under the functional test of subsection (a)(1) of this section because plaintiff’s contingent property right in the pension plan was not integral to its business nor used to generate income in its regular business operations. Union Carbide Corp. v. Offerman, 351 N.C. 310 , 526 S.E.2d 167, 2000 N.C. LEXIS 2 (2000).

“Compensation”. —

Article 4 of the Revenue Act was extensively revised in 1967, and this new section dealing with the payroll factor clarified the provisions of former G.S. 105-134 so as to make it plain that “compensation” to be included means “wages, salaries, commissions and any other form of remuneration paid to employees for personal services.” Myrtle Desk Co. v. Clayton, 8 N.C. App. 452, 174 S.E.2d 619, 1970 N.C. App. LEXIS 1584 (1970).

“Excluded Corporation”. —

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 were not excluded corporations under G.S. 105-130.4 . A&F Trademark, Inc. v. Tolson, 167 N.C. App. 150, 605 S.E.2d 187, 2004 N.C. App. LEXIS 2162 (2004), cert. denied, 546 U.S. 821, 126 S. Ct. 353, 163 L. Ed. 2d 62, 2005 U.S. LEXIS 6033 (2005).

G.S. 105-130.4(a)(4) should be understood as describing the entire entity rather than a small portion of the entity’s overall business. Midrex Techs. v. N.C. Dep't of Revenue, 369 N.C. 250 , 794 S.E.2d 785, 2016 N.C. LEXIS 1126 (2016).

Trial court properly upheld an ALJ’s determination that a C corporation was not an excluded corporation for purposes of G.S. 105-130.4(a)(4) during the relevant time period where it had only limited involvement in the actual, physical construction of a plant, but instead was only responsible for providing technical assistance and advice. Midrex Techs. v. N.C. Dep't of Revenue, 369 N.C. 250 , 794 S.E.2d 785, 2016 N.C. LEXIS 1126 (2016).

“Integral Part” of Business. —

Even though corporate taxpayer was not in business of leasing equipment, lease arrangement which was means of gaining working capital and increasing cash flow for all corporation business operations was considered an “integral part” of the corporation’s business. National Serv. Indus., Inc. v. Powers, 98 N.C. App. 504, 391 S.E.2d 509, 1990 N.C. App. LEXIS 419 (1990).

Once a corporation’s assets are found to constitute integral parts of the corporation’s regular trade or business, income resulting from the acquisition, management, and/or disposition of those assets constitutes business income regardless of how that income is received. Polaroid Corp. v. Offerman, 349 N.C. 290 , 507 S.E.2d 284, 1998 N.C. LEXIS 727 (1998), cert. denied, 526 U.S. 1098, 119 S. Ct. 1576, 143 L. Ed. 2d 671, 1999 U.S. LEXIS 3039 (1999), overruled in part, Lenox, Inc. v. Tolson, 353 N.C. 659 , 548 S.E.2d 513, 2001 N.C. LEXIS 671 (2001) (decided prior to the 2002 amendment to the definition of “business income” in this section).

State has right to collect nondiscriminatory income taxes imposed on foreign corporation if the taxes are imposed solely on that part of the corporation’s income earned within the State in its interstate business, and reasonably attributable to its interstate business done or performed within the borders of this State. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

Burden of Showing Statutory Assessment Unconstitutional. —

Where the Commissioner (now Secretary) of Revenue assessed an income tax against a foreign corporation operating a manufacturing plant in this State in accordance with the provisions of G.S. 311 of the Revenue Act of 1929, without regard to its intangible property, the Commissioner’s (now Secretary’s) assessment was upheld upon appeal where the corporation failed to show that such method of allocation was unconstitutional in its application to the corporation. State ex rel. Maxwell v. Kent-Coffey Mfg. Co., 204 N.C. 365 , 168 S.E. 397, 1933 N.C. LEXIS 410 (1933), aff'd, 291 U.S. 642, 54 S. Ct. 437, 78 L. Ed. 1040, 1934 U.S. LEXIS 528 (1934).

Method of Apportionment Not Unreasonable and Arbitrary Will Be Sustained. —

In determining the amount of income of a foreign corporation subject to taxation by a state the difficulty of making an exact apportionment is apparent and hence, when the state has adopted a method not intrinsically arbitrary, it will be sustained until proof is offered of an unreasonable and arbitrary application in particular cases. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

Evidence May Be Received to Show Arbitrariness of Method Fair on Its Face. —

When there are different taxing jurisdictions, each competent to lay a tax with respect to what lies within, and is done within, its own borders, and the question is necessarily one of apportionment, evidence may always be received which tends to show that a state has applied a method, which, albeit fair on its face, operates so as to reach profits which are in no just sense attributable to transactions within its jurisdiction. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

If Result Unjust, Additional Factors May Be Added to Formula. —

If the apportionment formula produces an unjust result, differing and additional factors may be added. Clark Equip Co. v. Johnson, 261 N.C. 269 , 134 S.E.2d 327, 1964 N.C. LEXIS 445 (1964).

Authority of Augmented North Carolina Tax Review Board to Create Special income Tax Allocation Formula for Corporate Tax Payer. —

As a special income tax allocation formula set forth in two North Carolina Tax Review Board orders was independent from and substituted G.S. 105-130.4(i) ’s otherwise applicable allocation formula for multi-state corporations, a taxpayer was not entitled to determine its tax liability by using the amended statutory formula. Philip Morris USA, Inc. v. Tolson, 176 N.C. App. 509, 626 S.E.2d 853, 2006 N.C. App. LEXIS 536 (2006).

Augmented North Carolina Tax Review Board did not violate the separation of powers doctrine by creating a special tax allocation formula for a multi-state corporation, because in so doing, it only exercised the powers expressly reserved for it by the general assembly under G.S. 105-130.4(t). Philip Morris USA, Inc. v. Tolson, 176 N.C. App. 509, 626 S.E.2d 853, 2006 N.C. App. LEXIS 536 (2006).

Use of Corporation’s Own Accounting System. —

When a complaining taxpayer establishes by evidence, clear, cogent and convincing, an inequitable result, the Tax Review Board may, in cases where the corporation keeps its books in such manner as to establish the income earned in this State, use the company’s separate bookkeeping and accounting system to ascertain that portion of the income earned in North Carolina. Clark Equip Co. v. Johnson, 261 N.C. 269 , 134 S.E.2d 327, 1964 N.C. LEXIS 445 (1964).

Purpose of Subsection(s). —

The purpose of provisions such as subsection (s) of this section was not to provide either a substitute for, or an alternative to, G.S. 105-267 [repealed], but to afford relief from the apportionment formula of this section when it operates to tax a greater portion of a corporation’s income than is reasonably attributable to business in this State. Gulf Oil Corp. v. Clayton, 267 N.C. 15 , 147 S.E.2d 522, 1966 N.C. LEXIS 969 (1966).

Taxpayer May Pay Under Protest and Sue for Refund. —

A taxpayer contending that an additional assessment of income tax is invalid is not required to proceed under provisions such as subsection (s) of this section, but may pay the tax under protest, make proper demand for refund and, upon refusal, bring suit under G.S. 105-267 . Sayles Biltmore Bleacheries, Inc. v. Johnson, 266 N.C. 692 , 147 S.E.2d 177, 1966 N.C. LEXIS 1422 (1966).

Tax Review Board Ruling Not Required Before Seeking Relief in Superior Court. —

It was not the intention of the legislature, when it amended the predecessor of this section in 1953, to require a corporation to secure a ruling from the augmented Tax Review Board before it might have the superior court determine the legality of a tax assessment against specific items of its income earned outside of North Carolina, no part of which, it contends, is allocable to North Carolina. Gulf Oil Corp. v. Clayton, 267 N.C. 15 , 147 S.E.2d 522, 1966 N.C. LEXIS 969 (1966).

No Appellate Review of Augmented Tax Review Board’s Decision. —

Appellate jurisdiction does not lie in a North Carolina superior court for an Augmented Tax Review Board’s (ATRB’s) decision; as a result, when a corporation is contesting the application of the apportionment formula before the ATRB, G.S. 105-130.4(t)(6) requires aggrieved corporations to pay the tax and bring an original civil action, thus directing them to G.S. 105-241.4 [repealed], which provides that an aggrieved corporation bypass administrative review and proceed to litigate the tax liability at issue in the superior court de novo pursuant to that court’s original jurisdiction. In re Cent. Tel. Co., 167 N.C. App. 14, 604 S.E.2d 680, 2004 N.C. App. LEXIS 2058 (2004).

Tax on Foreign Corporation Doing Exclusively Interstate Business. —

An income tax imposed under former G.S. 105-134 on a foreign corporation doing an exclusively interstate business as a motor carrier of freight did not impose a burden on interstate commerce in contravention of the United States Constitution, since no tax would be imposed if such corporation should have no net income earned in North Carolina by reason of its interstate business, and the tax was imposed only upon that portion of its net income which was reasonably attributable to its interstate business done within the borders of the State, without any discrimination against the taxpayer either in the admeasurement of the tax or the means for enforcing it, and the tax not being upon the franchise to engage in business. ET & WNC Transp. Co. v. Currie, 248 N.C. 560 , 104 S.E.2d 403, 1958 N.C. LEXIS 540 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, 1959 U.S. LEXIS 1420 (1959) (construing § 105-134 as it stood before the 1957 amendment) .

In the collection of income taxes under former G.S. 105-134 from a foreign corporation doing an exclusively interstate business in North Carolina there was no violation of the “due process of law” provision of U.S. Const., Amend. XIV or of the “law of the land” provision of N.C. Const., Art. I, § 19. ET & WNC Transp. Co. v. Currie, 248 N.C. 560 , 104 S.E.2d 403, 1958 N.C. LEXIS 540 (1958), aff'd, 359 U.S. 28, 79 S. Ct. 602, 3 L. Ed. 2d 625, 1959 U.S. LEXIS 1420 (1959) (construing § 105-134 as it stood before the 1957 amendment) .

Transactional Test For Business Income. —

Under the transactional test, to determine whether business income as defined in this section prior to the 2002 amendment was derived from a transaction or activity in the regular course of the corporation’s trade or business, one had to consider the frequency and regularity of similar transactions, the former practices of the business, and the taxpayer’s subsequent use of the income. Polaroid Corp. v. Offerman, 349 N.C. 290 , 507 S.E.2d 284, 1998 N.C. LEXIS 727 (1998), cert. denied, 526 U.S. 1098, 119 S. Ct. 1576, 143 L. Ed. 2d 671, 1999 U.S. LEXIS 3039 (1999), overruled in part, Lenox, Inc. v. Tolson, 353 N.C. 659 , 548 S.E.2d 513, 2001 N.C. LEXIS 671 (2001) (decided prior to the 2002 amendment to the definition of “business income” in this section); Union Carbide Corp. v. Offerman, 132 N.C. App. 665, 513 S.E.2d 341, 1999 N.C. App. LEXIS 256 (1999), aff'd, 351 N.C. 310 , 526 S.E.2d 167, 2000 N.C. LEXIS 2 (2000).

Functional Test for Business Income. —

Under the functional test, income was classified as business income as defined in this section prior to the 2002 amendment if it arose from the acquisition, management, and/or disposition of an asset that was used by the taxpayer in the regular course of business, and when determining whether a source of income constitutes business income under the functional test, the extraordinary nature or infrequency of the event was irrelevant. Polaroid Corp. v. Offerman, 349 N.C. 290 , 507 S.E.2d 284, 1998 N.C. LEXIS 727 (1998), cert. denied, 526 U.S. 1098, 119 S. Ct. 1576, 143 L. Ed. 2d 671, 1999 U.S. LEXIS 3039 (1999), overruled in part, Lenox, Inc. v. Tolson, 353 N.C. 659 , 548 S.E.2d 513, 2001 N.C. LEXIS 671 (2001) (decided prior to the 2002 amendment to the definition of “business income” in this section).

Prejudgment and postjudgment interest recovered by a taxpayer as part of a judgment for patent infringement was properly characterized as business income, where the patents arose out of and were created by the taxpayer’s business activities, and the interest represented compensation received in lieu of income that the taxpayer would have earned in the marketplace absent the infringement. Polaroid Corp. v. Offerman, 349 N.C. 290 , 507 S.E.2d 284, 1998 N.C. LEXIS 727 (1998), cert. denied, 526 U.S. 1098, 119 S. Ct. 1576, 143 L. Ed. 2d 671, 1999 U.S. LEXIS 3039 (1999), overruled in part, Lenox, Inc. v. Tolson, 353 N.C. 659 , 548 S.E.2d 513, 2001 N.C. LEXIS 671 (2001) (decided prior to the 2002 amendment to the definition of “business income” in this section).

In determining if income is business income under the functional test, the court considers whether there are indicia of corporate ownership of the property and whether the property is essential to completeness of the regular trade or business. Union Carbide Corp. v. Offerman, 132 N.C. App. 665, 513 S.E.2d 341, 1999 N.C. App. LEXIS 256 (1999), aff'd, 351 N.C. 310 , 526 S.E.2d 167, 2000 N.C. LEXIS 2 (2000).

Functional Test for Business Income Applied to Liquidation. —

The sale and liquidation of plaintiff’s fine jewelry manufacturing division generated nonbusiness income for the purpose of its corporate return where the plaintiff continued to manufacture and sell other consumer products but not fine jewelry and where the proceeds were not reinvested in the company to pay off debts or meet other needs but were immediately distributed to the shareholder; because the sale was a partial liquidation, the court looked to the totality of the circumstances in applying the functional test. Lenox, Inc. v. Offerman, 140 N.C. App. 662, 538 S.E.2d 203, 2000 N.C. App. LEXIS 1263 (2000), aff'd, 353 N.C. 659 , 548 S.E.2d 513, 2001 N.C. LEXIS 671 (2001) (decided prior to the 2002 amendment to the definition of “business income” in this section).

When a transaction involves a complete or partial liquidation and cessation of a company’s particular line of business, and the proceeds are distributed to shareholders rather than reinvested in the company, any gain or loss generated from that transaction is nonbusiness income under the functional test. Lenox, Inc. v. Tolson, 353 N.C. 659 , 548 S.E.2d 513, 2001 N.C. LEXIS 671 (2001), (decided prior to the 2002 amendment to the definition of “business income” in this section).

Apportionment of Income of Unitary Business. —

The fact that the corporate enterprise is a unitary one, in the sense that the ultimate gain is derived from the entire business, does not mean that for the purpose of taxation the activities which are conducted in different jurisdictions are to be regarded as component parts of a single unit so that the entire net income may be taxed in one state regardless of the extent to which it may be derived from the conduct of the enterprise in another state. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

Although a unitary business (a concern that is carrying on one kind of business, the component parts of which are too closely connected and necessary to each other to justify division or separate consideration, as independent units) may produce an income which must be allocated to two or more states in which its activities are carried on, such business may not be split up arbitrarily and conventionally in applying the tax laws; there must be some logical reference to the production of income. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

In apportioning the income of a unitary business to determine how much of it is subject to State taxation the formula used must give adequate weight to the essential elements responsible for the earning of the income. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

Lost Profit Damages Award for Patent Infringement. —

The Secretary of Revenue’s interpretation of business income to include a lost profit damages award for infringement of the taxpayer’s patents was correct, in that the recovery was an extraordinary or unusual transaction that provided the taxpayer with income from assets that were integral parts of its regular trade or business operations. Polaroid Corp. v. Offerman, 349 N.C. 290 , 507 S.E.2d 284, 1998 N.C. LEXIS 727 (1998), cert. denied, 526 U.S. 1098, 119 S. Ct. 1576, 143 L. Ed. 2d 671, 1999 U.S. LEXIS 3039 (1999), overruled in part, Lenox, Inc. v. Tolson, 353 N.C. 659 , 548 S.E.2d 513, 2001 N.C. LEXIS 671 (2001) (decided prior to the 2002 amendment to the definition of “business income” in this section).

Mutual Dependency of Interrelated Activities Sustains Apportionment Formula. —

In allocating for taxation by this State a part of the net income of a unitary business operating in this State and several other states, it is not required that its equipment appropriately employed in this State be equally productive with that employed in the other states, but the mutual dependency of the interrelated activities in furtherance of the entire business sustains an apportionment formula which results in a reasonable approximation of its income earned here, it being required only that the formula not be intrinsically arbitrary or produce an unreasonable result. VEPCO v. Currie, 254 N.C. 17 , 118 S.E.2d 155, 1961 N.C. LEXIS 373 , cert. denied, 367 U.S. 910, 81 S. Ct. 1919, 6 L. Ed. 2d 1250, 1961 U.S. LEXIS 827 (1961).

Taxation of Dividends Received by Foreign Corporation from Foreign Subsidiary. —

For purposes of taxation in a parent-subsidiary relationship, where the corporate separation is maintained and the subsidiary conducts its own business, the subsidiary, not the parent, is doing the business. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

The mere fact that a foreign corporation engaged in business in this and other states, owns a subsidiary corporation in another state, which subsidiary does no business in North Carolina and owns no property in this State but is engaged in a similar business to that of the parent corporation, does not of itself require the parent corporation to prorate the dividends received from such subsidiary to all the states in which the parent corporation does business. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

There was no legal basis for requiring a foreign corporation to pay income taxes to the State on the dividends received from its subsidiary, where the subsidiary was neither a customer nor a retail outlet of the parent corporation, and the dividends were paid out of earnings of the subsidiary no part of which was earned from business conducted or transacted in the State. American Bakeries Co. v. Johnson, 259 N.C. 419 , 131 S.E.2d 1, 1963 N.C. LEXIS 586 (1963).

Taxation of Dividends Received by Domesticated Corporation from Foreign Subsidiary. —

Where the separate entities of the domesticated parent and its foreign, dividend-paying subsidiary (engaged in a similar business outside of North Carolina) are maintained — each transacting its own business as a distinct corporation and dealing with the other as if no parent-subsidiary relation existed — North Carolina cannot tax the subsidiary’s dividends even though they are included in the parent’s ultimate gains. Gulf Oil Corp. v. Clayton, 267 N.C. 15 , 147 S.E.2d 522, 1966 N.C. LEXIS 969 (1966).

The test for determining whether income of a foreign subsidiary may be taxed in this State is not solely whether the business of a foreign subsidiary is similar to that in which the domesticated parent is engaging in North Carolina or elsewhere, or whether it has had business transactions with the parent elsewhere in the world. Conceding both similarity of businesses and intercorporate transactions outside the State, yet the dividend income which the subsidiary pays the parent cannot be constitutionally allocated to North Carolina and prorated for income taxation unless (1) it is attributable to business activities within this jurisdiction or (2) the activities of the corporations are so interrelated as to make it impossible to identify the various sources of the taxpayer’s total earnings with reasonable certainty. Gulf Oil Corp. v. Clayton, 267 N.C. 15 , 147 S.E.2d 522, 1966 N.C. LEXIS 969 (1966).

OPINIONS OF ATTORNEY GENERAL

A mortgage guaranty insurance company is not an “excluded corporation” under subdivision (a)(4). See opinion of Attorney General to Mr. W.B. Matthews, Director, Corporate Income and Franchise Tax Division, North Carolina Department of Revenue, 46 N.C. Op. Att'y Gen. 34 (1976).

§ 105-130.4A. (Effective for taxable years beginning on or after January 1, 2020) Market-based sourcing for wholesale content distributors.

  1. Definitions. —  The definitions in G.S. 105-130.4 and the following definitions apply to this section:
    1. Customer. — A person who has a direct contractual relationship with a wholesale content distributor from whom the wholesale content distributor derives gross receipts, including a business customer such as an advertiser or licensee and an individual customer that directly subscribes with the wholesale content distributor for access to film programming.
    2. Gross receipts. — The same meaning as the term “sales” in G.S. 105-130.4 .
    3. Wholesale content distributor. — A broadcast television network, a cable program network, or any television distribution company owned by, affiliated with, or under common ownership with any such network. The term does not mean or include a multichannel video programming distributor or a distributor of subscription-based Internet programming services.
  2. Market for Receipts. —  The receipts factor of a wholesale content distributor is a fraction, the numerator of which is the sum of the wholesale content distributor’s gross receipts from transactions and activity in the regular course of its trade or business from sources within the State and the denominator of which is the sum of the wholesale content distributor’s gross receipts from transactions and activity in the regular course of its trade or business everywhere. A wholesale content distributor’s receipts from transactions and activities in the regular course of its business, including advertising, licensing, and distribution activities, but excluding receipts from the sale of real property or tangible personal property, are in this State if derived from a business customer whose commercial domicile is in this State. Receipts derived from an individual customer are in this State if the billing address of the individual customer as listed in the broadcaster’s books and records is in this State.

History. 2019-246, s. 3(b).

Editor’s Note.

Session Laws 2019-246, s. 3(g), made this section effective for taxable years beginning on or after January 1, 2020.

§ 105-130.4B. (Effective for taxable years beginning on or after January 1, 2020) Market-based sourcing for banks.

  1. Definitions. —  The definitions in G.S. 105-130.4 apply to this section, and the following definitions apply to this section:
    1. Bank. — Defined in G.S. 105-130.7 B.
    2. Billing address. — The location indicated in the books and records of the taxpayer on the first day of the taxable year, or on the date in the taxable year when the customer relationship began, as the address where any notice, statement, or billing relating to the customer’s account is mailed.
    3. Borrower, cardholder, or payor located in this State. — A borrower, credit cardholder, or payor whose billing address is in this State.
    4. Card issuer’s reimbursement fee. — The fee a taxpayer receives from a merchant’s bank because one of the persons to whom the taxpayer has issued a credit, debit, or similar type of card has charged merchandise or services to the card.
    5. Credit card. — A card, or other means of providing information, that entitles the holder to charge the cost of purchases, or a cash advance, against a line of credit.
    6. Debit card. — A card, or other means of providing information, that enables the holder to charge the cost of purchases, or a cash withdrawal, against the holder’s bank account or a remaining balance on the card.
    7. Loan. — Any extension of credit resulting from direct negotiations between the taxpayer and its customer, and/or the purchase, in whole or in part, of such an extension of credit from another. The term includes participations, syndications, and leases treated as loans for federal income tax purposes.
    8. Loan secured by real property. — A loan or other obligation of which fifty percent (50%) or more of the aggregate value of the collateral used to secure the loan or other obligation, when valued at fair market value as of the time the original loan or obligation was incurred, was real property.
    9. Merchant discount. — The fee, or negotiated discount, charged to a merchant by the taxpayer for the privilege of participating in a program whereby a credit, debit, or similar type of card is accepted in payment for merchandise or services sold to the cardholder, net of any cardholder chargeback and unreduced by any interchange transaction or issuer reimbursement fee paid to another for charges or purchases made by its cardholder.
    10. Participation. — An extension of credit in which an undivided ownership interest is held on a prorated basis in a single loan or pool of loans and related collateral. In a loan participation, the credit originator initially makes the loan and then subsequently resells all or a portion of it to other lenders. The participation may or may not be known to the borrower.
    11. Payor. — The person who is legally responsible for making payment to the taxpayer.
    12. Real property owned. — Real property (i) on which the taxpayer may claim depreciation for federal income tax purposes or (ii) to which the taxpayer holds legal title and on which no other person may claim depreciation for federal income tax purposes or could claim depreciation if subject to federal income tax. Real property does not include coin, currency, or property acquired in lieu of or pursuant to a foreclosure.
    13. Syndication. — An extension of credit in which two or more persons fund and each person is at risk only up to a specified percentage of the total extension of credit or up to a specified dollar amount.
    14. Tangible personal property owned. — Tangible personal property (i) on which the taxpayer may claim depreciation for federal income tax purposes or (ii) to which the taxpayer holds legal title and on which no other person may claim depreciation for federal income tax purposes could claim deprecation if subject to federal income tax. Tangible personal property does not include coin, currency, or property acquired in lieu of or pursuant to a foreclosure.
    15. Transportation property. — Vehicles and vessels capable of moving under their own power as well as any equipment or containers attached to such property. Examples of transportation property include aircraft, trains, water vessels, motor vehicles, rolling stock, barges, and trailers.
  2. General Rule. —  The receipts factor of a bank is a fraction, the numerator of which is the total receipts of the taxpayer in this State during the income year, and the denominator of which is the total receipts of the taxpayer everywhere during the income year. The method of calculating receipts for purposes of the denominator is the same as the method used in determining receipts for purposes of the numerator. The receipts factor includes only those receipts described herein that are apportionable income for the taxable year. Notwithstanding any other provision under this Part, the receipts from the following are excluded from both the numerator and the denominator of the receipts factor:
    1. Receipts from a casual sale of property.
    2. Receipts exempt from taxation.
    3. The portion of receipts realized from the sale or maturity of securities or other obligations that represents a return of principal.
    4. Receipts in the nature of dividends subtracted under G.S. 105-130.5(b)(3a) and (3b) and dividends excluded for federal tax purposes.
    5. The portion of receipts from financial swaps and other similar financial derivatives that represent the notional principal amount that generates the cash flow traded in the swap agreement.
  3. Receipts from the Sale, Lease, or Rental of Real Property. —  The numerator of the receipts factor includes receipts from the sale, lease, or rental of real property owned by the taxpayer if the property is located within this State or receipts from the sublease of real property if the property is located within this State.
  4. Receipts from the Sale, Lease, or Rental of Tangible Personal Property. —  The method for calculating receipts from the sale, lease, or rental of tangible personal property is as follows:
    1. Tangible personal property. —  Except as provided in subdivision (2) of this subsection, the numerator of the receipts factor includes receipts from the sale, lease, or rental of tangible personal property owned by the taxpayer if the property is located within this State when it is first placed in service by the lessee.
    2. Transportation property. —  Receipts from the lease or rental of transportation property owned by the taxpayer are included in the numerator of the receipts factor to the extent that the property is used in this State. The extent an aircraft will be deemed to be used in this State and the amount of receipts that is to be included in the numerator of this State’s receipts factor is determined by multiplying all the receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the number of landings of the aircraft in this State and the denominator of which is the total number of landings of the aircraft. If the extent of the use of any transportation property within this State cannot be determined, then the property will be deemed to be used wholly in the state in which the property has its principal base of operations. A motor vehicle will be deemed to be used wholly in the state in which it is registered.
  5. Interest, Fees, and Penalties from Loans Secured by Real Property. —  The numerator of the receipts factor includes interest, fees, and penalties from loans secured by real property if the property is located within this State. If the property is located both within this State and one or more other states, the receipts described in this subsection are included in the numerator of the receipts factor if more than fifty percent (50%) of the fair market value of the real property is located within this State. If more than fifty percent (50%) of the fair market value of the real property is not located within any one state, then the receipts described in this subsection are included in the numerator of the receipts factor if the borrower is located in this State. The determination of whether the real property securing a loan is located within this State is made as of the time the original agreement was made and any and all subsequent substitutions of collateral are disregarded.
  6. Interest, Fees, and Penalties from Loans Not Secured by Real Property. —  The numerator of the receipts factor includes interest, fees, and penalties from loans not secured by real property if the borrower is located in this State.
  7. Net Gains from the Sale of Loans. —  The numerator of the receipts factor includes net gains from the sale of loans. Net gains from the sale of loans include income recorded under the coupon stripping rules of section 1286 of the Code. The amount of net gains from the sale of loans that is included in the numerator is determined as follows:
    1. Secured by real property. —  The amount of net gains, but not less than zero, from the sale of loans secured by real property is determined by multiplying the net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (e) of this section, and the denominator of which is the total amount of interest, fees, and penalties from loans secured by real property.
    2. Not secured by real property. —  The amount of net gains, but not less than zero, from the sale of loans not secured by real property is determined by multiplying the net gains by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (f) of this section, and the denominator of which is the total amount of interest, fees, and penalties from loans not secured by real property.
  8. Receipts from Interest, Fees, and Penalties from Cardholders. —  The numerator of the receipts factor includes interest, fees, and penalties charged to credit, debit, or similar cardholders, including annual fees and overdraft fees, if the cardholder is located in this State.
  9. Receipts from ATM Fees. —  The numerator of the receipts factor includes receipts from fees from the use of an ATM owned or rented by the taxpayer, if the ATM is located in this State. The receipts factor includes all ATM fees that are not forwarded directly to another bank. Receipts from ATM fees that are not sourced under this subsection are sourced pursuant to subsection (l) of this section.
  10. Net Gains from the Sale of Credit Card Receivables. —  The numerator of the receipts factor includes net gains, but not less than zero, from the sale of credit card receivables multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to subsection (h) of this section, and the denominator of which is the taxpayer’s total amount of interest, fees, and penalties charged to cardholders.
  11. Miscellaneous Receipts. —  The numerator of the receipts factor includes all of the following:
    1. Card issuer’s reimbursement fees. —  Receipts from card issuer’s reimbursement fees if the payor is located in this State.
    2. Receipts from merchant’s discount. —  Receipts from a merchant discount if the payor is located in this State.
    3. Loan servicing fees. —  Receipts from loan servicing fees if the payor is located in this State.
    4. Receipts from services. —  Receipts from services not otherwise apportioned under this section if the payor is located in this State.
    5. Receipts from investment assets and activity and trading assets and activity. —  Receipts from one or more of the following:
      1. Interest and dividends from investment assets and activities and trading assets and activities if the payor is located in this State.
      2. Net gains and other income, but not less than zero, from investment assets and activities and trading assets and activities multiplied by a fraction, the numerator of which is the amount included in the numerator of the receipts factor pursuant to sub-subdivision a. of this subdivision, and the denominator of which is the taxpayer’s total amount of interest and dividends from investment assets and activities and trading assets and activities.
  12. All Other Receipts. —  All other receipts not specifically enumerated in this section are included in the numerator of the receipts factor if the payor is located in this State.

History. 2019-246, s. 3(c).

Editor’s Note.

Session Laws 2019-246, s. 3(g), made this section effective for taxable years beginning on or after January 1, 2020.

§ 105-130.5. Adjustments to federal taxable income in determining State net income.

  1. The following additions to federal taxable income shall be made in determining State net income:
    1. Taxes based on or measured by net income by whatever name called and excess profits taxes.
    2. Interest paid in connection with income exempt from taxation under this Part.
    3. The contributions deduction allowed by the Code.
    4. Interest income earned on bonds and other obligations of other states or their political subdivisions, less allowable amortization on any bond acquired on or after January 1, 1963.
    5. The amount by which gains have been offset by the capital loss carryover allowed under the Code. All gains recognized on the sale or other disposition of assets must be included in determining State net income or loss in the year of disposition.
    6. Any amount allowed as a net operating loss deduction under the Code.
    7. Repealed by Session Laws 2001-327, s. 3(a), effective for taxable years beginning on or after January 1, 2001.
    8. Repealed by Session Laws 1987, c. 778, s. 2.
    9. Payments to or charges by a parent, subsidiary or affiliated corporation in excess of fair compensation in all intercompany transactions of any kind whatsoever pursuant to the Revenue Laws of this State.
    10. The total amounts allowed under this Chapter during the taxable year as a credit against the taxpayer’s income tax. A corporation that apportions part of its income to this State shall make the addition required by this subdivision after it determines the amount of its income that is apportioned and allocated to this State and shall not apply to a credit taken under this Chapter the apportionment factor used by it in determining the amount of its apportioned income.
    11. The amount by which the percentage depletion allowance allowed by sections 613 and 613A of the Code for mines, oil and gas wells, and other natural deposits exceeds the cost depletion allowance for these items under the Code, except as otherwise provided herein. This subdivision does not apply to depletion deductions for clay, gravel, phosphate rock, lime, shells, stone, sand, feldspar, gemstones, mica, talc, lithium compounds, tungsten, coal, peat, olivine, pyrophyllite, and other solid minerals or rare earths extracted from the soil or waters of this State. Corporations required to apportion income to North Carolina shall first add to federal taxable income the amount of all percentage depletion in excess of cost depletion that was subtracted from the corporation’s gross income in computing its federal income taxes and shall then subtract from the taxable income apportioned to North Carolina the amount by which the percentage depletion allowance allowed by sections 613 and 613A of the Code for solid minerals or rare earths extracted from the soil or waters of this State exceeds the cost depletion allowance for these items.
    12. The amount allowed under the Code for depreciation or as an expense in lieu of depreciation for a utility plant acquired by a natural gas local distribution company, to the extent the plant is included in the company’s rate base at zero cost in accordance with G.S. 62-158 .
    13. Repealed by Session Laws 2001-427, s. 4(b), effective for taxable years beginning on or after January 1, 2002.
    14. Royalty payments required to be added by G.S. 105-130.7 A, to the extent deducted in calculating federal taxable income.
    15. through (15b) Repealed by Session Laws 2013-414, s. 34(a), effective August 23, 2013.
    16. The amount excluded from gross income under Subchapter R of Chapter 1 of the Code.
    17. (Repealed effective for taxable years beginning on or after January 1, 2018.)  The amount excluded from gross income under section 199 of the Code.
    18. Repealed by Session Laws 2006-220, s. 1, effective for taxable years beginning on and after January 1, 2007.
    19. The dividend paid deduction allowed under the Code to a captive REIT, as defined in G.S. 105-130.12 .
    20. Repealed by Session Laws 2018-5, s. 38.2(d), effective June 12, 2018.
    21. Repealed by Session Laws 2020-58, s. 5.3, effective June 30, 2020.
    22. The amount allowed as a deduction under section 163(e)(5)(F) of the Code for an original issue discount on an applicable high yield discount obligation.
    23. , (23a) Repealed by Session Laws 2013-414, s. 34(a), effective August 23, 2013.
    24. The amount required to be added under G.S. 105-130.5 B when the State decouples from federal accelerated depreciation and expensing.
    25. The amount of net interest expense to a related member as determined under G.S. 105-130.7 B.
    26. The amount of gain that would be included for federal income tax purposes without regard to section 1400Z-2(a) of the Code. The adjustment made in this subsection does not result in a difference in basis of the affected assets for State and federal income tax purposes. The purpose of this subdivision is to decouple from the deferral of gains reinvested into an Opportunity Fund available under federal law.
    27. The amount of gain that would be included in the taxpayer’s federal taxable income but for the step-up in basis under section 1400Z-2(c) of the Code. The purpose of this subdivision is to decouple from the exclusion of gains from the sale or exchange of an investment in an Opportunity Fund available under federal law.
    28. The amount deducted under section 250 of the Code.
    29. The amount deducted under section 965(c) of the Code.
    30. Payments made to an affiliate or subsidiary that is not subject to tax under this Article pursuant to the exceptions for critical infrastructure disaster relief provided under G.S. 166A-19.70 A, to the extent the payments are deducted in determining federal taxable income. The definitions and provisions of G.S. 166A-19.70 A apply to this subdivision.
    31. For taxable years 2019 and 2020, a taxpayer must add an amount equal to the amount by which the taxpayer’s interest expense deduction under section 163(j) of the Code exceeds the interest expense deduction that would have been allowed under the Internal Revenue Code as enacted as of January 1, 2020, as calculated on a separate entity basis. An add-back under this subdivision is not required to the extent the amount was required to be added back under another provision of this subsection. The purpose of this subdivision is to decouple from the modification of limitation on business interest allowed under section 2306 of the CARES Act.
    32. For taxable years beginning on or after January 1, 2023, the amount of any expense deducted under the Code to the extent the expense is allocable to income that is either wholly excluded from gross income or wholly exempt from the taxes imposed by this Part.
  2. The following deductions from federal taxable income shall be made in determining State net income:
    1. Interest upon the obligations of the United States or its possessions, to the extent included in federal taxable income: Provided, interest upon the obligations of the United States shall not be an allowable deduction unless interest upon obligations of the State of North Carolina or any of its political subdivisions is exempt from income taxes imposed by the United States. (1a) Interest upon the obligations of any of the following, net of related expenses, to the extent included in federal taxable income:
      1. This State, a political subdivision of this State, or a commission, an authority, or another agency of this State or of a political subdivision of this State.
      2. A nonprofit educational institution organized or chartered under the laws of this State.
      3. A hospital authority created under G.S. 131E-17 .
    2. Payments received from a parent, subsidiary or affiliated corporation in excess of fair compensation in intercompany transactions which in the determination of the net income or net loss of such corporation were not allowed as a deduction under the Revenue Laws of this State.
    3. Repealed by Session Laws 2003-349, s. 1.1, effective January 1, 2003.

      (3a) Dividends treated as received from sources outside the United States as determined under section 862 of the Code, net of related expenses, to the extent included in federal taxable income. Notwithstanding the proviso in subdivision (c)(3) of this section, the netting of related expenses shall be calculated in accordance with subdivision (c)(3) of this section.

      (3b) Any amount included in federal taxable income under section 78, 951, 951A, or 965 of the Code, net of related expenses.

    4. Any unused portion of a net economic loss as allowed under G.S. 105-130.8 A(e). This subdivision expires for taxable years beginning on or after January 1, 2030.

      (4a) A State net loss as allowed under G.S. 105-130.8 A. A corporation may deduct its allocable and apportionable State net loss only from total income allocable and apportionable to this State.

    5. Contributions or gifts made by any corporation within the income year to the extent provided under G.S. 105-130.9 .
    6. , (7)Repealed by Session Laws 2015-241, s. 32.13(c), (d), effective for taxable years beginning on or after January 1, 2016.

      (8) The amount of losses realized on the sale or other disposition of assets not allowed under section 1211(a) of the Code. All losses recognized on the sale or other disposition of assets must be included in determining State net income or loss in the year of disposition.

      (9) With respect to a shareholder of a regulated investment company, the portion of undistributed capital gains of such regulated investment company included in such shareholder’s federal taxable income and on which the federal tax paid by the regulated investment company is allowed as a credit or refund to the shareholder under section 852 of the Code.

      (10) Repealed by Session Laws 1987, c. 778, s. 2.

      (11) If a deduction for an ordinary and necessary business expense was required to be reduced or was not allowed under the Code because the corporation claimed a federal tax credit against its federal income tax liability for the income year in lieu of a deduction, the amount by which the deduction was reduced and the amount of the deduction that was disallowed.

      (12) Reasonable expenses, in excess of deductions allowed under the Code, paid for reforestation and cultivation of commercially grown trees; provided, that this deduction shall be allowed only to those corporations in which the real owners of all the shares of such corporation are natural persons actively engaged in the commercial growing of trees, or the spouse, siblings, or parents of such persons. Provided, further, that in no case shall a corporation be allowed a deduction for the same reforestation or cultivation expenditure more than once.

      (13) Repealed by Session Laws 2015-241, s. 32.13(c), (d), effective for taxable years beginning on or after January 1, 2016.

      (14) The amount by which the basis of a depreciable asset is required to be reduced under the Code for federal tax purposes because of a tax credit allowed against the corporation’s federal income tax liability or because of a grant allowed under section 1603 of the American Recovery and Reinvestment Tax Act of 2009, P.L. 111-3. This deduction may be claimed only in the year in which the Code requires that the asset’s basis be reduced. In computing gain or loss on the asset’s disposition, this deduction shall be considered as depreciation.

      (15) Repealed by Session Laws 2015-241, s. 32.13(c), (d), effective for taxable years beginning on or after January 1, 2016.

      (16) The amount of natural gas expansion surcharges collected by a natural gas local distribution company under G.S. 62-158 .

      (17) To the extent included in federal taxable income, 911 charges imposed under G.S. 143B-1403 and remitted to the 911 Fund under that section.

      (18), (19)Repealed by Session Laws 2015-241, s. 32.13(c), (d), effective for taxable years beginning on or after January 1, 2016.

      (20) Royalty payments received from a related member who added the payments to income under G.S. 105-130.7 A for the same taxable year.

      (21) through (21b) Repealed by Session Laws 2013-414, s. 34(a), effective August 23, 2013.

      (22) Repealed by Session Laws 2015-241, s. 32.13(c), (d), effective for taxable years beginning on or after January 1, 2016.

      (23) A dividend received from a captive REIT, as defined in G.S. 105-130.12 .

      (24) Expired.

      (25) Repealed by Session Laws 2020-58, s. 5.3, effective June 30, 2020.

      (26), (26a) Repealed by Session Laws 2013-414, s. 34(a), effective August 23, 2013.

      (27) The amount allowed as a deduction under G.S. 105-130.5 B as a result of an add-back for federal accelerated depreciation and expensing.

      (28) The amount of qualified interest expense to a related member as determined under G.S. 105-130.7 B.

      (29) To the extent included in federal taxable income, the amount paid to the taxpayer during the taxable year from the State Emergency Response and Disaster Relief Reserve Fund for hurricane relief or assistance, but not including payments for goods or services provided by the taxpayer.

      (30) The amount of gain included in the taxpayer’s federal taxable income under section 1400Z-2(a) of the Code to the extent the same income was included in the taxpayer’s State net income in a prior taxable year under subdivision (a)(26) of this section. The purpose of this subdivision is to prevent double taxation of income the taxpayer was previously required to include in the calculation of State net income.

      (31) (Effective for taxable years beginning on or after January 1, 2019) To the extent included in federal taxable income, the amount received by a taxpayer as an economic incentive pursuant to G.S. 143B-437.012 or Part 2G or Part 2H of Article 10 of Chapter 143B of the General Statutes.

      (31a) (Effective for taxable years beginning on or after January 1, 2021, and applicable to amounts received by a taxpayer on or after that date.) To the extent included in federal taxable income, the amount received by a taxpayer under the Business Recovery Grant Program.

      (32) A taxpayer who made an addition under subdivision (a)(31) of this section may deduct twenty percent (20%) of the addition that was not otherwise disallowed by G.S. 105-130.7B in each of the first five taxable years beginning tax year 2021.

  3. The following other adjustments to federal taxable income shall be made in determining State net income:
    1. In determining State net income, no deduction shall be allowed for annual amortization of bond premiums applicable to any bond acquired prior to January 1, 1963. The amount of premium paid on any such bond shall be deductible only in the year of sale or other disposition.
    2. Federal taxable income must be increased or decreased to account for any difference in the amount of depreciation, amortization, or gains or losses applicable to property which has been depreciated or amortized by use of a different basis or rate for State income tax purposes than used for federal income tax purposes prior to the effective date of this Part.
    3. No deduction is allowed for any direct or indirect expenses related to income not taxed under this Part; provided, no adjustment shall be made under this subsection for adjustments addressed in G.S. 105-130.5(a) and (b). For dividends received that are not taxed under this Part, the adjustment for expenses may not exceed an amount equal to fifteen percent (15%) of the dividends.
    4. The taxpayer shall add to federal taxable income the amount of any recovery during the taxable year not included in federal taxable income, to the extent the taxpayer’s deduction of the recovered amount in a prior taxable year reduced the taxpayer’s tax imposed by this Part but, due to differences between the Code and this Part, did not reduce the amount of the taxpayer’s tax imposed by the Code. The taxpayer may deduct from federal taxable income the amount of any recovery during the taxable year included in federal taxable income under section 111 of the Code, to the extent the taxpayer’s deduction of the recovered amount in a prior taxable year reduced the taxpayer’s tax imposed by the Code but, due to differences between the Code and this Part, did not reduce the amount of the taxpayer’s tax imposed by this Part.
    5. Repealed by Session Laws 2015-241, s. 32.13(c), (d), effective for taxable years beginning on or after January 1, 2016.
  4. Repealed by Session Laws 1987, c. 778, s. 3.
  5. Notwithstanding any other provision of this section, any recapture of depreciation required under the Code must be included in a corporation’s State net income to the extent required for federal income tax purposes.
  6. Expired.

History. 1967, c. 1110, s. 3; 1969, cc. 1113, 1124; 1971, c. 820, s. 1; c. 1206, s. 1; 1973, c. 1287, s. 4; 1975, c. 764, s. 4; 1977, 2nd Sess., c. 1200, s. 1; 1979, c. 179, s. 2; c. 801, s. 32; 1981, c. 704, s. 20; c. 855, s. 1; 1983, c. 61; c. 713, ss. 70-73, 82, 83; 1985, c. 720, s. 1; c. 791, s. 43; 1985 (Reg. Sess., 1986), c. 825; 1987, c. 89; c. 637, s. 1; c. 778, ss. 2, 3; c. 804, s. 3; 1991, c. 598, ss. 3, 10; 1991 (Reg. Sess., 1992), c. 857, s. 1; 1993 (Reg. Sess., 1994), c. 745, ss. 4, 5; 1995, c. 509, s. 50; 1996, 2nd Ex. Sess., c. 14, ss. 4, 10; 1997-439, s. 1; 1998-98, ss. 1(c), 4, 69; 1998-158, s. 5; 1998-171, s. 7; 1999-333, s. 2; 1999-337, s. 1; 1999-463, Ex. Sess., s. 4.6(b); 2000-140, s. 93.1(a); 2000-173, s. 19(c); 2001-327, ss. 1(d), (e), 3(a), (b); 2001-424, s. 12.2(b); 2001-427, ss. 4(b), 10(a); 2002-72, s. 14; 2002-126, ss. 30C.2(a), 30C.2(c); 2002-136, ss. 1, 4; 2003-284, s. 37A.3; 2003-349, s. 1.1; 2005-1, s. 5.7(b); 2005-276, ss. 35.1(b), 39.1(e); 2006-220, s. 1; 2007-323, ss. 31.18(a), (b); 2007-383, s. 5; 2007-397, s. 13(b); 2008-107, ss. 28.1(c), (d), (g), 28.25(b), 28.27(a); 2008-134, s. 2(b); 2009-451, s. 27A.6(c), (d); 2010-89, s. 1; 2011-5, ss. 2(a), (b), 3(a), (b); 2011-330, s. 11; 2012-79, s. 1.1; 2013-10, ss. 2(a), (b), 3(a), (b); 2013-414, s. 34(a); 2014-3, ss. 1.1(a), 14.3; 2015-6, s. 2.7; 2015-241, ss. 7A.3, 32.13(c), (d); 2016-5, ss. 1.9(a), 5.3(b); 2018-5, ss. 5.6(k), 38.1(b), (e), 38.2(d); 2019-6, ss. 2.1, 2.2; 2019-187, s. 1(g); 2019-237, s. 2(a); 2020-58, ss. 1(c), 5.3; 2021-180, ss. 34.3B(a), 42.4(d), 42.13B(b), (c).

Editor’s Note.

For the Hurricane Floyd Recovery Fund, see the Hurricane Floyd Recovery Act, Session Laws 1999-463.

Session Laws 1999-463, s. 4.5 and Session Laws 2005-1, s. 5.6, provide that a written statement of State and federal income tax treatment be included with the disbursement of funds or property for hurricane relief or assistance by each agency disbursing same.

Session Laws 2005-1, s. 1, provides that 2005-1 shall be known as “The Hurricane Recovery Act of 2005.”

For Session Laws 2005-1, ss. 2.1 and 4, containing provisions for legislative findings regarding critical hurricane recovery needs not met by existing state and federal programs and funds, and establishment of the Disaster Relief Reserve Fund, see note at G.S. 143-1 .

Session Laws 2007-323, s. 31.18(a) and Session Laws 2007-397, s. 13(b) both enacted subdivisions designated as subdivision (a)(19). The subdivision enacted by Session Laws 2007-397 has been renumbered as subdivision (a)(20) at the direction of the Revisor of Statutes.

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

Session Laws 2011-5, ss. 2(a), (b), and 3(a), (b), as amended by Session Laws 2011-330, s. 11, which added subdivisions (a)(15b), (a)(23), (b)(21b), and (b)(26), was applicable to the estates of decedents dying on or after January 1, 2011.

Session Laws 2013-10, s. 11, provides: “Except as otherwise provided, this act is effective when it becomes law [March 13, 2013] and applies to the estates of decedents dying on or after January 1, 2012. Notwithstanding Section 1 of this act, any amendments to the Internal Revenue Code enacted after January 1, 2012, that increase North Carolina taxable income for the 2012 taxable year become effective for taxable years beginning on or after January 1, 2013.”

Session Laws 2015-241, 7A.3, provides in part: “The Revisor of Statutes may conform names and titles changed by this section and may correct statutory references as required by this section throughout the General Statutes. In making the changes authorized by this section, the Revisor may also adjust subject and verb agreement and the placement of conjunctions.” Pursuant to this authority, “ G.S. 143B-1403 ” was substituted for “ G.S. 62A-43” in subdivision (b)(17) 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. 33.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2015-2017 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2015-2017 fiscal biennium.”

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

Subdivision (b)(30) was enacted by Session Laws 2018-5, s. 38.1(b), as subdivision (b)(29). It was renumbered at the direction of the Revisor of Statutes.

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 subdivision (a)(30), as added by Session Laws 2019-187, s. 1(g), effective August 1, 2019, and applicable to disaster declarations on or after that date.

Session Laws 2019-237, s. 2(c), made subdivision (b)(31), as added by Session Laws 2019-237, s. 2(a), effective for taxable years beginning on or after January 1, 2019, and applicable to amounts received by a taxpayer on or after that date.

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.”

Session Laws 2021-180, s. 34.3B(c), made subdivision (b)(31a) of this section, as added by Session Laws 2021-180, s. 34.3B(a), effective for taxable years beginning on or after January 1, 2021, and applicable to amounts received by a taxpayer on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2001-427, s. 4(b), effective for taxable years beginning on or after January 1, 2002, repealed subdivision (a)(13), relating to income excluded because attributed under section 925 of the Code to a foreign sales corporation.

Session Laws 2001-427, s. 10(a), effective for taxable years beginning on or after January 1, 2001, in this section as enacted by Session Laws 2001-327, inserted “net of related expenses” in subdivisions (b)(3a) and (b)(3b).

Session Laws 2003-284. s. 37A.3, effective June 30, 2003, in subdivision (a)(15), twice substituted “special accelerated depreciation” for “thirty percent (30%) accelerated depreciation,” changed the applicable percentage for 2004 to “70%,” and added an applicable percentage of “0” for “2005 and thereafter.”

Session Laws 2003-349, s. 1.1, effective for taxable years beginning on and after January 1, 2003, repealed subdivision (b)(3).

Session Laws 2005-1, s. 5.7(b), effective for taxable years beginning on or after January 1, 2004, added subdivision (b)(22).

Session Laws 2005-276, s. 35.1(b), effective for taxable years beginning on or after January 1, 2005, added subdivisions (a)(16), (a)(17).

Session Laws 2005-276, s. 39.1(e), effective for taxable years beginning on or after January 1, 2005, and applicable to qualifying expenses incurred on or after July 1, 2005, added subdivision (a)(18).

Session Laws 2006-220, s. 1, effective for taxable years beginning on and after January 1, 2007, repealed subdivision (a)(18), which read: “To the extent not included in federal taxable income, the amount of qualifying expenses for which the taxpayer claims a credit under G.S. 105-130.47 .”

Session Laws 2007-323, s. 31.18(a), (b), effective January 1, 2007, and effective for taxable years beginning on or after January 1, 2007, added subdivisions (a)(19) and subdivision (b)(23).

Session Laws 2007-383, s. 5, effective January 1, 2008, rewrote subdivision (b)(17).

Session Laws 2007-397, s. 13(b), effective for taxable years beginning on or after January 1, 2008, added the subdivision designated herein as subdivision (a)(20).

Session Laws 2008-107, ss. 28.1(c), (d) and (g), 28.25(b), and 28.27(a), effective for taxable years beginning on or after January 1, 2008, in subdivision (a)(15), added “For taxable years 2002-2005” at the beginning, and deleted “and thereafter” following “2005” in the table; added subdivision (a)(15a); in subdivision (a)(20), inserted “or a unit of State or local government”; and added subdivisions (b)(21a) and (b)(24).

Session Laws 2008-134, s. 2(b), effective July 28, 2008, added the last sentence in subdivision (b)(11).

Session Laws 2009-451, s. 27A.6(c) and (d), effective for taxable years beginning on or after January 1, 2009, in subdivision (a)(6), substituted “Any amount allowed as a net operating loss deduction under the Code” for “The net operating loss deduction allowed by the Code; and”; rewrote subdivision (a)(15a); added subdivisions (a)(21) and (a)(22); rewrote subdivision (b)(21a); and added subdivision (b)(25).

Session Laws 2010-89, s. 1, effective for taxable years beginning on or after January 1, 2011, added the second sentence in subdivision (a)(10).

Session Laws 2011-5, ss. 2(a), (b), and 3(a), (b), as amended by Session Laws 2011-330, s. 11, effective March 17, 2011, and applicable to the estates of decedents dying on or after January 1, 2011, added subdivisions (a)(15b), (a)(23), (b)(21b), and (b)(26).

Session Laws 2012-79, s. 1.1, effective June 26, 2012, added “or because of a grant allowed under section 1603 of the American Recovery and Reinvestment Tax Act of 2009, P.L. 111-3” at the end of the first sentence in subdivision (b)(14).

Session Laws 2013-10, ss. 2(a), (b), and 3(a), (b), substituted “through 2013” for “through 2012” in the first sentence of subdivision (a)(15b); added subdivision (a)(23a); added the last sentence in subdivision (b)(21b); and added subdivision (b)(26a). For effective date and applicability, see editor’s note.

Session Laws 2013-414, s. 34(a), effective August 23, 2013, deleted subdivisions (a)(15), (a)(15a), (a)(15b), (a)(23), (a)(23a), (b)(21), (b)(21a), (b)(21b), (b)(26), and (b)(26a); and added subdivisions (a)(24) and (b)(27).

Session Laws 2014-3, s. 1.1(a), as amended by Session Laws 2015-6, s. 2.7, effective for taxable years beginning on or after January 1, 2015, rewrote subdivision (b)(4) and added subdivision (b)(4a).

Session Laws 2014-3, s. 14.3, effective May 29, 2014, inserted “and apportionable” twice in the second sentence of subdivision (b)(4).

Session Laws 2015-6, s. 2.7, effective April 9, 2015, rewrote subdivision (b)(4) and added subdivision (b)(4a).

Session Laws 2015-241, s. 7A.3, effective September 18, 2015, substituted “G.S. 143B-1403” for “G.S. 62A-43” in subdivision (b)(17).

Session Laws 2015-241, s. 32.13(c), effective for taxable years beginning on or after January 1, 2016, repealed subdivisions (b)(6), (7), (12), (13), (15), (18), (19), and (22), and (c)(5).

Session Laws 2015-241, s. 32.13(c), (d), effective for taxable years beginning on or after January 1, 2016, added subdivision (a)(25); in subsection (b), repealed subdivisions (6), (7), (12), (13), (15), (18), (19), and (22), substituted “this section” for “this section and G.S. 105-130.6 A” at the end of subdivision (3a), deleted the former last sentence in subdivision (11), which read: “This deduction is allowed only to the extent that a similar credit is not allowed by this Chapter for the amount.”, and added subdivision (28); and, in subsection (c), in subdivision (3), deleted the former second sentence, which read: “G.S. 105-130.6A applies to the adjustment for expenses related to dividends received that are not taxed under this Part”, and added the last sentence, and repealed subdivision (5).

Session Laws 2016-5, s. 1.9(a), effective for taxable years beginning on or after January 1, 2009, deleted the former last sentence in subdivision (b)(25), which read: “This deduction applies to taxable years beginning on or after January 1, 2014.”

Session Laws 2016-5, s. 5.3(b), effective May 11, 2016, added sub-subdivision (b)(1a)c.

Session Laws 2018-5, s. 5.6(k), effective for taxable years beginning on or after January 1, 2017, added subdivision (b)(29).

Session Laws 2018-5, s. 38.1(b), effective June 12, 2018, added subdivisions (a)(26) through (a)(29); in subdivision (b)(3b), substituted “section 78, 951, 951A, or 965” for “section 78 or section 951”; and added subdivision (b)(29). For renumbering of subdivision, see editor’s note.

Session Laws 2018-5, s. 38.1(e), effective for taxable years beginning on or after January 1, 2018, repealed subdivision (a)(17).

Session Laws 2018-5, s. 38.2(d), effective June 12, 2018, in subdivision (a)(10), deleted the former second sentence, which read: “This subdivision does not apply to a credit allowed under G.S. 105-130.47 .”; and deleted subdivision (a)(20), which read: “The amount of a donation made to a nonprofit organization or a unit of State or local government for which a credit is claimed under G.S. 105-129.16H.”

Session Laws 2019-6, ss. 2.1, 2.2, effective March 20, 2019, substituted “1400Z-2(a)” for “1400Z-2(b)” in subdivision (a)(26); and substituted “State net” for “federal taxable” in subdivision (b)(30).

Session Laws 2019-187, s. 1(g), added subdivision (a)(30). For effective date and applicability, see editor’s note.

Session Laws 2019-237, s. 2(a), added subdivision (b)(31). For effective date and applicability, see editor’s note.

Session Laws 2020-58, s. 1(c), effective June 30, 2020, added subdivisions (a)(31) and (a)(32).

Session Laws 2020-58, s. 5.3, effective June 30, 2020, deleted subdivisions (a)(21) and (b)(25).

Session Laws 2021-180, s. 34.3B(c), added subdivision (b)(31a). For effective date and applicability, see editor's note.

Session Laws 2021-180, ss. 42.4(d) and 42.13B(b) and (c), effective November 18, 2021, added the second sentence in subdivision (a)(31); rewrote subdivision (a)(32); and added subdivision (b)(32).

Legal Periodicals.

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

CASE NOTES

Market Discount Income on Bonds Not Deductible. —

Business court correctly concluded that the market discount income that the taxpayer received on the discounted bonds was not deductible for North Carolina corporate income tax purposes. Fid. Bank v. N.C. Dep't of Revenue, 370 N.C. 10 , 803 S.E.2d 142, 2017 N.C. LEXIS 557 (2017).

CASE NOTES

Market Discount Income on Bonds Not Deductible. —

Business court correctly concluded that the market discount income that the taxpayer received on the discounted bonds was not deductible for North Carolina corporate income tax purposes. Fid. Bank v. N.C. Dep't of Revenue, 370 N.C. 10 , 803 S.E.2d 142, 2017 N.C. LEXIS 557 (2017).

§ 105-130.5A. Secretary’s authority to adjust net income or require a combined return.

  1. Notice. —  When the Secretary has reason to believe that any corporation so conducts its trade or business in such manner as to fail to accurately report its State net income properly attributable to its business carried on in the State through the use of transactions that lack economic substance or are not at fair market value between members of an affiliated group of entities, the Secretary may, upon written notice to the corporation, require any information reasonably necessary to determine whether the corporation’s intercompany transactions have economic substance and are at fair market value and for the accurate computation of the corporation’s State net income properly attributable to its business carried on in the State. The corporation must provide the information requested within 90 days of the date of the notice.
  2. Adjust Net Income. —  If upon review of the information provided, the Secretary finds as a fact that the corporation’s intercompany transactions lack economic substance or are not at fair market value, the Secretary may redetermine the State net income of the corporation properly attributable to its business carried on in the State under this section by (i) adding back, eliminating, or otherwise adjusting intercompany transactions to accurately compute the corporation’s State net income properly attributable to its business carried on in the State, or, if such adjustments are not adequate under the circumstances to redetermine State net income, (ii) requiring the corporation to file a return that reflects the net income on a combined basis of all members of its affiliated group that are conducting a unitary business. The Secretary shall consider and be authorized to use any reasonable method proposed by the corporation for redetermining its State net income attributable to its business carried on in the State. In determining whether the corporation’s intercompany transactions lack economic substance or are not at fair market value, the Secretary shall consider each taxable year separately.
  3. Voluntary Redetermination. —  In addition to the authority granted under subsection (b) of this section, if the Secretary has reason to believe that any corporation’s State net income properly attributable to its business carried on in this State is not accurately reported on a separate return required by this Part because of intercompany transactions, without making a finding that those transactions lack economic substance or are not at fair market value, the Secretary and the corporation may jointly determine and agree to an alternative filing methodology that accurately reports State net income. The Secretary is authorized to allow any reasonable method for redetermining the corporation’s State net income attributable to its business carried on in this State.
  4. Combined Return. —  If the Secretary finds as a fact that a combined return is required, the Secretary may, upon written notice to the corporation, require the corporation to submit the combined return, and the corporation shall submit the combined return within 90 days of the date of the notice. The submission by the corporation of the combined return required by the Secretary shall not be deemed to be a return or construed as an agreement by the corporation that an assessment based on the combined return is correct or that additional tax is due by the Secretary’s deadline for submitting the combined return. The Secretary or the corporation may propose a combination of fewer than all members of the unitary group, and the Secretary shall be authorized to consider whether such proposed combination is a reasonable means of redetermining State net income; provided, however, the Secretary shall not require a combination of fewer than all members of the unitary group without the consent of the corporation.
  5. Written Statement of Findings. —  If the Secretary makes an adjustment or requires a combined return under this section, the Secretary shall provide the corporation with a written statement containing detail of the facts, circumstances, and reasons for which the Secretary has found as a fact that the corporation did not accurately report its State net income properly attributable to its business carried on in the State and the Secretary’s proposed method for computation of the corporation’s State net income no later than 90 days following the issuance of a proposed assessment as provided in this section.
  6. Members of Affiliated Group. —  The Secretary may require a combined return under this section regardless of whether the members of the affiliated group are or are not doing business in this State.
  7. Economic Substance. —  A transaction has economic substance if (i) the transaction, or the series of transactions of which the transaction is a part, has one or more reasonable business purposes other than the creation of State income tax benefits and (ii) the transaction, or the series of transactions of which the transaction is a part, has economic effects beyond the creation of State income tax benefits. In determining whether a transaction has economic substance, all of the following apply:
    1. Reasonable business purposes and economic effects include, but are not limited to, any material benefit from the transaction other than State income tax benefits not allowable under subdivision (3) of this subsection.
    2. In determining whether to require a combined return, whether the transaction has economic effects beyond the creation of State income tax benefits may be satisfied by demonstrating material business activity of the entities involved in the transaction.
    3. If State income tax benefits resulting from a transaction, or a series of transactions of which the transaction is a part, are consistent with legislative intent, such State income tax benefits shall be considered in determining whether such transaction has business purpose and economic substance.
    4. Centralized cash management of an affiliated group as defined in subsection (j) of this section shall not constitute evidence of an absence of economic substance.
    5. Achieving a financial accounting benefit shall not be taken into account as a reasonable business purpose for entering into a transaction if the origin of such financial accounting benefit is a reduction of State income tax.
  8. Allocation of Income and Deductions. —  In determining whether transactions between members of the affiliated group of entities are not at fair market value, the Secretary shall apply the standards contained in the regulations adopted under section 482 of the Code.
  9. Apportionment. —  If the Secretary requires a combined return under this section, the combined State net income of the corporation and the members of the affiliated group of entities shall be apportioned to this State by use of an apportionment formula that accurately reports the State net income properly attributable to the corporation’s business carried on in the State and which fairly reflects the apportionment formula in G.S. 105-130.4 applicable to the corporation and each member of the affiliated group included in the combined return.
  10. Affiliated Group Defined. —  For purposes of this section, an affiliated group is a group of two or more corporations or noncorporate entities in which more than fifty percent (50%) of the voting stock of each member corporation or ownership interest of each member noncorporate entity is directly or indirectly owned or controlled by a common owner or owners, either corporate or noncorporate, or by one or more of the member corporations or noncorporate entities. Nothing in this subsection shall be construed to limit or negate the Secretary’s authority to add back, eliminate, or otherwise adjust intercompany transactions involving the listed entities to accurately compute the corporation’s State net income properly attributable to its business carried on in the State, as provided in subsection (b) of this section.The following entities shall not be included in a combined return:
    1. A corporation not required to file a federal income tax return.
    2. An insurance company, other than a captive insurance company, (i) which is subject to tax under Article 8B of this Chapter, (ii) whose premiums are subject to tax under Article 21 of Chapter 58 or a similar tax in another state, (iii) which is licensed as a reinsurance company, (iv) which is a life insurance company as defined in Section 816 of the Code, or (v) which is an insurance company subject to tax imposed by Section 831 of the Code. A “captive insurance company” means an insurer that is part of an affiliated group where the insurer receives more than fifty percent (50%) of its net written premiums or other amounts received as compensation for insurance from members of the affiliated group.
    3. A corporation exempt from taxation under section 501 of the Code.
    4. An S corporation.
    5. A foreign corporation as defined in section 7701 of the Code, other than a domestic branch thereof.
    6. A partnership, limited liability company, or other entity not taxed as a corporation.
    7. A corporation with at least eighty percent (80%) of its gross income from all sources in the tax year being active foreign business income as defined in section 861(c)(1)(B) of the Code in effect as of July 1, 2009.
  11. Proposed Assessment or Refund. —  If the Secretary redetermines the State net income of the corporation in accordance with this section by adjusting the State net income of the corporation or requiring a combined return, the Secretary shall issue a proposed assessment or refund upon making such redetermination. When a refund is determined in whole or part by a proposed assessment to an affiliated group member under this section, the refund shall not be issued until the proposed assessment to the affiliated group member has become collectable under G.S. 105-241.22 . The amount of the refund shall reflect any changes made by the Department under this section. Otherwise, the procedures for a proposed assessment or a refund in Article 9 of Chapter 105 shall be applicable to proposed assessments and refunds made under this section.
  12. Penalties. —  If a combined return required by this section is not timely submitted by a corporation, then the corporation is subject to the penalties provided in G.S. 105-236(a)(3). Penalties shall not be imposed on an assessment under this section except as expressly authorized in this section and in G.S. 105-236(a)(5)f.
  13. Advice. —  A corporation may request in writing from the Secretary specific advice regarding whether a redetermination of the corporation’s State net income or a combined return would be required under this section under certain facts and circumstances. The Secretary may request information from the taxpayer that is required to provide the specific advice. The Secretary shall provide the specific advice within 120 days of the receipt of the requested information from the taxpayer. G.S. 105-264 governs the effect of this advice.
  14. Extension. —  The Secretary and the taxpayer may extend any time limit contained in this section by mutual agreement.
  15. Other Tax Adjustments. —  Nothing in this section shall be construed to limit or negate the Secretary’s authority to make tax adjustments as otherwise permitted by law, except that the Secretary shall not make adjustments pursuant to this section that limit a corporation’s options for reporting royalty payments under G.S. 105-130.7 A.
  16. Appeals. —  If the corporation appeals a final determination by the Department under this section to the Office of Administrative Hearings in a contested tax case, the administrative law judge shall review de novo (i) whether the separate income tax returns submitted by the taxpayer fail to report State net income properly attributable to its business carried on in this State through the use of intercompany transactions that lack economic substance or are not at fair market value between members of an affiliated group of entities; (ii) whether the Department’s means of determining the corporation’s State net income under this section is an appropriate means of determining the corporation’s State net income properly attributable to this State; and (iii) if a combined return is required by the Department, whether adjustments other than requiring the corporation to file a return on a combined basis are adequate under the circumstances to redetermine State net income.

History. 2011-390, s. 2; 2011-411, s. 8(a), (b); 2020-58, s. 5.4.

Cross References.

As to rules to exercise authority under G.S 105-130.5A, see G.S. 105-262.1 .

Editor’s Note.

Session Laws 2011-390, s. 8, as amended by Session Laws 2011-411, s. 8(b), made this section effective for taxable years beginning on or after January 1, 2012.

Subsections (c) through (p) were enacted by Session Laws 2011-390, s. 2, and Session Laws 2011-411, s. 8, as subsections (b1) through (o), respectively. They were redesignated as subsections (c) through (p) at the direction of the Revisor of Statutes.

Session Laws 2012-43, s. 4, provides: “On June 30, 2011, the Governor signed into law S.L. 2011-390, House Bill 619, as passed by the General Assembly. The law repealed the Secretary of Revenue’s authority to adjust a corporation’s net income or require a combined return under G.S. 105-130.6 , 105-130.15, and 105-130.16 and replaced it with a new authority under G.S. 105-130.5 A. The Fiscal Research Division of the North Carolina General Assembly prepared a fiscal memo on House Bill 619. Therefore, notwithstanding G.S. 105-262.1 , as enacted by Section 2 of this act, G.S. 105-262(c), and Section 7 of the Budget Manual prepared by the Office of State Budget and Management, the Secretary of Revenue shall not be required to prepare a fiscal note for a proposed new rule submitted to the Codifier of Rules under G.S. 105-262.1 , as enacted by this act, prior to December 31, 2012.”

Session Laws 2012-43, s. 5, provides: “On April 17, 2012, the Department of Revenue published a directive pursuant to G.S. 105-264 , CD-12-02, that explains the Secretary’s authority under G.S. 105-130.5 A to redetermine a corporation’s net income by adjusting the corporation’s intercompany transactions or requiring a corporation to file a combined income tax return for tax years beginning on or after January 1, 2012. This act supersedes the Directive; however, a taxpayer who relied upon the interpretation in the Directive and whose North Carolina taxable income for the 2012 taxable year is less under the Directive’s interpretation than under an interpretation of G.S. 105-130.5 A by a rule adopted pursuant to G.S. 105-262.1 , as enacted by this act, is entitled to rely on the interpretation under the Directive for the 2012 taxable year.”

Session Laws 2012-43, s. 6, provides: “S.L. 2011-390, as amended by S.L. 2011-411, enacted G.S. 105-130.5 A, effective for taxable years beginning on or after January 1, 2012. The Secretary of Revenue’s authority under G.S. 105-130.5 A exists continuously for taxable years beginning on or after January 1, 2012. G.S. 105-262.1 , as enacted by Section 2 of this act, prevents the Secretary from exercising the authority granted under G.S. 105-130.5A until a rule adopted in accordance with G.S. 105-262.1 becomes effective. After the rule becomes effective, the Secretary may issue a proposed denial of a refund or a proposed assessment under the authority of G.S. 105-130.5A for any taxable year beginning on or after January 1, 2012, subject to the applicable statute of limitations.”

Effect of Amendments.

Session Laws 2011-411, s. 8(a), effective September 15, 2011, added subsection designated herein as subsection (c).

Session Laws 2020-58, s. 5.4, effective June 30, 2020, in subsection (k), added the second and third sentences, and substituted “Otherwise, the procedures” for “The procedures” in the last sentence.

§ 105-130.5B. Adjustments when State decouples from federal accelerated depreciation and expensing.

  1. Special Accelerated Depreciation. —  A taxpayer who takes a special accelerated depreciation deduction for property under section 168(k) or 168(n) of the Code must add to the taxpayer’s federal taxable income eighty-five percent (85%) of the amount taken for that year under those Code provisions. A taxpayer is allowed to deduct twenty percent (20%) of the add-back in each of the first five taxable years following the year the taxpayer is required to include the add-back in income.
  2. 2009 Depreciation Exception. —  A taxpayer who placed property in service during the 2009 taxable year and whose North Carolina taxable income for the 2009 taxable year reflected a special accelerated depreciation deduction allowed for the property under section 168(k) of the Code must add eighty-five percent (85%) of the amount of the special accelerated depreciation deduction to its federal taxable income for the 2010 taxable year. A taxpayer is allowed to deduct this add-back under subsection (a) of this section as if it were for property placed in service in 2010.
  3. Section 179 Expense. —  For purposes of this subdivision, the definition of section 179 property has the same meaning as under section 179 of the Code. A taxpayer who places section 179 property in service during a taxable year must add to the taxpayer’s federal taxable income eighty-five percent (85%) of the amount by which the taxpayer’s expense deduction under section 179 of the Code exceeds the dollar and investment limitation for the taxable year. For taxable years 2010, 2011, and 2012, the dollar limitation is two hundred and fifty thousand dollars ($250,000) and the investment limitation is eight hundred thousand dollars ($800,000). For taxable years beginning on or after 2013, the dollar limitation is twenty-five thousand dollars ($25,000) and the investment limitation is two hundred thousand dollars ($200,000).A taxpayer is allowed to deduct twenty percent (20%) of the add-back in each of the first five taxable years following the year the taxpayer is required to include the add-back in income.
  4. Asset Basis. —  The adjustments made in this section do not result in a difference in basis of the affected assets for State and federal income tax purposes, except as modified in subsection (e) of this section.
  5. Bonus Asset Basis. —  In the event of an actual or deemed transfer of an asset occurring on or after January 1, 2013, wherein the tax basis of the asset carries over from the transferor to the transferee for federal income tax purposes, the transferee must add any remaining deductions allowed under subsection (a) of this section to the basis of the transferred asset and depreciate the adjusted basis over any remaining life of the asset. Notwithstanding the provisions of subsection (a) of this section, the transferor is not allowed any remaining future bonus depreciation deductions associated with the transferred asset.
  6. Prior Transactions. —  For any transaction meeting both the requirements of subsection (e) of this section prior to January 1, 2013, and the conditions of this subsection, the transferor and transferee can make an election to make the basis adjustment allowed in that subsection on the transferee’s 2013 tax return. If the asset has been disposed of or has no remaining useful life on the books of the transferee, the remaining bonus depreciation deduction may be allowed on the transferee’s 2013 tax return. For this subsection to apply, the following conditions must be met:
    1. The transferor has not taken the bonus depreciation deduction on a prior return.
    2. The transferor certifies in writing to the transferee that the transferor will not take any remaining deductions allowed under subsection (a) of this section for tax years beginning on or after January 1, 2013, for depreciation associated with the transferred asset.
  7. Tax Basis. —  For transactions described in subsections (e) or (f) of this section, federal taxable income must be increased or decreased to account for any difference in the amount of depreciation, amortization, or gains or losses applicable to the property that has been depreciated or amortized by use of a different basis or rate for State income tax purposes than used for federal income tax purposes.

History. 2013-414, s. 34(b); 2014-3, s. 2.1(a); 2015-2, s. 1.2(a); 2016-6, s. 2(a).

Effect of Amendments.

Session Laws 2014-3, s. 2.1(a), effective for taxable years beginning on or after January 1, 2013, substituted “$200,000” for “$125,000” in the last entry of the table in subsection (c); rewrote subsection (f); and added subsection (g).

Session Laws 2015-2, s. 1.2(a), effective March 31, 2015, in subsection (c), substituted “January 1, 2015” for “January 2, 2013” in the first paragraph and added the last entry in the table.

Session Laws 2016-6, s. 2(a), effective June 1, 2016, in subsection (c), in the first paragraph, deleted “as of January 1, 2015” following “Code” at the end of the first sentence, in the second sentence, twice deleted “listed in the table below” following “during a taxable year” and following “dollar and investment limitation,” and added the last two sentences, and deleted the table detailing taxable dollar and investment limitations that formerly followed the second paragraph.

§ 105-130.6. [Repealed]

Repealed by Session Laws 2011-390, s. 1, as amended by Session Laws 2011-411, s. 8(b), effective for taxable years beginning on or after January 1, 2012.

History. 1939, c. 158, s. 3181/2; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c. 708, s. 4; 1959, c. 1259, ss. 4, 8; 1967, c. 1110, s. 3; 1971, c. 1223, s. 1; 1973, c. 476, s. 193; 1998-98, s. 69; 1998-212, s. 29A.14(f); 2010-31, s. 31.10(d); 2011-390, s. 1; 2011-411, s. 8(b); repealed by 2011-390, s. 1, effective for taxable years beginning on or after January 1, 2012.

Editor’s Note.

Former G.S. 105-130.6 pertained to subsidiary and affiliated corporations.

§ 105-130.6A. [Repealed]

Repealed by Session Laws 2015-241, s. 32.13(e), effective for taxable years beginning on or after January 1, 2016.

History. 2002-136, s. 2; 2007-491, s. 13; 2013-316, s. 4.1(b); 2013-414, s. 36; repealed by 2015-241, s. 32.13(e), effective for taxable years beginning on or after January 1, 2016.

Editor’s Note.

Former G.S. 105-130.6 A pertained to the adjustment for expenses related to dividends.

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.”

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 2015-241, s. 32.13(e), repealed G.S. 105-130.6 A effective for taxable years beginning on or after January 1, 2016.

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. 13, effective January 1, 2008, in the third paragraph of subsection (e), substituted “G.S. 105-241.8” for “G.S. 105-241.1(e)” and “G.S. 105-241.21” for “105-241.1(i)” in the second and fourth sentences, respectively. For applicability, see Editor’s note.

Session Laws 2013-316, s. 4.1(b), effective July 1, 2014, substituted “engaged in the business of producing electric power” for “subject to the franchise tax on electric power companies levied in G.S. 105-116 ” in subdivision (a)(4). For applicability, see editor’s note.

Session Laws 2013-414, s. 36, effective August 23, 2013, substituted “definitions in G.S. 105-130.2 ” for “provisions of G.S. 105-130.6 ” in the introductory language of subsection (a).

§ 105-130.7. [Repealed]

Repealed by Session Laws 2003-349, s. 1.1, effective January 1, 2003.

§ 105-130.7A. Royalty income reporting option.

  1. Purpose. —  Royalty payments received for the use of intangible property in this State are income derived from doing business in this State. This section provides taxpayers with an option concerning the method by which these royalties can be reported for taxation when the recipient and the payer are related members. As provided in this section, these royalty payments can be either (i) deducted by the payer and included in the income of the recipient, or (ii) added back to the income of the payer and excluded from the income of the recipient. Exercising the royalty reporting income option provided in this section does not prevent a taxpayer from having taxable nexus in this State as otherwise provided in this Article and does not permit the recipient of the income to exclude royalty payments from its calculation of sales as defined in G.S. 105-130.4 .
  2. Definitions. —  The following definitions apply in this section:
    1. Component member. — Defined in section 1563(b) of the Code.

      (1a) Intangible property. — Copyrights, patents, and trademarks.

    2. North Carolina royalty. — An amount charged that is for, related to, or in connection with the use in this State of intangible property. The term includes royalty and technical fees, licensing fees, and other similar charges.
    3. Own. — To own directly, indirectly, beneficially, or constructively. The attribution rules of section 318 of the Code apply in determining ownership under this section.
    4. Related entity. — Any of the following:
      1. A stockholder who is an individual, or a member of the stockholder’s family enumerated in section 318 of the Code, if the stockholder and the members of the stockholder’s family own in the aggregate at least eighty percent (80%) of the value of the taxpayer’s outstanding stock.
      2. A stockholder, or a stockholder’s partnership, limited liability company, estate, trust, or corporation, if the stockholder and the stockholder’s partnerships, limited liability companies, estates, trusts, and corporations own in the aggregate at least fifty percent (50%) of the value of the taxpayer’s outstanding stock.
      3. A corporation, or a party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of section 318 of the Code, if the taxpayer owns at least eighty percent (80%) of the value of the corporation’s outstanding stock.
    5. Related member. — A person that, with respect to the taxpayer during any part of the taxable year, is one or more of the following:
      1. A related entity.
      2. A component member.
      3. A person to or from whom there would be attribution of stock ownership in accordance with section 1563(e) of the Code if the phrase “5 percent or more” were replaced by “twenty percent (20%) or more” each place it appears in that section.
    6. Royalty payment. — Either of the following:
      1. Expenses, losses, and costs paid, accrued, or incurred for North Carolina royalties, to the extent the amounts are allowed as deductions or costs in determining taxable income before operating loss deduction and special deductions for the taxable year under the Code.
      2. Amounts directly or indirectly allowed as deductions under section 163 of the Code, to the extent the amounts are paid, accrued, or incurred for a time price differential charged for the late payment of any expenses, losses, or costs described in this subdivision.
    7. Trademark. — A trademark, trade name, service mark, or other similar type of intangible asset.
    8. Use. — Use of intangible property includes direct or indirect maintenance, management, ownership, sale, exchange, or disposition of the intangible property.
  3. Election. —  For the purpose of computing its State net income, a taxpayer must add royalty payments made to, or in connection with transactions with, a related member during the taxable year. This addition is not required for an amount of royalty payments that meets any of the following conditions:
    1. The related member includes the amount as income on a return filed under this Part for the same taxable year that the amount is deducted by the taxpayer, and the related member does not elect to deduct the amount pursuant to G.S. 105-130.5(b)(20).
    2. The taxpayer can establish that the related member during the same taxable year directly or indirectly paid, accrued, or incurred the amount to a person who is not a related member.
    3. The taxpayer can establish that the related member to whom the amount was paid is organized under the laws of a country other than the United States, the country has a comprehensive income tax treaty with the United States, and the country imposes a tax on the royalty income of the related member at a rate that equals or exceeds the rate set in G.S. 105-130.3 .
  4. Indirect Transactions. —  For the purpose of this section, an indirect transaction or relationship has the same effect as if it were direct.

History. 2001-327, s. 1(b); 2003-416, s. 15; 2006-66, s. 24A.3(a); 2006-196, s. 10; 2016-5, s. 1.5.

Editor’s Note.

Session Laws 2001-327, s. 1(a), provides: “The General Assembly finds that most corporations engaged in manufacturing and retailing activities in this State comply with the State tax on income generated from using trademarks in those activities. Taxpayers who do not comply, however, create an unfair burden on these corporate citizens. It is the intent of this section to reward taxpayers who comply, by giving them an option on how to file tax returns involving royalty income.”

Effect of Amendments.

Session Laws 2003-416, s. 15, effective August 14, 2003, substituted “own in the aggregate at least fifty percent (50%) of the value of the taxpayer’s outstanding stock” for “are component members with respect to the taxpayer” in subdivision (b)(4)b.

Session Laws 2006-66, s. 24A.3(a), effective for taxable years beginning on or after January 1, 2006, substituted “intangible property” for “trademarks” throughout the section; and added new subdivision (b)(1a).

Session Laws 2006-196, s. 10, effective for taxable years beginning on or after January 1, 2006, in subsection (c), substituted “any” for “either” at the end of the introductory paragraph and added paragraph (c)(3).

Session Laws 2016-5, s. 1.5, effective May 11, 2016, added the last sentence in subsection (a).

§ 105-130.7B. Limitation on qualified interest for certain indebtedness.

  1. Limitation. —  In determining State net income, a deduction is allowed only for qualified interest expense paid or accrued by the taxpayer to a related member during a taxable year. This section does not limit the Secretary’s authority to adjust a taxpayer’s net income as it relates to payments to or charges by a parent, subsidiary, or affiliated corporation in excess of fair compensation in an intercompany transaction under G.S. 105-130.5(a)(9).
  2. Definitions. —  The definitions in G.S. 105-130.7 A apply in this section. In addition, the following definitions apply in this section:
    1. Repealed.
    2. Bank. — One or more of the following, or a subsidiary or affiliate of one or more of the following:
      1. A bank holding company as defined in the federal Bank Holding Company Act of 1956, as amended.
      2. One or more of the following entities incorporated or chartered under the laws of this State, another state, or the United States:
        1. A bank. This term has the same meaning as defined in G.S. 53C-1-4 .
        2. A savings bank. This term has the same meaning as defined in G.S. 54C-4 .
        3. A savings and loan association. This term has the same meaning as defined in G.S. 54B-4 .
        4. A trust company. This term has the same meaning as defined in G.S. 53C-1-4 .
    3. Net interest expense. — The excess of the interest paid or accrued by the taxpayer to each related member during the taxable year over the amount of interest from each related member includible in the gross income of the taxpayer for the taxable year. (3a) Proportionate share of interest. — The amount of taxpayer’s net interest expense paid or accrued directly to or through a related member to an ultimate payer divided by the total net interest expense of all related members that is paid or accrued directly to or through a related member to the same ultimate payer, multiplied by the interest paid or accrued to a person who is not a related member by the ultimate payer. Any amount that is distributed, paid, or accrued directly or through a related member that is not treated as interest under this Part does not qualify. In determining whether a nominal debt instrument creates deductible interest allowable under this section, the Secretary will not apply the covered debt instrument rules contained in the regulations promulgated under section 385 of the Code.
    4. Qualified interest expense. — The amount of net interest expense paid or accrued to a related member in a taxable year with the amount limited to the taxpayer’s proportionate share of interest paid or accrued to a person who is not a related member during the same taxable year. This limitation does not apply to interest paid or accrued to a related member if one or more of the following applies:
      1. The State imposes an income tax on the interest income of the related member under this Article.
      2. Another state imposes an income tax or gross receipts tax on the interest income of the related member. Interest amounts eliminated by combined or consolidated return requirements do not qualify as interest that is subject to tax under this sub-subdivision.
      3. The related member is organized under the laws of a foreign country that has a comprehensive income tax treaty with the United States, and that country taxes the interest income at a rate equal to or greater than G.S. 105-130.3 .
      4. The related member is a bank.
      5. The proportionate amount of interest paid or accrued to a related member that has already been disallowed by the application of section 163(j) of the Code.
    5. Ultimate payer. — A related member that receives or accrues interest from related members directly or through a related member and pays or accrues interest to a person who is not a related member.

History. 2015-241, s. 32.13(f); 2016-5, s. 1.8(a), (b); 2017-204, s. 1.6(a), (b); 2021-180, s. 42.13B(d).

Editor’s Note.

Session Laws 2015-241, s. 32.13(h), made this section effective for taxable years beginning on or after January 1, 2016.

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.

Subdivisions (b)(5) and (6), as enacted by Session Laws 2016-5, s. 1.8(b), were redesignated as subdivisions (b)(3a) and (5), respectively, at the direction of the Revisor of Statutes.

Session Laws 2017-204, s. 1.6(c) makes the amendments by Session Laws 2017-204, s. 1.6(a) and (b), effective for taxable years beginning on or after January 1, 2017.

Session Laws 2021-180, s. 42.13B(g), made subdivision (b)(4)e. of this section, as added by Session Laws 2021-180, s. 42.13B(d), effective November 18, 2021, and applicable retroactively for taxable years beginning on or after January 1, 2018.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2016-5, s. 1.8(a), (b), effective May 11, 2016, in subsection (b), substituted “each related member” for “a related member” twice in subdivision (b)(3), in subdivision (b)(4), rewrote the first sentence of the introductory language, which formerly read “The amount of net interest expense paid or accrued to a related member in a taxable year not to exceed thirty percent (30%) of the taxpayer’s adjusted taxable income”, rewrote subdivisions (b)(4)a. and b., which formerly read “Tax is imposed by the State under this Article on the related member with respect to the interest” and “The related member pays a net income tax or gross receipts tax to another state with respect to the interest income,” and added subdivisions (b)(5) and (6). See editor’s note for redesignation of subdivisions.

Session Laws 2017-204, s. 1.6(a) and (b), effective for taxable years beginning on or after January 1, 2017, repealed subdivision (b)(1); added the last sentence in subdivision (b)(3a); and deleted “the greater of (i) fifteen percent (15%) of the taxpayer’s adjusted taxable income or (ii)” following “amount limited to” in the introductory paragraph of subdivision (b)(4).

Session Laws 2021-180, s. 42.13B(d), added subdivision (b)(4)e. For effective date and applicability, see editor's note.

§ 105-130.8. [Repealed]

Repealed by Session Laws 2014-3, s. 1.1(b), effective for taxable years beginning on or after January 1, 2015.

History. 1939, c. 158, s. 322; 1941, c. 50, s. 5; 1943, c. 400, s. 4; c. 668; 1945, c. 708, s. 4; c. 752, s. 3; 1947, c. 501, s. 4; c. 894; 1949, c. 392, s. 3; 1951, c. 643, s. 4; c. 937, s. 4; 1953, c. 1031, s. 1; c. 1302, s. 4; 1955, c. 1100, s. 1; c. 1331, s. 1; cc. 1332, 1342; c. 1343, s. 1; 1957, c. 1340, ss. 4, 8; 1959, c. 1259, s. 4; 1961, c. 201, s. 1; c. 1148; 1963, c. 1169, s. 2; 1965, c. 1048; 1967, c. 1110, s. 3; 1998-98, s. 69; 1998-171, ss. 6, 8; 2002-136, s. 3; 2003-416, s. 5(i); repealed by 2014-3, s. 1.1(b), effective for taxable years beginning on or after January 1, 2015.

Editor’s Note.

Former G.S. 105-130.8 pertained to net economic loss.

Effect of Amendments.

Session Laws 2003-416, s. 5(i), effective August 14, 2003, substituted “nonapportionable” for “nonbusiness” in the first sentence of subdivision (a)(5).

Legal Periodicals.

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

CASE NOTES

Editor’s Note. —

Many of the following cases were decided under G.S. 105-147 prior to the amendment thereof by Session Laws 1967, c. 1110. G.S. 105-147 was repealed by Session Laws 1989, c. 728, s. 1.3.

Section Patterned After Internal Revenue Code. —

This section is patterned after the net operating loss carryover deduction found in the 1939 federal Internal Revenue Code (see now Internal Revenue Code of 1954). Fieldcrest Mills, Inc. v. Coble, 290 N.C. 586 , 227 S.E.2d 562, 1976 N.C. LEXIS 1122 (1976).

Federal Case Law Applicable. —

The Supreme Court of North Carolina in construing this section has looked to and relied upon federal cases applying the analogous federal deduction. Fieldcrest Mills, Inc. v. Coble, 290 N.C. 586 , 227 S.E.2d 562, 1976 N.C. LEXIS 1122 (1976).

Carry-Over Provisions Enacted as a Matter of Grace. —

The General Assembly was under no constitutional or other legal compulsion to permit a net economic loss or losses deduction for a corporation from taxable income in a subsequent year or years. It enacted the carry-over provisions purely as a matter of grace, gratuitously conferring a benefit but limiting such benefit to the net economic loss of the taxpayer after deducting therefrom the allocable portion of such taxpayer’s nontaxable income. Aberfoyle Mfg. Co. v. Clayton, 265 N.C. 165 , 143 S.E.2d 113, 1965 N.C. LEXIS 952 (1965).

The General Assembly was under no constitutional compulsion to allow any deduction whatever from income otherwise taxable in this State, because of a “net economic loss” in a prior year. Dayco Corp. v. Clayton, 269 N.C. 490 , 153 S.E.2d 28, 1967 N.C. LEXIS 1095 (1967).

Determination of Deduction of Loss for Prior Years. —

This section requires the inclusion of nontaxable income in arriving at an allowable deduction for carry-over purposes to be deducted from taxable income in a succeeding year. Dayton Rubber Co. v. Shaw, 244 N.C. 170 , 92 S.E.2d 799, 1956 N.C. LEXIS 677 (1956) (decided prior to the 1963 amendment to former G.S. 105-147) .

As to process provided for determining amount of deduction allowable to corporation on account of a “net economic loss” in a prior year, see Dayco Corp. v. Clayton, 269 N.C. 490 , 153 S.E.2d 28, 1967 N.C. LEXIS 1095 (1967).

Out-of-State Dividends and Capital Gains Received by Foreign Corporation Must Be Deducted. —

Dividends received by a foreign corporation from shares of stock owned by it in nonsubsidiary corporations and capital gains received by it from the sale of shares of stock in such nonsubsidiary corporations, even though such income is derived from out-of-state transactions and is not taxable here, must be deducted from the amount of loss carry-over claimed by the corporation against its income taxable by this State in succeeding years, since the income derived from dividends and capital gains is “income not taxable under this Division.” Dayco Corp. v. Clayton, 269 N.C. 490 , 153 S.E.2d 28, 1967 N.C. LEXIS 1095 (1967).

As Must Nonrecognized Gain on Liquidation of Subsidiaries. —

Plaintiff’s gain realized from the sale of its two wholly-owned subsidiaries constituted “income from all sources in the year including any income not taxable under this division”; consequently, plaintiff was not entitled to any net economic losses deduction as sought in its complaint. Aberfoyle Mfg. Co. v. Clayton, 265 N.C. 165 , 143 S.E.2d 113, 1965 N.C. LEXIS 952 (1965).

Deduction by Successor Corporation of Loss Sustained by Submerged Corporation. —

Whether a successor corporation is entitled to deduct from its gross income an economic loss sustained by another corporation depends upon whether the successor corporation is for practical purposes the same and is engaged in continuing the business of the kind and character conducted by the corporation whose loss is claimed as a deduction. Good Will Distribs. (N.), Inc. v. Shaw, 247 N.C. 157 , 100 S.E.2d 334, 1957 N.C. LEXIS 560 (1957); Good Will Distribs., Inc. v. Currie, 251 N.C. 120 , 110 S.E.2d 880, 1959 N.C. LEXIS 544 (1959).

Where a corporation surviving a merger seeks to establish its right to deduct from its gross income an economic loss of one of its submerged corporations for a prior year as a carry-over under this section, and it appears from the facts alleged that the submerged corporation had a profit in the months of the fiscal year prior to the merger and that it had deducted its prior economic loss from such net income, leaving a balance on the loss side, and further, that as far as the facts alleged disclosed, to allow the surviving corporation to make such deduction would result in reducing the surviving corporation’s income tax liability which had accrued on the date of the merger, such deduction by the surviving corporation was disallowed. Good Will Distribs. (N.), Inc. v. Shaw, 247 N.C. 157 , 100 S.E.2d 334, 1957 N.C. LEXIS 560 (1957).

The enactment of loss carry-over legislation by the General Assembly was purely a matter of grace. The provision should not be construed to give a “windfall” to a taxpayer who happens to have merged with other corporations. Its purpose is not to give a merged taxpayer a tax advantage over others who have not merged. Good Will Distribs., Inc. v. Currie, 251 N.C. 120 , 110 S.E.2d 880, 1959 N.C. LEXIS 544 (1959).

In determining whether a successor corporation may claim a net economic loss suffered by a predecessor corporation, the court must find that the two corporations are the “same,” applying the continuity of business enterprise test. Fieldcrest Mills, Inc. v. Coble, 290 N.C. 586 , 227 S.E.2d 562, 1976 N.C. LEXIS 1122 (1976).

Continuity of business enterprise theory, the test used in determining whether a successor corporation may claim a net economic loss suffered by its predecessor, means that where a loss corporation and a gain corporation are merged, premerger losses may be offset against post-merger gains only to the extent that the business (or group of assets) which was previously operating at a loss is now operating at a profit. Fieldcrest Mills, Inc. v. Coble, 290 N.C. 586 , 227 S.E.2d 562, 1976 N.C. LEXIS 1122 (1976).

The forgiveness of an indebtedness by an officer-stockholder constitutes a contribution to capital and does not constitute income of the corporation. Hence, the forgiveness of such indebtedness does not offset a net operating loss of a corporation for a taxable year, and the corporation is entitled to carry forward such loss. Foreman Mfg. Co. v. Johnson, 261 N.C. 504 , 135 S.E.2d 205, 1964 N.C. LEXIS 509 (1964).

OPINIONS OF ATTORNEY GENERAL

Life insurance proceeds constitute “income not taxable” for Purposes of Computing the Net Economic Loss Deduction under this Section. See opinion of Attorney General to Mr. Wiley A. Warren, Jr., Assistant Director, Corporate Income and Franchise Tax Division, 47 N.C. Op. Att'y Gen. 29 (1977).

§ 105-130.8A. Net loss provisions.

  1. State Net Loss. —  A taxpayer’s State net loss for a taxable year is the amount by which allowable deductions for the year, other than prior year losses, exceed gross income under the Code for the year adjusted as provided in G.S. 105-130.5 . In the case of a corporation that has income from business activity within and without this State, the loss must be allocated and apportioned to this State in the year of the loss in accordance with G.S. 105-130.4 .
  2. Deduction. —  A taxpayer may carry forward a State net loss the taxpayer incurred in a prior taxable year and deduct it in the current taxable year, subject to the limitations in this subsection:
    1. The loss was incurred in one of the preceding 15 taxable years.
    2. Any loss carried forward is applied to the next succeeding taxable year before any portion of it is carried forward and applied to a subsequent taxable year.
  3. Mergers and Acquisitions. –  The Secretary must apply the standards contained in regulations adopted under sections 381 and 382 of the Code in determining the extent to which a loss survives a merger or an acquisition. For mergers and acquisitions occurring prior to January 1, 2015, the Secretary must apply the standards under G.S. 105-130.8 for taxable years beginning before January 1, 2015, and the standards of this section for taxable years beginning on or after January 1, 2015.
  4. Administration. —  A taxpayer claiming a deduction under this section must maintain and make available for inspection by the Secretary all records necessary to determine and verify the amount of the deduction. The Secretary or the taxpayer may redetermine a loss originating in a taxable year that is closed under the statute of limitations for the purpose of determining the amount of loss that can be carried forward to a taxable year that remains open under the statute of limitations.
  5. (Expires for taxable years beginning on or after January 1, 2030) Net Economic Loss Carryforward. —  For taxable years beginning before January 1, 2015, a taxpayer is allowed a net economic loss as calculated under G.S. 105-130.8 . In determining and verifying the amount of a net economic loss incurred or carried forward for taxable years beginning before January 1, 2015, the provisions of G.S. 105-130.8 apply. Any unused portion of a net economic loss carried forward to taxable years beginning on or after January 1, 2015, is administered in accordance with this section. This subsection expires for taxable years beginning on or after January 1, 2030.

History. 2014-3, s. 1.1(c); 2021-180, s. 42.13B(e).

Editor’s Note.

Session Laws 2014-3, s. 1.1(d), made this section effective for taxable years beginning on or after January 1, 2015.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.13B(e), effective November 18, 2021, in subsection (c), added the second sentence.

§ 105-130.9. Contributions.

Contributions shall be allowed as a deduction to the extent and in the manner provided as follows:

  1. Charitable contributions as defined in section 170(c) of the Code, exclusive of contributions allowed in subdivision (2) of this section, shall be allowed as a deduction to the extent provided herein. The amount allowed as a deduction hereunder shall be limited to an amount not in excess of five percent (5%) of the corporation’s net income as computed without the benefit of this subdivision or subdivision (2) of this section. Provided, that a carryover of contributions shall not be allowed and that contributions made to North Carolina donees by corporations allocating a part of their total net income outside this State shall not be allowed under this subdivision, but shall be allowed under subdivision (3) of this section.
  2. Contributions by any corporation to the State of North Carolina, any of its institutions, instrumentalities, or agencies, any county of this State, its institutions, instrumentalities, or agencies, any municipality of this State, its institutions, instrumentalities, or agencies, and contributions or gifts by any corporation to educational institutions located within North Carolina, no part of the net earnings of which inures to the benefit of any private stockholders or dividend. For the purpose of this subdivision, the words “educational institution” shall mean only an educational institution which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where the educational activities are carried on. The words “educational institution” shall be deemed to include all of such institution’s departments, schools and colleges, a group of “educational institutions” and an organization (corporation, trust, foundation, association or other entity) organized and operated exclusively to receive, hold, invest and administer property and to make expenditures to or for the sole benefit of an “educational institution” or group of “educational institutions.”
  3. Corporations allocating a part of their total net income outside North Carolina under the provisions of G.S. 105-130.4 shall deduct from total income allocable to North Carolina contributions made to North Carolina donees qualified under subdivisions (1) and (2) of this section or made through North Carolina offices or branches of other donees qualified under the above-mentioned subdivisions of this section; provided, such deduction for contributions made to North Carolina donees qualified under subdivision (1) of this section shall be limited in amount to five percent (5%) of the total income allocated to North Carolina as computed without the benefit of this deduction for contributions.
  4. The amount of a contribution for which the taxpayer claimed a tax credit pursuant to G.S. 105-130.34 shall not be eligible for a deduction under this section. The amount of the credit claimed with respect to the contribution is not, however, required to be added to income under G.S. 105-130.5(a)(10).

History. 1939, c. 158, s. 322; 1941, c. 50, s. 5; 1943, c. 400, s. 4; c. 668; 1945, c. 708, s. 4; c. 752, s. 3; 1947, c. 501, s. 4; c. 894; 1949, c. 392, s. 3; 1951, c. 643, s. 4; c. 937, s. 4; 1953, c. 1031, s. 1; c. 1302, s. 4; 1955, c. 1100, s. 1; c. 1331, s. 1; cc. 1332, 1342; c. 1343, s. 1; 1957, c. 1340, ss. 4, 8; 1959, c. 1259, s. 4; 1961, c. 201, s. 1; c. 1148; 1963, c. 1169, s. 2; 1965, c. 1048; 1967, c. 1110, s. 3; 1969, c. 1175, s. 1; 1973, c. 1287, s. 4; 1983, c. 713, s. 82; c. 793, s. 2; 1995, c. 370, s. 4; 2006-66, s. 24.18(b); 2011-330, s. 36.

Editor’s Note.

Section 105-130.34, referred to in subdivision (4), was repealed by Session Laws 2013-316, s. 2.1(b), effective January 1, 2014.

Effect of Amendments.

Session Laws 2006-66, s. 24.18(b), as amended by Session Laws 2011-330, s. 36, effective for taxable years beginning on or after January 1, 2006, and expiring for taxable years beginning on or after January 1, 2013, added “or G.S. 105-130.48 ” following “G.S. 105-130.34” in subdivision (4).

§ 105-130.10. [Repealed]

Repealed by Session Laws 2015-241, s. 32.13(c), effective for taxable years beginning on or after January 1, 2016.

History. 1939, c. 158, s. 322; 1941, c. 50, s. 5; 1943, c. 400, s. 4; c. 668; 1945, c. 708, s. 4; c. 752, s. 3; 1947, c. 501, s. 4; c. 894; 1949, c. 392, s. 3; 1951, c. 643, s. 4; c. 937, s. 4; 1953, c. 1031, s. 1; c. 1302, s. 4; 1955, c. 1100, s. 1; c. 1331, s. 1; cc. 1332, 1342; c. 1343, s. 1; 1957, c. 1340, ss. 4, 8; 1959, c. 1259, s. 4; 1961, c. 201, s. 1; c. 1148; 1963, c. 1169, s. 2; 1965, c. 1048; 1967, c. 1110, s. 3; 1969, c. 817; 1973, c. 476, s. 193; c. 1262, s. 23; 1975, c. 764, s. 3; 1977, c. 771, s. 4; 1981, c. 704, s. 19; 1987, c. 804, s. 4; 1989, c. 148, s. 2; c. 727, ss. 218(40), 219(28); 1997-443, s. 11A.119(a); 2015-241, s. 14.30(u); repealed by 2015-241, s. 32.13(c), effective for taxable years beginning on or after January 1, 2016.

Editor’s Note.

Former G.S. 105-130.10 pertained to to the amortization of air-cleaning devices, waste treatment facilities and recycling facilities.

Session Laws 2015-241, s. 32.13(c), repealed G.S. 105-130.10 effective for taxable years beginning on or after January 1, 2016.

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.

§ 105-130.10A. Amortization of equipment mandated by OSHA.

  1. In lieu of any depreciation allowance, at the option of the corporation, a deduction shall be allowed for the amortization, based on a period of 60 months, of the cost of any equipment mandated by the Occupational Safety and Health Act (OSHA), including the cost of planning, acquiring, constructing, modifying, and installing said equipment.
  2. For the purposes of this section and G.S. 105-147(13)d, the term “equipment mandated by the Occupational Safety and Health Act” is any tangible personal property and other buildings and structural components of buildings, which is acquired, constructed, reconstructed, modified, or erected after January 1, 1979; and which the taxpayer must acquire, construct, install, or make available in order to comply with the occupational safety and health standards adopted and promulgated by the United States Secretary of Labor or the Commissioner of Labor of North Carolina, and the term “occupational safety and health standards” includes but is not limited to interim federal standards, consensus standards, any proprietary standards or permanent standards, as well as temporary emergency standards which may be adopted by the United States Secretary of Labor, promulgated as provided by the Occupational Safety and Health Act of 1970, (Public Law 91-596, 91st Congress, Act of December 29, 1970, 84 Stat. 1950) and which standards or regulations are published in the Code of Federal Regulations or otherwise properly promulgated under the Occupational Safety and Health Act of 1970 or any alternative rule, regulation or standard promulgated by the Commissioner of Labor of North Carolina as provided in G.S. 95-131 .

History. 1979, c. 776, s. 1.

Editor’s Note.

G.S. 105-147(13)d, referred to in this section, was repealed by Session Laws 1989, c. 728, s. 13, effective for taxable years beginning on or after January 1, 1989.

§ 105-130.11. Conditional and other exemptions.

  1. Exempt Organizations. —  Except as provided in subsections (b) and (c), the following organizations and any organization that is exempt from federal income tax under the Code are exempt from the tax imposed under this Part.
    1. Fraternal beneficiary societies, orders or associations
      1. Operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and
      2. Providing for the payment of life, sick, accident, or other benefits to the members of such society, order or association, or their dependents.
    2. Cooperative banks without capital stock organized and operated for mutual purposes and without profit; and electric and telephone membership corporations organized under Chapter 117 of the General Statutes.
    3. Cemetery corporations and corporations organized for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual.
    4. Business leagues, chambers of commerce, merchants’ associations, or boards of trade not organized for profit, and no part of the net earnings of which inures to the benefit of any private stockholder or individual.
    5. Civic leagues or organizations not organized for profit, but operated exclusively for the promotion of social welfare.
    6. Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private stockholder or member.
    7. Farmers’ or other mutual hail, cyclone, or fire insurance companies, mutual ditch or irrigation companies, mutual or cooperative telephone companies, or like organizations of a purely local character the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting expenses.
    8. Farmers’, fruit growers’, or like organizations organized and operated as sales agents for the purpose of marketing the products of members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity of product furnished by them.
    9. Mutual associations formed under G.S. 54-111 through 54-128 to conduct agricultural business on the mutual plan and marketing associations organized under G.S. 54-129 through 54-158.Nothing in this subdivision shall be construed to exempt any cooperative, mutual association, or other organization from an income tax on net income that has not been refunded to patrons on a patronage basis and distributed either in cash, stock, or certificates, or in some other manner that discloses the amount of each patron’s refund. Provided, in arriving at net income for purposes of this subdivision, no deduction shall be allowed for dividends paid on capital stock. Patronage refunds made after the close of the taxable year and on or before the fifteenth day of the ninth month following the close of the taxable year are considered as to be made on the last day of the taxable year to the extent the allocations are attributable to income derived before the close of the year; provided, that no stabilization or marketing organization that handles agricultural products for sale for producers on a pool basis is considered to have realized any net income or profit in the disposition of a pool or any part of a pool until all of the products in that pool have been sold and the pool has been closed; provided, further, that a pool is not considered closed until the expiration of at least 90 days after the sale of the last remaining product in that pool. These cooperatives and other organizations shall file an annual information return with the Secretary on forms to be furnished by the Secretary and shall include the names and addresses of all persons, patrons, or shareholders whose patronage refunds amount to ten dollars ($10.00) or more.
    10. Insurance companies paying the tax on gross premiums as specified in G.S. 105-228.5 .
    11. Corporations or organizations, such as condominium associations, homeowner associations, or cooperative housing corporations 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, and operated exclusively for the management, operation, preservation, maintenance, or landscaping of the common areas and facilities owned by the corporation or organization or its members situated contiguous to the houses, apartments, or other dwellings or for the management, operation, preservation, maintenance, and repair of the houses, apartments, or other dwellings owned by the corporation or organization or its members, but only if no part of the net earnings of the corporation or organization inures (other than through the performance of related services for the members of such corporation or organization) to the benefit of any member of such corporation or organization or other person.
  2. Unrelated Business Income. —  Except as provided in this subsection, an organization described in subdivision (a)(1), (3), (4), (5), (6), (7), (8), or (9) of this section and any organization exempt from federal income tax under the Code is subject to the tax provided in G.S. 105-130.3 on its unrelated business taxable income, as defined in section 512 of the Code, adjusted as provided in G.S. 105-130.5 . The tax does not apply, however, to net income derived from any of the following:
    1. Research performed by a college, university, or hospital.
    2. Research performed for the United States or its instrumentality or for a state or its political subdivision.
    3. Research performed by an organization operated primarily to carry on fundamental research, the results of which are freely available to the general public.
    4. Repealed by Session Laws 2020-58, s. 5.5, effective June 30, 2020.
  3. Homeowner Association Income. —  An organization described in subdivision (a)(11) of this section is subject to the tax provided in G.S. 105-130.3 on its gross income other than membership income less the deductions allowed by this Article that are directly connected with the production of the gross income other than membership income. The term “membership income” means the gross income from assessments, fees, charges, or similar amounts received from members of the organization for expenditure in the preservation, maintenance, and management of the common areas and facilities of or the residential units in the condominium or housing development.
  4. Real Estate Mortgage Investment Conduits. —  An entity that qualifies as a real estate mortgage investment conduit, as defined in section 860D of the Code, is exempt from the tax imposed under this Part, except that any net income derived from a prohibited transaction, as defined in section 860F of the Code, is taxable to the real estate mortgage investment conduit under G.S. 105-130.3 and G.S. 105-130.3 A, subject to the adjustments provided in G.S. 105-130.5 . This subsection does not exempt the holders of a regular or residual interest in a real estate mortgage investment conduit as defined in section 860G of the Code from any tax on the income from that interest.

History. 1939, c. 158, s. 314; 1945, c. 708, s. 4; c. 752, s. 3; 1949, c. 392, s. 3; 1951, c. 937, s. 1; 1955, c. 1313, s. 1; 1957, c. 1340, s. 4; 1959, c. 1259, s. 4; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; c. 1053, s. 4; 1975, c. 19, s. 28; c. 591, s. 2; 1981, c. 450, s. 2; 1983, c. 28, s. 1; c. 31; 1985 (Reg. Sess., 1986), c. 826, s. 5; 1991 (Reg. Sess., 1992), c. 921, s. 1; 1993, c. 494, s. 2; 1998-98, ss. 1(b), 69; 2018-5, s. 38.2(i); 2020-58, s. 5.5.

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. 38.2(i), effective for taxable years beginning on or after January 1, 2018, added subdivision (b)(4).

Session Laws 2020-58, s. 5.5, effective June 30, 2020, deleted subdivision (b)(4), which read: “Amounts paid or incurred by an organization that is exempt from federal income tax under section 501(c)(3) of the Code for a parking facility that would otherwise be included as unrelated business income under section 512(a)(7) of the Code.”

Legal Periodicals.

For article, “North Carolina’s Nonprofit Property Tax Exemption Conundrum,” see 96 N.C.L. Rev. 1769 (2018).

CASE NOTES

Income realized by an educational institution of another state from the rental of real estate owned by it in this State is exempt from income taxes under this section, when such income is placed in the general fund of such educational institution and is used exclusively for educational purposes. In re Vanderbilt Univ., 252 N.C. 743 , 114 S.E.2d 655, 1960 N.C. LEXIS 635 (1960) (decided under former G.S. 105-138).

§ 105-130.12. Real estate investment trusts.

  1. Definitions. —  The following definitions apply in this section:
    1. Captive REIT. — A REIT whose shares or certificates of beneficial interest are not regularly traded on an established securities market and are owned or controlled, at any time during the last half of the tax year, by a person that is subject to tax under this Part and is not a REIT or a listed Australian property trust.
    2. Own or control. — To own or control directly, indirectly, beneficially, or constructively more than fifty percent (50%) of the voting power or value of an entity. The attribution rules of section 318 of the Code, as modified by section 856(d)(5) of the Code, apply in determining ownership and control.
    3. REIT. — A trust or another entity that qualifies as a real estate investment trust under section 856 of the Code.
  2. Tax. —  The income of a REIT is taxable under this Part in accordance with the Code, unless the REIT is a captive REIT. A captive REIT is required to add to its federal taxable income the amount of a dividend paid deduction allowed under the Code, as provided in G.S. 105-130.5 .

History. 1963, c. 1169, s. 2; 1967, c. 110, s. 3; 1971, c. 820, s. 2; 1973, c. 476, s. 193; 1983, c. 713, s. 74; 1998-98, s. 69; 2007-323, s. 31.18(c).

Effect of Amendments.

Session Laws 2007-323, s. 31.18(c), substituted “Real” for “Regulated investment companies and real” in the section heading; and rewrote the section.

§ 105-130.13. [Repealed]

Repealed by Session Laws 1987 (Regular Session, 1988), c. 1089, s. 2, as amended by Session Laws 1989, c. 728, s. 1.33.

§ 105-130.14. Corporations filing consolidated returns for federal income tax purposes.

Any corporation electing or required to file a consolidated income tax return with the Internal Revenue Service must determine its State net income as if the corporation had filed a separate federal return and shall not file a consolidated or combined return with the Secretary unless one of the following applies:

  1. The corporation is specifically directed in writing by the Secretary under G.S. 105-130.5 A to file a consolidated or combined return.
  2. Repealed by Session Laws 2012-79, s. 1.14(c), effective June 26, 2012.
  3. Pursuant to a written request from the corporation under G.S. 105-130.5 A, the Secretary has provided written advice to the corporation stating that the Secretary will allow a consolidated or combined return under the facts and circumstances set out in the request and the corporation files a consolidated or combined return in accordance with that written advice.

History. 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 2010-31, s. 31.10(e); 2012-79, s. 1.14(c).

Effect of Amendments.

Session Laws 2010-31, s. 31.10(e), effective June 30, 2010, rewrote the section, which formerly read: “Any corporation electing or required to file a consolidated income tax return with the Internal Revenue Service shall not file a consolidated return with the Secretary of Revenue, unless specifically directed to do so in writing by the Secretary, and shall determine its State net income as if a separate return had been filed for federal purposes.”

Session Laws 2012-79, s. 1.14(c), effective June 26, 2012, in subdivision (1), substituted “G.S. 105-130.5A” for “G.S. 105-130.6”; deleted subdivision (2), which read: “The corporation’s facts and circumstances meet the facts and circumstances described in a permanent rule adopted under G.S. 105-130.6 and the corporation files a consolidated or combined return in accordance with that rule.”; and, in subdivision (3), substituted “corporation under G.S. 105-130.5 A” for “corporation”, and substituted “will allow” for “will require”.

Legal Periodicals.

For article, “A Time for Action: Reforming the North Carolina Tax Code,” see 88 N.C.L. Rev. 1A (2010).

§ 105-130.15. Basis of return of net income.

  1. The net income of a corporation shall be computed in accordance with the method of accounting it regularly employs in keeping its books. The method must be consistent with respect to both income and deductions and shall follow as nearly as practicable the federal practice, unless contrary to the context and intent of this Part.The Secretary may adopt the rules and regulations and any guidelines administered or established by the Internal Revenue Service unless contrary to any provisions of this Part.
  2. Change of Income Year. —
    1. A corporation may change the income year upon which it reports for income tax purposes without prior approval by the Secretary of Revenue if such change in income year has been approved by or is acceptable to the Federal Commissioner of Internal Revenue and is used for filing income tax returns under the provisions of the Code.If a corporation desires to make a change in its income year other than as provided above, it may make such change in its income year with the approval of the Secretary of Revenue, provided such approval is requested at least 30 days prior to the end of its new income year.A corporation which has changed its income year without requesting the approval of the Secretary of Revenue as provided in the first paragraph of this subdivision shall submit to the Secretary of Revenue notification of any change in the income year after the change has been approved by the Federal Commissioner of Internal Revenue or his agent where application for permission to change is required by the Federal Commissioner of Internal Revenue with such notification stating that such approval has been received. Where application for change of the income year is not required by the Federal Commissioner of Internal Revenue, notification of the change of income year shall be submitted to the Secretary of Revenue with the short period return.
    2. A return for a period of less than 12 months (referred to in this subsection as “short period”) shall be made when the corporation changes its income year. In such a case, the return shall be made for the short period beginning on the day after the close of the former taxable year and ending at the close of the day before the day designated as the first day of the new taxable year, except that a corporation changing to, or from, a taxable year varying from 52 to 53 weeks shall not be required to file a short period return if such change results in a short period of 359 days or more, or less than seven days. Short period income tax returns shall be filed within the same period following the end of such short period as is required for full year returns under the provisions of G.S. 105-130.17 .
  3. Any foreign corporation not domesticated in this State shall not use the installment method of reporting income to this State unless such corporation files a bond with the Secretary of Revenue in such amount and with such sureties as the Secretary shall deem necessary to secure the payment of any taxes which were deferred with respect to any installment transaction.
  4. Notwithstanding any other provision of this Part, any corporation which uses the installment method of reporting income to this State and which is planning to withdraw from this State, merge, or consolidate its business, or terminate its business in this State by any other means whatsoever, shall be required to make a report for income tax purposes, to the Secretary of Revenue, of any unrealized or unreported income from installment sales made while doing business in this State and to pay any tax which may be due on such income. The manner and form for making such report and paying the tax shall be as prescribed by the Secretary.

History. 1939, c. 158, s. 318; 1943, c. 400, s. 4; 1945, c. 708, s. 4; 1949, c. 392, s. 3; 1955, c. 1313, s. 1; 1957, c. 1340, s. 4; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1983, c. 713, s. 82; 1998-98, s. 69; 2000-140, s. 64(a); 2011-390, s. 3; 2011-411, s. 8(b).

Effect of Amendments.

Session Laws 2011-390, s. 3, as amended by Session Laws 2011-411, s. 8(b), effective for taxable years beginning on or after January 1, 2012, in the first paragraph of subsection (a), rewrote the second sentence, which formerly read: “The method must be consistent with respect to both income and deductions,” and deleted the former last sentence, which read: “If this method does not clearly reflect the income, the computation shall be made in accordance with a method that, in the Secretary’s opinion, does clearly reflect the income, but shall follow as nearly as practicable the federal practice, unless contrary to the context and intent of this Part.”

§ 105-130.16. Returns.

  1. Every corporation doing business in this State must file with the Secretary an income tax return showing specifically the items of gross income and the deductions allowed by this Part and any other facts the Secretary requires to make any computation required by this Part. The return of a corporation must be signed by its president, vice-president, treasurer, or chief financial officer. The officer signing the return must furnish an affirmation verifying the return. The affirmation must be in the form required by the Secretary.
  2. , (c) Repealed by Session Laws 2011-390, s. 4, as amended by Session Laws 2011-411, s. 8(b), effective for taxable years beginning on or after January 1, 2012.

History. 1939, c. 158, s. 326; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c. 708, s. 4; 1951, c. 643, s. 4; 1957, c. 1340, s. 4; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1998-98, s. 69; 1999-337, s. 22; 2008-134, s. 4(a); 2009-445, s. 6; 2011-390, s. 4; 2011-411, s. 8(b).

Editor’s Note.

Session Laws 2008-134, s. 4(b), was amended by Session Laws 2009-445, s. 6, to change the effective date for the 2008 amendment to subsection (a). The amendment by Session Laws 2008-134, s. 4(a), is now effective for taxable years beginning on or after January 1, 2008.

Session Laws 2007-323, s. 31.18(e), provides: “This section does not affect the authority of the Department of Revenue under G.S. 105-130.6 , G.S. 105-130.16 , or any other statute to require a corporation to file a consolidated return or to determine the net income of a corporation properly attributable to this State. The General Assembly finds that an alternative method of addressing a corporation’s attempt to use a real estate investment trust to shift income between entities and avoid State taxes is to require a captive REIT, as defined in G.S. 105-130.12 as amended by this section, to add to its federal taxable income the dividend paid deduction otherwise allowed under the Internal Revenue Code.”

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.

Effect of Amendments.

Session Laws 2008-134, s. 4(a), effective for taxable years beginning on or after January 1, 2009, substituted “or chief financial officer” for “assistant treasurer, secretary, or assistant secretary” in the second sentence of subsection (a).

Session Laws 2011-390, s. 4, as amended by Session Laws 2011-411, s. 8(b), effective for taxable years beginning on or after January 1, 2012, deleted the subsection (a) catchline, which read “Return.”; and deleted subsections (b) and (c), which pertained to “Correction of Distortions” and “Other Corrections,” respectively.

§ 105-130.17. Time and place of filing returns.

  1. Returns must be filed as prescribed by the Secretary at the place prescribed by the Secretary. Returns must be in the form prescribed by the Secretary. The Secretary must furnish forms in accordance with G.S. 105-254 .
  2. Except as otherwise provided in this section, the return of a corporation shall be filed on or before the fifteenth day of the fourth month following the close of its income year. An income year ending on any day other than the last day of the month shall be deemed to end on the last day of the calendar month ending nearest to the last day of a taxpayer’s actual income year.
  3. In the case of mutual associations formed under G.S. 54-111 through 54-128 to conduct agricultural business on the mutual plan and marketing associations organized under G.S. 54-129 through 54-158, which are required to file under subsection (a)(9) of G.S. 105-130.11 , a return made on the basis of a calendar year shall be filed on or before the fifteenth day of the September following the close of the calendar year, and a return made on the basis of a fiscal year shall be filed on or before the fifteenth day of the ninth month following the close of the fiscal year.
  4. A taxpayer may ask the Secretary for an extension of time to file a return under G.S. 105-263 . (d1) Organizations described in G.S. 105-130.11(a)(1), (3), (4), (5), (6), (7) and (8) that are required to file a return under G.S. 105-130.11(b) shall file a return made on the basis of a calendar year on or before the fifteenth day of May following the close of the calendar year and a return made on the basis of a fiscal year on or before the fifteenth day of the fifth month following the close of the fiscal year.
  5. Any corporation that ceases its operations in this State before the end of its income year because of its intention to dissolve or to withdraw from this State, or because of a merger, conversion, or consolidation or for any other reason whatsoever shall file its return for the then current income year within 105 days after the date it terminates its business in this State.
  6. Repealed by Session Laws 1998-217, s. 42, effective October 31, 1998.
  7. A corporation that files a federal return pursuant to section 6072(c) of the Code shall file its return on or before the fifteenth day of the seventh month following the close of its income year.

History. 1939, c. 158, s. 329; 1943, c. 400, s. 4; 1951, c. 643, s. 4; 1953, c. 1302, s. 4; 1955, c. 17, s. 1; 1957, c. 1340, s. 4; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; c. 1287, s. 4; 1981, c. 56; 1989 (Reg. Sess., 1990), c. 984, s. 8; 1997-300, s. 3; 1998-217, s. 42; 1999-369, s. 5.5; 2000-140, s. 64(b); 2006-18, s. 7; 2007-491, s. 14.

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 2006-18, s. 7, effective for taxable years beginning on or after January 1, 2006, added subsection (g).

Session Laws 2007-491, s. 14, effective for taxable years beginning on or after January 1, 2008, substituted “must furnish” for “shall furnish” in the third sentence of subsection (a); substituted “fourth month” for “third month” in the first sentence of subsection (b); substituted “105 days” for “75 days” at the end of subsection (e); and substituted “seventh month” for “sixth month” in subsection (g). For applicability, see Editor’s note.

§ 105-130.18. [Repealed]

Repealed by Session Laws 2009-445, s. 7, effective August 7, 2009.

Editor’s Note.

Former G.S. 105-130.18 , Failure to file returns; supplementary returns, was derived from Session Laws 1939, c. 158, s. 331, and amended by 1959, c. 1259, s. 8; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1998-98, s. 69; 2000-140, s. 64(c).

§ 105-130.19. When tax must be paid.

  1. Except as provided in Article 4C of this Chapter, the full amount of the tax payable as shown on the return must be paid to the Secretary within the time allowed for filing the return.
  2. , (c) Repealed by Session Laws 1989, c. 37, s. 1.

    (d) Repealed by Session Laws 1993, c. 450, s. 3.

History. 1939, c. 158, s. 332; 1943, c. 400, s. 4; 1947, c. 501, s. 4; 1951, c. 643, s. 4; 1955, c. 17, s. 2; 1959, c. 1259, s. 2; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1977, c. 1114, s. 7; 1989, c. 37, s. 1; 1989 (Reg. Sess., 1990), c. 984, s. 9; 1991 (Reg. Sess., 1992), c. 930, s. 14; 1993, c. 450, s. 3.

§ 105-130.20. Federal determinations and amended returns.

  1. Federal Determination. —  If a taxpayer’s federal taxable income or a federal tax credit is changed or corrected by the Commissioner of Internal Revenue or an agreement of the U.S. competent authority, and the change or correction affects the amount of State tax payable, the taxpayer must file an income tax return reflecting each change or correction from a federal determination within six months after being notified of each change or correction. The Secretary must propose an assessment for any additional tax due from the taxpayer as provided in Article 9 of this Chapter. The Secretary must refund any overpayment of tax as provided in Article 9 of this Chapter. A federal determination has the same meaning as defined in G.S. 105-228.90 .
  2. Amended Return. —  The following applies to an amended return filed by a taxpayer with the Commissioner of Internal Revenue:
    1. If the amended return contains an adjustment that would increase the amount of State tax payable under this Part, then notwithstanding the provisions of G.S. 105-241.8(a), the taxpayer must file within six months thereafter an amended return with the Secretary.
    2. If the amended return contains an adjustment that would decrease the amount of State tax payable under this Part, the taxpayer may file an amended return with the Secretary within the provisions of G.S. 105-241.6 .
  3. Penalties. —  A taxpayer that fails to comply with this section is subject to the penalties in G.S. 105-236 and forfeits the right to any refund due by reason of the determination.

History. 1939, c. 158, s. 334; 1947, c. 501, s. 4; 1949, c. 392, s. 3; 1957, c. 1340, s. 14; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1993 (Reg. Sess., 1994), c. 582, s. 2; 2006-18, s. 4; 2007-491, s. 15; 2017-39, s. 4(a); 2018-5, s. 38.3(a); 2019-169, s. 6.3(b).

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.”

Session Laws 2018-5, s. 38.3(h), made the rewriting of this section by Session Laws 2018-5, s. 38.3(a), effective June 12, 2018, and applicable to federal amended returns filed on or after that date.

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 2019-169, s. 6.3(d), made the amendment to subsection (a) by Session Laws 2019-169, s. 6.3(b), effective July 26, 2019, and applicable to a federal determination on or after that date.

Effect of Amendments.

Session Laws 2006-18, s. 4, effective July 1, 2006, and applicable to federal determinations made on or after that date, substituted “six months” for “two years” in the first sentence of the first undesignated paragraph.

Session Laws 2007-491, s. 15, effective for taxable years beginning on or after January 1, 2007, rewrote the second and third sentences of the former first paragraph and the first sentence of the former second paragraph as the present second sentence; and substituted “must refund” for “shall refund” in the present third sentence. For applicability, see Editor’s note.

Session Laws 2017-39, s. 4(a), effective June 21, 2017, inserted “or federal tax credit that affects the amount of State tax payable” in the first sentence.

Session Laws 2018-5, s. 38.3(a), rewrote the section. For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 6.3(b), substituted “or an agreement of the U.S. competent authority” for “or other officer of the United States or other competent authority” in the first sentence of subsection (a). For effective date and applicability, see editor’s note.

§ 105-130.21. Information at the source.

  1. Every corporation having a place of business or having one or more employees, agents or other representatives in this State, in whatever capacity acting, including lessors or mortgagors of real or personal property, or having the control, receipt, custody, disposal, or payment of interest (other than interest coupons payable to the bearer), rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments or other fixed or determinable annual or periodical gains or profits paid or payable during any year to any taxpayer, shall make complete return thereof to the Secretary of Revenue under such regulations and in such form and manner and to such extent as may be prescribed by him. The filing of any report in compliance with the provisions of this section by a foreign corporation shall not constitute an act in evidence of and shall not be deemed to be evidence that such corporation is doing business in this State.
  2. Every corporation doing business or having a place of business in this State shall file with the Secretary of Revenue, on such form and in such manner as he may prescribe, the names and addresses of all taxpayers, residents of North Carolina, to whom dividends have been paid and the amount of such dividends during the income year.

History. 1939, c. 158, s. 328; 1945, c. 708, s. 4; 1957, c. 1340, s. 4; 1967, c. 1110, s. 3; 1973, c. 476, s. 193.

§ 105-130.22. [Repealed]

Repealed by Session Laws 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1973, c. 910, s. 1; 1979, c. 803, ss. 1, 2; 1981, c. 682, s. 16; 1997-6, s. 3; 1998-98, s. 69; repealed by 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-130.22 pertained to tax credit for construction of dwelling units for handicapped persons.

§ 105-130.23. [Repealed]

Repealed by Session Laws 1999-342, s. 1, effective for taxable years beginning on or after January 1, 2000.

§ 105-130.24. [Repealed]

Repealed by Session Laws 1983 (Regular Session, 1984), c. 1004, s. 2.

§ 105-130.25. Credit against corporate income tax for construction of cogenerating power plants.

  1. Credit. —  A corporation or a partnership, other than a public utility as defined in G.S. 62-3(23), that constructs a cogenerating power plant in North Carolina is allowed as a credit against the tax imposed by this Part an amount equal to ten percent (10%) of the costs paid during the taxable year to purchase and install the electrical or mechanical power generation equipment of that plant. The credit may not be taken for the year in which the costs are paid but shall be taken for the taxable year beginning during the calendar year following the calendar year in which the costs were paid. To be eligible for the credit allowed by this section, the corporation or partnership must own or control the power plant at the time of construction. The credit allowed by this section may not exceed the amount of tax imposed by this Part for the year reduced by the sum of all credits allowed, except payments of tax made by or on behalf of the taxpayer.
  2. Cogenerating Power Plant Defined. —  For purposes of this section, a cogenerating power plant is a power plant that sequentially produces electrical or mechanical power and useful thermal energy using natural gas as its primary energy source.
  3. Alternative Method. —  A taxpayer eligible for the credit allowed by this section may elect to treat the costs paid during an earlier year as if they were paid during the year the plant becomes operational. This election must be made on or before April 15 following the calendar year in which the plant becomes operational. The election must be in the form prescribed by the Secretary and must contain any supporting documentation the Secretary may require. An election with respect to costs paid by a partnership must be made by the partnership and is binding on any partners to whom the credit is passed through.The costs with respect to which this election is made will be treated, for the purposes of this section, as if they had actually been paid in the year the plant becomes operational. If a taxpayer makes this election, however, the credit may not exceed one-fourth the amount of tax imposed by this Part for the year reduced by the sum of all credits allowed, except payments of tax by or on behalf of the taxpayer, but any unused portion of the credit may be carried forward for the next 10 taxable years. An election made under this subsection is irrevocable.
  4. Application. —  To be eligible for the credit allowed in this section, a taxpayer must file an application for the credit with the Secretary on or before April 15 following the calendar year in which the costs were paid. The application shall be in the form prescribed by the Secretary and shall include any supporting documentation the Secretary may require. An application with respect to costs paid by a partnership must be made by the partnership on behalf of its partners.
  5. Ceiling. —  The total amount of all tax credits allowed to taxpayers under this section for payments for construction and installation made in a calendar year may not exceed five million dollars ($5,000,000). The Secretary shall calculate the total amount of tax credits claimed from the applications filed pursuant to subsection (d). If the total amount of tax credits claimed for payments made in a calendar year exceeds five million dollars ($5,000,000), the Secretary shall allow a portion of the credits claimed by allocating the total allowable amount among all taxpayers claiming the credits in proportion to the size of the credit claimed by each taxpayer. In no case may the total amount of all tax credits allowed under this section for costs paid in a calendar year exceed five million dollars ($5,000,000).If a credit claimed under this section is reduced as provided in this subsection, the Secretary shall notify the taxpayer of the amount of the reduction of the credit on or before December 31 of the year the taxpayer applied for the credit. The amount of the reduction of the credit may be carried forward and claimed for the next 10 taxable years if the taxpayer reapplies for a credit for the amount of the reduction, as provided in subsection (d). In such a reapplication, the costs for which a credit is claimed shall be considered as if they had been paid in the year preceding the reapplication. The Secretary’s allocations based on applications filed pursuant to subsection (d) are final and shall not be adjusted to account for credits applied for but not claimed.

History. 1979, c. 801, s. 34; 1993 (Reg. Sess., 1994), c. 674, ss. 1, 2, 4; 1995, c. 17, s. 2; 1998-98, s. 69.

Editor’s Note.

Subsections (a1) and (b) through (d) were redesignated as subsections (b) through (e), respectively, at the direction of the Revisor of Statutes.

§ 105-130.26. [Repealed]

Repealed by Session Laws 1999-342, s. 1, effective for taxable years beginning on or after January 1, 2000.

§ 105-130.27.

Expired.

Editor’s Note.

Pursuant to former subsection (g) of this section, this section applied only to costs incurred during taxable years beginning prior to January 1, 1998.

§ 105-130.27A. [Repealed]

Repealed by Session Laws 1999-342, s. 1, effective for taxable years beginning on or after January 1, 2000.

§ 105-130.28. [Repealed]

Repealed by Session Laws 2000-128, s. 3, effective for costs incurred during taxable years beginning on or after January 1, 2006.

Editor’s Note.

Session Laws 2000-128, s. 4, effective July 14, 2000, provides: “This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under the statute repealed by this act before the effective date of its repeal, nor does it affect the right to any refund or credit of a tax that accrued under the repealed statute before the effective date of its repeal.”

§§ 105-130.29 through 105-130.33. [Repealed]

Repealed by Session Laws 1999-342, s. 1, effective for taxable years beginning on or after January 1, 2000.

Editor’s Note.

Repealed G.S. 105-130.33 was amended by Session Laws 1999-337, s. 23, effective July 22, 1999, which, in subsection (a), inserted a second instance of “generator” and deleted “under this Part” following “allowable.”

§ 105-130.34. [Repealed]

Repealed by Session Laws 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1983, c. 793, s. 1; 1989, c. 716, s. 1; c. 727, s. 218 (41); 1997-226, s. 1; 1997-443, s. 11A.119(a); 1998-98, s. 69; 1998-212, s. 29A.13(c); 2002-72, s. 15(a); 2007-309, s. 1; 2009-445, s. 9(c); 2010-167, s. 5(a); repealed by 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-130.34 pertained to credit for certain real property donations.

§ 105-130.35.

Recodified as G.S. 105-269.5 by Session Laws 1991, c. 45, s. 20.

§§ 105-130.36, 105-130.37. [Repealed]

Repealed by Session Laws 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 105-130.36; 1983 (Reg. Sess., 1984), c. 969, s. 1; 1998-98, s. 88; repealed by 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014. 105-130.37; 1983 (Reg. Sess., 1984), c. 1018, s. 1; 1993 (Reg. Sess., 1994), c. 745, s. 6; 1997-261, s. 12; 1998-98, s. 89; repealed by 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-130.36 pertained to credit for conservation tillage equipment. Former G.S. 105-130.37 pertained to credit for gleaned crop.

§ 105-130.38. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 1, effective for taxable years beginning on or after January 1, 1996.

§ 105-130.39. [Repealed]

Repealed by Session Laws 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1985, c. 694, s. 2; 1998-98, s. 90; repealed by 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-130.39 pertained to credit for certain telephone subscriber line charges.

§ 105-130.40.

Recodified as G.S. 105-129.8 by Session Laws 1996, Second Extra Session, c. 13, s. 3.2, effective for taxable years beginning on or after January 1, 1996.

§ 105-130.41. [Repealed]

Repealed pursuant to the terms of former subsection (d) of this section, effective for taxable years beginning on or after January 1, 2014.

History. 1991 (Reg. Sess., 1992), c. 977, s. 1; 1993 (Reg. Sess., 1994), c. 681, s. 1; 1995, c. 17, s. 17; c. 495, ss. 1, 3, 4; 1996, 2nd Ex. Sess., c. 18, s. 15.3(a); 1997-443, s. 29.1(a)-(c); 1998-98, s. 69; 2001-517, ss. 1, 2; 2002-99, s. 6(c); 2003-414, s. 7; 2005-429, s. 2.9; 2007-527, s. 26(a); 2008-107, s. 28.5(a), (b); 2010-166, s. 1.11; repealed pursuant to the terms of former subsection (d) of this section, effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-130.41 pertained to credit for North Carolina State Ports Authority wharfage, handling, and throughput charges.

§ 105-130.42.

Recodified as G.S. 105-129.35 through 105-129.37 by Session Laws 1999-389, ss. 2-4, effective for taxable years beginning on or after January 1, 1999.

Editor’s Note.

Session Laws 1999-389, s. 6 provides that Article 3D of Chapter 105, as amended by Session Laws 1999-389, incorporates both G.S. 105-130.42 and G.S. 105-151.23 .

§§ 105-130.43, 105-130.44. [Repealed]

Repealed by Session Laws 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 105-130.43; 1985, c. 750, s. 1; 1989, c. 76, s. 24; c. 751, s. 7(8); 1991 (Reg. Sess., 1992), c. 959, s. 22; 1998-98, s. 1(d), (e); 2001-193, s. 16; repealed by Session Laws 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014. 105-130.44; 1985, c. 750, s. 1; 1989, c. 76, s. 24; c. 751, s. 7(8); 1991 (Reg. Sess., 1992), c. 959, s. 22; 1998-98, s. 1(d), (e); 2001-193, s. 16; repealed by Session Laws 2013-316, s. 2.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-130.43 pertained to credit for savings and loan supervisory fees. Former G.S. 105-130.44 pertained to credit for construction of poultry composting facility.

§ 105-130.45. [Repealed]

Repealed by Session Laws 1999-333, s. 10, effective for cigarettes exported on or after January 1, 2018.

History. 1999-333, s. 4; 2003-435, 2nd Ex. Sess., ss. 5.1, 5.2, 5.3; 2005-429, s. 2.10; 2010-166, s. 1.12; repealed by 1999-333, s. 10, effective for cigarettes exported on or after January 1, 2018.

Editor’s Note.

Former G.S. 105-130.45 pertained to credit for manufacturing cigarettes for exportation.

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.”

§ 105-130.46.

Expired.

History. 2003-435, 2nd Ex. Sess., s. 6.1; 2004-170, s. 16(a); 2010-166, s. 1.13; expired by 2003-434, 2nd Ex. Sess., s. 6.2, for exports occurring on or after January 1, 2018.

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.”

Editor’s Note.

Former G.S. 105-130.46 pertained to credit for manufacturing cigarettes for exportation while increasing employment and utilizing State Ports.

§ 105-130.47. [Repealed]

Repealed pursuant to former subsection (k) of this section, effective for qualifying expenses occurring on or after January 1, 2015.

History. 2005-276, s. 39.1(a); 2005-345, ss. 47(a), 47(b); 2006-162, s. 4(a); 2006-220, s. 2; 2007-527, s. 24; 2008-107, s. 28.24(a); 2009-445, s. 8(a); 2009-529, s. 1; 2010-147, s. 2.1; 2010-166, s. 1.14; 2012-194, s. 79.10(a); 2015-241, s. 15.4(g).

Editor’s Note.

Former G.S. 105-130.47 pertained to the credit for qualifying expenses of a production company.

§ 105-130.48. [Repealed]

Repealed pursuant to former subsection (f) of this section, effective for taxable years beginning on or after January 1, 2014.

History. 2006-66, s. 24.18(a); 2007-527, s. 9(a); 2010-147, s. 4.1; 2011-330, s. 36; 2012-36, s. 6(a).

Editor’s Note.

Former G.S. 105-130.48 pertained to credit for recycling oyster shells.

Part 1A. S Corporation Income Tax.

§ 105-131. Title; definitions; interpretation.

  1. This Part of the income tax Article shall be known and may be cited as the S Corporation Income Tax Act.
  2. For the purpose of this Part, unless otherwise required by the context:
    1. “Code” has the same meaning as in G.S. 105-228.90 .
    2. “C Corporation” means a corporation that is not an S Corporation and is subject to the tax levied under Part 1 of this Article.
    3. “Department” means the Department of Revenue.
    4. “Income attributable to the State” means items of income, loss, deduction, or credit of the S Corporation apportioned and allocated to this State pursuant to G.S. 105-130.4 .
    5. “Income not attributable to the State” means all items of income, loss, deduction, or credit of the S Corporation other than income attributable to the State.
    6. “Post-termination transition period” means that period defined in section 1377(b)(1) of the Code.
    7. “Pro rata share” means the share determined with respect to an S Corporation shareholder for a taxable period in the manner provided in section 1377(a) of the Code.
    8. “S Corporation” means a corporation for which a valid election under section 1362(a) of the Code is in effect.
    9. “Secretary” means the Secretary of Revenue.
    10. “Taxable period” means any taxable year or portion of a taxable year during which a corporation is an S Corporation.
    11. (Effective for taxable years beginning on or after January 1, 2022)  “Taxed S Corporation” means an S Corporation for which a valid election under G.S. 105-131.1 A(a) is in effect.
  3. Except as otherwise expressly provided or clearly appearing from the context, any term used in this Part shall have the same meaning as when used in a comparable context in the Code, or in any statute relating to federal income taxes, in effect during the taxable period. Due consideration shall be given in the interpretation of this Part to applicable sections of the Code in effect and to federal rulings and regulations interpreting those sections, except where the Code, ruling, or regulation conflicts with the provisions of this Part.

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1989 (Reg. Sess., 1990), c. 981, s. 4; 1991, c. 689, s. 251; 1991 (Reg. Sess., 1992), c. 922, s. 5; 1993, c. 12, s. 6; 1998-98, ss. 43, 68-70; 2021-180, s. 42.5(a).

Editor’s Note.

Another section, also numbered G.S. 105-131 , which was in Division I [now Part I] of Article 4 of this Chapter, was repealed by Session Laws 1967, c. 1110, s. 3. For present provisions similar to the repealed section, see G.S. 105-130.1 , 105-134.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.5(a), effective for taxable years beginning on or after January 1, 2022, added subdivision (b)(11).

§ 105-131.1. (Effective for taxable years beginning before January 1, 2022) Taxation of an S Corporation and its shareholders.

  1. An S Corporation shall not be subject to the tax levied under G.S. 105-130.3 .
  2. Each shareholder’s pro rata share of an S Corporation’s income attributable to the State and each resident shareholder’s pro rata share of income not attributable to the State, shall be taken into account by the shareholder in the manner and subject to the adjustments provided in Parts 2 and 3 of this Article and section 1366 of the Code and shall be subject to the tax levied under Parts 2 and 3 of this Article.

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1998-98, ss. 5, 68.

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.5(b), effective for taxable years beginning on or after January 1, 2022, added the last sentence in subsection (a); and added “Except with respect to a taxed S Corporation” at the beginning of subsection (b).

§ 105-131.1. Taxation of an S Corporation and its shareholders. [Effective for taxable years beginning on or after January 1, 2022]

  1. An S Corporation shall not be subject to the tax levied under G.S. 105-130.3 . A taxed S Corporation shall be subject to tax under G.S. 105-131.1 A.
  2. Except with respect to a taxed S Corporation, each shareholder’s pro rata share of an S Corporation’s income attributable to the State and each resident shareholder’s pro rata share of income not attributable to the State, shall be taken into account by the shareholder in the manner and subject to the adjustments provided in Parts 2 and 3 of this Article and section 1366 of the Code and shall be subject to the tax levied under Parts 2 and 3 of this Article.”

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1998-98, ss. 5, 68; 2021-180, s. 42.5(b).

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.5(b), effective for taxable years beginning on or after January 1, 2022, added the last sentence in subsection (a); and added “Except with respect to a taxed S Corporation” at the beginning of subsection (b).

§ 105-131.1A. Taxation of S Corporation as a taxed pass-through entity. [Effective for taxable years beginning on or after January 1, 2022]

  1. Taxed S Corporation Election.   — An S Corporation may elect, on its timely filed annual return required under G.S. 105-131.7 , to have the tax under this Article imposed on the S Corporation for any taxable period covered by the return. An S Corporation may not revoke the election after the due date of the return including extensions.
  2. Taxable Income of Taxed S Corporation.    — A tax is imposed for the taxable period on the North Carolina taxable income of a taxed S Corporation. The tax shall be levied, collected, and paid annually. The tax is imposed on the North Carolina taxable income at the rate levied in G.S. 105-153.7 . The North Carolina taxable income of a taxed S Corporation is determined as follows:
    1. The North Carolina taxable income of a taxed S Corporation with respect to such taxable period shall be equal to the sum of the following:
      1. Each shareholder’s pro rata share of the taxed S Corporation’s income or loss, subject to the adjustments provided in G.S. 105-153.5 and G.S. 105-153.6 , attributable to the State.
      2. Each resident shareholder’s pro rata share of the taxed S Corporation’s income or loss, subject to the adjustments provided in G.S. 105-153.5 and G.S. 105-153.6 , not attributable to the State with respect to such taxable period.
    2. Separately stated items of deduction are not included when calculating each shareholder’s pro rata share of the taxed S Corporation’s taxable income. For purposes of this subdivision, separately stated items are those items described in section 1366 of the Code and the regulations under it.
    3. The adjustments required by G.S. 105-153.5(c3) are not included in the calculation of the taxed S Corporation’s taxable income.
  3. Tax Credit.   — A taxed S Corporation that qualifies for a credit may apply each shareholder’s pro rata share of the taxed S Corporation’s credits against the shareholder’s pro rata share of the taxed S Corporation’s income tax imposed by subsection (b) of this section. An S Corporation must pass through to its shareholders any credit required to be taken in installments by this Chapter if the first installment was taken in a taxable period that the election under subsection (a) of this section was not in effect. An S Corporation shall not pass through to its shareholders any of the following:
    1. Any credit allowed under this Chapter for any taxable period the S Corporation makes the election under subsection (a) of this section and the carryforward of the unused portion of such credit.
    2. Any subsequent installment of such credit required to be taken in installments by this Chapter after the S Corporation makes an election under subsection (a) of this section and the carryforward of any unused portion of such installment.
  4. Tax Credit for Income Taxes Paid to Other States.    — With respect to resident shareholders, a taxed S Corporation is allowed a credit against the taxes imposed by this section for income taxes imposed by and paid to another state or country on income taxed under this section. The credit allowed by this subsection is administered in accordance with the provisions of G.S. 105-153.9 .
  5. Deduction Allowed for Shareholders of a Taxed S Corporation.   — The shareholders of a taxed S Corporation are allowed a deduction as specified in G.S. 105-153.5(c3)(1). This adjustment is only allowed if the taxed S Corporation complies with the provisions of subsection (g) of this section.
  6. Addition Required for Shareholders of a Taxed S Corporation.   — The shareholders of a taxed S Corporation must make an addition as provided in G.S. 105-153.5(c3)(2).
  7. Payment of Tax.   — Except as provided in Article 4C of this Chapter, the full amount of the tax payable as shown on the return of the taxed S Corporation must be paid to the Secretary within the time allowed for filing the return. In the case of any overpayment by a taxed S Corporation of the tax imposed under this section, only the taxed S Corporation may request a refund of the overpayment. If the taxed S Corporation files a return showing an amount due with the return and does not pay the amount shown due, the Department may collect the tax from the taxed S Corporation pursuant to G.S. 105-241.22(1). The Secretary must issue a notice of collection for the amount of tax debt to the taxed S Corporation. If the tax debt is not paid to the Secretary within 60 days of the date the notice of collection is mailed to the taxed S Corporation, the shareholders of the S Corporation are not allowed the deduction provided in G.S. 105-153.5(c3)(1). The Secretary must send the shareholders a notice of proposed assessment in accordance with G.S. 105-241.9 . For purposes of this subsection, the term “tax debt” has the same meaning as defined in G.S. 105-243.1(a) .
  8. Basis.   — The basis of both resident and nonresident shareholders of a taxed S Corporation in their stock and indebtedness of the taxed S Corporation shall be determined as if the election under subsection (a) of this section had not been made and each of the shareholders of the taxed S Corporation had properly taken into account each shareholder’s pro rata share of the taxed S Corporation’s items of income, loss, and deduction in the manner required with respect to an S Corporation for which no such election is in effect.”

History. 2021-180, s. 42.5(c).

Editor's Note.

Session Laws 2021-180, s. 42.5(n), made this section, as added by Session Laws 2021-180, s. 42.5(c), effective for taxable years beginning on or after January 1, 2022.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-131.2. Adjustment and characterization of income.

  1. Adjustment. —  Each shareholder’s pro rata share of an S Corporation’s income is subject to the adjustments provided in G.S. 105-153.5 and G.S. 105-153.6 .
  2. Repealed by Session Laws 1989, c. 728, s. 1.35.
  3. Characterization of Income. —  S Corporation items of income, loss, deduction, and credit taken into account by a shareholder pursuant to G.S. 105-131.1(b) are characterized as though received or incurred by the S Corporation and not its shareholder.

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1993, c. 485, s. 8; 2006-17, s. 1; 2013-316, s. 1.3(a).

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.”

Section 105-134.6, referred to in subsection (a), was repealed by Session Laws 2013-316, s. 1.1(b), effective January 1, 2014.

Effect of Amendments.

Session Laws 2006-17, s. 1, effective for taxable years beginning on or after January 1, 2006, rewrote subsection (a); in subsection (c) substituted “are” for “shall be.”

Session Laws 2013-316, s. 1.3(a), effective for taxable years beginning on or after January 1, 2014, substituted “G.S. 105-153.5 and G.S. 105-153.6 ” for “G.S. 105-134.6” in subsection (a).

§ 105-131.3. Basis and adjustments.

  1. The initial basis of a resident shareholder in the stock of an S Corporation and in any indebtedness of the corporation owed to that shareholder shall be determined, as of the later of the date the stock is acquired, the effective date of the S Corporation election, or the date the shareholder became a resident of this State, as provided under the Code.
  2. The basis of a resident shareholder in the stock and indebtedness of an S Corporation shall be adjusted in the manner and to the extent required by section 1011 of the Code except that:
    1. Any adjustments made (other than for income exempt from federal or State income taxes) pursuant to G.S. 105-131.2 shall be taken into account; and
    2. Any adjustments made pursuant to section 1367 of the Code for a taxable period during which this State did not measure S Corporation shareholder income by reference to the corporation’s income shall be disregarded.
  3. The initial basis of a nonresident shareholder in the stock of an S Corporation and in any indebtedness of the corporation to that shareholder shall be zero.
  4. The basis of a nonresident shareholder in the stock and indebtedness of an S Corporation shall be adjusted as provided in section 1367 of the Code, except that adjustments to basis shall be limited to the income taken into account by the shareholder pursuant to G.S. 105-131.1(b).
  5. The basis of a shareholder in the stock of an S Corporation shall be reduced by the amount allowed as a loss or deduction pursuant to G.S. 105-131.4(c).
  6. The basis of a resident shareholder in the stock of an S Corporation shall be reduced by the amount of any cash distribution that is not taxable to the shareholder as a result of the application of G.S. 105-131.6(b).
  7. For purposes of this section, a shareholder shall be considered to have acquired stock or indebtedness received by gift at the time the donor acquired the stock or indebtedness, if the donor was a resident of this State at the time of the gift.

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35.

§ 105-131.4. Carryforwards; carrybacks; loss limitation.

  1. Carryforwards and carrybacks to and from an S Corporation shall be restricted in the manner provided in section 1371(b) of the Code.
  2. The aggregate amount of losses or deductions of an S Corporation taken into account by a shareholder pursuant to G.S. 105-131.1(b) may not exceed the combined adjusted bases, determined in accordance with G.S. 105-131.3 , of the shareholder in the stock and indebtedness of the S Corporation.
  3. Any loss or deduction that is disallowed for a taxable period pursuant to subsection (b) of this section shall be treated as incurred by the corporation in the succeeding taxable period with respect to that shareholder.
    1. Any loss or deduction that is disallowed pursuant to subsection (b) of this section for the corporation’s last taxable period as an S Corporation shall be treated as incurred by the shareholder on the last day of any post-termination transition period.
    2. The aggregate amount of losses and deductions taken into account by a shareholder pursuant to subdivision (1) of this subsection may not exceed the adjusted basis of the shareholder in the stock of the corporation (determined in accordance with G.S. 105-131.3 at the close of the last day of any post-termination transition period and without regard to this subsection).
  5. Expired.

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1989 (Reg. Sess., 1990), c. 984, s. 1; 1991, c. 752, s. 1.

§ 105-131.5. Part-year resident shareholder.

If a shareholder of an S Corporation is both a resident and nonresident of this State during any taxable period, the shareholder’s pro rata share of the S Corporation’s income attributable to the State and income not attributable to the State for the taxable period shall be further prorated between the shareholder’s periods of residence and nonresidence, in accordance with the number of days in each period, as provided in G.S. 105-153.4 .

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 2017-204, s. 1.7(a).

Editor’s Note.

Session Laws 2017-204, s. 1.7(b), made the amendment to this section by Session Laws 2017-204, s. 1.7(a), effective for taxable years beginning on or after January 1, 2014.

Effect of Amendments.

Session Laws 2017-204, s. 1.7(a), effective for taxable years beginning on or after January 1, 2014, substituted “G.S. 105-153.4” for “G.S. 105-134.5.”

§ 105-131.6. Distributions.

  1. Subject to the provisions of subsection (c) of this section, a distribution made by an S Corporation with respect to its stock to a resident shareholder is taxable to the shareholder as provided in Parts 2 and 3 of this Article to the extent that the distribution is characterized as a dividend or as gain from the sale or exchange of property pursuant to section 1368 of the Code.
  2. Subject to the provisions of subsection (c) of this section, any distribution of money made by a corporation with respect to its stock to a resident shareholder during a post-termination transition period is not taxable to the shareholder as provided in Parts 2 and 3 of this Article to the extent the distribution is applied against and reduces the adjusted basis of the stock of the shareholder in accordance with section 1371(e) of the Code.
  3. In applying sections 1368 and 1371(e) of the Code to any distribution referred to in this section:
    1. The term “adjusted basis of the stock” means the adjusted basis of the shareholder’s stock as determined under G.S. 105-131.3 .
    2. The accumulated adjustments account maintained for each resident shareholder must be equal to, and adjusted in the same manner as, the corporation’s accumulated adjustments account defined in section 1368(e)(1)(A) of the Code, except that:
      1. The accumulated adjustments account shall be modified in the manner provided in G.S. 105-131.3 (b)(1).
      2. The amount of the corporation’s federal accumulated adjustments account that existed on the day this State began to measure the S Corporation shareholders’ income by reference to the income of the S Corporation is ignored and is treated for purposes of this Article as additional accumulated earnings and profits of the corporation.

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1998-98, s. 6.

§ 105-131.7. Returns; shareholder agreements; mandatory withholding.

  1. An S Corporation incorporated or doing business in the State shall file with the Department an annual return, on a form prescribed by the Secretary, on or before the due date prescribed for the filing of C Corporation returns in G.S. 105-130.17 . The return shall show the name, address, and social security or federal identification number of each shareholder, income attributable to the State and the income not attributable to the State with respect to each shareholder as defined in G.S. 105-131(b)(4) and (5), and such other information as the Secretary may require.
  2. The Department shall permit S Corporations to file composite returns and to make composite payments of tax on behalf of some or all nonresident shareholders. The Department may permit S Corporations to file composite returns and make composite payments of tax on behalf of some or all resident shareholders.
  3. An S Corporation shall file with the Department, on a form prescribed by the Secretary, the agreement of each nonresident shareholder of the corporation (i) to file a return and make timely payment of all taxes imposed by this State on the shareholder with respect to the income of the S Corporation, and (ii) to be subject to personal jurisdiction in this State for purposes of the collection of any unpaid income tax, together with related interest and penalties, owed by the nonresident shareholder. If the corporation fails to timely file an agreement required by this subsection on behalf of any of its nonresident shareholders, then the corporation shall at the time specified in subsection (d) of this section pay to the Department on behalf of each nonresident shareholder with respect to whom an agreement has not been timely filed an estimated amount of the tax due the State. The estimated amount of tax due the State shall be computed at the rate levied in G.S. 105-153.7 on the shareholder’s pro rata share of the S Corporation’s income attributable to the State reflected on the corporation’s return for the taxable period. An S Corporation may recover a payment made pursuant to the preceding sentence from the shareholder on whose behalf the payment was made.
  4. The agreements required to be filed pursuant to subsection (c) of this section shall be filed at the following times:
    1. At the time the annual return is required to be filed for the first taxable period for which the S Corporation becomes subject to the provisions of this Part.
    2. At the time the annual return is required to be filed for any taxable period in which the corporation has a nonresident shareholder on whose behalf such an agreement has not been previously filed.
  5. Amounts paid to the Department on account of the corporation’s shareholders under subsections (b) and (c) constitute payments on their behalf of the income tax imposed on them under Parts 2 and 3 of this Article for the taxable period.
  6. Critical Infrastructure Disaster Relief. —  An S Corporation that is not doing business in this State because it is a nonresident business performing disaster-related work during a disaster response period at the request of a critical infrastructure company is not required to file a return with the Department. However, the corporation must furnish to each shareholder who would be entitled to share in the corporation income any information necessary for that person to properly file a State income tax return. The definitions and provisions in G.S. 166A-19.70 A concerning disaster-related work apply to this subsection.
  7. (Effective for taxable years beginning on or after January 1, 2022) Taxed S Corporation. –  Subsections (b) through (f) of this section do not apply to an S Corporation with respect to any taxable period for which it is a taxed S Corporation under G.S. 105-131.1 A.”

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1991, c. 689, s. 301; 1998-98, s. 7; 1999-337, s. 24; 2013-316, s. 1.3(b); 2017-204, s. 1.8; 2019-187, s. 1(h); 2021-180, s. 42.5(d).

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

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2013-316, s. 1.3(b), effective for taxable years beginning on or after January 1, 2014, substituted “rate levied in G.S. 105-153.7 ” for “rates levied in G.S. 105-134.2(a)(3)” in the third sentence of subsection (c).

Session Laws 2017-204, s. 1.8, effective August 11, 2017, substituted “G.S. 105-131(b)(4) and (5)” for “G.S. 105-131(4) and (5)” in subsection (a).

Session Laws 2019-187, s. 1(h), added subsection (f). For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 42.5(d), effective for taxable years beginning on or after January 1, 2022, added subsection (g).

CASE NOTES

Bankrupt Corporate Distribution to Pay Personal Taxes of Shareholders. —

Bankruptcy court denied a Chapter 11 corporate debtor’s motion seeking permission to distribute $44,578 to its shareholders so they could pay personal tax liabilities they owed to the North Carolina Department of Revenue (“NCDOR”). The debtor made distributions totaling $262,500 to its shareholders in 2011, before it declared bankruptcy, and the court approved additional distributions in the amount of $45,000 to the shareholders after the debtor declared bankruptcy, and those payments were sufficient to pay taxes the shareholders allegedly owed to the NCDOR; there was no merit to the debtor’s claim that it would lose its Subchapter S status if it did not file composite returns and pay the taxes on behalf of its shareholders pursuant to G.S. 105-131.7 , and approving the debtor’s motion would have contravened the priority scheme that was embodied in 11 U.S.C.S. §§ 507 and 1129(b)(2)(B)(ii) by allowing the debtor to distribute property to its equity security holders when it had substantial unpaid general unsecured creditors of a higher priority. In re Carolina Internet, Ltd., 2012 Bankr. LEXIS 3147 (Bankr. W.D.N.C. July 11, 2012).

§ 105-131.8. Tax credits. [Effective for taxable years beginning before January 1, 2022]

  1. For purposes of G.S. 105-153.9 and G.S. 105-160.4 , each resident shareholder is considered to have paid a tax imposed on the shareholder in an amount equal to the shareholder’s pro rata share of any net income tax paid by the S Corporation to a state that does not measure the income of S Corporation shareholders by the income of the S Corporation. For purposes of the preceding sentence, the term “net income tax” means any tax imposed on or measured by a corporation’s net income.
  2. Except as otherwise provided in G.S. 105-160.3 , each shareholder of an S Corporation is allowed as a credit against the tax imposed by Parts 2 and 3 of this Article an amount equal to the shareholder’s pro rata share of the tax credits for which the S Corporation is eligible.

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1991, c. 45, s. 7; 1998-98, s. 8; 2020-58, s. 4.1.

Cross References.

As to credits for rehabilitated mill property, see G.S. 105-129.71 and 105-129.72.

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2020-58, s. 4.1, effective June 30, 2020, substituted “G.S. 105-153.9” for “G.S. 105-151” in the first sentence of subsection (a).

§ 105-131.8. Tax credits. [Effective for taxable years beginning on or after January 1, 2022]

  1. Except as otherwise provided in G.S. 105-153.9 (a)(4) with respect to a taxed S Corporation, for purposes of G.S. 105-153.9 and G.S. 105-160.4 , each resident shareholder is considered to have paid a tax imposed on the shareholder in an amount equal to the shareholder’s pro rata share of any net income tax paid by the S Corporation to a state that does not measure the income of S Corporation shareholders by the income of the S Corporation. For purposes of the preceding sentence, the term “net income tax” means any tax imposed on or measured by a corporation’s net income.
  2. Except as otherwise provided in G.S. 105-160.3 , each shareholder of an S Corporation is allowed as a credit against the tax imposed by Parts 2 and 3 of this Article an amount equal to the shareholder’s pro rata share of the tax credits for which the S Corporation is eligible.

History. 1987 (Reg. Sess., 1988), c. 1089, s. 1; 1989, c. 728, ss. 1.33, 1.35; 1991, c. 45, s. 7; 1998-98, s. 8; 2020-58, s. 4.1; 2021-180, s. 42.5(e).

Cross References.

As to credits for rehabilitated mill property, see G.S. 105-129.71 and 105-129.72.

Section Set Out Twice.

The section above is in effect for taxable years beginning on or after January 1, 2022. For this section as in effect for taxable years beginning before January 1, 2022, see the main volume.

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2020-58, s. 4.1, effective June 30, 2020, substituted “G.S. 105-153.9” for “G.S. 105-151” in the first sentence of subsection (a).

Session Laws 2021-180, s. 42.5(e), effective for taxable years beginning on or after January 1, 2022, added “Except as otherwise provided in G.S. 105-153.9(a)(4) with respect to a taxed S Corporation” at the beginning of subsection (a).

§ 105-132.

Recodified as G.S. 105-135 by Session Laws 1967, c. 1110, s. 3.

Editor’s Note.

G.S. 105-132 , at the end of this Part, is reserved for future codification purposes. Another section, also numbered G.S. 105-132 , was transferred to G.S. 105-135 by Session Laws 1967, c. 1110, s. 3, but was repealed by Session Laws 1989, c. 728, s. 1.3.

Part 2. Individual Income Tax.

§ 105-133.

Recodified as G.S. 105-153.1 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

§ 105-134. [Repealed]

Recodified as G.S. 105-153.2 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

History. 1939, c. 158, s. 301; 1967, c. 1110, s. 3; 1989, c. 728, s. 1.2; 1998-98, s. 69; 2005-276, s. 31.1(dd), (jj); 2005-344, s. 10.3; 2006-259, s. 8(j); 2006-264, s. 91(a).

Editor’s Note.

Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014, recodified G.S. 105-134 as G.S. 105-153.2 . For provisions effective for taxable years beginning on or after January 1, 2014, see G.S. 105-153.2 .

Effect of Amendments.

Session Laws 2005-344, s. 10.3, as added by Session Laws 2005-276, s. 31.1(dd), and as amended by Session Laws 2005-276, s. 31.1(jj), as added by Session Laws 2006-259, s. 8(j), and 2006-264, s. 91(a), effective for taxable years beginning on or after January 1, 2005, inserted “or deriving income from gambling activities in this state” at the end of subdivision (2), and made related, stylistic changes.

§ 105-134.1. [Repealed]

Recodified as G.S. 105-153.3 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Session Laws 2017-204, s. 1.9(a), applicable to taxable years beginning before January 1, 2014, amended this section by adding subdivision (5a). For present provisions, see G.S. 105-153.3 .

§ 105-134.2. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1989, c. 728, s. 1.4; 1989 (Reg. Sess., 1990), c. 814, s. 16; 1991, c. 45, s. 8; c. 689, s. 300; 1991 (Reg. Sess., 1992), c. 930, s. 15; 2001-424, s. 34.18(a); 2003-284, s. 39.1(a); 2003-284, ss. 39.1, 39.2; 2005-276, s. 36.1(a); 2006-66, ss. 24.2(a)-(c); 2013-414, s. 1(e); repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-134.2 pertained to individual income tax imposed.

§ 105-134.2A. Expired.

History. 2009-451, s. 27A.1(b); expired effective for taxable years beginning on or after January 1, 2011.

Editor’s Note.

Former G.S. 105-134.2 A pertained to income tax surtax.

§ 105-134.3. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1989, c. 728, s. 1.4; 1998-98, s. 69; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-134.3 pertained to year of assessment.

§ 105-134.4. [Repealed]

Repealed by Session Laws 2011-145, s. 31A.1(d), effective for taxable years beginning on or after January 1, 2012.

History. 1989, c. 728, s. 1.4; 2011-145, s. 31A.1(d); repealed by 2011-145, s. 31A.1(d), effective for taxable years beginning on or after January 1, 2012.

Editor’s Note.

Former G.S. 105-134.4 pertained to computing taxable income on the basis of taxable year.

§ 105-134.5.

Recodified as G.S. 105-153.4 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Session Laws 2017-204, s. 1.9(c), applicable to taxable years beginning before January 1, 2014, amended this section by amending subsection (d). For present provisions, see G.S. 105-153.4 .

§§ 105-134.6, 105-134.6A. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 105-134.6; 1989, c. 718, s. 2; c. 728, s. 1.4; c. 770, ss. 41.2, 41.3; c. 792, s. 1.1; 1989 (Reg. Sess., 1990), c. 984, s. 4; c. 1002, s. 2; 1991, c. 45, s. 9; c. 453, s. 1; c. 689, ss. 253, 254; 1991 (Reg. Sess., 1992), c. 1007, s. 3; 1993, c. 12, s. 8; c. 443, s. 8; c. 485, s. 9; 1993 (Reg. Sess., 1994), c. 745, s. 7; 1995, c. 17, s. 5; c. 42, ss. 1, 2(a), (b); c. 46, s. 3; c. 370, s. 3; 1996, 2nd Ex. Sess., c. 13, s. 8.1; c. 14, s. 9; 1997-226, s. 3; 1997-328, s. 1; 1997-388, s. 4; 1997-525, s. 1; 1998-98, s. 69; 1998-171, ss. 2, 3; 1998-212, ss. 29A.2(c), 29A.13(a); 1999-333, s. 3; 1999-463, Ex Sess., s. 4.6 (a); 2000-140, ss. 65, 93.1(a); 2001-424, ss. 12.2(b), 34.19(a), (b); 2002-126, ss. 30B.1(a), 30B.1(b), 30C.2(b), 30C.2(d), 30C.4; 2003-284, s. 37A.2; 2005-1, s. 5.7(a); 2005-276, ss. 35.1(e), 39.1(f); 2005-435, s. 55; 2006-17, ss. 2, 3; 2006-66, ss. 24.12(a), 24.18(e); 2006-220, s. 3; 2006-221, s. 27(a); 2007-323, ss. 31.19(a)-(d), 31.24(a); 2007-397, s. 13(c); 2008-107, ss. 28.1(e), (f), (h), 28.25(c), 28.27(b), (c); 2008-134, s. 2(c); 2009-445, s. 43; 2009-451, s. 27A.6(e), (f); 2010-31, s. 31.1(b); 2011-5, ss. 2(c), (d), 3(d), (c); 2011-106, s. 1; 2011-145, s. 31A.1(c); 2011-330, ss. 11, 12(b)-(e), 13, 36; 2012-74, s. 2(a); 2012-79, s. 1.3; 2013-10, ss. 2(c), (d), 3(c), (d), 5(a), (b), 6(a), (b), 7, 8; 2013-414, ss. 5(a), 6(a)-(e), 34(c), 35(a); 2015-6, s. 2.20(d); 2016-5, s. 2.4(a); repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014. 105-134.6A; 2013-414, ss. 34(d), 58(b); 2014-3, s. 2.1(b); 2015-6, s. 2.8(a); repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-134.6 pertained to modifications to adjusted gross income. Former G.S. 105-134.6 A pertained to adjustments when State decouples from federal accelerated depreciation and expensing.

Session Laws 2008-107, s. 28.27(d), provides, in part, that the amendment to this section by s. 28.27(b), which added subdivision (b)(19), expires for taxable years beginning on or after January 1, 2015.

Effect of Amendments.

Session Laws 2001-424, s. 34.19(a), as amended by Session Laws 2002-126, s. 30B.1(a), effective for taxable years beginning on or after January 1, 2003, in subdivision (c)(3), substituted “the taxpayer is required to add to taxable income under subdivision (4) of this subsection” for “by which the taxpayer’s allowable standard deduction has been increased under section 63(c)(4) of the Code,” and in subdivision (c)(4), inserted “additional,” “for aged and blind,” and the language beginning “plus the amount by which,” and added the table.

Session Laws 2001-424, s. 34.19(b), as amended by Session Laws 2002-126, s. 30B.1(b), effective for taxable years beginning on or after January 1, 2004, amended subdivision (c)(4), as amended by Session Laws 2001-424, s. 34.19(a), by changing the standard deduction for married filing jointly/surviving spouse from $5,500 to $6,000 and for married filing separately from $2,750 to $3,000.

Session Laws 2003-284, s. 37A.2, effective June 30, 2003, in subdivision (c)(8), twice substituted “special accelerated depreciation” for “thirty percent (30%) accelerated depreciation,” changed the applicable percentage for 2004 to “70%,” and added an applicable percentage of “0” for “2005 and thereafter.”

Session Laws 2005-1, s. 5.7(a), effective for taxable years beginning on or after January 1, 2004, added subdivision (b)(18).

Session Laws 2005-276, s. 35.1(e), effective for taxable years beginning on or after January 1, 2005, in subdivision (c)(3), inserted “or as state or local general sales tax” and added subdivision (c)(9); because of a conflicting amendment, it was subsequently renumbered as subdivision (c)(10) at the direction of the Revisor of Statutes.

Session Laws 2005-276, s. 39.1(f), effective for taxable years beginning on or after January 1, 2005, and applicable to qualifying expenses incurred on or after July 1, 2005, added subdivision (c)(9).

Session Laws 2005-435, s. 55, effective September 27, 2005, substituted “G.S. 105-151.29” for “G.S. 105-130.47” in subdivision (c)(9).

Session Laws 2006-17, ss. 2 and 3, effective for taxable years beginning on or after January 1, 2006, rewrote subsection (a), and added subdivision (c)(3a).

Session Laws 2006-66, s. 24.12(a), as amended by Session Laws 2007-323, s. 31.19(b), effective for taxable years beginning on or after January 1, 2006, added subdivisions (d)(4), and (d)(5).

Session Laws 2006-66, s. 24.18(e), as amended by Session Laws 2011-330, s. 36, effective for taxable years beginning on or after January 1, 2006, and expiring for taxable years beginning on or after January 1, 2013, added subdivision (c)(5a).

Session Laws 2006-220, s. 3, effective for taxable years beginning on and after January 1, 2007, repealed subdivision (c)(9), which read: “The amount of qualifying expenses for which the taxpayer claims a credit under G.S. 105-151.29 .”

Session Laws 2007-323, ss. 31.19(c), (d) and 31.24(a), rewrote subdivision (d)(4); and added subdivision (d)(6). For effective dates, see Editor’s note.

Session Laws 2007-397, s. 13(c), effective for taxable years beginning on or after January 1, 2008, added subdivision (c)(5b).

Session Laws 2008-107, ss. 28.1(e), (f), (h), and 28.27(b), effective for taxable years beginning on or after January 1, 2008, added subdivisions (b)(17a) and (b)(19); in subdivision (c)(8), in the introductory paragraph, added “For taxable years 2002-2005,” at the beginning of the first sentence, and in the table, deleted “and thereafter” following “2005”; and added subdivision (c)(8a). For expiration of amendment made by s. 28.27(b), see Editor’s note.

Session Laws 2008-107, s. 28.25(c), as amended by Session Laws 2009-445, s. 43, effective for taxable years beginning on or after January 1, 2008, inserted “or a unit of State or local government” in subdivision (c)(5b).

Session Laws 2008-134, s. 2(c), effective July 28, 2008, substituted “allowed by this Chapter” for “allowed by this Part” near the end of subdivision (d)(2).

Session Laws 2009-451, s. 27A.6(e) and (f), effective for taxable years beginning on or after January 1, 2009, rewrote subdivision (b)(17a); added subdivision (b)(20); rewrote subdivision (c)(8a); and added subdivisions (c)(11) through (c)(14).

Session Laws 2010-31, s. 31.1(b), effective June 30, 2010, added subdivisions (d)(7) and (d)(8).

Session Laws 2011-5, ss. 2(c), (d) and 3(c), (d), as amended by Session Laws 2011-330, s. 11, effective March 17, 2011, and applicable to the estates of decedents dying on or after January 1, 2011, added subdivisions (b)(17b), (b)(21), (c)(8b), and (c)(15).

Session Laws 2011-145, s. 31A.1(c), effective for taxable years beginning on or after January 1, 2012, added subsections (a1) and (a2); rewrote the introductory paragraph of subsection (b), which formerly read: “Deductions. — The following deductions from taxable income shall be made in calculating North Carolina taxable income, to the extent each item is included in taxable income”; added subdivision (b)(22); rewrote the introductory paragraph of subsection (c), which formerly read: “Additions. — The following additions to taxable income shall be made in calculating North Carolina taxable income, to the extent each item is not included in taxable income”; deleted subdivisions (c)(4), (c)(4a), and (11), which pertained to taxpayer’s additional standard deduction for aged and blind, taxpayer’s personal exemptions, and taxpayer’s real property tax deduction, respectively; deleted “or section 63(c)(1)(E)” following “section 164(a)(6)” in subdivision (c)(12); and rewrote the last sentence in subsection (d), which read: “The following adjustments to taxable income shall be made in calculating North Carolina taxable income.”

Session Laws 2011-330, s. 12(b)-(e), effective for taxable years beginning on or after January 1, 2012, in the introductory paragraph of subsection (a1), substituted “same personal exemptions allowed” for “same number of personal exemptions claimed”; in subsection (a2), in the introductory paragraph, substituted “claimed under the Code” for “elected under section 63 of the Code” in the first sentence, deleted the former last sentence, which read: “A taxpayer may not deduct both the standard deduction amount and the itemized deductions amount,” and added the present last sentence; and added the second paragraph; in subdivision (b)(22), substituted “An amount not to exceed” for “The first” at the beginning of the first sentence, and added the present second sentence; rewrote subdivision (c)(3); and repealed subdivision (c)(12), which read: “The amount of the taxpayer’s deduction for motor vehicle sales taxes under section 164(a)(6) of the Code.”

Session Laws 2011-330, s. 13, effective June 27, 2011, rewrote subdivision (d)(8).

Session Laws 2012-74, s. 2(a), effective for taxable years beginning on or after January 1, 2012, added subdivision (d)(9).

Session Laws 2012-79, s. 1.3, effective June 26, 2012, in the first paragraph of subsection (a2), inserted “North Carolina” and deleted “listed in the table below” preceding “taxpayer’s filing status” in the first sentence, added the second sentence, and added “the taxpayer or” in the third sentence.

Session Laws 2013-10, ss. 2(c), (d), 3(c), (d), 5(a), (b), 6(a), (b), 7, and 8, added subdivisions (b)(21a), (c)(15a), (c)(16), (c)(17), (c)(18), (c)(19), and (d)(23) (now (d)(10)); in the fourth sentence of subdivision (b)(17b), substituted “adjusted gross income” for “taxable income” and added the last sentence; substituted “2013” for “2012” in the first sentence of subdivision (c)(8b); in the last sentence of subdivision (d)(2), added “not” and “in the following circumstances”; redesignated subdivision (d)(2) as the introductory language of (d)(2) and subdivision (d)(2)a.; in subdivision (d)(2)a., substituted “If” for “only to the extent that” and deleted “not” preceding “allowed”; and added subdivision (d)(2)b. For effective date and applicability, see editor’s note.

Session Laws 2013-414, ss. 5(a) and 6(b), effective for taxable years beginning on or after January 1, 2012, substituted “adjusted gross income” for “taxable income” throughout subdivision (d)(3), and in subdivisions (b)(17b), (d)(4), (d)(5), and (d)(6); deleted “to federal taxable income as accelerated depreciation” following “amount added” in the first sentence of subdivision (b)(17b); substituted “105-134.6A” for “105-134.7” twice in the first paragraph of subdivision (d)(1); deleted “from taxable income” following “amount deducted” in subdivision (d)(5); and deleted “shall be added to taxable income” from the end of subdivision (c)(21).

Session Laws 2013-414, s. 34(c), effective August 23, 2013, deleted subdivisions (b)(17), (b)(17a), (b)(17b), (b)(21), (b)(21a), (c)(8), (c)(8a), (c)(8b), (c)(15), and (c)(15a); and added subdivisions (b)(23) and (c)(22).

Session Laws 2013-414, s. 35(a), effective for taxable years beginning on or after January 1, 2013, renumbered subdivision (d)(23), as enacted by Session Laws 2013-10, s. 6(b), as subdivision (d)(10), and inserted “who elects to itemize deductions under G.S. 105-134.6(a2)” in the first sentence, and added the last sentence.

Session Laws 2015-6, s. 2.20(d), effective retroactively for taxable years beginning on or after January 1, 2012, and before January 1, 2014, substituted “Married, filing jointly/surviving spouse” for “Married, filing jointly” in the table in subsection (a2).

Session Laws 2016-5, s. 2.4(a), effective for taxable years beginning on or after January 1, 2009, deleted the former last sentence in subdivision (b)(20), which read: “This deduction applies to taxable years beginning on or after January 1, 2014.”

§ 105-134.7. [Repealed]

Repealed by Session Laws 2013-414, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1989, c. 728, s. 1.4; 1993, c. 485, s. 10; 1998-98, s. 91; 2013-414, s. 6(a)-(f); repealed by 2013-414, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-134.7 pertained to traditional adjustments.

§ 105-134.8. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1989, c. 728, s. 1.4; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-134.8 pertained to inventory.

§§ 105-135 through 105-149. [Repealed]

Repealed by Session Laws 1989, c. 728, s. 1.3.

§ 105-150. [Repealed]

Repealed by Session Laws 1973, c. 1287, s. 5.

§ 105-151.

Recodified as G.S. 105-153.9 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

§ 105-151.1. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1973, c. 910, s. 2; 1979, c. 803, ss. 3, 4; 1981, c. 682, s. 17; 1989, c. 728, s. 1.6; 1997-6, s. 4; 1998-98, s. 69; 1998-100, s. 1; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-151.1 pertained to credit for construction of dwelling units for handicapped persons.

§ 105-151.2. [Repealed]

Repealed by Session Laws 1999-342, s. 1, effective for taxable years beginning on or after January 1, 2000.

§ 105-151.3. [Repealed]

Repealed by Session Laws 1983 (Regular Session 1984), c. 1004, s. 2.

§ 105-151.4. [Repealed]

Repealed by Session Laws 1989, c. 728, s. 1.8.

§ 105-151.5. [Repealed]

Repealed by Session Laws 1999-342, s. 1, effective for taxable years beginning on or after January 1, 2000.

§ 105-151.6.

Expired.

Editor’s Note.

Pursuant to former subsection (g) of this section, this section applied only to costs incurred during taxable years beginning prior to January 1, 1998.

§ 105-151.6A. [Repealed]

Repealed by Session Laws 1989, c. 728, s. 1.11.

§§ 105-151.7 through 105-151.10. [Repealed]

Repealed by Session Laws 1999-342, s. 1, effective for taxable years beginning on or after January 1, 2000.

§§ 105-151.11 through 105-151.14. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 105-151.11; 1981, c. 899, s. 1; 1985, c. 656, ss. 8-11; 1989, c. 728, s. 1.16; 1993, c. 432, s. 1; 1998-98, ss. 69, 99; 1998-100, s. 2; 2006-18, s. 9; 2013-414, s. 5(c); repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014. 105-151.12; 1983, c. 793, s. 3; 1985, c. 278, s. 2; 1989, c. 716, s. 2; c. 727, s. 218(43); c. 728, s. 1.17; 1989 (Reg. Sess., 1990), c. 869, s. 3; 1991, c. 45, s. 10; c. 453, ss. 2, 4; 1991 (Reg. Sess., 1992), c. 930, s. 21; 1993 (Reg. Sess., 1994), c. 717, s. 4; 1997- 226, s. 2; 1997-443, s. 11A.119(a); 1998-98, s. 69; 1998-179, s. 2; 1998-212, s. 29A.13(b), (d); 2001-335, s. 2; 2002-72, s. 15(b); 2004-134, s. 1; 2006-66, s. 24.15(a); 2007-309, s. 2; 2009-445, s. 9(d); 2010-167, s. 5(b); repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014. 105-151.13; 1983 (Reg. Sess., 1984), c. 969, s. 2; 1989, c. 728, s. 1.18; 1991 (Reg. Sess., 1992), c. 930, s. 22; 1998-98, s. 100; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014. 105-151.14; 1983 (Reg. Sess., 1984), c. 1018, s. 2; 1989, c. 728, s. 1.19; 1991, c. 453, s. 3; 1997-261, s. 13; 1998-98, s. 101; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-151.11 pertained to credit for child care and certain employment-related expenses. Former G.S. 105-151.12 pertained to credit for certain real property donations. Former G.S. 105-151.13 pertained to credit for conservation tillage equipment. Former G.S. 105-151.14 pertained to credit for gleaned crop.

§ 105-151.15. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 1, effective for taxable years beginning on or after January 1, 1996.

§ 105-151.16. [Repealed]

Repealed by Session Laws 1989, c. 728, s. 1.21.

§ 105-151.17.

Recodified as G.S. 105-129.8 by Session Laws 1996, Second Extra Session, c. 13, s. 3.4, effective for taxable years beginning on or after January 1, 1996.

§ 105-151.18. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 1989, c. 728, s. 1.22; 1989 (Reg. Sess., 1990), c. 984, s. 5; 1998-98, ss. 69, 102; 2013-414, s. 7; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-151.18 pertained to credit for the disabled.

§ 105-151.19. [Repealed]

Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 2, effective for taxable years beginning on or after January 1, 1996.

§§ 105-151.20, 105-151.21. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 105-151.20; 1989 (Reg. Sess., 1990), c. 984, s. 6; 1991, c. 45, s. 11; 1996, 2nd Ex. Sess., c. 19, s. 1; 1997-499, ss. 1, 2; 1998-98, s. 69; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014. 105-151.21; 1985, c. 656, s. 13(3); 1987, c. 804, s. 6; 1991, c. 45, s. 14(a); 1998-98, s. 103; 2001-414, s. 11; 2005-276, s. 33.25; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-151.20 pertained to credit or partial refund for taxes paid on certain federal retirement benefits. Former G.S. 105-151.21 pertained to credit for property taxes paid on farm machinery.

§ 105-151.22. [Repealed]

Repealed pursuant to former subsection (d) of this section, effective for taxable years beginning on or after January 1, 2014.

History. 1991 (Reg. Sess., 1992), c. 977, s. 2; 1993 (Reg. Sess., 1994), c. 681, s. 2; 1995, c. 17, s. 17; c. 495, ss. 2-4; 1996, 2nd Ex. Sess., c. 18, s. 15.3(b); 1997-443, s. 29.1 (a), (b), (d); 1998-98, s. 69; 2001-517, ss. 1, 2; 2002-99, s. 6(d); 2003-414, s. 8; 2005-429, s. 2.11; 2007-527, s. 26(b); 2008-107, s. 28.5(c), (d); 2010-166, s. 1.15.

Editor’s Note.

Former G.S. 105-151.22 pertained to credit for North Carolina State Ports Authority wharfage, handling, and throughput charges.

§ 105-151.23.

Recodified as G.S. 105-129.35 through 105-129.37 by Session Laws 1999-389, s. 6, effective for taxable years beginning on or after January 1, 1999.

Editor’s Note.

Session Laws 1999-389, s. 6 provides that Article 3D of Chapter 105, as amended by Session Laws 1999-389, incorporates both G.S. 105-130.42 and G.S. 105-151.23 .

§ 105-151.24. [Repealed]

Recodified as G.S. 105-153.10 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

History. 1995, c. 42, s. 3; 1998-98, s. 69; 2001-424, s. 34.20(a); 2002-126, s. 30B.2(a), (b); 2003-284, s. 39B.2.

Editor’s Note.

Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014, recodified G.S. 105-151.24 as G.S. 105-153.10 . For provisions effective for taxable years beginning on or after January 1, 2014, see G.S. 105-153.10 .

Effect of Amendments.

Session Laws 2001-424, 34.20(b), as amended by Session Laws 2002-126, s. 30B.2(b), in this section as amended by Session Laws 2001-424, s. 34.20(a), effective for taxable years beginning on or after January 1, 2004, substituted “one hundred dollars ($100.00)” for “seventy-five dollars ($75.00)” in the first paragraph.

Session Laws 2003-284, s. 39B.2, effective for taxable years beginning on or after January 1, 2003, designated the previously undesignated provisions of the section as subsections (a) and (b); in subsection (a), added “Credit. —” at the beginning, inserted “who is allowed a federal child tax credit under section 24 of the Code for the taxable year and” following “An individual,” and substituted “is allowed the federal credit” for “was allowed to deduct a personal exemption under section 151(c)(1)(B) of the code”; and in subsection (b), added “Limitations. —” at the beginning.

§§ 105-151.25, 105-151.26. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 105-151.25; 1995, c. 543, s. 1; 1998-134, ss. 2, 3; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014. 105-151.26: repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-151.25 pertained to credit for construction of a poultry composting facility. Former G.S. 105-151.26 pertained to credit for charitable contributions by nonitemizers.

§ 105-151.27. [Repealed]

Repealed by Session Laws 2001-424, s. 34.21(a), effective for taxable years beginning on or after January 1, 2001.

§ 105-151.28. [Repealed]

Repealed pursuant to former subsection (d) of this section, effective for taxable years beginning on or after January 1, 2014.

History. 1998-212, s. 29A.6(a); 2007-323, s. 31.5(a); 2012-36, s. 7.

Editor’s Note.

Former G.S. 105-151.28 pertained to credit for premiums paid on long-term care insurance.

§ 105-151.29. [Repealed]

Repealed pursuant to former subsection (k) of this section, effective for qualifying expenses occurring on or after January 1, 2015.

History. 2005-276, s. 39.1(b); 2005-345, ss. 47(c), 47(d); 2006-162, s. 4(b); 2006-220, s. 4; 2007-527, s. 24; 2008-107, s. 28.24(b); 2009-445, s. 8(b); 2009-529, s. 2; 2010-147, s. 2.2; 2010-166, s. 1.16; 2012-194, s. 79.10(b); 2015-241, s. 15.4(g); repealed by 2012-194, s. 79.10(b), effective July 17, 2012.

Editor’s Note.

Former G.S. 105-151.29 pertained to credit for qualifying expenses of a production company.

§ 105-151.30. [Repealed]

Repealed pursuant to former subsection (d) of this section, effective for taxable years beginning on or after January 1, 2014.

History. 2006-66, s. 24.18(c); 2007-527, s. 9(b); 2010-147, s. 4.2; 2011-330, s. 36; 2012-36, s. 6(b); 2013-414, s. 5(d).

Editor’s Note.

Former G.S. 105-151.30 pertained to credit for recycling oyster shells.

§ 105-151.31. [Repealed]

Repealed pursuant to former subsection (c) of this section, effective for taxable years beginning on or after January 1, 2014.

History. 2007-323, s. 31.4(a); 2008-107, s. 28.9(a); 2012-36, s. 8; 2013-10, s. 9.

Editor’s Note.

Former G.S. 105-151.31 pertained to earned income tax credit.

§ 105-151.32. [Repealed]

Repealed pursuant to former subsection (c) of this section, effective for taxable years beginning on or after January 1, 2014.

History. 2007-323, s. 31.6(a); 2012-36, s. 9; 2013-10, s. 10.

Editor’s Note.

Former G.S. 105-151.32 pertained to credit for adoption expenses.

§ 105-151.33. [Repealed]

Repealed by Session Laws 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

History. 2011-395, ss. 1, 2; 2013-364, s. 2; repealed by 2013-316, s. 1.1(b), effective for taxable years beginning on or after January 1, 2014.

Editor’s Note.

Former G.S. 105-151.33 pertained to education expenses credit.

§ 105-152.

Recodified as G.S. 105-153.8 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

History. 1939, c. 158, s. 326; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c. 708, s. 4; 1951, c. 643, s. 4; 1957, c. 1340, s. 4; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; c. 903, s. 1; c. 1287, s. 5; 1977, c. 315; 1989, c. 728, s. 1.23; 1991 (Reg. Sess., 1992), c. 930, s. 1; 1998-98, ss. 69, 104; 1999-337, s. 25; 2006-66, s. 24.11(a); 2012-79, s. 2.5; 2013-414, s. 5(e).

Editor’s Note.

Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014, recodified G.S. 105-152 as G.S. 105-153.8 . For provisions effective for taxable years beginning on or after January 1, 2014, see G.S. 105-153.8 .

Effect of Amendments.

Session Laws 2006-66, s. 24.11(a), effective for taxable years beginning on or after January 1, 2006, rewrote the first sentence in subsection (e).

Session Laws 2012-79, s. 2.5, effective June 26, 2012, substituted “qualifies for relief of” for “has been relieved of” in the next-to-last sentence of subsection (e).

Session Laws 2013-414, s. 5(e), effective for taxable years beginning on or after January 1, 2012, substituted “adjusted gross income” for “taxable income” in subsection (c) and throughout subsection (d).

CASE NOTES

Deduction of Tax Refunds Received from Estate Share Proper. —

Order allowing an estate to deduct one-half of the federal income tax refund and a portion of the State income tax refund received by a widow from joint tax returns from the widow’s share of the estate was proper. Bryant v. Bowers, 182 N.C. App. 338, 641 S.E.2d 855, 2007 N.C. App. LEXIS 583 (2007).

§ 105-152.1. [Repealed]

Repealed by Session Laws 1991 (Reg. Sess., 1992), c. 930, s. 12.

§ 105-153. [Repealed]

Repealed by Session Laws 1967, c. 1110, s. 3.

§ 105-153.1. Short title.

This Part of the income tax Article shall be known as the Individual Income Tax Act.

History. 1967, c. 1110, s. 3; 1989, c. 728, s. 1.1; 1998-98, ss. 44, 68; 2013-316, s. 1.1(a).

Editor’s Note.

This section was former G.S. 105-133 . It was recodified as G.S. 105-153.1 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014. For provisions effective for taxable years beginning before January 1, 2014, see G.S. 105-133 .

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.”

Legal Periodicals.

For comment on definition of rents from foreign real estate, see 17 N.C.L. Rev. 382 (1939).

For discussion of the provisions of this and other sections of the North Carolina income tax law designed to guard against excessive duplicate taxation, see 27 N.C.L. Rev. 582 (1949).

For note on income tax consequences of alimony payments, see 29 N.C.L. Rev. 319 (1951).

For notes as to employees’ death benefits and the relation between trust income and beneficiary income under the 1957 amendments, see 36 N.C.L. Rev. 163, 166 (1958).

For comment discussing state adoption of federal taxing concepts, see 51 N.C.L. Rev. 834 (1973).

For survey of 1977 tax law, see 56 N.C.L. Rev. 1128 (1978).

For survey of 1979 tax law, see 58 N.C.L. Rev. 1548 (1980).

For comment on the tax effects of equitable distribution upon divorce, see 18 Wake Forest L. Rev. 555 (1982).

For survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

For note, “Stone v. Lynch: North Carolina Takes a Different Approach to Defining Gift,” see 64 N.C.L. Rev. 677 (1986).

CASE NOTES

Analysis

I.General Consideration

Editor’s Note. —

Reserved for future annotations.

II.Decisions under Prior Law

Editor’s Note. —

Session Laws 1989, c. 728, effective for taxable years beginning on or after January 1, 1989, repealed former G.S. 105-135 to 105-149, relating to individual income tax, and enacted new G.S. 105-134.1 to 105-134.8 (now repealed). The following annotations were taken from the repealed sections and arranged under this analysis for convenience.

A.Individuals

Editor’s Note. —

The cases cited below were decided under former G.S. 105-136.

Former G.S. 105-136 imposed a tax on all of a resident’s net income. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Only Portion of Income Derived from This State Taxed. —

Former G.S. 105-136 imposed a tax only on that portion of the net income of a nonresident which is derived from North Carolina sources. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Basis for Taxation of Nonresident Partner. —

Former G.S. 105-142(c) determined the basis on which this section levied an income tax on a nonresident partner. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

B.Gross Income Defined

Editor’s Note. —

The cases cited below were decided under former G.S. 105-141.

This Division taxes income derived from any source whatever and in whatever form paid. Foreman Mfg. Co. v. Johnson, 261 N.C. 504 , 135 S.E.2d 205, 1964 N.C. LEXIS 509 (1964).

Section Does Not Include Loans. —

Neither former G.S. 105-141, which defined income, nor former G.S. 105-147, which specified deductions, included loans. In re Fleishman, 264 N.C. 204 , 141 S.E.2d 256, 1965 N.C. LEXIS 1150 (1965).

Loans to a taxpayer do not constitute taxable income and should not, therefore, be included as gross income on his income tax return. In re Fleishman, 264 N.C. 204 , 141 S.E.2d 256, 1965 N.C. LEXIS 1150 (1965).

Nor Value of Property Acquired by Gift. —

The value of property acquired by gift is excluded from both State and federal income tax. Foreman Mfg. Co. v. Johnson, 261 N.C. 504 , 135 S.E.2d 205, 1964 N.C. LEXIS 509 (1964).

Meaning of “Gift.” —

For North Carolina income tax purposes the definition of gift remains what it was at common law: “A voluntary transfer of property by one to another without any consideration therefor.” Stone v. Lynch, 68 N.C. App. 441, 315 S.E.2d 350, 1984 N.C. App. LEXIS 3295 (1984), aff'd, 312 N.C. 739 , 325 S.E.2d 230, 1985 N.C. LEXIS 1504 (1985).

Federal Practice Not Controlling. —

Whereas the General Assembly has specifically provided at numerous places in the income tax statutes that the State shall follow federal practice, the absence of such language in former G.S. 105-141(b)(3) leads to the inference that, by exclusion, the legislature intended federal practice not to control it. Stone v. Lynch, 68 N.C. App. 441, 315 S.E.2d 350, 1984 N.C. App. LEXIS 3295 (1984), aff'd, 312 N.C. 739 , 325 S.E.2d 230, 1985 N.C. LEXIS 1504 (1985).

Union strike benefits are not taxable as income to the recipient under North Carolina law; such strike benefits qualify as a gift, thereby allowing the taxpayer to exclude them from taxable income. Stone v. Lynch, 68 N.C. App. 441, 315 S.E.2d 350, 1984 N.C. App. LEXIS 3295 (1984), aff'd, 312 N.C. 739 , 325 S.E.2d 230, 1985 N.C. LEXIS 1504 (1985).

Damages for Wrongful Death Not Exempt. —

It is reversible error for the trial court to instruct the jury that damages awarded in a wrongful death action are exempt from federal and State income taxes. Scallon v. Hooper, 58 N.C. App. 551, 293 S.E.2d 843, 1982 N.C. App. LEXIS 2806 (1982).

C.Basis of Return of Net Income

Editor’s Note. —

The cases cited below were decided under former G.S. 105-142.

Statutes providing exemption from taxation are strictly construed. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Taxation is the rule; exemption the exception. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Former G.S. 105-142(a) does not authorize any deductions not specifically authorized by North Carolina statute, nor does it require use of federal tax treatments. Stone v. Lynch, 68 N.C. App. 441, 315 S.E.2d 350, 1984 N.C. App. LEXIS 3295 (1984), aff'd, 312 N.C. 739 , 325 S.E.2d 230, 1985 N.C. LEXIS 1504 (1985).

Former G.S. 105-142(a) authorizes no deductions not included in former G.S. 105-147. In re Fleishman, 264 N.C. 204 , 141 S.E.2d 256, 1965 N.C. LEXIS 1150 (1965).

Accounting Practices. —

While it is true that former G.S. 105-142(a) provided that accounting methods selected by the State shall follow as nearly as practicable the federal practice, this provision, however, does not mandate use of federal accounting practices. Stone v. Lynch, 68 N.C. App. 441, 315 S.E.2d 350, 1984 N.C. App. LEXIS 3295 (1984), aff'd, 312 N.C. 739 , 325 S.E.2d 230, 1985 N.C. LEXIS 1504 (1985).

Determining Basis of Income Tax on Nonresident Partner. —

Former G.S. 105-142(c) determined the basis on which former G.S. 105-136 levied an income tax on a nonresident partner. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Determination of Net Income of Multistate Partnerships Attributable to This State. —

The proviso following the third sentence of former G.S. 105-142(c) relates solely to the second and third sentences of that subsection and its sole purpose was to provide how the net income of a multistate partnership attributable to North Carolina was to be determined. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

The proviso of former G.S. 105-142(c) relates solely to the method for determining the portion of the net income attributable to North Carolina of a multistate partnership with nonresident members. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Proviso Not Enacted in Substitution for Former G.S. 105-147(10)(b). —

The contention that the proviso of former G.S. 105-142(c) was enacted in substitution for former G.S. 105-147(10)(b) is without substance. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Loan Not Income and Repayment Not Deductible. —

The classification of a loan as income for the year in which the money was borrowed and as a deduction for the year in which the money was repaid, not only is not an approved and generally accepted method of accounting but also is a procedure directly contrary to “the context and intent” of this Article. In re Fleishman, 264 N.C. 204 , 141 S.E.2d 256, 1965 N.C. LEXIS 1150 (1965).

A gain resulting from the involuntary conversion of a capital asset by fire was taxable under the State law as income, notwithstanding that the proceeds of the fire insurance plus additional cash were necessary for and used in the restoration of the building, under former G.S. 105-142 and former G.S. 105-141, prior to the passage of former G.S. 105-144.1. State v. Speizman, 230 N.C. 459 , 53 S.E.2d 533, 1949 N.C. LEXIS 369 (1949).

Requirement That Secretary of Revenue Follow Federal Practice. —

Subsection (a) of former G.S. 105-142, stipulating that the Secretary of Revenue shall follow the federal practice as nearly as practicable in instances where the method of accounting of the taxpayer does not clearly reflect the income of the taxpayer, does not require the Secretary to apply the provisions of G.S. 112(f), 26 U.S.C.A. 95, in computing the income of a taxpayer from involuntary conversion of a capital asset. State v. Speizman, 230 N.C. 459 , 53 S.E.2d 533, 1949 N.C. LEXIS 369 (1949).

Necessity of Reliance on Federal Tax Returns. —

Recognizing the practical necessity for the North Carolina Department of Revenue to rely upon tax returns accepted by the Federal Internal Revenue Service for a proper reflection of taxable income upon foreign corporations, the General Assembly enacted this section. In re Virginia-Carolina Chem. Corp., 248 N.C. 531 , 103 S.E.2d 823, 1958 N.C. LEXIS 526 (1958).

D.Determination of Gain or Loss

Editor’s Note. —

The cases cited below were decided under former G.S. 105-144.

Former G.S. 105-144 had to do only with fixing for tax purposes the mode of ascertaining realized gains or losses sustained in respect to the disposal of property. Hence the statute was not applicable to a gift of property to a charitable institution. Wiscassett Mills Co. v. Shaw, 235 N.C. 14 , 68 S.E.2d 816, 1952 N.C. LEXIS 335 (1952).

Former G.S. 105-144 prescribed the method for ascertaining the amount of a loss resulting “from the sale or other disposition of property.” Ward v. Clayton, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

When Method for Ascertaining Loss Is Applicable. —

The method for ascertaining the amount of a loss prescribed is applicable whenever property is disposed of by sale, casualty or otherwise, in such manner as to result in a taxable gain or a deductible loss. Ward v. Clayton, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Income tax law is concerned only with realized losses, as with realized gains. Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Basis Where Loss Is from Sale or Other Disposition of Property. —

Former G.S. 105-144 clearly provided that in ascertaining a loss from the sale or other disposition of property, the basis shall be the adjusted cost of the property. Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Casualty loss is an “other disposition of property.” Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

A taxpayer’s loss of timber by fire is an “other disposition of property”, and therefore the income tax deduction allowable under former G.S. 105-147 for such casualty loss may not exceed the taxpayer’s cost basis of the property so destroyed. Ward v. Clayton, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

And Is Not Treated Differently Than a Loss from a Sale. —

Nothing indicates the General Assembly intended a taxpayer’s deductible loss by fire or other casualty to be treated differently from a loss resulting from a sale. Ward v. Clayton, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Taxpayer showed no cost basis whereby a realized loss could be measured. See Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

E.Deductions

Editor’s Note. —

The cases cited below were decided under former G.S. 105-147.

Deduction Defined. —

A deduction is defined as “something that is or may be subtracted.” Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Nature of Deductions. —

Deductions are in the nature of exemptions; they are privileges, not matters of right, and are allowed as a matter of legislative grace. Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Taxpayer claiming deduction must bring himself within the statutory provisions authorizing the deduction. Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

The allowance of a deduction in the computation of taxable income is a privilege granted as a matter of legislative grace. One claiming the deduction must bring himself within the statutory provisions authorizing it, and in general the deduction may be taken only by the taxpayer to whom it accrues. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

Deduction of Particular Charges, Expenses, or Disbursements. —

The states may allow deductions in the computation of income for income tax purposes as they choose, and statutes imposing a tax on incomes ordinarily authorize the deduction from gross income of particular charges, expenses, or disbursements, in arriving at the income on which the tax is to be imposed. Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Strict Accounting on Annual Basis Formerly Required. —

The North Carolina income tax statutes formerly required all taxpayers to account strictly on an annual basis, reporting for each taxable year all items of gross income and claiming as deductions for that year only items properly pertaining to that accounting period. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

Burden of proof to establish a deductible loss and the amount of it is on the plaintiff. Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Section Does Not Include Loans. —

Neither former G.S. 105-141, which defined income, nor former G.S. 105-147, which specified deductions, included loans. In re Fleishman, 264 N.C. 204 , 141 S.E.2d 256, 1965 N.C. LEXIS 1150 (1965).

Amounts expended to repay the principal of a loan are not allowed as deductions from taxable income. In re Fleishman, 264 N.C. 204 , 141 S.E.2d 256, 1965 N.C. LEXIS 1150 (1965).

Income from Business Situated in Another State. —

In order for a resident taxpayer to be entitled to deduct income derived from a business situated in another state from his income taxable by this State, the taxpayer must show that he has a business or investment in such other state, that the income therefrom is taxable in that state, and that the questioned income is derived from such business or investment. Sabine v. Gill, 229 N.C. 599 , 51 S.E.2d 1, 1948 N.C. LEXIS 391 (1948).

What are “ordinary and necessary” expenses necessarily vary in individual cases, and depend upon the nature of a particular business, its size, its location, its mode of operations, and to some extent the business customs and practices prevailing at the time and in the locality or area where the taxpayer operates. Therefore, in order to take care of the varying situations as they arise, former G.S. 105-147 should be left flexible in form for application in individual cases according to the practical meaning of the statutory language. Wiscassett Mills Co. v. Shaw, 235 N.C. 14 , 68 S.E.2d 816, 1952 N.C. LEXIS 335 (1952).

In order for an item of expense to be deductible it must be both an “ordinary” expense and a “necessary” expense, since these words are used conjunctively. Also of controlling significance is this phrase appearing in the section: “in carrying on any trade or business.” Here, the connotation is that the expense in order to be deductible must relate to the cost of “carrying on” the business, and carrying on a business in plain language means operating the business. Therefore, it would seem that an expense in order to be deductible not only must be an “ordinary and necessary” business expense, but as a general rule it must relate in a substantial way to the costs of current operations, — to the cost of producing the gross income from which the deduction is sought. Wiscassett Mills Co. v. Shaw, 235 N.C. 14 , 68 S.E.2d 816, 1952 N.C. LEXIS 335 (1952).

Business expenses are proper deductions from one’s taxable income. Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Capital Expenditures Not Deductible. —

Former G.S. 105-147 did not sanction the deduction of an expenditure the underlying purpose and predominant effect of which are to provide permanent improvements or betterments reasonably calculated to enhance the value of the taxpayer’s business or property for a period substantially beyond the year in which the outlay is made. Such an outlay is a capital expenditure, as distinguished from an item of normal operating business expense, and it is not deductible for income tax purposes. Wiscassett Mills Co. v. Shaw, 235 N.C. 14 , 68 S.E.2d 816, 1952 N.C. LEXIS 335 (1952).

Ordinarily, the expense of installing sewers is treated as a capital expenditure and is not deductible. And the fact that the taxpayer does not own the property on which the mains were laid and did not by contractual arrangement with the city acquire some vested property rights therein in return for the sums paid to the city does not have the effect of transforming these capital expenditures into ordinary and necessary business expenses to be written off entirely within the year. Wiscassett Mills Co. v. Shaw, 235 N.C. 14 , 68 S.E.2d 816, 1952 N.C. LEXIS 335 (1952).

Former G.S. 105-147(4) was intended to provide for the deduction only of “rentals or other payments” as and when the items accrue from year to year, and in no event may it be interpreted as authorizing the deduction in one year of a prepayment of rentals or other like charges for a period of years in advance. Wiscassett Mills Co. v. Shaw, 235 N.C. 14 , 68 S.E.2d 816, 1952 N.C. LEXIS 335 (1952).

Advance Rentals, Bonuses, etc., to Be Spread over Life of Lease. —

Rentals required to be paid for the use or possession of business property, not owned by the taxpayer and in which he has no equity, may usually be deducted in computing income tax. However, where an expenditure made by a lessee is in the nature of an investment in property used in his trade or business, or is the cost, or part of the cost, of the lease itself, it cannot be deducted in toto from the lessee’s taxable income as an expense for the year in which it occurred, but must be recovered in annual allowances. Thus, advances, rentals and bonuses, the price paid for an assignment of a lease, and other similar expenditures by a lessee are not deductible as ordinary and necessary business expenses in the year of payment but are required to be spread over the entire life of the lease. Wiscassett Mills Co. v. Shaw, 235 N.C. 14 , 68 S.E.2d 816, 1952 N.C. LEXIS 335 (1952).

Interest on Estate Tax Deficiency Not Part of Tax. —

Although collected as part of the tax, interest paid on an estate or inheritance tax deficiency is not part of the tax, but something in addition to the tax. Holt v. Lynch, 307 N.C. 234 , 297 S.E.2d 594, 1982 N.C. LEXIS 1679 (1982).

No distinction between interest paid on debt created to pay taxes and interest paid on tax itself. To deny a deduction merely because the government is the lending party has the practical effect of treating such interest in the same manner as a penalty if the estate does not have sufficient taxable income to benefit from deducting the interest paid on its income tax returns. Interest in the tax law, as elsewhere, is merely the cost of the use of money and is not a penalty. Holt v. Lynch, 307 N.C. 234 , 297 S.E.2d 594, 1982 N.C. LEXIS 1679 (1982).

Interest on Tax Is Deductible. —

Inasmuch as the definition of “tax” in former G.S. 105-241.1(i1) [repealed] specifically applied to the subchapter dealing with state inheritance taxes, interest on tax, although administratively treated as tax for assessment, collection and payment purposes, remains substantively interest paid for the use of money and was deductible. Holt v. Lynch, 307 N.C. 234 , 297 S.E.2d 594, 1982 N.C. LEXIS 1679 (1982).

Former G.S. 105-147 authorized a deduction for certain casualty losses, including fire, to property not connected with a trade or business. Ward v. Clayton, 5 N.C. App. 53, 167 S.E.2d 808, 1969 N.C. App. LEXIS 1281 (1969), aff'd, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Section Prescribed No Method for Ascertaining Amount of Casualty Loss. —

Former G.S. 105-147 enumerated the items, including casualty losses, which were deductible, but prescribed no method for ascertaining the amount of such casualty loss. Ward v. Clayton, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Determining Deduction for Loss of Timber by Fire. —

A taxpayer’s loss of timber by fire was an “other disposition of property” within the meaning of former G.S. 105-144, and therefore the income tax deduction allowable for such casualty loss may not exceed the taxpayer’s cost basis of the property so destroyed. Ward v. Clayton, 276 N.C. 411 , 172 S.E.2d 531, 1970 N.C. LEXIS 695 (1970).

Constitutionality of Carryover Losses Requirement. —

The requirement that the taxpayer reduce his North Carolina carryover losses by his non-North Carolina income did not result in a sophisticated scheme which belatedly taxed the non-North Carolina income and did not violate either the due process clause of the United States Constitution or the law of the land clause of N.C. Const., Art. I, § 20. Aronov v. Secretary of Revenue, 323 N.C. 132 , 371 S.E.2d 468, 1988 N.C. LEXIS 536 (1988), cert. denied, 489 U.S. 1096, 109 S. Ct. 1568, 103 L. Ed. 2d 935, 1989 U.S. LEXIS 1584 (1989).

Requirement of Taxpayer to Reduce Carryover Losses Does Not Exceed Legislative Authority. —

The Secretary’s interpretation of former G.S. 105-147(9)(d)(2) to require a taxpayer to reduce his North Carolina carryover losses by his non-North Carolina income does not exceed legislative authority. Aronov v. Secretary of Revenue, 323 N.C. 132 , 371 S.E.2d 468, 1988 N.C. LEXIS 536 (1988), cert. denied, 489 U.S. 1096, 109 S. Ct. 1568, 103 L. Ed. 2d 935, 1989 U.S. LEXIS 1584 (1989).

Deductions, such as that authorized in former G.S. 105-147(9)(d)(2), were in the nature of exemptions: they were privileges, not rights, and were allowed as a matter of legislative grace. Aronov v. Secretary of Revenue, 323 N.C. 132 , 371 S.E.2d 468, 1988 N.C. LEXIS 536 (1988), cert. denied, 489 U.S. 1096, 109 S. Ct. 1568, 103 L. Ed. 2d 935, 1989 U.S. LEXIS 1584 (1989).

Deduction of Prior Year’s Net Economic Loss from Current Gross Income. —

Subdivision (9)d of former G.S. 105-147 permits, under certain conditions, a deduction of a prior year’s net economic loss from current gross income in order to determine taxable income. The legislature was under no constitutional or other legal compulsion to allow any carry-over to be deducted from taxable income in a future year. It enacted the carry-over provisions purely as a matter of grace, gratuitously conferring a benefit but limiting such benefit to the net economic loss of the taxpayer after deducting therefrom the allocable portion of such taxpayer’s nontaxable income. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

Loss Carry-Over Provision Was Added for Purpose of Tax Relief. —

For the purpose of granting some measure of relief to taxpayers who have incurred economic misfortune of who are otherwise materially affected by strict adherence to the annual accounting rule in the determination of taxable income, the legislature added a loss carry-over provision to the State income tax statute which was subdivision (9)d of former G.S. 105-147. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

Former G.S. 105-147(9)d required the inclusion of nontaxable income in arriving at an allowable deduction for carry-over purposes to be deducted from taxable income in a succeeding year. Dayton Rubber Co. v. Shaw, 244 N.C. 170 , 92 S.E.2d 799, 1956 N.C. LEXIS 677 (1956) (decided prior to the 1963 amendment) .

Deduction of Loss Carry-Over from Post-Merger Income Depends on Continuity of Business. —

A corporation resulting from a merger may not deduct from its post-merger income the loss carry-over of one or more of its constituent corporations unless there is a continuity of business enterprise — that is, unless the income-producing business has not been altered, enlarged, or materially affected by the merger. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

Type of Merger Makes No Difference. —

In determining whether there is a “continuity of business enterprise” after a merger, for purposes of determining the loss carry-over of the surviving corporation it makes no difference that there was a “vertical type” merger in which the several merged corporations were doing jobs in one continuous chain of processing, rather than a “horizontal type” in which each of the corporations was doing basically the same job. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

Nor Does Purpose of Merger. —

The fact that mergers were made in pursuance of an overall plan to bring into being an “integrated” operation and were not for tax avoidance purposes is not determinative of the question of whether the surviving corporation can carry forward and deduct from its own gross income pre-merger losses incurred by corporations with which it merged. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

No Continuity of Business in Surviving Corporation after Merger. —

There was no “continuity of business enterprise” where the net worth of the surviving corporation into which two other corporations were merged was increased substantially by each merger, and the surviving corporation was transformed from a manufacturer of poultry feeds into a combined manufacturing and feeding operation; consequently, the surviving corporation was not entitled to carry over and deduct for North Carolina income tax purposes the pre-merger net economic losses of the two submerged corporations from the post-merger income earned by the combined corporate businesses. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

A corporation resulting from the merger of several separate incorporated businesses was not entitled to carry over and deduct the pre-merger net operating losses of some of its constituent corporations from the post-merger income attributable to the other businesses, since the income against which the offset was claimed was not produced by substantially the same businesses which incurred the losses. Holly Farms Poultry Indus., Inc. v. Clayton, 9 N.C. App. 345, 176 S.E.2d 367, 1970 N.C. App. LEXIS 1357 , cert. denied, 277 N.C. 351 , 177 S.E.2d 900, 1970 N.C. LEXIS 612 (1970).

Deduction by Successor Corporation of Loss Sustained by Submerged Corporation. —

See Good Will Distribs. (N.), Inc. v. Shaw, 247 N.C. 157 , 100 S.E.2d 334, 1957 N.C. LEXIS 560 (1957); Good Will Distribs., Inc. v. Currie, 251 N.C. 120 , 110 S.E.2d 880, 1959 N.C. LEXIS 544 (1959).

Regulation in Respect to Carry-Over Losses Held to Comply. —

The Supreme Court found no conflict between the Income Tax Regulation No. 2, promulgated on 10 February, 1944, by the Secretary of Revenue and followed by the Department of Revenue in its administrative practice with respect to carry-over losses, and the statutory provisions with respect thereto. Dayton Rubber Co. v. Shaw, 244 N.C. 170 , 92 S.E.2d 799, 1956 N.C. LEXIS 677 (1956).

Deduction for Depletion Not Required to Be on Basis of Cost. —

Deduction on basis of percentage of cost is applicable to depreciation and not to depletion. A reasonable allowance is provided for depletion. There is no requirement that it should be on the basis of cost. In re Virginia-Carolina Chem. Corp., 248 N.C. 531 , 103 S.E.2d 823, 1958 N.C. LEXIS 526 (1958).

Prior to the 1953 amendment to former G.S. 105-147, the section permitted a reasonable allowance for depletion without requiring that it should be calculated on percentage of cost; the 1953 amendment made mandatory that which was permissible before. In re Virginia-Carolina Chem. Corp., 248 N.C. 531 , 103 S.E.2d 823, 1958 N.C. LEXIS 526 (1958).

“Amount” of Gift. —

Former G.S. 105-147(15) contained no technical language. Thus, it must be interpreted in accordance with the ordinary use and common understanding of the words used. According to ordinary use, the “amount” of a gift and the value of a gift have the same meaning and effect. It follows, then, that when a contribution was made in property rather than in cash, the amount of the gift, and the amount of the deduction, was the fair market value of the property at the time of the gift. Wiscassett Mills Co. v. Shaw, 235 N.C. 14 , 68 S.E.2d 816, 1952 N.C. LEXIS 335 (1952).

Constitutionality. —

Subdivision (18) of former G.S. 105-147 limiting the right of a nonresident taxpayer, in computing his net income taxable by this State, to claim only those deductions which are related to his business in this State, was valid and did not constitute an unlawful discrimination in that residents of this State were permitted personal deductions not allowed to the nonresident, since only the income of the nonresident earned within this State was subject to income taxes here. Stiles v. Currie, 254 N.C. 197 , 118 S.E.2d 428, 1961 N.C. LEXIS 388 (1961).

Legal Obligation Need Not Exist. —

The contention that payments by an employer to the widow of an employee are allowable as deductions only when a legal obligation to make such payments exists would seem to render meaningless the 1957 amendment of subsection (23) of former G.S. 105-147. Boylan-Pearce, Inc. v. Johnson, 257 N.C. 582 , 126 S.E.2d 492, 1962 N.C. LEXIS 384 (1962).

Preexisting Contract or Resolution Not Required. —

The 1957 amendment of subsection (23) of former G.S. 105-147 made no reference to a previous or preexisting “contract, resolution of the board of directors, or custom,” of the corporation with respect to payments by an employer to a deceased employee’s estate, widow or heirs. Boylan-Pearce, Inc. v. Johnson, 257 N.C. 582 , 126 S.E.2d 492, 1962 N.C. LEXIS 384 (1962).

Payments by an employer to the widow of a deceased executive were authorized and allowable as deductions in computing employer’s net income, and were not taxable as gifts under G.S. 105-188 [repealed], and no legal significance was attached to the fact that there was no preexisting plan or policy, or to the fact that the resolution authorizing the payments was not adopted until some 13 months after the death of the executive, or to the fact that the employer was a so-called family corporation. Boylan-Pearce, Inc. v. Johnson, 257 N.C. 582 , 126 S.E.2d 492, 1962 N.C. LEXIS 384 (1962).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. J.A. Porter, Jr., Director, Division of Auditing and Accounting, State Board of Education, 40 N.C.A.G. 841 (1970), decided under former G.S. 105-136.

See opinion of Attorney General to Representative Marcus Short, 41 N.C.A.G. 866 (1972), decided under former G.S. 105-149.

§ 105-153.2. Purpose.

The general purpose of this Part is to impose a tax for the use of the State government upon the taxable income collectible annually:

  1. Of every resident of this State.
  2. Of every nonresident individual deriving income from North Carolina sources attributable to the ownership of any interest in real or tangible personal property in this State, deriving income from a business, trade, profession, or occupation carried on in this State, or deriving income from gambling activities in this State. This subdivision does not apply to a nonresident business or a nonresident employee who solely derives income from North Carolina sources attributable to a business, trade, profession, or occupation carried on in this State to perform disaster-related work during a disaster response period at the request of a critical infrastructure company. The definitions and provisions in G.S. 166A-19.70 A apply to this subdivision.

History. 1939, c. 158, s. 301; 1967, c. 1110, s. 3; 1989, c. 728, s. 1.2; 1998-98, s. 69; 2005-276, s. 31.1(dd), (jj); 2005-344, s. 10.3; 2006-259, s. 8(j); 2006-264, s. 91(a); 2013-316, s. 1.1(a); 2019-187, s. 1(j).

Editor’s Note.

This section was former G.S. 105-134 . It was recodified as G.S. 105-153.2 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014. For provisions effective for taxable years beginning before January 1, 2014, see G.S. 105-134 .

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 2019-187, s. 3, made the last two sentences in subdivision (2), as added by Session Laws 2019-187, s. 1(j), effective August 1, 2019, and applicable to disaster declarations on or after that date.

Effect of Amendments.

Session Laws 2005-344, s. 10.3, as added by Session Laws 2005-276, s. 31.1(dd), and as amended by Session Laws 2005-276, s. 31.1(jj), as added by Session Laws 2006-259, s. 8(j), and 2006-264, s. 91(a), effective for taxable years beginning on or after January 1, 2005, inserted “or deriving income from gambling activities in this state” at the end of subdivision (2), and made related, stylistic changes.

Session Laws 2019-187, s. 1(j), added the last two sentences in subdivision (2). For effective date and applicability, see editor’s note.

§ 105-153.3. Definitions.

The following definitions apply in this Part:

  1. Adjusted gross income. — Defined in section 62 of the Code.
  2. Code. — Defined in G.S. 105-228.90 .
  3. Department. — The Department of Revenue.
  4. Educational institution. — An educational institution that normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on.
  5. Fiscal year. — Defined in section 441(e) of the Code.
  6. Gross income. — Defined in section 61 of the Code.

    (6a) Guaranteed payments. — Defined in section 707(c) of the Code.

  7. Head of household. — Defined in section 2(b) of the Code.
  8. Individual. — A human being.
  9. 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 partnership. As applied to a limited liability company that is a partnership under this Part, the term “partner” means a member of the limited liability company.
  10. Married individual. — An individual who is married and is considered married as provided in section 7703 of the Code.
  11. Nonresident individual. — An individual who is not a resident of this State.
  12. North Carolina taxable income. — Defined in G.S. 105-153.4 .
  13. Partnership. — A domestic partnership, a foreign partnership, or a limited liability company.
  14. Person. — Defined in G.S. 105-228.90 .
  15. Resident. — An individual who is domiciled in this State at any time during the taxable year or who resides in this State during the taxable year for other than a temporary or transitory purpose. In the absence of convincing proof to the contrary, an individual who is present within the State for more than 183 days during the taxable year is presumed to be a resident, but the absence of an individual from the State for more than 183 days raises no presumption that the individual is not a resident. A resident who removes from the State during a taxable year is considered a resident until he has both established a definite domicile elsewhere and abandoned any domicile in this State. The fact of marriage does not raise any presumption as to domicile or residence.
  16. S Corporation. — Defined in G.S. 105-131(b).
  17. Secretary. — The Secretary of Revenue.

    (17a) Surviving spouse. — Defined in section 2(a) of the Code.

  18. Taxable year. — Defined in section 441(b) of the Code. (18a) (Effective for taxable years beginning on or after January 1, 2022) Taxed partnership. — A partnership for which a valid election under G.S. 105-154.1 is in effect.

    (18b) (Effective for taxable years beginning on or after January 1, 2022) Taxed pass-through entity. — A taxed S Corporation or a taxed partnership.

    (18c) (Effective for taxable years beginning on or after January 1, 2022) Taxed S Corporation. — Defined in G.S. 105-131(b).

  19. Taxpayer. — An individual subject to the tax imposed by this Part.
  20. This State. — The State of North Carolina.

History. 1989, c. 728, s. 1.4; c. 792, s. 1.2; 1989 (Reg. Sess., 1990), c. 814, s. 15; c. 981, s. 5; 1991, c. 689, s. 252; 1991 (Reg. Sess., 1992), c. 922, s. 6; 1993, c. 12, s. 7; c. 354, s. 13; 1996, 2nd Ex. Sess., c. 13, s. 8.2; 1998-98, ss. 9, 69; 2011-145, s. 31A.1(a); 2011-330, s. 12(a); 2013-157, s. 28; 2013-316, s. 1.1(a), (c); 2013-414, s. 58(c); 2015-6, s. 2.20(a); 2017-204, s. 1.9(a), (b); 2021-180, s. 42.5(f).

Editor’s Note.

This section was former G.S. 105-134.1 . It was recodified as G.S. 105-153.3 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

Session Laws 2011-330, s. 12(a), effective for taxable years beginning on or after January 1, 2012, reenacted subdivision (19), which was repealed by Session Laws 2011-145, s. 31A.1(a).

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 2013-414, s. 58(f), made the amendments to subdivisions (9) and (12) by Session Laws 2013-414, s. 58(c), applicable to taxable years that begin on or after January 1, 2014, and to purchases made on or after that date.

Session Laws 2015-6, s. 2.20(a), enacted a new subdivision as subdivision (18), and redesignated existing subdivisions (18) through (20) as subdivisions (19) through (21). The new subdivision was redesignated as subdivision (17a), with subdivisions (18) through (20) retaining their designations, at the direction of the Revisor of Statutes.

Subdivision (6a) was originally enacted as subdivision (5a) by Session Laws 2017-204, s. 1.9(b). It has been redesignated as subdivision (6a) at the direction of the Revisor of Statutes to maintain alphabetical order.

Session Laws 2017-204, s. 1.9(g), provides: “The General Assembly finds that the amendments made by this section clarify the intent of the existing law and do not represent a change in the law. Accordingly, subsections (a) and (c) of this section apply to taxable years beginning before January 1, 2014, subsections (b) and (d) of this section apply to taxable years beginning on or after January 1, 2014, and subsection (f) of this section applies to all taxable years.”

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

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2011-145, s. 31A.1(a), effective for taxable years beginning on or after January 1, 2012, added present subdivision (1) and redesignated former subdivision (1) as present subdivision (1a); and repealed subdivisions (16) and (19), which were the definitions for “Taxable income” and “This State,” respectively.

Session Laws 2013-157, s. 28, effective January 1, 2014, substituted “Chapter 57D” for “Chapter 57C” in subdivision (7a) (now (9)).

Session Laws 2013-316, s. 1.1(c), effective for taxable years beginning on or after January 1, 2014, redesignated former subdivisions (1a) through (19) as present subdivisions (2) through (20); deleted subdivisions (7b), (13), and (16); and substituted “G.S. 105-153.5” for “G.S. 105-134.5” in subdivision (12).

Session Laws 2013-414, s. 58(c), effective January 1, 2014, substituted “Chapter 57D” for “Chapter 57C” in subdivision (9); and substituted “G.S. 105-153.4” for “G.S. 105-153.5” in subdivision (12). For applicability, see editor’s note.

Session Laws 2015-6, s. 2.20(a), effective for taxable years beginning on or after January 1, 2014, added subdivision (17a). See editor’s note.

Session Laws 2017-204, s. 1.9(a), (b), added subdivision (5a). For effective date and applicability, and for redesignation of subdivision, see editor’s notes.

Session Laws 2021-180, s. 42.5(f), effective for taxable years beginning on or after January 1, 2022, added subdivisions (18a) through (18c).

§ 105-153.4. North Carolina taxable income defined.

  1. Residents. —  For an individual who is a resident of this State, the term “North Carolina taxable income” means the taxpayer’s adjusted gross income as modified in G.S. 105-153.5 and G.S. 105-153.6 .
  2. Nonresidents. —  For a nonresident individual, the term “North Carolina taxable income” means the taxpayer’s adjusted gross income as modified in G.S. 105-153.5 and G.S. 105-153.6 , multiplied by a fraction the denominator of which is the taxpayer’s gross income as modified in G.S. 105-153.5 and G.S. 105-153.6 , and the numerator of which is the amount of that gross income, as modified, that is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State, is derived from a business, trade, profession, or occupation carried on in this State, or is derived from gambling activities in this State.
  3. Part-year Residents. —  If an individual was a resident of this State for only part of the taxable year, having moved into or removed from the State during the year, the term “North Carolina taxable income” has the same meaning as in subsection (b) of this section except that the numerator includes gross income, as modified under G.S. 105-153.5 and G.S. 105-153.6 , derived from all sources during the period the individual was a resident.
  4. S Corporations and Partnerships. —  In order to calculate the numerator of the fraction provided in subsection (b) of this section, the amount of a shareholder’s pro rata share of S Corporation income, as modified in G.S. 105-153.5 and G.S. 105-153.6 , that is includable in the numerator is the shareholder’s pro rata share of the S Corporation’s income attributable to the State, as defined in G.S. 105-131(b)(4). In order to calculate the numerator of the fraction provided in subsection (b) of this section for a partner in a partnership or a member of another unincorporated business that has one or more nonresident partners or members and operates in one or more other states, the amount of the partner’s or member’s distributive share of the total net income of the business, as modified in G.S. 105-153.5 and G.S. 105-153.6 , plus any guaranteed payments made to a partner from the partnership that is includable in the numerator is determined in accordance with the provisions of G.S. 105-130.4 . As used in this subsection, total net income means the entire gross income of the business less all expenses, taxes, interest, and other deductions allowable under the Code that were incurred in the operation of the business.
  5. Tax Year. —  A taxpayer must compute North Carolina taxable income on the basis of the taxable year used in computing the taxpayer’s income tax liability under the Code.

History. 1989, c. 728, s. 1.4; 1995, c. 17, s. 4; 2005-276, s. 31.1(aa); 2005-344, s. 10.4; 2011-145, s. 31A.1(b); 2012-79, s. 1.2; 2013-414, s. 55; 2013-316, ss. 1.1(a), 1.3(c); 2015-6, s. 2.22(a); 2017-204, s. 1.9(c), (d).

Editor’s Note.

This section was former G.S. 105-134.5 . It was recodified as G.S. 105-153.4 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014.

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 2017-204, s. 1.9(g), provides: “The General Assembly finds that the amendments made by this section clarify the intent of the existing law and do not represent a change in the law. Accordingly, subsections (a) and (c) of this section apply to taxable years beginning before January 1, 2014, subsections (b) and (d) of this section apply to taxable years beginning on or after January 1, 2014, and subsection (f) of this section applies to all taxable years.”

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

Effect of Amendments.

Session Laws 2011-145, s. 31A.1(b), effective for taxable years beginning on or after January 1, 2012, rewrote the section.

Session Laws 2012-79, s. 1.2, effective June 26, 2012, in subsection (b), deleted “adjusted” preceding the second and third occurrences of “gross income”; and in subsection (c), deleted “adjusted” preceding “gross income”.

Session Laws 2013-316, s. 1.3(c), effective for taxable years beginning on or after January 1, 2014, substituted “G.S. 105-153.5 and G.S. 105-153.6 ” for “G.S. 105-134.6” in subsections (a) through (c).

Session Laws 2013-414, s. 55, effective August 23, 2013, inserted “and G.S. 105-134.6 A” in subsection (a), twice in subsection (b), and in subsection (c).

Session Laws 2015-6, s. 2.22(a), effective for taxable years beginning on or after January 1, 2015, deleted “and G.S. 105-134.6 A” following “G.S. 105-153.6” throughout subsections (a) through (c); and in subsection (d), inserted “as modified in G.S. 105-153.5 and G.S. 105-153.6 ” throughout, substituted “the total net income” for “income” and “in accordance with the provisions” for “by multiplying the total net income of the business by the ratio ascertained under the provisions” in the second sentence.

Session Laws 2017-204, s. 1.9(c), (d), rewrote the second sentence in subsection (d). For effective date and applicability, see editor’s note.

CASE NOTES

Analysis

I.In General

Editor’s Note. —

Reserved for future annotations.

II.Taxable Year

Editor’s Note. —

The following annotations were decided under former G.S. 105-134.4 .

Operation of tax increase. —

Midyear tax rate increase implemented by 2001 N.C. Sess. Laws 424, as codified in G.S. 105-134.2(a) (now repealed), was not levied until the conclusion of the taxable year under G.S. 105-134.4 ; thus, the tax operated prospectively from the date of enactment and did not violate N.C. Const., Art. I, § 16. Coley v. State, 360 N.C. 493 , 631 S.E.2d 121, 2006 N.C. LEXIS 594 (2006).

§ 105-153.5. Modifications to adjusted gross income.

  1. (Effective for taxable years beginning on or after January 1, 2018) Deduction Amount. —  In calculating North Carolina taxable income, a taxpayer may deduct from adjusted gross income either the standard deduction amount provided in subdivision (1) of this subsection or the itemized deduction amount provided in subdivision (2) of this subsection. The deduction amounts are as follows:
    1. (Effective for taxable years beginning before January 1, 2019) Standard deduction amount. —

      The standard deduction amount is zero for a person who is not eligible for a standard deduction under section 63 of the Code. For all other taxpayers, the standard deduction amount is equal to the amount listed in the table below based on the taxpayer’s filing status:

      Click to view

      (1) (Effective for taxable years beginning on or after January 1, 2019, and before January 1, 2020) Standard deduction amount. —

      The standard deduction amount is zero for a person who is not eligible for a standard deduction under section 63 of the Code. For all other taxpayers, the standard deduction amount is equal to the amount listed in the table below based on the taxpayer’s filing status:

      Click to view

      (1) (Effective for taxable years beginning on or after January 1, 2020, and before January 1, 2022) Standard deduction amount. —

      The standard deduction amount is zero for a person who is not eligible for a standard deduction under section 63 of the Code. For all other taxpayers, the standard deduction amount is equal to the amount listed in the table below based on the taxpayer’s filing status:

      Click to view

      (1) (Effective for taxable years beginning on or after January 1, 2022) Standard deduction amount. – The standard deduction amount is zero for a person who is not eligible for a standard deduction under section 63 of the Code. For all other taxpayers, the standard deduction amount is equal to the amount listed in the table below based on the taxpayer’s filing status:

      Click to view

    2. Itemized deduction amount. —  An amount equal to the sum of the items listed in this subdivision. The amounts allowed under this subdivision are not subject to the overall limitation on itemized deductions under section 68 of the Code:
      1. Charitable Contribution. —  The amount allowed as a deduction for charitable contributions under section 170 of the Code for that taxable year, subject to the following provisions:
        1. Distributions from IRAs. –   For taxable years 2014 through 2018, a taxpayer who elected to take the income exclusion under section 408(d)(8) of the Code for a qualified charitable distribution from an individual retirement plan by a person who has attained the age of 70 1/2 may deduct the amount that would have been allowed as a charitable deduction under section 170 of the Code had the taxpayer not elected to take the income exclusion.
        2. Charitable Giving During COVID-19. –   For taxable years 2020 and 2021, notwithstanding G.S. 105-228.90(b)(7) and for purposes of this sub-sub-subdivision, the term “Code” means the Internal Revenue Code as enacted as of January 1, 2020. For taxable years beginning on or after January 1, 2021, a taxpayer may only carry forward the charitable contributions from taxable years 2020 and 2021 that exceed the applicable percentage limitation for the 2020 and 2021 taxable years allowed under this sub-sub-subdivision. The purpose for defining the Internal Revenue Code differently for the 2020 and 2021 taxable years is to decouple from the modification of limitations on charitable contributions allowed under section 2205 of the CARES Act and section 213 of the Consolidated Appropriations Act, 2021.
      2. Mortgage Expense and Property Tax. —  The amount allowed as a deduction for interest paid or accrued during the taxable year under section 163(h) of the Code with respect to any qualified residence plus the amount allowed as a deduction for property taxes paid or accrued on real estate under section 164 of the Code for that taxable year. For taxable years 2014 through 2021, the amount allowed as a deduction for interest paid or accrued during the taxable year under section 163(h) of the Code with respect to any qualified residence shall not include the amount for mortgage insurance premiums treated as qualified residence interest. The amount allowed under this sub-subdivision may not exceed twenty thousand dollars ($20,000). For spouses filing as married filing separately or married filing jointly, the total mortgage interest and real estate taxes claimed by both spouses combined may not exceed twenty thousand dollars ($20,000). For spouses filing as married filing separately with a joint obligation for mortgage interest and real estate taxes, the deduction for these items is allowable to the spouse who actually paid them. If the amount of the mortgage interest and real estate taxes paid by both spouses exceeds twenty thousand dollars ($20,000), these deductions must be prorated based on the percentage paid by each spouse. For joint obligations paid from joint accounts, the proration is based on the income reported by each spouse for that taxable year.
      3. Medical and Dental Expense. —  The amount allowed as a deduction for medical and dental expenses under section 213 of the Code for that taxable year.
      4. Repayment in the current taxable year of an amount included in adjusted gross income in an earlier taxable year because it appeared that the taxpayer had an unrestricted right to such item, to the extent the repayment is not deducted in arriving at adjusted gross income in the current taxable year. If the repayment is three thousand dollars ($3,000) or less, the deduction is the amount of repayment less (i) the limitation provided under section 67(a) of the Code minus (ii) all other items deductible under section 67(b) of the Code, not to exceed the limitation provided under section 67(a) of the Code. If the repayment is more than three thousand dollars ($3,000), the deduction is the amount of repayment. No deduction is allowed if the taxpayer calculates the federal income tax for the year of repayment under section 1341(a)(5) of the Code.

        (a1) (Effective for taxable years beginning before January 1, 2022) Child Deduction Amount. —

        A taxpayer who is allowed a federal child tax credit under section 24 of the Code for the taxable year is allowed a deduction under this subsection for each qualifying child for whom the taxpayer is allowed the federal tax credit. The amount of the deduction is equal to the amount listed in the table below based on the taxpayer’s adjusted gross income, as calculated under the Code:

        Click to view

        (a1) (Effective for taxable years beginning on or after January 1, 2022) Child Deduction Amount. — A taxpayer who is allowed a federal child tax credit under section 24 of the Code for the taxable year is allowed a deduction under this subsection for each qualifying child for whom the taxpayer is allowed the federal tax credit. The amount of the deduction is equal to the amount listed in the table below based on the taxpayer’s adjusted gross income, as calculated under the Code:

        Click to view

  2. Other Deductions. —  In calculating North Carolina taxable income, a taxpayer may deduct from the taxpayer’s adjusted gross income any of the following items that are included in the taxpayer’s adjusted gross income:
    1. Interest upon the obligations of any of the following:
      1. The United States or its possessions.
      2. This State, a political subdivision of this State, or a commission, an authority, or another agency of this State or of a political subdivision of this State.
      3. A nonprofit educational institution organized or chartered under the laws of this State.
      4. A hospital authority created under G.S. 131E-17 .
    2. Gain from the disposition of obligations issued before July 1, 1995, to the extent the gain is exempt from tax under the laws of this State.
    3. Benefits received under Title II of the Social Security Act and amounts received from retirement annuities or pensions paid under the provisions of the Railroad Retirement Act of 1937.
    4. Refunds of State, local, and foreign income taxes included in the taxpayer’s gross income.
    5. The amount received during the taxable year from one or more State, local, or federal government retirement plans to the extent the amount is exempt from tax under this Part pursuant to a court order in settlement of any of the following cases:
      1. Bailey v. State, 92 CVS 10221, 94 CVS 6904, 95 CVS 6625, 95 CVS 8230.
      2. Emory v. State, 98 CVS 0738.
      3. Patton v. State, 95 CVS 04346. (5a) (Effective for taxable years beginning on or after January 1, 2021) The amount received during the taxable year from the United States government for the payments listed in this subdivision. Amounts deducted under this subdivision may not also be deducted under subdivision (5) of this subsection. The payments are:

        a. Retirement pay for service in the Armed Forces of the United States to a retired member that meets either of the following:

        1. Served at least 20 years.
        2. Medically retired under 10 U.S.C. Chapter 61. This deduction does not apply to severance pay received by a member due to separation from the member’s armed forces.

          b. Payments of a Plan defined in 10 U.S.C. § 1447 to a beneficiary of a retired member eligible to deduct retirement pay under sub-subdivision a. of this subdivision.

    6. Income that meets both of the following requirements:
      1. Is earned or received by an enrolled member of a federally recognized Indian tribe.
      2. Is derived from activities on a federally recognized Indian reservation while the member resides on the reservation. Income from intangibles having a situs on the reservation and retirement income associated with activities on the reservation are considered income derived from activities on the reservation.
    7. The amount by which the basis of property under this Article exceeds the basis of the property under the Code, in the year the taxpayer disposes of the property.
    8. The amount allowed as a deduction under G.S. 105-153.6 as a result of an add-back for federal accelerated depreciation and expensing.
    9. Expired.
    10. Repealed by Session Laws 2020-58, s. 4.2, effective June 30, 2020.
    11. The amount by which the deduction for an ordinary and necessary business expense was required to be reduced or was not allowed under the Code because the taxpayer claimed a federal tax credit against its federal income tax liability for the income year in lieu of a deduction. This deduction is allowed only to the extent that a similar credit is not allowed by this Chapter for the amount.
    12. (Applicable to taxable years beginning before January 1, 2022)  The amount deposited during the taxable year to a personal education savings account under Article 41 of Chapter 115C of the General Statutes.

      (12) (Applicable to taxable years beginning on or after January 1, 2022) The amount deposited during the taxable year to a personal education student account under Article 41 of Chapter 115C of the General Statutes.

    13. The amount paid to the taxpayer during the taxable year from the State Emergency Response and Disaster Relief Reserve Fund for hurricane relief or assistance, but not including payments for goods or services provided by the taxpayer.
    14. (Effective for taxable years beginning on or after January 1, 2019)  The amount received by a taxpayer as an economic incentive pursuant to G.S. 143B-437.012 or Part 2G or Part 2H of Article 10 of Chapter 143B of the General Statutes.

      (14a) (Effective for taxable years beginning on or after January 1, 2021, and applicable to amounts received by a taxpayer on or after that date.) The amount received by a taxpayer under the Business Recovery Grant Program.

    15. (Effective for taxable years beginning on or after January 1, 2021 and expiring for taxable years beginning on or after January 1, 2022)  The amount granted to the taxpayer during the taxable year under the Extra Credit grant program. This subdivision expires for taxable years beginning on or after January 1, 2022.
    16. (Effective for taxable years beginning on or after January 1, 2022)  A State net operating loss as allowed under G.S. 105-153.5 A.
  3. Additions. —  In calculating North Carolina taxable income, a taxpayer must add to the taxpayer’s adjusted gross income any of the following items that are not included in the taxpayer’s adjusted gross income:
    1. Interest upon the obligations of states other than this State, political subdivisions of those states, and agencies of those states and their political subdivisions.
    2. The amount by which a shareholder’s share of S Corporation income is reduced under section 1366(f)(2) of the Code for the taxable year by the amount of built-in gains tax imposed on the S Corporation under section 1374 of the Code.
    3. The amount by which the basis of property under the Code exceeds the basis of the property under this Article, in the year the taxpayer disposes of the property.
    4. (Repealed effective for taxable years beginning on or after January 1, 2018)  The amount excluded from gross income under section 199 of the Code.
    5. The amount required to be added under G.S. 105-153.6 when the State decouples from federal accelerated depreciation and expensing.
    6. (Effective for taxable years beginning before January 1, 2022)  The amount of net operating loss carried to and deducted on the federal return but not absorbed in that year and carried forward to a subsequent year. (6) (Effective for taxable years beginning on or after January 1, 2022) Any amount allowed as a net operating loss deduction under the Code.
    7. The amount deducted in a prior taxable year to the extent this amount was withdrawn from the Parental Savings Trust Fund of the State Education Assistance Authority established pursuant to G.S. 116-209.25 and not used to pay for education expenses of the designated beneficiary as permitted under section 529 of the Code, unless the withdrawal meets at least one of the following conditions:
      1. The withdrawal was not subject to the additional tax imposed by section 529(c)(6) of the Code.
      2. The withdrawal was rolled over to an ABLE account as defined in G.S. 147-86.70(b) .

        (c1) Other Additions. — S Corporations subject to the provisions of Part 1A of this Article, partnerships subject to the provisions of this Part, and estates and trusts subject to the provisions of Part 3 of this Article must add any amount deducted under section 164 of the Code as state, local, or foreign income tax.

        (c2) Decoupling Adjustments. — In calculating North Carolina taxable income, a taxpayer must make the following adjustments to the taxpayer’s adjusted gross income:

        (1) For taxable years 2014 through 2025, the taxpayer must add the amount excluded from the taxpayer’s gross income for the discharge of qualified principal residence indebtedness under section 108 of the Code. The purpose of this subdivision is to decouple from the income exclusion available under federal tax law. If the taxpayer is insolvent, as defined in section 108(d)(3) of the Code, then the addition required under this subdivision is limited to the amount of discharge of qualified principal residence indebtedness excluded from adjusted gross income under section 108(a)(1)(E) of the Code that exceeds the amount of discharge of indebtedness that would have been excluded under section 108(a)(1)(B) of the Code.

        (2) For taxable years 2014 through 2020, the taxpayer must add the amount of the taxpayer’s deduction for qualified tuition and related expenses under section 222 of the Code. The purpose of this subdivision is to decouple from the above-the-line deduction available under federal tax law.

        (3) For taxable years 2014 through 2018, the taxpayer must add the amount excluded from the taxpayer’s gross income for a qualified charitable distribution from an individual retirement plan by a person who has attained age 70 1/2 under section 408(d)(8) of the Code. The purpose of this subdivision is to decouple from the income exclusion available under federal tax law.

        (4) For taxable years prior to 2014, the taxpayer must add the amount excluded from the taxpayer’s gross income for amounts received by a wrongfully incarcerated individual under section 139F of the Code for which the taxpayer took a deduction under former G.S. 105-134.6(b)(14). The purpose of this subdivision is to prevent a double benefit where federal tax law provides an income exclusion for income for which the State previously provided a deduction.

        (5) The taxpayer must add the amount of gain that would be included for federal income tax purposes without regard to section 1400Z-2(a) of the Code. The adjustment made in this subsection does not result in a difference in basis of the affected assets for State and federal income tax purposes. The purpose of this subdivision is to decouple from the deferral of gains reinvested into an Opportunity Fund available under federal law.

        (6) The taxpayer may deduct the amount of gain included in the taxpayer’s adjusted gross income under section 1400Z-2(a) of the Code to the extent the same income was included in the taxpayer’s North Carolina taxable income in a prior taxable year under subdivision (5) of this subsection. The purpose of this subdivision is to prevent double taxation of income the taxpayer was previously required to include in the calculation of North Carolina taxable income.

        (7) The taxpayer must add the amount of gain that would be included in the taxpayer’s adjusted gross income but for the step-up in basis under section 1400Z-2(c) of the Code. The purpose of this subdivision is to decouple from the exclusion of gains from the sale or exchange of an investment in an Opportunity Fund available under federal law.

    8. For taxable years 2013, 2014, 2015, 2016, or 2017, the taxpayer must add the amount of any 2018 net operating loss deducted and absorbed on a federal return under section 172 of the Code. The purpose of the adjustments made under this subdivision is to decouple from the net operating loss carryback provisions of section 2303 of the CARES Act. The addition under this subdivision is not required to the extent the 2018 net operating loss is carried back under the provisions of section 172(b)(1)(B) of the Code.
    9. For taxable years 2014, 2015, 2016, 2017, or 2018, the taxpayer must add the amount of any 2019 net operating loss deducted and absorbed on a federal return under section 172 of the Code. The purpose of the adjustments made under this subdivision is to decouple from the net operating loss carryback provisions of section 2303 of the CARES Act. The addition under this subdivision is not required to the extent the 2019 net operating loss is carried back under the provisions of section 172(b)(1)(B) of the Code.
    10. For taxable years 2015, 2016, 2017, 2018, or 2019, the taxpayer must add the amount of any 2020 net operating loss deducted and absorbed on a federal return under section 172 of the Code. The purpose of the adjustments made under this subdivision is to decouple from the net operating loss carryback provisions of section 2303 of the CARES Act. The addition under this subdivision is not required to the extent the 2020 net operating loss is carried back under the provisions of section 172(b)(1)(B) of the Code.
    11. For taxable years 2013, 2014, 2015, 2016, 2017, 2018, or 2019, the taxpayer must add the amount of any 2018, 2019, or 2020 net operating loss carried back and deducted on a federal return pursuant to section 2303(b) of the CARES Act but not absorbed in that year and carried forward to a subsequent year. The addition under this subdivision is not required to the extent an addition is required under G.S. 105-153.5(c)(6). The purpose of the adjustments made under this subdivision is to decouple from the net operating loss carryback provision of section 2303 of the CARES Act.
    12. For taxable years 2018, 2019, and 2020, the taxpayer must add an amount equal to the taxpayer’s excess business loss, as defined under the provisions of section 461(l) of the Internal Revenue Code as enacted as of January 1, 2019. The addition under this subdivision is not required to the extent the loss is added under subdivision (8), (9), or (10) of this subsection.
    13. The taxpayer must add the amount by which the taxpayer’s net operating loss carryforward deduction exceeds the amount allowed under the provisions of section 172(a)(2)(B) of the Internal Revenue Code as enacted as of January 1, 2019. This add-back only applies to net operating losses arising during taxable years 2018, 2019, and 2020.
    14. For taxable years 2021 through 2025, a taxpayer who made an addition under subdivision (8), (9), or (10) of this subsection may deduct twenty percent (20%) per tax year of the sum of the amount added under subdivisions (8), (9), and (10) of this subsection.
    15. A taxpayer who made an addition under subdivision (12) of this subsection may deduct twenty percent (20%) of the addition in each of the taxable years 2021 through 2025.
    16. A taxpayer who made an addition under subdivision (13) of this subsection may deduct twenty percent (20%) of the add-back in each of the taxable years 2021 through 2025.
    17. For taxable years 2019 and 2020, a taxpayer must add an amount equal to the amount by which the taxpayer’s interest expense deduction under section 163(j) of the Code exceeds the interest expense deduction that would have been allowed under the Internal Revenue Code as enacted as of January 1, 2020. An add-back under this subdivision is not required to the extent the amount was required to be added back under another provision of this subsection. The purpose of this subdivision is to decouple from the modification of limitation on business interest allowed under section 2306 of the CARES Act.

      (17a) A taxpayer who made an addition under subdivision (17) of this subsection may deduct twenty percent (20%) of the addition in each of the first five taxable years beginning with tax year 2021.

    18. For taxable years 2020 through 2025, a taxpayer must add the amount excluded from the taxpayer’s gross income for payment by an employer, whether paid to the taxpayer or to a lender, of principal or interest on any qualified education loan, as defined in section 221(d)(1) of the Code, incurred by the taxpayer for education of the taxpayer. The purpose of this subdivision is to decouple from the exclusion for certain employer payments of student loans under section 2206 of the CARES Act or under the Consolidated Appropriations Act, 2021.
    19. For taxable year 2020, a taxpayer must add the amount excluded from the taxpayer’s gross income under section 62(a)(22) of the Code. The purpose of this subdivision is to decouple from the allowance of a partial above-the-line deduction of qualified charitable contributions under section 2204 of the CARES Act.
    20. For taxable years beginning on or after January 1, 2023, a taxpayer must add the amount of any expense deducted under the Code to the extent the expense is allocable to income that is either wholly excluded from gross income or wholly exempt from the taxes imposed by this Part.
    21. For taxable years 2021 and 2022, a taxpayer must add an amount equal to the amount by which the taxpayer’s deduction under section 274(n) of the Code exceeds the deduction that would have been allowed under the Internal Revenue Code as enacted as of May 1, 2020. The purpose of this subdivision is to decouple from the increased deduction under the Consolidated Appropriations Act, 2021, for business-related expenses for food and beverages provided by a restaurant.
    22. For taxable years 2021 through 2025, a taxpayer must add the amount excluded from the taxpayer’s gross income for the discharge of a student loan under section 108(f)(5) of the Code. The purpose of this subdivision is to decouple from the exclusion from income for the discharge of a student loan under section 9675 of the American Rescue Plan Act of 2021.
    23. For taxable year 2020, a taxpayer must add the amount excluded from the taxpayer’s gross income for unemployment compensation received by the taxpayer under section 85(c) of the Code. The purpose of this subdivision is to decouple from the exclusion from income for unemployment compensation under section 9042 of the American Rescue Plan Act of 2021.

      (c3) (Effective for taxable years beginning on or after January 1, 2022) Taxed Pass-Through Entities. — In calculating North Carolina taxable income, a taxpayer must make the following adjustments to the taxpayer’s adjusted gross income:

      (1) A taxpayer that is a shareholder of a taxed S Corporation may deduct the amount of the taxpayer’s pro rata share of income from the taxed S Corporation to the extent it was included in the taxed S Corporation’s North Carolina taxable income and the taxpayer’s adjusted gross income.

      (2) A taxpayer that is a shareholder of a taxed S Corporation must add the amount of the taxpayer’s pro rata share of loss from the taxed S Corporation to the extent it was included in the taxed S Corporation’s North Carolina taxable income and the taxpayer’s adjusted gross income.

      (3) A taxpayer that is a partner of a taxed partnership may deduct the amount of the taxpayer’s distributive share of income from the taxed partnership to the extent it was included in the taxed partnership’s North Carolina taxable income and the taxpayer’s adjusted gross income.

      (4) A taxpayer that is a partner of a taxed partnership must add the amount of the taxpayer’s distributive share of loss from the taxed partnership to the extent it was included in the taxed partnership’s North Carolina taxable income and the taxpayer’s adjusted gross income.

  4. S Corporations. —  Each shareholder’s pro rata share of an S Corporation’s income is subject to the adjustments provided in this section and in G.S. 105-153.6 .

Filing Status Standard Deduction Married, filing jointly/surviving spouse $17,500 Head of Household 14,000 Single 8,750 Married, filing separately 8,750.

Filing Status Standard Deduction Married, filing jointly/surviving spouse $20,000 Head of Household 15,000 Single 10,000 Married, filing separately 10,000.

Filing Status Standard Deduction Married, filing jointly/surviving spouse $21,500 Head of Household 16,125 Single 10,750 Married, filing separately 10,750.

Filing Status Standard Deduction Married, filing jointly/surviving spouse $25,500 Head of Household 19,125 Single 12,750 Married, filing separately 12,750.

Filing Status AGI Deduction Amount Married, filing jointly/ Up to $40,000 $2,500.00 surviving spouse Over $40,000 Up to $60,000 2,000.00 Over $60,000 Up to $80,000 1,500.00 Over $80,000 Up to $100,000 1,000.00 Over $100,000 Up to $120,000 500.00 Over $120,000 0 Head of Household Up to $30,000 $2,500.00 Over $30,000 Up to $45,000 2,000.00 Over $45,000 Up to $60,000 1,500.00 Over $60,000 Up to $75,000 1,000.00 Over $75,000 Up to $90,000 500.00 Over $90,000 0 Single Up to $20,000 $2,500.00 Over $20,000 Up to $30,000 2,000.00 Over $30,000 Up to $40,000 1,500.00 Over $40,000 Up to $50,000 1,000.00 Over $50,000 Up to $60,000 500.00 Over $60,000 0 Married, filing separately Up to $20,000 $2,500.00 Over $20,000 Up to $30,000 2,000.00 Over $30,000 Up to $40,000 1,500.00 Over $40,000 Up to $50,000 1,000.00 Over $50,000 Up to $60,000 500.00 Over $60,000 0.

Filing Status AGI Deduction Amount Married, filing jointly/ Up to $40,000 $3,000 surviving spouse Over $40,000 Up to $60,000 2,500 Over $60,000 Up to $80,000 2,000 Over $80,000 Up to $100,000 1,500 Over $100,000 Up to $120,000 1,000 Over $120,000 Up to $140,000 500.00 Over $140,000 0 Head of Household Up to $30,000 $3,000 Over $30,000 Up to $45,000 2,500 Over $45,000 Up to $60,000 2,000 Over $60,000 Up to $75,000 1,500 Over $75,000 Up to $90,000 1,000 Over $90,000 Up to $105,000 500.00 Over $105,000 0 Single Up to $20,000 $3,000 Over $20,000 Up to $30,000 2,500 Over $30,000 Up to $40,000 2,000 Over $40,000 Up to $50,000 1,500 Over $50,000 Up to $60,000 1,000 Over $60,000 Up to $70,000 500.00 Over $70,000 0 Married, filing separately Up to $20,000 $3,000 Over $20,000 Up to $30,000 2,500 Over $30,000 Up to $40,000 2,000 Over $40,000 Up to $50,000 1,500 Over $50,000 Up to $60,000 1,000 Over $60,000 Up to $70,000 500.00 Over $70,000 0.

History. 2013-316, s. 1.1(d); 2013-360, s. 6.18(b); 2014-3, s. 2.2(a); 2015-2, s. 1.3; 2015-6, ss. 2.20(b), 2.22(b); 2015-241, s. 32.16(a), (b); 2016-5, ss. 2.1(a)-(c), 2.2(a), 5.3(c); 2016-6, ss. 3, 4; 2016-92, s. 1.2; 2016-94, s. 38.1(a), (b); 2017-57, ss. 10A.4(b), 38.2(a), 38.4(a); 2018-5, ss. 5.6(j), 38.1(c), (f), (h), 35.25(g); 2018-97, s. 8.1(b); 2019-6, ss. 3.1, 3.2, 3.3; 2019-237, ss. 1(a), (b), 2(b); 2019-246, s. 1(a); 2020-58, ss. 1(d)-(f), 4.2; 2020-97, s. 1.4(a); 2021-180, ss. 8A.3(s), 34.3B(b), 42.1(b), (c), 42.1A(a), 42.4(b), (c), 42.5(i), 42.6(a), 42.13A(a), (b).

Subdivision (a)(1) Set Out Four Times.

The first version of subdivision (a)(1) set out above is effective for taxable years beginning on or after January 1, 2018. The second version of subdivision (a)(1) set out above is effective for taxable years beginning on or after January 1, 2019, and before January 1, 2020). The third version of subdivision (a)(1) set out above is effective for taxable years beginning on or after January 1, 2020, and before January 1, 2022. The fourth version of subdivision (a)(1) set out above is effective for taxable years beginning on or after January 1, 2022.

Subsection (a1) Set Out Twice.

The first version of subdivision (c)(6) set out above is effective for taxable years beginning before January 1, 2022. The second version of subdivision (c)(6) set out above is effective for taxable years beginning on or after January 1, 2022.

Subdivision (c)(6) Set Out Twice.

The first version of subdivision (c)(6) set out above is effective for taxable years beginning before January 1, 2022. The second version of subdivision (c)(6) set out above is effective for taxable years beginning on or after January 1, 2022.

Editor’s Note.

Subsection (c2) was enacted as subsection (d) by Session Laws 2015-2, s. 1.3. It has been redesignated at the direction of the Revisor of Statutes.

Session Laws 2015-6, s. 2.9(a), (b), provides: “Notwithstanding G.S. 105-163.15 , the Secretary of Revenue may not impose interest with respect to an underpayment of income tax to the extent the underpayment was created or increased by the changes made in Section 2.2 of S.L. 2014-3 [which amended the deduction amounts in subsection (a)]. Notwithstanding G.S. 105-163.8 , a withholding agent is not liable for the amount of tax the agent fails to withhold to the extent the amount of tax not withheld was created or increased by the changes made in Section 2.2 of S.L. 2014-3.

“(b) This section is effective when it becomes law and applies to taxable years beginning on or after January 1, 2014, and before January 1, 2015, and to payroll periods beginning on or after January 1, 2014, and before January 1, 2015.”

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 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.7, 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 2018-5, s. 35.25(g), effective for taxable years beginning on or after January 1, 2018, added subdivision (b)(13). Session Laws 2018-97, s. 8.1(b), effective July 1, 2018, provides: “If Senate Bill 99, 2017 Regular Session, becomes law, then G.S. 105-153.5(b)(13), as enacted by Section 35.25(g) of that act, is repealed.” Senate Bill 99 is Session Laws 2018-5.

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 2018-5, 38.1(j), as amended by Session Laws 2019-6, s. 3.1, provides, in part: “ G.S. 105-153.5(a) , as amended by subsection (c) of this section, is effective for taxable years beginning on or after January 1, 2018. The remainder of this section is effective when it becomes law [June 12, 2018].”

Session Laws 2019-237, s. 2(c), made subdivision (b)(14), as added by Session Laws 2019-237, s. 2(b), effective for taxable years beginning on or after January 1, 2019, and applicable to amounts received by a taxpayer on or after that date.

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.”

Session Laws 2020-97, s. 4.5, is a severability clause.

Session Laws 2020-97, s. 1.4(a) added a new subdivision (b)(14). It was renumbered as subdivision (b)(15) at the direction of the Revisor of Statutes.

Session Laws 2020-97, s. 4.5, is a severability clause.

Session Laws 2021-180, s. 34.3B(c), made subdivision (b)(14a) of this section, as added by Session Laws 2021-180, s. 34.3B(b), effective for taxable years beginning on or after January 1, 2021, and applicable to amounts received by a taxpayer on or after that date.

Session Laws 2021-180, s. 34.3B(c), made subdivision (b)(14a) of this section, as added by Session Laws 2021-180, s. 34.3B(b), effective for taxable years beginning on or after January 1, 2021, and applicable to amounts received by a taxpayer on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2013-360, s. 6.18(b), effective for taxable years beginning on or after January 1, 2015, added subdivision (b)(9).

Session Laws 2014-3, s. 2.2(a), effective for taxable years beginning on or after January 1, 2014, in subsection (a), rewrote the last sentence in the introductory language, rewrote the introductory language in subdivision (a)(1), and added the last four sentences in subdivision (a)(1)b.

Session Laws 2015-2, s. 1.3, effective March 31, 2015, added the second sentence in subdivision (a)(2)a.; added the present second sentence in subdivision (a)(2)b.; and added subsection (c2). See editor’s note.

Session Laws 2015-6, s. 2.20(b), effective for taxable years beginning on or after January 1, 2014, substituted “Married, filing jointly/surviving spouse” for “Married, filing jointly” in the table in subdivision (a)(1).

Session Laws 2015-6, s. 2.22(b), effective for taxable years beginning on or after January 1, 2015, added subsection (c1).

Session Laws 2015-241, s. 32.16(a), effective for taxable years beginning on or after January 1, 2016, increased the Standard Deduction amounts in subdivision (a)(1).

Session Laws 2015-241, s. 32.16(b), effective for taxable years beginning on or after January 1, 2015, in subdivision (a)(2), added the headings in sub-subdivisions a. and b., substituted “amount allowed” for “amount claimed by the taxpayer” in the first sentence of sub-subdivision b., and added sub-subdivision c.

Session Laws 2016-5, s. 2.1(a), (b), effective for taxable years beginning on or after January 1, 2014, added sub-subdivision (a)(2)d. and subdivision (b)(10).

Session Laws 2016-5, ss. 2.1(c), 2.2(a), effective for taxable years beginning on or after January 1, 2016, added subdivision (b)(11) and subdivisions (c)(6) and (7).

Session Laws 2016-5, s. 5.3(c), effective May 11, 2016, added sub-subdivision (b)(1)d.

Session Laws 2016-6, ss. 3, 4, effective June 1, 2016, in subdivision (a)(2)a., substituted “years beginning on or after 2014” for “year 2014”; substituted “years 2014, 2015, and 2016” for “year 2014” in subdivision (a)(2)b; and rewrote subdivisions (c2)(1) through (3); and added subdivision (c2)(24).

Session Laws 2016-92, s. 1.2, effective July 11, 2016, added the last sentence in subdivision (c2)(1).

Session Laws 2016-94, s. 38.1(a), effective for taxable years beginning on or after January 1, 2016, in the “Standard Deduction” column of the table in subdivision (a)(1), substituted “$16,500” for “$15,500,” “13,200” for “12,400,” and “8,250” for “7,750”.

Session Laws 2016-94, s. 38.1(b), effective for taxable years beginning on or after January 1, 2017, in the “Standard Deduction” column of the table in subdivision (a)(1), substituted “$17,500” for “$16,500,” “14,000” for “13,200,” and “8,750” for “8,250.”

Session Laws 2017-57, s. 10A.4(b), effective for taxable years beginning on or after January 1, 2018, added subdivision (b)(12).

Session Laws 2017-57, s. 38.2(a), effective for taxable years beginning on or after January 1, 2019, in the “Standard Deduction” column of the table in subdivision (a)(1), substituted “$20,000 for ”$17,500, “$15,000” for “$14,000”, and “$10,000” for “$8,750”.

Session Laws 2017-57, s. 38.4(a), effective for taxable years beginning on or after January 1, 2018, added subsection (a1).

Session Laws 2018-5, s. 5.6(j), effective for taxable years beginning on or after January 1, 2017, added subdivision (b)(13).

Session Laws 2018-5, s. 38.1(c), in subsection (a), in the first sentence of the introductory language, deleted “that the taxpayer claimed under the Code” following “subsection”; in sub-subdivision (a)(2)b, substituted “2016, and 2017” for “and 2016”; in subsection (c2), in the introductory language, substituted “must make the following adjustments to the taxpayer’s adjusted gross income:” for “add to the taxpayer’s adjusted gross income any of the following items that are not included in the taxpayer’s adjusted gross income:”; in subdivisions (c2)(1) and (2), substituted “2016, and 2017, the taxpayer must add the amount” for “2016, the taxpayer must add the amount”; in subdivisions (c2)(3) and (4), added “taxpayer must add the”; and added subdivisions (c2)(5), (6), and (7). For effective date, see editor’s note.

Session Laws 2018-5, s. 38.1(f), (h), effective for taxable years beginning on or after January 1, 2018, repealed subdivision (c)(4); and rewrote subdivision (c)(7).

Session Laws 2019-6, s. 3.2, effective March 20, 2019, substituted “qualifying” for “dependent” in subsection (a1).

Session Laws 2019-6, ss. 3.2, 3,3, effective March 20, 2019, substituted “qualifying” for “dependent” in the first sentence of subsection (a1); substituted “1400Z-2(a)” for “1400Z-2(b)” in subdivision (c2)(5); and substituted “North Carolina taxable” for “adjusted gross” in subdivision (c2)(6).

Session Laws 2019-237, s. 1(a), (b), effective November 1, 2019, substituted “2014 through 2018” for “beginning on or after 2014” near the beginning of the second sentence of subdivision (a)(2)a. and in the first sentence of subdivision (c2)(3).

Session Laws 2019-237, s. 2(b), added subdivision (b)(14). For effective date and applicability, see editor’s note.

Session Laws 2019-246, s. 1(a), effective for taxable years beginning on or after January 1, 2020, increased the Standard Deduction amounts in subdivision (a)(1).

Session Laws 2020-58, s. 1(d), (e), (f), effective June 30, 2020, added the last three sentences in sub-subdivision (a)(2)a.; substituted “2014 through 2020” for “2014, 2015, 2016, and 2017” in the first sentence of sub-subdivision (a)(2)b.; substituted “2014 through 2020” for “2014, 2015, 2016, and 2017” in subdivision (c2)(1); substituted “years 2014 through 2020” for “year 2014, 2015, 2016, and 2017” in subdivision (c2)(2); and added subdivisions (c2)(8) through (c2)(20).

Session Laws 2020-58, s. 4.2, effective June 30, 2020, deleted subdivision (b)(10), which read: “The amount added to federal taxable income under section 108(i)(1) of the Code.”

Session Laws 2020-97, s. 1.4(a), effective for taxable years beginning on or after January 1, 2020, and expiring for taxable years beginning on or after January 1, 2021, added subdivision (b)(14). For renumbering of subdivision, see editor’s note.

Session Laws 2021-180, s. 8A.3(s), effective July 1, 2021, substituted “student account” for “savings account” in subdivision (b)(12). For applicability, see editor's note.

Session Laws 2021-180, s. 34.3B(b), added subdivision (b)(14a). For effective date and applicability, see editor's note.

Session Laws 2021-180, s. 42.1(b), (c), effective for taxable years beginning on or after January 1, 2022, in subdivision (a)(1), increased the amounts in the “Standard Deduction” column; and rewrote the table in subsection (a1).

Session Laws 2021-180, s. 42.1A(a), effective for taxable years beginning on or after January 1, 2021, added subdivision (b)(5a).

Session Laws 2021-180, s. 42.4(b), (c), effective November 18, 2021, rewrote sub-subdivision (a)(2)a.; and, in subsection (c2), in subdivision (c2)(1), substituted “2025” for “2020,” in subdivision (c2)(18), substituted “years 2020 through 2025” for “year 2020” near the beginning and added “or under the Consolidated Appropriations Act, 2021” at the end, rewrote subdivision (c2)(20), and added subdivisions (21) through (23).

Session Laws 2021-180, s. 42.5(i), effective for taxable years beginning on or after January 1, 2022, added subsection (c3).

Session Laws 2021-180, s. 42.6(a), effective for taxable years beginning on or after January 1, 2022, added subdivision (b)(16); and rewrote subdivision (c)(6).

Session Laws 2021-180, ss. 42.13A(a), (b), effective November 18, 2021, renumbered subdivision (b)(14), as added by Session Laws 2020-97, s. 1.4(a), as subdivision (b)(15), and, in subdivision (b)(15), substituted “2022” for “2021” at the end; added the second sentence in subdivision (c2)(17); and added subdivision (c2)(17a).

§ 105-153.5A. Net operating loss provisions. [Effective for taxable years beginning on or after January 1, 2022]

  1. State Net Operating Loss.    — A taxpayer’s State net operating loss for a taxable year is the amount by which business deductions for the year exceed gross business income for the year as determined under the Code adjusted as provided in G.S. 105-153.5 and G.S. 105-153.6 . The amount of a taxpayer’s State net operating loss must also be determined in accordance with the following modifications:
    1. No State net operating loss deduction shall be allowed.
    2. The amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includable on account of gains from sales or exchanges of capital assets.
    3. The exclusion provided by Code section 1202 shall not be allowed.
    4. No deduction shall be allowed under G.S. 105-153.5 (a1) for the child deduction.
    5. The deductions which are not attributable to a taxpayer’s trade or business shall be allowed only to the extent of the amount of the gross income not derived from such trade or business.
    6. Any deduction under Code section 199A shall not be allowed.
  2. Deduction.    — A taxpayer may carry forward a State net operating loss the taxpayer incurred in a prior taxable year and deduct it in the current taxable year, subject to the limitations in this subsection:
    1. The loss was incurred in one of the preceding 15 taxable years.
    2. Any loss carried forward is applied to the next succeeding taxable year before any portion of it is carried forward and applied to a subsequent taxable year.
    3. The taxpayer’s State net operating loss deduction may not exceed the amount of the taxpayer’s North Carolina taxable income determined without deducting the taxpayer’s State net operating loss.
    4. The portion of the State net operating loss attributable to the carryforward allowed under subsection (f) of this section is only allowed to the extent described in subsection (f) of this section.
  3. Nonresidents.    — In the case of a taxpayer that is a nonresident in the year of the loss, the State net operating loss only includes income and deductions derived from a business carried on in this State in the year of the loss. In the case of a taxpayer that is a nonresident in the year of the deduction, the State net operating loss must be included in the numerator of the fraction used to calculate taxable income as defined in G.S. 105-153.4(b) .
  4. Part-Year Residents.    — In the case of a taxpayer that is a part-year resident in the year of the loss, the State net operating loss includes income and deductions derived from a business carried on in this State while the taxpayer was a nonresident and includes business income and deductions derived from all sources during the period the taxpayer was a resident. In the case of a taxpayer that is a part-year resident in the year of the deduction, the State net operating loss must be included in the numerator of the fraction used to calculate taxable income as defined in G.S. 105-153.4(c) .
  5. Administration.    — A taxpayer claiming a deduction under this section must maintain and make available for inspection by the Secretary all records necessary to determine and verify the amount of the deduction. The Secretary or the taxpayer may redetermine a loss originating in a taxable year that is closed under the statute of limitations for the purpose of determining the amount of loss that can be carried forward to a taxable year that remains open under the statute of limitations.
  6. Federal Net Operating Loss Carryforwards.    — The portion of a taxpayer’s federal net operating loss carryforward that was not absorbed in tax years beginning prior to January 1, 2022, may be included in the amount of a taxpayer’s State net operating loss in taxable years beginning on or after January 1, 2022. The federal net operating loss carryforward is only allowed as a State net operating loss in tax years beginning after January 1, 2022, to the extent that it meets all of the following conditions:
    1. The loss would have been allowed in that taxable year under section 172 of the Code as enacted on April 1, 2021.
    2. The provisions of G.S. 105-153.5(c2)(8), (9), (10), (13), and (14) do not apply to the federal net operating loss carryforward.
    3. The loss was incurred in one of the preceding 15 taxable years.

History. 2021-180, s. 42.6(b).

Editor's Note.

Session Laws 2021-180, s. 42.6(c), made this section, as added by Session Laws 2021-180, s. 42.6(b), effective for taxable years beginning on or after January 1, 2022.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-153.6. Adjustments when State decouples from federal accelerated depreciation and expensing.

  1. Special Accelerated Depreciation. —  A taxpayer who takes a special accelerated depreciation deduction for that property under section 168(k) or 168(n) of the Code must add to the taxpayer’s federal taxable income or adjusted gross income, as appropriate, eighty-five percent (85%) of the amount taken for that year under those Code provisions. For taxable years before 2012, the taxpayer must add the amount to the taxpayer’s federal taxable income. For taxable year 2012 and after, the taxpayer must add the amount to the taxpayer’s adjusted gross income. A taxpayer is allowed to deduct twenty percent (20%) of the add-back in each of the first five taxable years following the year the taxpayer is required to include the add-back in income.
  2. 2009 Depreciation Exception. —  A taxpayer who placed property in service during the 2009 taxable year and whose North Carolina taxable income for the 2009 taxable year reflected a special accelerated depreciation deduction allowed for the property under section 168(k) of the Code must add eighty-five percent (85%) of the amount of the special accelerated depreciation deduction to its federal taxable income for the 2010 taxable year. A taxpayer is allowed to deduct this add-back under subsection (a) of this section as if it were for property placed in service in 2010.
  3. Section 179 Expense. —  For purposes of this subdivision, the definition of section 179 property has the same meaning as under section 179 of the Code. A taxpayer who places section 179 property in service during a taxable year must add to the taxpayer’s federal taxable income or adjusted gross income, as appropriate, eighty-five percent (85%) of the amount by which the taxpayer’s expense deduction under section 179 of the Code exceeds the dollar and investment limitation for that taxable year. For taxable years before 2012, the taxpayer must add the amount to the taxpayer’s federal taxable income. For taxable year 2012 and after, the taxpayer must add the amount to the taxpayer’s adjusted gross income. For taxable years 2010, 2011, and 2012, the dollar limitation is two hundred and fifty thousand dollars ($250,000) and the investment limitation is eight hundred thousand dollars ($800,000). For taxable years beginning on or after 2013, the dollar limitation is twenty-five thousand dollars ($25,000) and the investment limitation is two hundred thousand dollars ($200,000).A taxpayer is allowed to deduct twenty percent (20%) of the add-back in each of the first five taxable years following the year the taxpayer is required to include the add-back in income.
  4. Asset Basis. —  The adjustments made in this section do not result in a difference in basis of the affected assets for State and federal income tax purposes, except as modified in subsection (e) of this section.
  5. Bonus Asset Basis. —  In the event of an actual or deemed transfer of an asset occurring on or after January 1, 2013, wherein the tax basis of the asset carries over from the transferor to the transferee for federal income tax purposes, the transferee must add any remaining deductions allowed under subsection (a) of this section to the basis of the transferred asset and depreciate the adjusted basis over any remaining life of the asset. Notwithstanding the provisions of subsection (a) of this section, the transferor and any owner in a transferor are not allowed any remaining future bonus depreciation deductions associated with the transferred asset. This subsection applies only to the extent that each transferor or owner in a transferor that added bonus depreciation to its federal taxable income or adjusted gross income associated with the transferred asset certifies in writing to the transferee, that the transferor or owner in a transferor will not take any remaining future bonus depreciation deduction associated with the transferred asset.
  6. Prior Transactions. —  For any transaction meeting both the requirements of subsection (e) of this section prior to January 1, 2013, and the conditions of this subsection, the transferor and transferee can make an election to make the basis adjustment allowed in that subsection on the transferee’s 2013 tax return. If the asset has been disposed of or has no remaining useful life on the books of the transferee, the remaining bonus depreciation deduction may be allowed on the transferee’s 2013 tax return. For this subsection to apply, the following conditions must be met:
    1. The transferor or any owner in a transferor has not taken the bonus depreciation deduction on a prior return.
    2. The transferor is not allowed any remaining future bonus depreciation deductions associated with the transferred asset and each transferor or owner in a transferor certifies in writing to the transferee that the transferor or owner in a transferor will not take any remaining deductions allowed under subsection (a) of this section for tax years beginning on or after January 1, 2013, for depreciation associated with the transferred asset.
    3. The amount of the basis adjustment under this subsection is limited to the total remaining future bonus depreciation deductions forfeited by the transferor and any owner in the transferor at the time of the transfer.
  7. Tax Basis. —  For transactions described in subsection (e) or (f) of this section, adjusted gross income must be increased or decreased to account for any difference in the amount of depreciation, amortization, or gains or losses applicable to property that has been depreciated or amortized by use of a different basis or rate for State income tax purposes than used for federal income tax purposes.
  8. Definitions. —  The following definitions apply in this section:
    1. Owner in a transferor. — One or more of the following of a transferor:
      1. A partner, shareholder, or member.
      2. A beneficiary subject to tax under Part 2 or 3 of Article 4 of this Chapter of a transferor.
    2. Transferor. — An individual, partnership, corporation, S Corporation, limited liability company, or an estate or trust that does not fully distribute income to its beneficiaries.

History. 2013-316, s. 1.1(d); 2013-414, s. 58(a); 2014-3, s. 2.1(c); 2015-2, s. 1.2(b); 2015-6, s. 2.8(b); 2016-6, s. 2(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 2013-414, s. 58(a), provides, in part: “If House Bill 998, 2013 Regular Session, becomes law, then G.S. 105-153.6 , as enacted by House Bill 998, reads as rewritten.” House Bill 998 is Session Laws 2013-316.

Session Laws 2013-414, s. 58(f), made the amendments to this section by Session Laws 2013-414, s. 58(a), applicable to taxable years that begin on or after January 1, 2014, and to purchases made on or after that January 1, 2014.

Effect of Amendments.

Session Laws 2013-414, s. 58(a), effective January 1, 2014, added “except as modified in subsection (e) of this section” in subsection (d); and added subsections (e) through (h). For applicability, see editor’s note.

Session Laws 2014-3, s. 2.1(c), effective for taxable years beginning on or after January 1, 2014, substituted “$200,000” for “125,000” in the last entry of the table in subsection (c); rewrote subsection (f); deleted “prior to the effective date of this section” at the end of subsection (g); and inserted “corporation” preceding “S corporation” in subsection (h).

Session Laws 2015-2, s. 1.2(b), effective March 31, 2015, in subsection (c), substituted “January 1, 2015” for “January 2, 2013” in the first paragraph and added the last entry in the table.

Session Laws 2015-6, s. 2.8(b), effective for taxable years beginning on or after January 1, 2014, rewrote subsection (h).

Session Laws 2016-6, s. 2(b), effective June 1, 2016, in subsection (c), in the first paragraph, deleted “as of January 1, 2015” following “Code” at the end of the first sentence, in the second sentence, twice deleted “listed in the table below” following “during a taxable year” and following “dollar and investment limitation,” and added the last two sentences, and deleted the table detailing taxable dollar and investment limitations that formerly followed the second paragraph.

§ 105-153.7. Individual income tax imposed.

  1. (Effective for taxable years beginning before January 1, 2019) Tax. —  A tax is imposed for each taxable year on the North Carolina taxable income of every individual. The tax shall be levied, collected, and paid annually. The tax is five and four hundred ninety-nine thousandths percent (5.499%) of the taxpayer’s North Carolina taxable income.

    (a) (Effective for taxable years beginning on or after January 1, 2019 and before January 1, 2022) Tax. — A tax is imposed for each taxable year on the North Carolina taxable income of every individual. The tax shall be levied, collected, and paid annually. The tax is five and one-quarter percent (5.25%) of the taxpayer’s North Carolina taxable income.

    (a) (Effective for taxable years beginning on or after January 1, 2022) Tax. — A tax is imposed for each taxable year on the North Carolina taxable income of every individual. The tax shall be levied, collected, and paid annually. The tax is a percentage of the taxpayer’s North Carolina taxable income computed as follows:

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  2. Withholding Tables. —  The Secretary may provide tables that compute the amount of tax due for a taxable year under this Part. The tables do not apply to an individual who files a return under section 443(a)(1) of the Code for a period of less than 12 months due to a change in the individual’s annual accounting period or to an estate or trust.

Taxable Years Beginning Tax In 2022 4.99% In 2023 4.75% In 2024 4.6% In 2025 4.5% In 2026 4.25% After 2026 3.99%.

History. 2013-316, s. 1.1(d); 2013-316, s. 1.2(a); 2015-241, s. 32.16(c); 2017-57, s. 38.1(a); 2021-180, s. 42.1(a).

Subsection (a) is Set Out Three Times.

The first version of subsection (a) is effective for taxable years beginning before January 1, 2019. The second version of subsection (a) is effective for taxable years beginning on of after January 1, 2019 and before January 1, 2022. The third version of subsection (a) is effective for taxable years beginning on or after January 1, 2022.

Editor’s Note.

Session Laws 2013-316, s. 1.1(f), made this section effective for taxable years beginning on or after January 1, 2014.

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 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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2013-316, s. 1.2(a), effective for taxable years beginning on or after January 1, 2015, substituted “five and seventy-five hundredths percent (5.75%)” for “five and eight-tenths percent (5.8%)” in the third sentence of subsection (a).

Session Laws 2015-241, s. 32.16(c), effective for taxable years beginning on or after January 1, 2017, substituted “five and four hundred ninety-nine thousandths percent (5.499%)” for “five and seventy-five hundredths percent (5.75%)” in the last sentence of subsection (a).

Session Laws 2017-57, s. 38.1(a), effective for taxable years beginning on or after January 1, 2019, substituted “five and one-quarter percent (5.25%)” for “five and four hundred ninety-nine thousandths percent (5.499%)” in subsection (a).

Session Laws 2021-180, s. 42.1(a), effective for taxable years beginning on or after January 1, 2022, rewrote subsection (a).

§ 105-153.8. Income tax returns.

  1. Who Must File. —  The following individuals must file with the Secretary an income tax return under affirmation:
    1. Every resident who for the taxable year has gross income under the Code that exceeds the standard deduction amount provided in G.S. 105-153.5(a)(1).
    2. Every nonresident individual who meets all of the following requirements:
      1. Receives during the taxable year gross income that is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State, is derived from a business, trade, profession, or occupation carried on in this State, or is derived from gambling activities in this State. This sub-subdivision does not apply to a nonresident business or a nonresident employee who solely derives income from North Carolina sources attributable to a business, trade, profession, or occupation carried on in this State to perform disaster-related work during a disaster response period at the request of a critical infrastructure company. The definitions and provisions in G.S. 166A-19.70 A apply to this sub-subdivision.
      2. Has gross income under the Code that exceeds the applicable standard deduction amount provided in G.S. 105-153.5(a)(1).
    3. Any individual whom the Secretary believes to be liable for a tax under this Part, when so notified by the Secretary and requested to file a return.
  2. Taxpayer Deceased or Unable to Make Return. —  If a taxpayer is unable to file an income tax return, a duly authorized agent of the taxpayer or a guardian or other person charged with the care of the person or property of the taxpayer must file the return. If an individual who was required to file an income tax return for the taxable year while living has died before making the return, the administrator or executor of the estate must file the return in the decedent’s name and behalf, and the tax is payable by the estate.
  3. Information Required With Return. —  The income tax return must show the adjusted gross income and modifications required by this Part, and any other information the Secretary requires. The Secretary may require some or all individuals required to file an income tax return to attach to the return a copy of their federal income tax return for the taxable year. The Secretary may require a taxpayer to provide the Department with copies of any other return the taxpayer has filed with the Internal Revenue Service and to verify any information in the return.
  4. Secretary May Require Additional Information. —  When the Secretary has reason to believe that any taxpayer conducts a trade or business in a way that directly or indirectly distorts the taxpayer’s adjusted gross income or North Carolina taxable income, the Secretary may require any additional information for the proper computation of the taxpayer’s adjusted gross income and North Carolina taxable income. In computing the taxpayer’s adjusted gross income and North Carolina taxable income, the Secretary must consider the fair profit that would normally arise from the conduct of the trade or business.
  5. (Effective for taxable years beginning before January 1, 2018) Joint Returns. —  A husband and wife whose adjusted gross income is determined on a joint federal return must file a single income tax return jointly if each spouse either is a resident of this State or has North Carolina taxable income and may file a single income tax return jointly if one spouse is not a resident and has no North Carolina taxable income. Except as otherwise provided in this Part, a wife and husband filing jointly are treated as one taxpayer for the purpose of determining the tax imposed by this Part. A husband and wife filing jointly are jointly and severally liable for the tax imposed by this Part reduced by the sum of all credits allowable including tax payments made by or on behalf of the husband and wife. However, if a spouse qualifies for relief of liability for federal tax attributable to a substantial understatement by the other spouse pursuant to section 6015 of the Code, that spouse is not liable for the corresponding tax imposed by this Part attributable to the same substantial understatement by the other spouse. A wife and husband filing jointly have expressly agreed that if the amount of the payments made by them with respect to the taxes for which they are liable, including withheld and estimated taxes, exceeds the total of the taxes due, refund of the excess may be made payable to both spouses jointly or, if either is deceased, to the survivor alone.

    (e) (Effective for taxable years beginning on or after January 1, 2018) Joint Returns. — A husband and wife whose adjusted gross income is determined on a joint federal return must file a single income tax return jointly if each spouse either is a resident of this State or has North Carolina taxable income and may file a single income tax return jointly if one spouse is not a resident and has no North Carolina taxable income. Except as otherwise provided in this Part, a wife and husband filing jointly are treated as one taxpayer for the purpose of determining the tax imposed by this Part. A husband and wife filing jointly are jointly and severally liable for the tax imposed by this Part reduced by the sum of all credits allowable including tax payments made by or on behalf of the husband and wife. However, if a spouse qualifies for relief of liability for federal tax pursuant to section 6015 of the Code, that spouse is not liable for the corresponding tax imposed by this Part. A wife and husband filing jointly have expressly agreed that if the amount of the payments made by them with respect to the taxes for which they are liable, including withheld and estimated taxes, exceeds the total of the taxes due, refund of the excess may be made payable to both spouses jointly or, if either is deceased, to the survivor alone.

History. 1939, c. 158, s. 326; 1941, c. 50, s. 5; 1943, c. 400, s. 4; 1945, c. 708, s. 4; 1951, c. 643, s. 4; 1957, c. 1340, s. 4; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; c. 903, s. 1; c. 1287, s. 5; 1977, c. 315; 1989, c. 728, s. 1.23; 1991 (Reg. Sess., 1992), c. 930, s. 1; 1998-98, ss. 69, 104; 1999-337, s. 25; 2006-66, s. 24.11(a); 2012-79, s. 2.5; 2013-316, ss. 1.1(a), 1.3(d); 2018-5, s. 38.1(g); 2019-169, s. 2.1(a); 2019-187, s. 1(k).

Subsection (e) Set Out Twice.

The first version of subsection (e) set out above is effective for taxable years beginning before January 1, 2018. The second version of subsection (e) set out above is effective for taxable years beginning on or after January 1, 2018.

Editor’s Note.

This section was former G.S. 105-152 . It was recodified as G.S. 105-153.8 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014. For provisions effective for taxable years beginning before January 1, 2014, see G.S. 105-152 .

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 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 2019-169, s. 2.1(b), made the amendments to this section by Session Laws 2019-169, s. 2.1(a) effective for taxable years beginning on or after January 1, 2018.

Session Laws 2019-187, s. 3, made the last two sentences in sub-subdivision (a)(2)a., as added by Session Laws 2019-187, s. 1(k), effective August 1, 2019, and applicable to disaster declarations on or after that date.

Effect of Amendments.

Session Laws 2006-66, s. 24.11(a), effective for taxable years beginning on or after January 1, 2006, rewrote the first sentence in subsection (e).

Session Laws 2012-79, s. 2.5, effective June 26, 2012, substituted “qualifies for relief of” for “has been relieved of” in the next-to-last sentence of subsection (e).

Session Laws 2013-316, s. 1.3(d), effective for taxable years beginning on or after January 1, 2014, substituted “must” for “shall” throughout the section; deleted “and every” following “Code” in subdivision (a)(1); redesignated former subdivision (a)(1) as present subdivisions (a)(1) and (a)(2); deleted former subdivision (a)(2) and rewrote present subdivision (a)(2); in subsection (b), substituted “a” for “the” preceding “taxpayer,” “an” for “there” preceding “income tax,” and “is payable by” for “shall be levied upon an collected from,” deleted “the return shall be file by” preceding “a duly authorized” and “by” preceding “a guardian,” and added “of the taxpayer” and “must file the return”; substituted “adjusted gross income and modifications” for “taxable income and adjustments” in subsection (c); substituted “adjusted gross income” for “taxable income” throughout subsection (d); substituted “adjusted gross income” for “federal taxable income” in subsection (e); and deleted the repeal line that was formerly located in subsection (f).

Session Laws 2018-5, s. 38.1(g), effective June 12, 2018, in subdivision (a)(1), substituted “who for the taxable year has gross income under the Code that exceeds the standard deduction amount provided in G.S. 105-153.5(a)(1)” for “required to file an income tax return for the taxable year under the Code”; and, in sub-subdivision (a)(2)b., substituted “Has gross income under the Code that exceeds the applicable standard deduction amount provided in G.S. 105-153.5(a)(1).” for “Is required to file an income tax return for the taxable year under the Code.”

Session Laws 2019-169, s. 2.1(a), in subsection (e), in the fourth sentence, deleted “attributable to a substantial understatement by the other spouse” following “federal tax” near the middle and deleted “attributable to a substantial understatement by the other spouse” following “this Part” at the end. For effective date, see editor’s note.

Session Laws 2019-187, s. 1(k), added the last two sentences in sub-subdivision (a)(2)a. For effective date and applicability, see editor’s note.

CASE NOTES

Deduction of Tax Refunds Received from Estate Share Proper. —

Order allowing an estate to deduct one-half of the federal income tax refund and a portion of the State income tax refund received by a widow from joint tax returns from the widow’s share of the estate was proper. Bryant v. Bowers, 182 N.C. App. 338, 641 S.E.2d 855, 2007 N.C. App. LEXIS 583 (2007).

§ 105-153.9. Tax credits for income taxes paid to other states by individuals.

  1. An individual who is a resident of this State is allowed a credit against the taxes imposed by this Part for income taxes imposed by and paid to another state or country on income taxed under this Part, subject to the following conditions:
    1. The credit is allowed only for taxes paid to another state or country on income that is derived from sources within that state or country and is taxed under its laws irrespective of the residence or domicile of the recipient, except that whenever a taxpayer who is considered a resident of this State under this Part is considered a resident of another state or country under the laws of that state or country, the Secretary may allow a credit against the taxes imposed by this Part for taxes imposed by and paid to the other state or country on income taxed under this Part.
    2. The fraction of the gross income, as modified as provided in G.S. 105-153.5 and G.S. 105-153.6 , that is subject to income tax in another state or country shall be ascertained, and the North Carolina net income tax before credit under this section shall be multiplied by that fraction. The credit allowed is either the product thus calculated or the income tax actually paid the other state or country, whichever is smaller.
    3. Receipts showing the payment of income taxes to another state or country and a true copy of a return or returns upon the basis of which the taxes are assessed shall be filed with the Secretary when the credit is claimed. If credit is claimed on account of a deficiency assessment, a true copy of the notice assessing or proposing to assess the deficiency, as well as a receipt showing the payment of the deficiency, shall be filed.
    4. (Effective for taxable years beginning on or after January 1, 2022)  Shareholders of a taxed S Corporation shall not be allowed a credit under this section for taxes paid by the taxed S Corporation to another state or country on income that is taxed to the taxed S Corporation. For purposes of allowing the credit under this section for taxes paid to another state or country by a taxed S Corporation’s shareholders, a shareholder’s pro rata share of the income of the taxed S Corporation shall be treated as income taxed to the shareholder under this Part and a shareholder’s pro rata share of the tax imposed on the taxed S Corporation under G.S. 105-131.1 A shall be treated as tax imposed on the shareholder under this Part.
    5. (Effective for taxable years beginning on or after January 1, 2022)  Partners of a taxed partnership shall not be allowed a credit under this section for taxes paid by the taxed partnership to another state or country on income that is taxed to the taxed partnership. The taxed partnership as defined in G.S. 105-153.3(18a) is entitled to a credit under this section for all such taxes paid. For purposes of allowing the credit under this section for taxes paid to another state or country by a taxed partnership’s partners, a partner’s pro rata share of the income of the taxed partnership shall be treated as income taxed to the partner under this Part and a partner’s pro rata share of the tax imposed on the taxed partnership under G.S. 105-154.1 shall be treated as tax imposed on the partner under this Part.
  2. If any taxes paid to another state or country for which a taxpayer has been allowed a credit under this section are at any time credited or refunded to the taxpayer, a tax equal to that portion of the credit allowed for the taxes so credited or refunded is due and payable from the taxpayer and is subject to the penalties and interest provided in Subchapter I of this Chapter.

History. 1939, c. 158, s. 325; 1941, c. 50, s. 5; c. 204, s. 1; 1943, c. 400, s. 4; 1957, c. 1340, s. 4; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1989, c. 728, s. 1.5; 1989 (Reg. Sess., 1990), c. 814, s. 17; 1998-98, s. 92; 2013-316, ss. 1.1(a), 1.3(d); 2013-414, s. 5(b); 2021-180, ss. 42.5(j), 42.13A(c).

Editor’s Note.

This section was former G.S. 105-151 . It was recodified as G.S. 105-153.9 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014. For provisions effective for taxable years beginning before January 1, 2014, see G.S. 105-151 .

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2013-316, s. 1.3(d), effective for taxable years beginning on or after January 1, 2014, in subdivision (a)(1), inserted “that is,” substituted “and is taxed” for “that is taxed,” “considered” for “deemed to be” and similar language, and deleted “the provisions of” following “State under”; and substituted “modified as provided in G.S. 105-153.5 and G.S. 105-153.6 ” for “calculated under the Code and adjusted as provided in G.S. 105-134.6 and G.S. 105-134.7 ” in subdivision (a)(2).

Session Laws 2013-414, s. 5(b), effective for taxable years beginning on or after January 1, 2012, substituted “G.S. 105-134.6A” for G.S. 105-134.7 ” in subdivision (a)(2).

Session Laws 2021-180, s. 42.5(j), effective for taxable years beginning on or after January 1, 2022, added subdivisions (a)(4) and (a)(5).

Session Laws 2021-180, s. 42.13A(c), effective November 18, 2021, in subdivision (a)(2), substituted “G.S. 105-153.5 and G.S. 105-153.6 ” for “G.S. 105-134.6A, G.S. 105-153.5 , and G.S. 105-153.6 .”

Legal Periodicals.

For discussion of the provisions of this and other sections of the North Carolina income tax law designed to guard against excessive duplicate taxation, see 27 N.C.L. Rev. 582 (1949).

For note, “Stone v. Lynch: North Carolina Takes a Different Approach to Defining Gift,” see 64 N.C.L. Rev. 677 (1986).

CASE NOTES

Statutes providing exemption from taxation are strictly construed. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Taxation is the rule, exemption the exception. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Credit Allowed on Income Tax for Payments to Another State. —

Under this section, instead of allowing a deduction in computing taxable net income, a credit is allowed against North Carolina tax for the amount of the tax paid to another state or country on the same income. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

That “another state or country” can lawfully impose an income tax only on that portion of the income of a resident of North Carolina derived from sources in that “state or country,” implies that such income is to be taxed by North Carolina, but allows a credit on the North Carolina income tax for payments, if any, to “another state or country.” In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

Tax Computed on Basis of Resident’s Entire Net Income. —

The income tax of a resident is computed on the basis of his entire net income. In re Dickinson, 281 N.C. 552 , 189 S.E.2d 141, 1972 N.C. LEXIS 1108 (1972).

§ 105-153.10. (Repealed effective for taxable years beginning on or after January 1, 2018) Credit for children.

  1. Credit. —  A taxpayer who is allowed a federal child tax credit under section 24 of the Code for the taxable year is allowed a credit against the tax imposed by this Part for each dependent child for whom the taxpayer is allowed the federal credit. The amount of credit allowed under this section for the taxable year is equal to the amount listed in the table below based on the taxpayer’s adjusted gross income, as calculated under the Code:

    Click to view

  2. Limitations. —  A nonresident or part-year resident who claims the credit allowed by this section shall reduce the amount of the credit by multiplying it by the fraction calculated under G.S. 105-134.5(b) or (c), as appropriate. The credit allowed under this section may not exceed the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowed, except payments of tax made by or on behalf of the taxpayer.

Filing Status AGI Credit Amount Married, filing jointly Up to $40,000 $125.00 Over $40,000 Up to $100,000 $100.00 Over $100,000 0 Head of Household Up to $32,000 $125.00 Over $32,000 Up to $80,000 $100.00 Over $80,000 0 Single Up to $20,000 $125.00 Over $20,000 Up to $50,000 $100.00 Over $50,000 0 Married, filing separately Up to $20,000 $125.00 Over $20,000 Up to $50,000 $100.00 Over $50,000 0.

History. 1995, c. 42, s. 3; 1998-98, s. 69; 2001-424, s. 34.20(a); 2002-126, s. 30B.2(a), (b); 2003-284, s. 39B.2; 2013-316, s. 1.1(a), (e).

Delayed Repeal of Section.

Session Laws 2017-57, s. 38.4(b), repealed this section for taxable years beginning on or after January 1, 2018.

Editor’s note.

This section was former G.S. 105-151.24 . It was recodified as G.S. 105-153.10 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014. For provisions effective for taxable years beginning before January 1, 2014, see G.S. 105-151.24 .

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 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 2001-424, 34.20(b), as amended by Session Laws 2002-126, s. 30B.2(b), in this section as amended by Session Laws 2001-424, s. 34.20(a), effective for taxable years beginning on or after January 1, 2004, substituted “one hundred dollars ($100.00)” for “seventy-five dollars ($75.00)” in the first paragraph.

Session Laws 2003-284, s. 39B.2, effective for taxable years beginning on or after January 1, 2003, designated the previously undesignated provisions of the section as subsections (a) and (b); in subsection (a), added “Credit. —” at the beginning, inserted “who is allowed a federal child tax credit under section 24 of the Code for the taxable year and” following “An individual,” and substituted “is allowed the federal credit” for “was allowed to deduct a personal exemption under section 151(c)(1)(B) of the code”; and in subsection (b), added “Limitations. —” at the beginning.

Session Laws 2013-316, s. 1.1(e), effective for taxable years beginning on or after January 1, 2014, rewrote subsection (a).

§ 105-154. Information at the source returns.

  1. Repealed by Session Laws 1993, c. 354, s. 14.
  2. Information Returns of Payers. —  A person who is a resident of this State, has a place of business in this State, or has an employee, an agent, or another representative in any capacity in this State shall file an information return as required by the Secretary if the person directly or indirectly pays or controls the payment of any income to any taxpayer. The return shall contain all information required by the Secretary. The filing of any return in compliance with this section by a foreign corporation is not evidence that the corporation is doing business in this State.
  3. Information Returns of Partnerships. —  A partnership doing business in this State and required to file a return under the Code shall file an information return with the Secretary. A partnership that the Secretary believes to be doing business in this State and to be required to file a return under the Code shall file an information return when requested to do so by the Secretary. The information return shall contain all information required by the Secretary. It shall state specifically the items of the partnership’s gross income, the deductions allowed under the Code, each partner’s distributive share of the partnership’s income, and the adjustments required by this Part. A partner’s distributive share of partnership net income includes any guaranteed payments made to the partner. The information return shall also include the name and address of each person who would be entitled to share in the partnership’s net income, if distributable, and the amount each person’s distributive share would be. The information return shall be signed by one of the partners under affirmation in the form required by the Secretary.A partnership that files an information return under this subsection shall furnish to each person who would be entitled to share in the partnership’s net income, if distributable, any information necessary for that person to properly file a State income tax return. The information shall be in the form prescribed by the Secretary and must be furnished on or before the due date of the information return.A partnership that is not doing business in this State because it is a nonresident business performing disaster-related work during a disaster response period at the request of a critical infrastructure company is not required to file an information return with the Secretary. However, the partnership must furnish to each person who would be entitled to share in the partnership’s net income, if distributable, any information necessary for that person to properly file a State income tax return. The definitions and provisions in G.S. 166A-19.70 A apply to this paragraph.
  4. (Effective for taxable years beginning before January 1, 2019) Payment of Tax on Behalf of Nonresident Owner or Partner. —  If a business conducted in this State is owned by a nonresident individual or by a partnership having one or more nonresident members, the manager of the business shall report information concerning the earnings of the business in this State, the distributive share of the income of each nonresident owner or partner, and any other information required by the Secretary. The distributive share of the income of each nonresident partner includes any guaranteed payments made to the partner. The manager of the business shall pay with the return the tax on each nonresident owner or partner’s share of the income computed at the rate levied on individuals under G.S. 105-153.7 . The business may deduct the payment for each nonresident owner or partner from the owner or partner’s distributive share of the income of the business in this State. If the nonresident partner is not an individual and the partner has executed an affirmation that the partner will pay the tax with its corporate, partnership, trust, or estate income tax return, the manager of the business is not required to pay the tax on the partner’s share. In this case, the manager shall include a copy of the affirmation with the report required by this subsection. (d) (Effective for taxable years beginning on or after January 1, 2019 and before January 1, 2022) Payment of Tax on Behalf of Nonresident Owner or Partner. — If a business conducted in this State is owned by a nonresident individual or by a partnership having one or more nonresident members, the manager of the business shall report information concerning the earnings of the business in this State, the distributive share of the income of each nonresident owner or partner, and any other information required by the Secretary. The distributive share of the income of each nonresident partner includes any guaranteed payments made to the partner. The manager of the business shall pay with the return the tax on each nonresident owner or partner’s share of the income computed at the rate levied on individuals under G.S. 105-153.7 . The business may deduct the payment for each nonresident owner or partner from the owner or partner’s distributive share of the income of the business in this State. If the nonresident partner is not an individual and the partner has executed an affirmation that the partner will pay the tax with its corporate, partnership, trust, or estate income tax return, the manager of the business is not required to pay the tax on the partner’s share. In this case, the manager shall include a copy of the affirmation with the report required by this subsection. The affirmation must be annually filed by the nonresident partner and submitted by the manager by the due date of the report required in this subsection. Otherwise, the manager of the business is required to pay the tax on the nonresident partner’s share. Notwithstanding the provisions of G.S. 105-241.7(b), the manager of the business may not request a refund of an overpayment made on behalf of a nonresident owner or partner if the manager of the business has previously filed the return and paid the tax due. The nonresident owner or partner may, on its own income tax return, request a refund of an overpayment made on its behalf by the manager of the business within the provisions of G.S. 105-241.6 .

    (d) (Effective for taxable years beginning on or after January 1, 2022) Payment of Tax on Behalf of Nonresident Owner or Partner. – If a business conducted in this State is owned by a nonresident individual or by a partnership having one or more nonresident members, the manager of the business shall report information concerning the earnings of the business in this State, the distributive share of the income of each nonresident owner or partner, and any other information required by the Secretary. The distributive share of the income of each nonresident partner includes any guaranteed payments made to the partner. The manager of the business shall pay with the return the tax on each nonresident owner or partner’s share of the income computed at the rate levied on individuals under G.S. 105-153.7. The business may deduct the payment for each nonresident owner or partner from the owner or partner’s distributive share of the income of the business in this State. If the nonresident partner is not an individual and the partner has executed an affirmation that the partner will pay the tax with its corporate, partnership, trust, or estate income tax return, the manager of the business is not required to pay the tax on the partner’s share. In this case, the manager shall include a copy of the affirmation with the report required by this subsection. The affirmation must be annually filed by the nonresident partner and submitted by the manager by the due date of the report required in this subsection. Otherwise, the manager of the business is required to pay the tax on the nonresident partner’s share. Notwithstanding the provisions of G.S. 105-241.7(b), the manager of the business may not request a refund of an overpayment made on behalf of a nonresident owner or partner if the manager of the business has previously filed the return and paid the tax due. The nonresident owner or partner may, on its own income tax return, request a refund of an overpayment made on its behalf by the manager of the business within the provisions of G.S. 105-241.6 . This subsection does not apply to a partnership with respect to any taxable period for which it is a taxed partnership.

  5. Publicly Traded Partnership. —  The information return and payment requirements under this section are modified as follows for a publicly traded partnership that is described in section 7704(c) of the Code:
    1. The information return required under subsection (c) of this section is limited to partners whose distributive share of the partnership’s net income during the tax year was more than five hundred dollars ($500.00).
    2. The payment requirements under subsection (d) of this section do not apply.

History. 1939, c. 158, s. 328; 1945, c. 708, s. 4; 1957, c. 1340, s. 4; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; c. 1287, s. 5; 1989, c. 728, s. 1.25; 1989 (Reg. Sess., 1990), c. 814, s. 19; 1991 (Reg. Sess., 1992), c. 930, s. 2; 1993, c. 314, s. 1; c. 354, s. 14; 1998-98, s. 69; 1999-337, s. 26; 2008-107, s. 28.8(a); 2013-316, s. 1.3(e); 2017-204, s. 1.9(f); 2019-169, s. 1.1(a); 2019-187, s. 1(i); 2020-58, s. 4.3; 2021-180, s. 42.5(g).

Subsection (d) Set Out Three Times.

The first version of subsection (d) set out above is effective for taxable years beginning before January 1, 2019. The second version of subsection (d) set out above is effective for taxable years beginning on or after January 1, 2019 and before January 1, 2022. The third version of subsection (d) set out above is effective for taxable years beginning on or after January 1, 2022.

Editor’s Note.

Session Laws 2017-204, s. 1.9(g), provides: “The General Assembly finds that the amendments made by this section clarify the intent of the existing law and do not represent a change in the law. Accordingly, subsections (a) and (c) of this section apply to taxable years beginning before January 1, 2014, subsections (b) and (d) of this section apply to taxable years beginning on or after January 1, 2014, and subsection (f) of this section applies to all taxable years.”

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

Session Laws 2019-169, s. 1.1(b), made the last two sentences in subsection (d) as added by Session Laws 2019-169, s. 1.1(a), effective for taxable years beginning on or after January 1, 2019, and applicable to a request for refund filed on or after that date.

Session Laws 2019-187, s. 3, made the last paragraph in subsection (c), as added by Session Laws 2019-187, s. 1(i), effective August 1, 2019, and applicable to disaster declarations on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2008-107, s. 28.8(a), effective for taxable years beginning on or after January 1, 2008, added subsection (e).

Session Laws 2013-316, s. 1.3(e), effective for taxable years beginning on or after January 1, 2014, substituted “G.S. 105-153.7” for “G.S. 105-134.2(a)(3)” in the second sentence of subsection (d).

Session Laws 2017-204, s. 1.9(f), in the first paragraph of subsection (c), inserted “each partner’s distributive share of the partnership’s income” in the fourth sentence, added the present fifth sentence, deleted the former sixth sentence, which read: “The information return shall specify the part of each person’s distributive share of the net income that represents corporation dividends”; and, in subsection (d), inserted “information concerning” in the first sentence, inserted the present second sentence, and substituted “share of the income” for “share of the profit” in the present fourth sentence. For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 1.1(a), added the last two sentences in subsection (d). For effective date and applicability, see editor’s note.

Session Laws 2019-187, s. 1(i), added the last paragraph in subsection (c). For effective date and applicability, see editor’s note.

Session Laws 2020-58, s. 4.3, effective June 30, 2020, added the third-and-fourth-to-last sentences in subsection (d).

Session Laws 2021-180, s. 42.5(g), effective for taxable years beginning on or after January 1, 2022, added the last sentence of subsection (d).

CASE NOTES

Preemption. —

Chapter 7 trustee was not liable for income taxes attributable to resident or non-resident members of the LLC debtor because to the extent that the statute purported to require payment of member taxes prior to distributions to creditors, it was preempted by the distribution scheme under 11 U.S.C.S. § 726. In re N.C. Tobacco Int'l, 2020 Bankr. LEXIS 2160 (Bankr. M.D.N.C. Aug. 10, 2020).

§ 105-154.1. Taxation of partnership as a taxed pass-through entity. [Effective for taxable years beginning on or after January 1, 2022]

  1. Taxed Partnership Election. —   A partnership may elect, on its timely filed annual return required under G.S. 105-154(c), to have the tax under this Article imposed on the partnership for any taxable period covered by the return. A partnership may not revoke the election after the due date of the return, including extensions. This election cannot be made by a publicly traded partnership that is described in section 7704(c) of the Code or by a partnership that has at any time during the taxable year a partner who is not one of the following:
    1. An individual.
    2. An estate.
    3. A trust described in section 1361(c)(2) of the Code.
    4. An organization described in section 1361(c)(6) of the Code.
  2. Taxable Income of Taxed Partnership. —   A tax is imposed for the taxable period on the North Carolina taxable income of a taxed partnership. The tax shall be levied, collected, and paid annually. The tax is imposed on the North Carolina taxable income at the rate levied in G.S. 105-153.7 . The North Carolina taxable income of a taxed partnership is determined as follows:
    1. The North Carolina taxable income of a taxed partnership with respect to such taxable period shall be equal to the sum of the following:
      1. Each partner’s distributive share of the taxed partnership’s income or loss, subject to the adjustments provided in G.S. 105-153.5 and G.S. 105-153.6 , attributable to the State.
      2. Each resident partner’s distributive share of the taxed partnership’s income or loss, subject to the adjustments provided in G.S. 105-153.5 and G.S. 105-153.6 , not attributable to the State with respect to such taxable period.
    2. Separately stated items of deduction are not included when calculating each partner’s distributive share of the taxed partnership’s taxable income. For purposes of this subdivision, separately stated items are those items described in section 702 of the Code and the regulations adopted under it.
    3. The adjustments required by G.S. 105-153.5(c3) are not included in the calculation of the taxed partnership’s taxable income.
  3. Tax Credit. —   A taxed partnership that qualifies for a credit may apply each partner’s distributive share of the taxed partnership’s credits against the partner’s distributive share of the taxed partnership’s income tax imposed by subsection (b) of this section. A partnership must pass through to its partners any credit required to be taken in installments by this Chapter if the first installment was taken in a taxable period that the election under subsection (a) of this section was not in effect. A partnership shall not pass through to its partners any of the following:
    1. Any credit allowed under this Chapter for any taxable period the partnership makes the election under subsection (a) of this section and the carryforward of the unused portion of such credit.
    2. Any subsequent installment of such credit required to be taken in installments by this Chapter after the partnership makes an election under subsection (a) of this section and the carryforward of any unused portion of such installment.
  4. Deduction Allowed for Partners of a Taxed Partnership. —   The partners of a taxed partnership are allowed a deduction as specified in G.S. 105-153.5(c3)(3). This adjustment is only allowed if the taxed partnership complies with the provisions of subsection (f) of this section.
  5. Addition Required for Partners of a Taxed Partnership. —   The partners of a taxed partnership must make an addition as provided in G.S. 105-153.5(c3)(4).
  6. Payment of Tax. —   Except as provided in Article 4C of this Chapter, the full amount of the tax payable as shown on the return of the taxed partnership must be paid to the Secretary within the time allowed for filing the return. In the case of any overpayment by a taxed partnership of the tax imposed under this section, only the taxed partnership may request a refund of the overpayment. If the taxed partnership files a return showing an amount due with the return and does not pay the amount shown due, the Department may collect the tax from the taxed partnership pursuant to G.S. 105-241.22(1). The Secretary must issue a notice of collection for the amount of the tax debt to the taxed partnership. If the tax debt is not paid to the Secretary within 60 days of the date the notice of collection is mailed to the taxed partnership, the partners of the partnership are not allowed the deduction provided in G.S. 105-153.5(c3)(3). The Secretary must send the partners a notice of proposed assessment in accordance with G.S. 105-241.9 . For purposes of this subsection, the term “tax debt” has the same meaning as defined in G.S. 105-243.1(a) .
  7. Basis. —   The basis of both resident and nonresident partners of a taxed partnership shall be determined as if the election under subsection (a) of this section had not been made and each of the partners of the taxed partnership had properly taken into account each partner’s distributive share of the taxed partnership’s items of income, loss, and deduction in the manner required with respect to a partnership for which no such election is in effect.

History. 2021-180, s. 42.5(h).

Editor's Note.

Session Laws 2021-180, s. 42.5(n), made this section, as added by Session Laws 2021-180, s. 42.5(h), effective for taxable years beginning on or after January 1, 2022.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-155. Time and place of filing returns; extensions; affirmation.

  1. Return. —  An income tax return shall be filed at the place and in the form prescribed by the Secretary. The income tax return of every taxpayer reporting on a calendar year basis is due on or before the fifteenth day of April in each year. The income tax return of every taxpayer reporting on a fiscal year basis is due on or before the fifteenth day of the fourth month following the close of the fiscal year. These dates do not apply to a nonresident alien whose federal income tax return is due at a later date under section 6072(c) of the Code. The return of a nonresident alien affected by that Code section is due on or before the fifteenth day of the sixth month following the close of the taxable year. An information return shall be filed at the times prescribed by the Secretary. A taxpayer may ask the Secretary for an extension of time to file a return under G.S. 105-263 .
  2. Repealed by 1991 (Regular Session, 1992), c. 930, s. 3.
  3. Repealed by Session Laws 1998-217, s. 44, effective October 31, 1998.
  4. Forms. —  Returns and affirmations shall be in the form prescribed by the Secretary.

History. 1939, c. 158, s. 329; 1943, c. 400, s. 4; 1951, c. 643, s. 4; 1953, c. 1302, s. 4; 1955, c. 17, s. 1; 1957, c. 1340, s. 4; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1989, c. 728, s. 1.26; 1989 (Reg. Sess., 1990), c. 984, s. 10; 1991, c. 45, s. 12; 1991 (Reg. Sess., 1992), c. 930, s. 3; 1998-217, s. 44; 2006-18, s. 8.

Effect of Amendments.

Session Laws 2006-18, s. 8, effective for taxable years beginning on or after January 1, 2006, rewrote subsection (a).

Legal Periodicals.

For brief comment on the 1953 amendment which rewrote the second paragraph, see 31 N.C.L. Rev. 441 (1953).

§ 105-156. [Repealed]

Repealed by Session Laws 2009-445, s. 7, effective August 7, 2009.

Editor’s Note.

Former G.S. 105-156 , Failure to file returns; supplementary returns, was derived from Session Laws 1939, c. 158, s. 331, and amended by 1959, c. 1259, s. 8; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1989, c. 728, s. 1.27; 1989 (Reg. Sess., 1990), c. 814, s. 20; 1998-98, s. 69.

§ 105-156.1. [Repealed]

Repealed by Session Laws 1989, c. 728, s. 1.28.

§ 105-157. When tax must be paid.

  1. Except as otherwise provided in this section and in Article 4A of this Chapter, the full amount of the tax payable as shown on the return must be paid to the Secretary within the time allowed for filing the return. If the amount shown to be due is less than one dollar ($1.00), no payment need be made.
  2. Repealed by Session Laws 1993, c. 450, s. 4.

History. 1939, c. 158, s. 332; 1943, c. 400, s. 4; 1947, c. 501, s. 4; 1951, c. 643, s. 4; 1955, c. 17, s. 2; 1959, c. 1259, s. 2; 1963, c. 1169, s. 2; 1967, c. 702, s. 1; c. 1110, s. 3; 1973, c. 476, s. 193; c. 903, s. 2; c. 1287, s. 5; 1989, c. 728, s. 1.29; 1989 (Reg. Sess., 1990), c. 984, s. 11; 1991 (Reg. Sess., 1992), c. 930, s. 4; 1993, c. 450, s. 4.

§ 105-158. Taxation of certain Armed Forces personnel and other individuals upon death.

An individual is not subject to the tax imposed by this Part for a taxable year if, under section 692 of the Code, the individual is not subject to federal income tax for that same taxable year.

History. 1969, c. 1116; 1979, c. 179, s. 2; 1989, c. 728, s. 1.30; 1991, c. 439, s. 2; 1998-98, s. 69; 2011-183, s. 72.

Editor’s Note.

Former G.S. 105-158 was repealed by Session Laws 1959, c. 1259, s. 9.

Effect of Amendments.

Session Laws 2011-183, s. 72, effective June 20, 2011, substituted “Armed Forces” for “armed forces” in the section catchline.

§ 105-159. Federal determinations and amended returns.

  1. Federal Determination. —  If a taxpayer’s adjusted gross income, filing status, personal exemptions, standard deduction, itemized deductions, or federal tax credit are changed or corrected by the Commissioner of Internal Revenue or an agreement of the U.S. competent authority, and the change or correction affects the amount of State tax payable, the taxpayer must file an income tax return reflecting each change or correction from a federal determination within six months after being notified of each change or correction. The Secretary must propose an assessment for any additional tax due from the taxpayer as provided in Article 9 of this Chapter. The Secretary must refund any overpayment of tax as provided in Article 9 of this Chapter. A federal determination has the same meaning as defined in G.S. 105-228.90 .
  2. Amended Return. —  The following applies to an amended return filed by a taxpayer with the Commissioner of Internal Revenue:
    1. If the amended return contains an adjustment that would increase the amount of State tax payable under this Part, then notwithstanding the provisions of G.S. 105-241.8(a), the taxpayer must file within six months thereafter an amended return with the Secretary.
    2. If the amended return contains an adjustment that would decrease the amount of State tax payable under this Part, the taxpayer may file an amended return with the Secretary within the provisions of G.S. 105-241.6 .
  3. Penalties. —  A taxpayer that fails to comply with this section is subject to the penalties in G.S. 105-236 and forfeits the right to any refund due by reason of the determination.

History. 1939, c. 158, s. 334; 1947, c. 501, s. 4; 1949, c. 392, s. 3; 1957, c. 1340, s. 14; 1963, c. 1169, s. 2; 1967, c. 1110, s. 3; 1973, c. 476, s. 193; 1989, c. 728, s. 1.31; 1993 (Reg. Sess., 1994), c. 582, s. 1; 2006-18, s. 5; 2007-491, s. 16; 2013-414, s. 38; 2017-39, s. 4(b); 2018-5, s. 38.3(b); 2019-169, s. 6.3(c).

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.”

Session Laws 2018-5, s. 38.3(h), made the rewriting of this section by Session Laws 2018-5, s. 38.3(b), effective June 12, 2018, and applicable to federal amended returns filed on or after that date.

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 2019-169, s. 6.3(d), made the amendment to subsection (a) by Session Laws 2019-169, s. 6.3(c), effective July 26, 2019, and applicable to a federal determination on or after that date.

Effect of Amendments.

Session Laws 2006-18, s. 5, effective July 1, 2006, and applicable to federal determinations made on or after that date, substituted “six months” for “two years” in the first sentence of the first undesignated paragraph.

Session Laws 2007-491, s. 16, effective for taxable years beginning on or after January 1, 2007, rewrote the second and third sentences of the former first paragraph; and substituted “Secretary must either refund” for “Secretary shall either refund” in the present third sentence. For applicability, see Editor’s note

Session Laws 2013-414, s. 38, effective August 23, 2013, in the first sentence, substituted “If a taxpayer’s adjusted gross income or federal tax credit that affects the amount of State tax payable” for “If a taxpayer’s federal taxable income” at the beginning, and substituted “adjusted gross income or federal tax credit that affects the amount of State tax payable” for “taxable income” at the end.

Session Laws 2017-39, s. 4(b), effective June 21, 2017, inserted “filing status, personal exemptions, standard deduction, itemized deductions” in the first sentence.

Session Laws 2018-5, s. 38.3(b), rewrote the section. For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 6.3(c), deleted “or other officer of the United States” following “Revenue”, and inserted “an agreement of the U.S.” in the first sentence in subsection (a). For effective date and applicability, see editor’s note.

Legal Periodicals.

For survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

CASE NOTES

This section imposes on the taxpayer a positive duty with respect to his income tax liability beyond that required by G.S. 105-152 , respecting his original return; it is his duty not only to report the change made by the federal department but to file another return under oath reflecting it. Garrou Knitting Mills v. Gill, 228 N.C. 764 , 47 S.E.2d 240, 1948 N.C. LEXIS 399 (1948).

This section imposes a positive duty upon taxpayers beyond the requirements as to their original return. State v. Patton, 57 N.C. App. 702, 292 S.E.2d 172, 1982 N.C. App. LEXIS 2699 (1982).

Correction of Net Income by Federal Officer Requires New Return. —

The taxpayer whose net income for any year is corrected by the Commissioner of Internal Revenue or other authorized federal officer must file a new return reflecting his corrected net income within two years [now 6 months] after receipt of the federal agent’s report. Failure to make such a new return within the time specified subjects the taxpayer to all penalties provided by G.S. 105-236 including, when applicable, the criminal penalty provided by G.S. 105-236 (7). State v. Patton, 57 N.C. App. 702, 292 S.E.2d 172, 1982 N.C. App. LEXIS 2699 (1982).

Effect on North Carolina Net Income Not Required. —

This section does not require that the taxpayer’s North Carolina net income be affected before it governs a taxpayer’s duty to report changes in his federal net income. McFarland v. Justus, 113 N.C. App. 107, 437 S.E.2d 668, 1993 N.C. App. LEXIS 1303 (1993) (decision based on pre-1989 law) .

Procedure Under Former Statute Exclusive. —

The procedure prescribed by the former statute requiring that a new return be made within 30 days of the receipt of the redetermination of the taxpayer’s income tax by the federal government was held exclusive and had to be followed to entitle the taxpayer to the relief therein provided. State ex rel. Maxwell v. Hinsdale, 207 N.C. 37 , 175 S.E. 847, 1934 N.C. LEXIS 372 (1934).

Statute of Limitations Extended. —

Failure to notify the Secretary of Revenue of the assessment of additional taxes by the Commissioner of Internal Revenue pursuant to this section extended the statute of limitations. McFarland v. Justus, 113 N.C. App. 107, 437 S.E.2d 668, 1993 N.C. App. LEXIS 1303 (1993) (decision based on pre-1989 law) .

§ 105-159.1. [Repealed]

Repealed by Session Laws 2013-381, s. 38.1(e), effective July 1, 2013.

History. 1977, 2nd Sess., c. 1298, s. 1; 1979, c. 801, s. 69; 1981, c. 963, s. 1; 1983, cc. 139, 480, 481; 1989, c. 37, s. 4; c. 713; c. 728, s. 1.32; c. 770, s. 41.1; 1991, c. 45, s. 13; c. 347, s. 3; c. 690, ss. 8, 9; 1997-515, s. 10(a); 1999-438, s. 3; 2002-106, s. 3; 2005-345, s. 46; 2010-95, s. 3; repealed by 2013-381, s. 38.1(e), effective July 1, 2013.

Editor’s Note.

Former G.S. 105-159.1 pertained to designation of tax by an individual to a political party.

§ 105-159.2. [Repealed]

Repealed by Session Laws 2013-360, s. 21.1(c), as amended by Session Laws 2014-3, s. 14.15, and Session Laws 2013-381, s. 38.1(f), effective July 1, 2013.

History. 2002-158, s. 4; 2005-276, s. 23A.1(d); 2006-192, s. 18; repealed by 2013-360, s. 21.1(c), and 2013-381, s. 38.1(f).

Editor’s Note.

Former G.S. 105-159.2 pertained to designation of tax to North Carolina Public Campaign Fund.

This section was repealed in 2013 by two different Session Laws, each giving the repeal different effective dates. Session Laws 2013-360, s. 21.1(c), repealed this section effective for taxable years beginning on or after January 1, 2013. Session Laws 2013-381, s. 38.1(f), repealed this section effective July 1, 2013. Session Laws 2014-3, s. 14.15, amended Session Laws 2013-360, s. 21.1(m), the effective date provision affecting Session Laws 2013-360, s. 21.1(c), by changing the effective date of the repeal of this section to July 1, 2013.

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.5 is a severability clause.

Part 3. Income Tax — Estates, Trusts, and Beneficiaries.

§ 105-160. Short title.

This Part shall be known as the Income Tax Act for Estates, Trusts, and Beneficiaries.

History. 1967, c. 1110, s. 3; 1989, c. 728, s. 1.36; 1998-98, ss. 45, 68.

§ 105-160.1. Definitions.

The definitions provided in Part 2 of this Article shall apply in this Part except where the context clearly indicates a different meaning. In addition, as used in this Part, “taxable income” is defined in sections 641 through 692 of the Code.

History. 1989, c. 728, s. 1.38; 1998-98, ss. 69, 71; 2013-414, s. 5(f).

Effect of Amendments.

Session Laws 2013-414, s. 5(f), effective for taxable years beginning on or after January 1, 2012, added the second sentence.

§ 105-160.2. Imposition of tax.

The tax imposed by this Part applies to the taxable income of estates and trusts as determined under the provisions of the Code except as otherwise provided in this Part. The taxable income of an estate or trust is the same as taxable income for such an estate or trust under the provisions of the Code, adjusted as provided in G.S. 105-153.5 and G.S. 105-153.6 , except that the adjustments provided in G.S. 105-153.5 and G.S. 105-153.6 are apportioned between the estate or trust and the beneficiaries based on the distributions made during the taxable year. The tax is computed on the amount of the taxable income of the estate or trust that is for the benefit of a resident of this State, or for the benefit of a nonresident to the extent that the income (i) is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State or (ii) is derived from a business, trade, profession, or occupation carried on in this State. For purposes of the preceding sentence, taxable income and gross income is computed subject to the adjustments provided in G.S. 105-153.5 and G.S. 105-153.6. The tax on the amount computed above is at the rate levied in G.S. 105-153.7 . The fiduciary responsible for administering the estate or trust shall pay the tax computed under the provisions of this Part.

History. 1989, c. 728, s. 1.38; 1989 (Reg. Sess., 1990), c. 814, s. 21; 1991, c. 689, s. 302; 1998-98, s. 69; 2013-414, s. 5(g); 2014-3, s. 2.3(a); 2017-204, s. 1.12.

Effect of Amendments.

Session Laws 2013-414, s. 5(g), effective for taxable years beginning on or after January 1, 2012, substituted “G.S. 105-134.6A” for “G.S. 105-134.7” and “shall be” for “is” throughout; in the first sentence, substituted “applies” for “shall apply”; in the second sentence, substituted “are apportioned” for “shall be apportioned”; and rewrote the last sentence, which formerly read “The tax computer under the provisions of this Part shall be paid by the fiduciary responsible for administering the estate or trust.”

Session Laws 2014-3, s. 2.3(a), effective for taxable years beginning on or after January 1, 2014, substituted “G.S. 105-153.5 and G.S. 105-153.6 ” for “G.S. 105-134.6 and G.S. 105-134.6 A” throughout the section, and substituted “G.S. 105-153.7” for “G.S. 105-134.2(a)(3)” in the next-to-last sentence.

Session Laws 2017-204, s. 1.12, effective August 11, 2017, substituted “rate levied” for “rates levied” in the next-to-last sentence.

CASE NOTES

Constitutionality of Legislation. —

Court of Appeals properly affirmed the North Carolina Business Court’s grant of summary judgment in favor of a family trust because allowing taxation of trust income violated the due process requirements of the state and federal constitutions where the trust did not have sufficient minimum contacts with the State and due process was not satisfied solely from the beneficiaries’ contacts with North Carolina since the trust and the trust’s beneficiaries were separate legal entities. Kimberley Rice Kaestner 1992 Family Trust v. N.C. Dep't of Revenue, 248 N.C. App. 463, 790 S.E.2d 339, 2018 N.C. LEXIS 431 (2018).

Minimum Connection Needed for Imposition of Tax. —

Residence of the trust beneficiaries in North Carolina alone did not supply the minimum connection necessary to sustain the State’s income tax under G.S. 105-160.2 where the beneficiaries received no income from the trust, had no right to demand trust income, and could not count on receiving any income in the future. N.C. Dep’t of Revenue v. Kimberley Rice Kaestner 1992 F amily Trust, — U.S. — (June 21, 2019).

Residence of the trust beneficiaries in North Carolina alone did not supply the minimum connection necessary to sustain the State’s tax because the beneficiaries did not receive any, income from the trust, they had no right to demand trust income or otherwise control, possess, or enjoy the trust assets, and they also could not count on necessarily receiving any specific amount of income from the trust in the future. Kimberley Rice Kaestner 1992 Family Trust v. N.C. Dep't of Revenue, 2019 N.C. LEXIS 661 (N.C. July 23, 2019).

Presence of in-state beneficiaries alone does not empower a State to tax trust income that has not been distributed to the beneficiaries where the beneficiaries have no right to demand that income and are uncertain to receive it. Kimberley Rice Kaestner 1992 Family Trust v. N.C. Dep't of Revenue, 2019 N.C. LEXIS 661 (N.C. July 23, 2019).

§ 105-160.3. Tax credits.

  1. Except as otherwise provided in this section, the credits allowed to an individual against the tax imposed by Part 2 of this Article shall be allowed to the same extent to an estate or a trust against the tax imposed by this Part. Any credit computed as a percentage of income received shall be apportioned between the estate or trust and the beneficiaries based on the distributions made during the taxable year. No credit may exceed the amount of the tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, except for payments of tax made by or on behalf of the estate or trust.
  2. The tax credits allowed under G.S. 105-153.9 may not be claimed by an estate or trust.

History. 1989, c. 728, s. 1.38; 1998-1, s. 5(b); 1998-98, ss. 10, 105; 1998-212, s. 29A.6(b); 2004-170, s. 17; 2006-66, s. 24.18(f); 2007-323, ss. 31.4(b), 31.5(b), 31.6(b); 2011-330, s. 36; 2012-79, s. 2.6; 2013-316, s. 1.3(f); 2013-364, s. 3; 2018-5, s. 38.10(l).

Cross References.

For the Health Insurance Program for Children, see G.S. 108A-70.18 et seq.

Editor’s Note.

Session Laws 1998-1, s. 5(d) provides that s. 5 of the act which added subdivision (b)(6) of G.S. 105-160.3 , is effective for taxable years beginning on or after January 1, 1999, and expires on the effective date of an act repealing the Health Insurance Program for Children established under the act.

Session Laws 1998-1, s. 5(e) provides that s. 5 of the act becomes effective only if the United States Secretary of Health and Human Services approves the State Plan to implement the Health Insurance Program for Children established under this act. The Program was approved by letter dated July 14, 1998 from Secretary Donna E. Shalala.

Session Laws 1998-212, s. 29A.6(d), provided that subdivision (b)(7), as enacted by that act, was repealed effective for taxable years beginning on or after January 1, 2004. Session Laws 2007, 323, s. 31.5(b), effective for taxable years beginning on or after January 1, 2007, reenacted subdivision (b)(7).

Session Laws 2004-170, s. 17, effective August 2, 2004, repealed subdivision (b)(6).

Session Laws 2006-66, s. 24.18(g), as amended by Session Laws 2011-330, s. 36, provides that s. 24.18(f), which added subdivision (b)(8), expires for taxable years beginning on or after January 1, 2013.

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 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.”

Section 105-151.11, referred to in subdivision (b)(2), was repealed by Session Laws 2013-316, s. 1.1(b), effective January 1, 2014.

Section 105-151.18, referred to in subdivision (b)(3), was repealed by Session Laws 2013-316, s. 1.1(b), effective January 1, 2014.

Section 105-151.33, referred to in subdivision (b)(11), was repealed by Session Laws 2013-316, s. 1.1(b) and Session Laws 2013-364, s. 1, effective January 1, 2014.

Effect of Amendments.

Session Laws 2007-323, ss. 31.4(b), 31.5(b), and 31.6(b), effective for taxable years beginning on or after January 1, 2007, reenacted subdivision (b)(7); and added subdivisions (b)(9) and (b)(10).

Session Laws 2012-79, s. 2.6, effective June 26, 2012, added subdivision (b)(11).

Session Laws 2013-316, s. 1.3(f), effective for taxable years beginning on or after January 1, 2014, rewrote subsection (b).

Session Laws 2013-364, s. 3, effective for taxable years beginning on or after January 1, 2014, repealed subdivision (b)(11).

Session Laws 2018-5, s. 38.10( l ), effective June 12, 2018, deleted “and G.S. 105-153.10 ” following “G.S. 105-153.9” in subsection (b).

§ 105-160.4. Tax credits for income taxes paid to other states by estates and trusts.

  1. If a fiduciary is required to pay income tax to this State for an estate or a trust, the fiduciary shall be allowed a credit against the tax imposed by this Part for income taxes imposed by and paid to another state or country on income derived from sources within that other state or country in accordance with the formula contained in subsection (b) and the requirements of subsection (c).
  2. The fraction of the gross income for North Carolina income tax purposes that is derived from sources within and subject to income tax in another state or country shall be ascertained and the North Carolina income tax before credit under this section shall be multiplied by that fraction. The credit allowed shall be either the product thus calculated or the income tax actually paid the other state or country, whichever is smaller.
  3. Receipts showing the payment of income taxes to another state or country and a true copy of the return upon the basis of which the taxes are assessed shall be filed with the Secretary at or before the time credit is claimed. If credit is claimed on account of a deficiency assessment, a true copy of the notice assessing or proposing to assess the deficiency, as well as a receipt showing the payment of the deficiency, shall be filed with the Secretary.
  4. If any taxes paid to another state or country for which a fiduciary has been allowed a credit under this section are at any time credited or refunded to the fiduciary, a tax equal to that portion of the credit allowed for the taxes so credited or refunded shall be due and payable from the fiduciary and shall be subject to the penalties and interest on delinquent payments provided in G.S. 105-236 and G.S. 105-241.21 .
  5. A resident beneficiary of an estate or trust who is taxed under the provisions of Part 2 of this Article on income from an estate or trust determined to be includable in the resident’s gross income is allowed a credit against the tax imposed for income taxes paid by the fiduciary to another state or country on the income in accordance with the formula contained in subsection (b) of this section and the requirements of subsection (c) of this section; provided, that if any taxes paid to another state or country for which a beneficiary has been allowed credit under this section are at any time credited or refunded to the beneficiary, a tax equal to that portion of the credit allowed for the taxes so credited or refunded shall be due and payable from the beneficiary and shall be subject to the penalties and interest on delinquent payments provided in G.S. 105-236 and G.S. 105-241.21 .
  6. (Effective for taxable years beginning on or after January 1, 2022)  Fiduciaries and beneficiaries of estates and trusts who are shareholders of a taxed S Corporation are not allowed a credit under this section for taxes paid by the estates and trusts or by the taxed S Corporation to another state or country on income that is taxed to the taxed S Corporation. The taxed S Corporation is entitled to a credit under G.S. 105-153.9(a)(4) for all such taxes paid. For purposes of this subsection, the term “taxed S Corporation” is the same as defined in G.S. 105-131(b).
  7. (Effective for taxable years beginning on or after January 1, 2022)  Fiduciaries and beneficiaries of estates and trusts who are partners of a taxed partnership are not allowed a credit under this section for taxes paid by the estates and trusts or by the taxed partnership to another state or country on income that is taxed to the taxed partnership. The taxed partnership is entitled to a credit under G.S. 105-153.9(a)(5) for all such taxes paid. For purposes of this subsection, the term “taxed partnership” is the same as defined in G.S. 105-153.3 .

History. 1989, c. 728, s. 1.38; 1998-98, ss. 69, 71; 2007-491, s. 44(1)b; 2021-180, s. 42.5(k).

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 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2007-491, s. 44(1)b., effective January 1, 2008, substituted “G.S. 105-241.21” for “G.S. 105-241.1” in subsections (d) and (e). For applicability, see Editor’s note.

Session Laws 2021-180, s. 42.5(k), effective for taxable years beginning on or after January 1, 2022, added subsections (f) and (g).

§ 105-160.5. Returns.

The fiduciary of an estate or trust described below shall file an income tax return under affirmation, showing specifically the taxable income and the adjustments required by this Part and such other facts as the Secretary may require for the purpose of making any computation required by this Part:

  1. Every estate or trust which has taxable income under this Part during the taxable year and is required to file an income tax return for the taxable year under the Code.
  2. Every estate or trust which the Secretary believes to be liable for a tax under this Part, when so notified by the Secretary and requested to file a return.

History. 1989, c. 728, s. 1.38; 1998-98, s. 69.

§ 105-160.6. Time and place of filing returns.

An income tax return of an estate or a trust shall be filed as prescribed by the Secretary at the place prescribed by the Secretary. The return of every fiduciary reporting on a calendar year basis shall be filed on or before the 15th day of April in each year, and the return of every fiduciary reporting on a fiscal year basis shall be filed on or before the 15th day of the fourth month following the close of the fiscal year. A fiduciary may ask the Secretary for an extension of time to file a return under G.S. 105-263 .

History. 1989, c. 728, s. 1.38; 1989 (Reg. Sess., 1990), c. 984, s. 12; 1991 (Reg. Sess., 1992), c. 930, s. 7.

§ 105-160.7. When tax must be paid.

  1. The full amount of the tax payable as shown on the return must be paid to the Secretary within the time allowed for filing the return. However, if the amount shown to be due after all credits is less than one dollar ($1.00), no payment need be made.
  2. Repealed by Session Laws 1993, c. 450, s. 5.

History. 1989, c. 728, s. 1.38; 1989 (Reg. Sess., 1990), c. 984, s. 13; 1991 (Reg. Sess., 1992), c. 930, s. 8; 1993, c. 450, s. 5.

§ 105-160.8. Federal determinations.

For purposes of this Part, the provisions of G.S. 105-159 apply to fiduciaries required to file returns for estates and trusts.

History. 1989, c. 728, s. 1.38; 1993 (Reg. Sess., 1994), c. 582, s. 3; 1998-98, s. 69; 2018-5, s. 38.3(c).

Editor’s Note.

Session Laws 2018-5, s. 38.3(h), made the amendment of this section by Session Laws 2018-5, s. 38.3(c), effective June 12, 2018, and applicable to federal amended returns filed on or after that date.

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. 38.3(c), in the section heading, substituted “determinations” for “corrections”, and in the text, deleted “requiring an individual to report the correction or determination of taxable income by the federal government” preceding “apply to fiduciaries.” For effective date and applicability, see editor’s note.

§§ 105-161 through 105-163. [Repealed]

Repealed by Session Laws 1989, c. 728, s. 1.37.

Part 4. Income Tax Credits for Property Taxes.

§§ 105-163.01 through 105-163.06. [Repealed]

Repealed by Session Laws 1991, c. 45, s. 14(b).

Editor’s Note.

G.S. 105-163.01 was formerly repealed by Session Laws 1985, c. 656, s. 14. G.S. 105-163.03 was formerly repealed by Session Laws 1987, c. 622, s. 3. G.S. 105-163.05 was formerly repealed by Session Laws 1989, c. 37, s. 5. G.S. 105-163.06 was formerly repealed by Session Laws 1987, c. 622, s. 3.

§ 105-163.07.

Recodified as G.S. 105-151.21 by Session Laws 1991, c. 45, s. 14.

Editor’s Note.

Section 105-151.21 has, also, now been repealed by Session Laws 2013-316, s. 1.1(b), effective January 1, 2014.

§§ 105-163.08, 105-163.09. [Repealed]

Repealed by Session Laws 1991, c. 45, s. 14(b).

Part 5. Tax Credits for Qualified Business Investments.

§§ 105-163.010 through 105-163.015. [Repealed]

Repealed pursuant to former G.S. 105-163.015(d), effective for investments made on or after January 1, 2014.

History. 105-163.010; 1987, c. 852, s. 1; 1987 (Reg. Sess., 1988), c. 882, s. 2; 1989 (Reg. Sess., 1990), c. 848, s. 2; 1991, c. 637, s. 1; 1993, c. 443, s. 1; 1996, 2nd Ex. Sess., c. 14, s. 7; 1997-6, s. 5; 1998-98, ss. 46, 69; 1998-212, ss. 29A.15(a), 29A.16(c), (d); 1999-369, s. 5.6; 2002-99, s. 3; 2003-414, s. 2; 2003-416, s. 4(a). 105-163.011; 1987, c. 852, s. 1; 1987 (Reg. Sess., 1988), c. 882, ss. 3, 3.1; 1989 (Reg. Sess., 1990), c. 848, s. 3; 1991, c. 637, s. 2; 1993, c. 443, s. 2; 1995, c. 491, s. 1; 1996, 2nd Ex. Sess., c. 14, s. 7; 1998-98, s. 71; 1998-212, s. 29A.15(a); 1999- 337, s. 27; 2003-414, s. 3; 2007-422, s. 2; 2009-445, s. 9(a). 105-163.012; 1987, c. 852, s. 1; 1987 (Reg. Sess., 1988), c. 882, ss. 4, 4.1; 1989 (Reg. Sess., 1990), c. 848, s. 4; 1991, c. 637, s. 3; 1993, c. 443, s. 3; 1993 (Reg. Sess., 1994), c. 745, s. 8; 1996, 2nd Ex. Sess., c. 14, ss. 6, 7; 1998-98, s. 71; 1998-212, s. 29A.15(a); 2003-414, s. 4; 2004-124, s. 32C.1; 2008-107, s. 28.26(a); 2009-445, s. 9(b). 105-163.013; 1987, c. 852, s. 1; 1991, c. 637, s. 4; 1993, c. 443, ss. 4, 9; c. 485, s. 12; c. 553, s. 80.1; 1994, Ex. Sess., c. 14, s. 50; 1993 (Reg. Sess., 1994), c. 745, ss. 9, 10; 1996, 2nd Ex. Sess., c. 14, s. 7; 1998-98, s. 69; 1998-212, ss. 29A.15(a), 29A.16(e); 1999-369, s. 5.7; 2001-414, s. 12; 2002-99, s. 4; 2003-414, s. 5. 105-163.014; 1987, c. 852, s. 1; 1991, c. 637, s. 5; 1993, c. 443, s. 5; 1996, 2nd Ex. Sess., c. 14, s. 7; 1998-98, s. 69; 1998-212, ss. 29A.15(a), 29A.16(a), (b); 1999-369, s. 5.8; 2003-414, s. 6; 2007-491, s. 44(1)a; 2002-99, s. 5; 2003-414, s. 1; 2004-124, s. 32C.2; 2007-422, s. 1; 2010-31, s. 31.5(b); 2012-36, s. 10. 105-163.015; 2002-99, s. 5; 2003-414, s. 1; 2004-124, s. 32C.2; 2007-422, s. 1; 2010-31, s. 31.5(b); 2012- 36, s. 10.

Editor’s Note.

Former G.S. 105-163.010 contained definitions. Former G.S. 105-163.011 pertained to allowable tax credits. Former G.S. 105-163.012 pertained to limit, carry-over, ceiling, and reduction in basis. Former G.S. 105-163.013 pertained to registration. Former G.S. 105-163.014 pertained to forfeiture of credit. Former G.S. 105-163.015 contained sunset provisions.

Article 4A. Withholding; Estimated Income Tax for Individuals.

§ 105-163.1. Definitions.

The following definitions apply in this Article:

  1. Compensation. — Consideration a payer pays a payee.
  2. Repealed by Session Laws 2009-476, s. 1, effective for taxable years beginning on or after January 1, 2010.
  3. Repealed by Session Laws 2014-3, s. 14.4(a), effective for taxable years beginning on or after January 1, 2014.
  4. Employee. — An individual, whether a resident or a nonresident of this State, who performs services in this State for wages or an individual who is a resident of this State and performs services outside this State for wages. The term includes an ordained or licensed member of the clergy who elects to be considered an employee under G.S. 105-163.1 A, an officer of a corporation, and an elected public official.
  5. Employer. — A person for whom an individual performs services for wages. In applying the requirements to withhold income taxes from wages and pay the withheld taxes, the term includes a person who:
    1. Controls the payment of wages to an individual for services performed for another.
    2. Pays wages on behalf of a person who is not engaged in trade or business in this State.
    3. Pays wages on behalf of a unit of government that is not located in this State.
    4. Pays wages for any other reason.
  6. Individual. — Defined in G.S. 105-153.3 . (6a) Individual Taxpayer Identification Number (ITIN). — A taxpayer identification number issued by the Internal Revenue Service to an individual who is required to have a U.S. taxpayer identification number but who does not have, or is not eligible to obtain, a Social Security number (SSN) from the Social Security Administration.

    (6b) ITIN contractor. — An ITIN holder who performs services in this State for compensation other than wages.

    (6c) ITIN holder. — A person whose taxpayer identification number is an Individual Taxpayer Identification Number (ITIN), including applied for and expired numbers.

  7. Miscellaneous payroll period. — A payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.

    (7a) Nonresident contractor. — Either of the following:

    1. A nonresident individual who performs in this State for compensation other than wages any personal services in connection with a performance, an entertainment, an athletic event, a speech, or the creation of a film, radio, or television program.
    2. A nonresident entity that provides for the performance in this State for compensation of any personal services in connection with a performance, an entertainment, an athletic event, a speech, or the creation of a film, radio, or television program.
  8. Nonresident entity. — Any of the following:
    1. A foreign limited liability company, defined using the same definition for the term “foreign LLC” in G.S. 57D-1-03 , that has not obtained a certificate of authority from the Secretary of State pursuant to Article 7 of Chapter 57D of the General Statutes.
    2. A foreign limited partnership as defined in G.S. 59-102 or a general partnership formed under the laws of any jurisdiction other than this State, unless the partnership maintains a permanent place of business in this State.
    3. A foreign corporation, as defined in G.S. 55-1-40 , that has not obtained a certificate of authority from the Secretary of State pursuant to Article 15 of Chapter 55 of the General Statutes.
  9. Pass-through entity. — Defined in G.S. 105-228.90 . (9a) Payee. — Any of the following:
    1. A nonresident contractor.
    2. An ITIN contractor.
    3. A person who performs services in this State for compensation that fails to provide the payer a taxpayer identification number.
    4. A person who performs services in this State for compensation that fails to provide the payer a valid taxpayer identification number. The Secretary must notify a payer that a taxpayer identification number is not valid.
  10. Payer. — A person who, in the course of a trade or business, pays compensation.
  11. Payroll period. — A period for which an employer ordinarily pays wages to an employee of the employer.

    (11a) Pension payer. — A payor or a plan administrator with respect to a pension payment under section 3405 of the Code.

    (11b) Pension payment. — A periodic payment or a nonperiodic distribution as those terms are defined in section 3405 of the Code.

  12. Taxable year. — Defined in section 441(b) of the Code.

    (12a) Taxpayer Identification Number (TIN). — Defined in G.S. 105-228.90(b)(31).

  13. Wages. — The term has the same meaning as in section 3401 of the Code, except the term does not include amounts paid to a nonresident employee for a business, trade, profession, or occupation carried on in this State to perform disaster-related work during a disaster response period at the request of a critical infrastructure company. The definitions and provisions of G.S. 166A-19.70 A apply to this subdivision.
  14. Withholding agent. — An employer, a pension payer, or a payer.

History. 1959, c. 1259, s. 1; 1967, c. 716, s. 3; 1973, c. 476, s. 193; 1977, c. 657, s. 5; 1979, c. 801, s. 70; 1983, c. 713, ss. 79, 82; 1985, c. 394, s. 1; c. 656, s. 7; 1985 (Reg. Sess., 1986), c. 853, s. 1; 1987, c. 778, s. 1; 1987 (Reg. Sess., 1988), c. 1015, s. 5; 1989, c. 36, s. 5; c. 728, s. 1.40; 1989 (Reg. Sess., 1990), c. 945, s. 5; c. 981, s. 6; 1991, c. 689, s. 255; 1991 (Reg. Sess., 1992), c. 922, s. 7; 1993, c. 12, s. 9; c. 354, s. 15; 1997-6, s. 6; 1997-109, ss. 1, 2, 4; 1998-162, ss. 1, 2; 1999-414, ss. 1, 2; 2000-126, s. 2; 2003-416, s. 4(b); 2009-476, s. 1; 2013-157, s. 29; 2014-3, s. 14.4(a); 2016-5, s. 2.3; 2018-5, s. 38.1(d); 2019-169, s. 6.4(a); 2019-187, s. 1(l); 2020-58, s. 4.4(c).

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 2019-187, s. 3, made the amendment of subdivision (13) by Session Laws 2019-187, s. 1( l ), effective August 1, 2019, and applicable to disaster declarations on or after that date.

G.S. 105-228.90(b)(31) was substituted for G.S. 105-228.90(b)(9) in subdivision (12a) at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 1999-414, ss. 1 and 2, effective January 1, 2001, added subdivisions (11a) and (11b); and inserted “a pension payer” and made a minor punctuation change in subdivision (14).

Session Laws 2000-126, s. 2, effective January 1, 2001, in subdivision (11b) deleted “that is not an eligible rollover distribution” following “nonperiodic distribution” and inserted “those terms are” preceding “defined.”

Session Laws 2003-416, s. 4.(b), effective August 14, 2003, substituted “G.S. 105-228.90” for “G.S. 105-163.010” in subdivision (9).

Session Laws 2009-476, s. 1, effective for taxable years beginning on or after January 1, 2010, rewrote subdivision (1); deleted subdivision (2), which defined “Contractor”; added subdivisions (6a), (6b), and (7a); and rewrote subdivision (10).

Session Laws 2013-157, s. 29, effective January 1, 2014, in subdivision (8)a., substituted “defined using the same definition for the term ‘foreign LLC’ in G.S. 57D-1-03 ” for “as defined in G.S. 57C-1-03” near the beginning, and substituted “Chapter 57D” for “Chapter 57C” near the end.

Session Laws 2014-3, s. 14.4(a), effective for taxable years beginning on or after January 1, 2014, repealed subdivision (3).

Session Laws 2016-5, s. 2.3, effective May 11, 2016, substituted “G.S. 105-153.3” for “G.S. 105-134.1” in subdivision (6); and rewrote subdivision (13).

Session Laws 2018-5, s. 38.1(d), effective June 12, 2018, deleted “except it does not include the amount an employer pays an employee as reimbursement for ordinary and necessary expenses incurred by the employee on behalf of the employer and in the furtherance of the business of the employer” following “Code” at the end of subdivision (13).

Session Laws 2019-169, s. 6.4(a), effective January 1, 2020, rewrote subdivisions (1) and (10); added subdivisions (6a), (9a), and (12a); redesignated former subdivisions (6a) and (6b) as subdivisions (6b) and (6c), respectively; and added “including applied for and expired numbers” at the end of subdivision (6c).

Session Laws 2019-187, s. 1( l ), rewrote subdivision (13), which formerly read: “The term had the same meaning as in section 3401 of the Code.” For effective date and applicability, see editor’s note.

Session Laws 2020-58, s. 4.4(c), effective June 30, 2020, rewrote subdivision (12a).

Legal Periodicals.

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

§ 105-163.1A. Ordained or licensed clergyman may elect to be considered an employee.

An ordained or licensed clergyman who performs services for a church of any religious denomination may file an election with the Secretary and the church he serves to be considered an employee of the church instead of self-employed. Until a clergyman files an election, amounts paid by a church to a clergyman are not subject to withholding. A church shall withhold taxes from a clergyman’s wages after the clergyman files an election with it under this section.

History. 1985, c. 394, s. 2; 1985 (Reg. Sess., 1986), c. 826, s. 9; 1989 (Reg. Sess., 1990), c. 945, s. 6.

§ 105-163.2. Employers must withhold taxes.

  1. Withholding Required. —  An employer shall deduct and withhold from the wages of each employee the State income taxes payable by the employee on the wages. For each payroll period, the employer shall withhold from the employee’s wages an amount that would approximate the employee’s income tax liability under Article 4 of this Chapter if the employer withheld the same amount from the employee’s wages for each similar payroll period in a calendar year. In calculating an employee’s anticipated income tax liability, the employer shall allow for the additions that employee is required to make under Article 4 of this Chapter and the deductions, and credits to which the employee is entitled under Article 4 of this Chapter. The amount of State income taxes withheld by an employer is held in trust for the Secretary.
  2. Withholding Tables. —  The manner of withholding and the amount to be withheld shall be determined in accordance with tables and rules adopted by the Secretary. The withholding of wages pursuant to and in accordance with these tables shall be deemed as a matter of law to constitute compliance with the provisions of subsection (a) of this section, notwithstanding any other provisions of this Article. The Secretary shall promulgate tables for computing amounts to be withheld with respect to different rates of wages for different payroll periods applicable to the various combinations of allowances to which an employee may be entitled and taking into account the appropriate standard deduction. The tables may provide for the same amount to be withheld within reasonable salary brackets or ranges so designed as to result in the withholding during a year of approximately the amount of an employee’s indicated income tax liability for that year.The withholding allowances provided by these tables and rules shall, as nearly as possible, approximate the amount of the employee’s indicated income tax liability for that year based upon all of the following factors:
    1. An income tax rate equal to the rate set in G.S. 105-153.7 plus one-tenth of one percent (0.1%).
    2. The additions the employee is required to make under Article 4 of this Chapter.
    3. The deductions and credits to which an employee is entitled under Article 4 of this Chapter.
  3. Withholding if No Payroll Period. —  If wages are paid with respect to a period that is not a payroll period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days, excluding Sundays and holidays, equal to the number of days in the period with respect to which such wages are paid. In any case in which wages are paid by an employer without regard to any payroll period or other period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days equal to the number of days, excluding Sundays and holidays, which have elapsed since the date of the last payment of such wages by such employer during the calendar year, or the date of commencement of employment with such employer during such year, or January 1 of such year, whichever is the later.
  4. Estimated Withholding. —  The Secretary may, by rule, authorize employers to estimate the wages to be paid to an employee during a calendar quarter, calculate the amount to be withheld for each period based on the estimated wages, and, upon payment of wages to the employee, adjust the withholding so that the amount actually withheld is the amount that would be required to be withheld if the employee’s payroll period were quarterly.
  5. Alternatives to Tables. —  If the Secretary determines that use of the withholding tables would be impractical, would impose an unreasonable burden on an employer, or would produce substantially incorrect results, the Secretary may authorize or require an employer to use some other method of determining the amounts to be withheld under this Article. The alternative method authorized by the Secretary must reasonably approximate the predicted income tax liability of the affected employees based upon the factors provided in subsection (b) of this section. In addition, with the agreement of the employer and employee, the Secretary may authorize an employer to use an alternative method that results in withholding of a greater amount than otherwise required under this section.The Secretary’s authorization of an alternative method is discretionary and may be cancelled at any time without advance notice if the Secretary finds that the method is being abused or is not resulting in the withholding of an amount reasonably approximating the predicted income tax liability of the affected employees. The Secretary shall give an employer written notice of any cancellation and the findings upon which the cancellation is based. The cancellation becomes effective upon the employer’s receipt of this notice or on the third day after the notice was mailed to the employer, whichever occurs first. If the employer requests a hearing on the cancellation within 30 days after the cancellation, the Secretary shall grant a hearing. After a hearing, the Secretary’s findings are conclusive.

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1981, c. 13; 1989, c. 728, s. 1.41; 1989 (Reg. Sess., 1990), c. 945, s. 7; 1997-109, s. 2; 2014-3, s. 14.5(a); 2015-241, s. 32.16A(a).

Effect of Amendments.

Session Laws 2014-3, s. 14.5(a), effective for taxable years beginning on or after January 1, 2014, in the first sentence of subsection (a), substituted “additions that employee is required to make under Article 4 of this Chapter and the deductions” for “exemptions, deductions”; and, in subsection (b), in the second sentence, substituted “allowances provided” for “exemption allowed” near the beginning, substituted “additions the employee is required to make under Article 4 of this Chapter and the deductions” for “exemptions, deductions” near the middle, and substituted “is entitled” for “would be entitled” near the end, and, in the third sentence, substituted “combinations of allowances” for “combinations of exemptions” in the third sentence.

Session Laws 2015-241, s. 32.16A(a), effective for taxable years beginning on or after January 1, 2016, rewrote subsection (b); and inserted “based upon the factors provided in subsection (b) of this section” at the end of the second sentence in the first paragraph of subsection (e).

§ 105-163.2A. Pension payers must withhold taxes.

  1. Definitions. —  The definitions provided in section 3405 of the Code apply in this section.
  2. Withholding Required. —  A pension payer required to withhold federal taxes under section 3405 of the Code on a pension payment to a resident of this State must deduct and withhold from the payment the State income taxes payable on the payment. Liability for withholding and paying taxes under this section on a pension payment falls on the person who would be liable under section 3405 of the Code for withholding federal taxes on the payment.Except as otherwise provided in this section, the provisions of this Article apply to a pension payer’s pension payment to a resident of this State as if it were an employer’s payment of wages to an employee. The pension payer must file a return, pay the withheld taxes, and report the amount withheld in the time and manner required under G.S. 105-163.6 and G.S. 105-163.7 as if the pension payment were wages. If a pension payer has more than one arrangement under which it may make pension payments to a resident of this State, each arrangement must be treated separately under this section.
  3. Amount. —  In the case of a periodic payment, the pension payer must withhold the amount that would be required to be withheld under this Article if the payment were a payment of wages by an employer to an employee for the appropriate payroll period.In the case of a nonperiodic distribution, the pension payer must withhold taxes equal to four percent (4%) of the nonperiodic distribution.
  4. Election of No Withholding. —  The recipient may elect not to have taxes withheld under this section to the extent permitted by section 3405 of the Code. The election must be in the form required by the Secretary. In the case of periodic payments, the election remains in effect until revoked by the recipient. In the case of a nonperiodic distribution, the election applies on a distribution-by-distribution basis unless it meets conditions prescribed by the Secretary for it to apply to subsequent nonperiodic distributions by the pension payer.A pension payer must notify each recipient of the right to elect not to have taxes withheld under this section. The notice must comply with the requirements of section 3405 of the Code and any additional requirements prescribed by the Secretary.A recipient’s election not to have taxes withheld under this section is void if the recipient fails to furnish the recipient’s tax identification number to the pension payer, or the Secretary has notified the pension payer that the tax identification number furnished by the recipient is incorrect.
  5. Exemptions. —  This section does not apply to the following pension payments:
    1. A pension payment that is wages under this Article.
    2. Any portion of a pension payment that meets both of the following conditions:
      1. It is not a distribution or payment from an individual retirement plan as defined in section 7701 of the Code.
      2. The pension payer reasonably believes it is not taxable to the recipient under Article 4 of this Chapter.
    3. A distribution described in section 404(k)(2) of the Code, relating to dividends on corporate securities.
    4. A pension payment that consists only of securities of the recipient’s employer corporation plus cash not in excess of two hundred dollars ($200.00) in lieu of securities of the employer corporation.

History. 1999-414, s. 3; 2000-126, s. 3; 2014-3, s. 14.6(a); 2015-259, s. 7.1(c).

Effect of Amendments.

Session Laws 2014-3, s. 14.6(a), effective January 1, 2015, deleted the former second sentence in the first paragraph of subsection (c), which read: “If the recipient of periodic payments fails to file an exemption certificate under G.S. 105-163.5 , the pension payer must compute the amount to be withheld as if the recipient were a married individual claiming three withholding exemptions.” See Editor’s note for applicability.

Session Laws 2015-259, s. 7.1(c), effective for taxable years beginning on or after January 1, 2015, added the second sentence in the second paragraph of subsection (b). For applicability, see Editor’s note.

§ 105-163.2B. North Carolina State Lottery Commission must withhold taxes.

The North Carolina State Lottery Commission, established by Chapter 18C of the General Statutes, must deduct and withhold State income taxes from the payment of winnings in an amount of six hundred dollars ($600.00) or more. The amount of taxes to be withheld is a percentage of the winnings. The percentage is the individual income tax rate in G.S. 105-153.7 . The Commission must file a return, pay the withheld taxes, and report the amount withheld in the time and manner required under G.S. 105-163.6 and G.S. 105-163.7 as if the winnings were wages. The taxes the Commission withholds are held in trust for the Secretary.

History. 2005-276, s. 31.1(bb); 2005-344, s. 10.2(a); 2006-259, s. 8(f); 2006-264, s. 91(b); 2013-316, s. 1.3(g); 2015-259, s. 7.1(d).

Editor’s Note.

Session Laws 2006-264, s. 91(b), which substituted “in an amount of six hundred dollars ($600.00) or more” for “that are reportable to the Internal Revenue Service under section 3406 of the Code” in the first sentence and added “and report the amount withheld” at the end of the third sentence, was repealed by Session Laws 2006-264, s. 91(e). Session Laws 2006-264, s. 91(e) provided that if Senate Bill 1523, 2005 Regular Session (S.L. 2006-259) becomes law, subsections (b) and (c) of this section are repealed.

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 2006-259, s. 8(f), effective August 23, 2006, substituted “in an amount of six hundred dollars ($600.00) or more” for “that are reportable to the Internal Revenue Service under section 3406 of the Code” at the end of the first sentence and substituted “return, pay the withheld taxes, and report the amount withheld” for “return and pay the withheld taxes” in the middle of the second sentence.

Session Laws 2013-316, s. 1.3(g), effective for taxable years beginning on or after January 1, 2014, substituted “a percentage” for “seven percent (7%)” in the second sentence, and added the third sentence.

Session Laws 2015-259, s. 7.1(d), effective for taxable years beginning on or after January 1, 2015, inserted “and G.S. 105-163.7 ” near the end of the fourth sentence. For applicability, see Editor’s note.

§ 105-163.3. Certain payers must withhold taxes.

  1. Requirement. —  Every payer who pays more than one thousand five hundred dollars ($1,500) during a calendar year to a payee must deduct and withhold from compensation paid to the payee the State income taxes payable by the payee on the compensation as provided in this section. The amount of taxes to be withheld is four percent (4%) of the compensation paid to the payee. The taxes a payer withholds are held in trust for the Secretary.
  2. Exemptions. —  The withholding requirement does not apply to the following:
    1. Compensation that is subject to the withholding requirement of G.S. 105-163.2 .
    2. Compensation paid to an ordained or licensed member of the clergy.
    3. Compensation paid to an entity exempt from tax under G.S. 105-130.11 .
    4. Compensation paid to an alien, as described by 8 U.S.C. § 1101(a)(15)(H)(ii)(a), that is not subject to federal income tax withholding under section 1441 of the Code.
    5. Compensation paid by a nonresident business or a critical infrastructure company to an ITIN contractor who is a nonresident individual for a business, trade, profession, or occupation carried on in this State to perform disaster-related work during a disaster response period at the request of a critical infrastructure company. The definitions and provisions of G.S. 166A-19.70 A apply to this subdivision.
  3. Repealed by Session Laws 2015-259, s. 7.1(e), effective for taxable years beginning on or after January 1, 2015.
  4. Returns, Annual Statement, and Report. —  A payer required to deduct and withhold from a payee’s compensation under this section must file a return, pay the withheld taxes, and report the amount withheld in the time and manner required under G.S. 105-163.6 and G.S. 105-163.7 as if the compensation were wages.
  5. Records. —  This subsection applies to a payer who pays compensation for personal services performed in connection with a performance, an entertainment, an athletic event, a speech, or the creation of a film, radio, or television program. If a payer does not withhold from payments to a nonresident entity because the entity is exempt from tax under G.S. 105-130.11 , the payer must obtain from the entity documentation proving its exemption from tax. If a payer does not withhold from payments to a nonresident corporation or a nonresident limited liability company because the entity has obtained a certificate of authority from the Secretary of State, the payer must obtain from the entity its corporate identification number issued by the Secretary of State. If a payer does not withhold from payments to an individual because the individual is a resident, the payer must obtain the individual’s address and social security number. If a payer does not withhold from a partnership because the partnership has a permanent place of business in this State, the payer must obtain the partnership’s address and taxpayer identification number. The payer must retain this information with its records.
  6. Payer May Repay Amounts Withheld Improperly. —  A payer may refund to a person any amount the payer withheld improperly from the person under this section, if the refund is made before the end of the calendar year and before the payer furnishes the person the annual statement required by subsection (d) of this section. An amount is withheld improperly if it is withheld from a payment to a person who is not a payee, if it is withheld from a payment that is not compensation, or if it is in excess of the amount required to be withheld under this section. A payer who makes a refund under this section must take the following actions:
    1. Not report the amount refunded on the annual statement required by subsection (d) of this section.
    2. Either not pay to the Secretary the amount refunded or, if the amount refunded has already been paid to the Secretary, reduce by the amount refunded the next payments to the Secretary of taxes withheld from the person.

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1989, c. 728, s. 1.42; 1989 (Reg. Sess., 1990), c. 945, s. 8; 1997-109, s. 2; 1998-98, ss. 11-13; 1998-162, s. 3; 2009-476, s. 2; 2013-414, s. 39(a); 2015-259, s. 7.1(e); 2015-263, s. 2(a); 2019-169, s. 6.4(b); 2019-187, s. 1(m).

Editor’s Note.

Session Laws 2019-187, s. 3, made subdivision (b)(5), as added by Session Laws 2019-187, s. 1(m), effective August 1, 2019, and applicable to disaster declarations on or after that date.

Effect of Amendments.

Session Laws 2009-476, s. 1, effective for taxable years beginning on or after January 1, 2010, in subsection (a), deleted “a contractor” following “payer who pays” and substituted “to either a nonresident contractor or an ITIN contractor must” for “shall”; rewrote subsections (c) and (d); in subsection (e), added the present first sentence and substituted “must” for “shall” five times; and in subsection (f), in the introductory paragraph, inserted “nonresident contractor or an ITIN” and added “take the following action,” and, in subdivision (f)(1), substituted “subsection (d) of this section” for “subsection (d), and.”

Session Laws 2013-414, s. 39(a), effective August 1, 2013, added “in the manner required by the Secretary” at the end of first sentence in the last paragraph of subsection (d).

Session Laws 2015-259, s. 7.1(e), effective for taxable years beginning on or after January 1, 2015, deleted former subsection (c); and rewrote subsection (d). For applicability, see Editor’s note.

Session Laws 2015-263, s. 2(a), effective for taxable years beginning on or after January 1, 2015, added subdivision (b)(4).

Session Laws 2019-169, s. 6.4(b), effective January 1, 2020, in subsection (a), in the first sentence, substituted “a payee” for “either a nonresident contractor or an ITIN contractor” near the middle and, in the first and second sentences, substituted “payee” for “contractor” wherever appearing; substituted “payee’s” for “contractor’s” in subsection (d); and substituted “payee” for “contractor” in the second sentence of the introductory paragraph of subsection (f).

Session Laws 2019-187, s. 1(m), added subdivision (b)(5). For effective date and applicability, see editor’s note.

§ 105-163.4. Withholding does not create nexus.

A nonresident withholding agent’s act in compliance with this Article does not in itself constitute evidence that the nonresident is doing business in this State.

History. 1959, c. 1259, s. 1; 1989 (Reg. Sess., 1990), c. 945, s. 9; 1997-109, s. 2.

§ 105-163.5. Employee withholding allowances; certificates.

  1. An employee receiving wages is entitled to the withholding allowances that would result in the employer withholding approximately the employee’s income tax liability under Article 4 of this Chapter.
  2. Every employee shall, at the time of commencing employment, furnish his or her employer with a signed withholding allowance certificate informing the employer of the allowances the employee claims. If the employee fails to file the allowance certificate, the employer must compute the amount to be withheld from the employee’s wages as if the employee were a single individual with no allowances.
  3. Withholding allowance certificates shall take effect as of the beginning of the first payroll period that ends on or after the date on which the certificate is furnished, or if payment of wages is made without regard to a payroll period, then the certificate shall take effect as of the beginning of the miscellaneous payroll period for which the first payment of wages is made on or after the date on which the certificate is furnished.
  4. If, on any day during the calendar year, the amount of withholding allowances to which the employee is entitled is less than the amount of withholding allowances claimed by the employee on the withholding allowance certificate then in effect with respect to the employee, the employee shall, within 10 days thereafter, furnish the employer with a new withholding allowance certificate stating the amount of withholding allowances which the employee then claims, which shall in no event exceed the amount to which the employee is entitled on that day. If, on any day during the calendar year, the amount of withholding allowances to which the employee is entitled is greater than the amount of withholding allowances claimed, the employee may furnish the employer with a new withholding allowance certificate stating the amount of withholding allowances that the employee then claims, which shall not exceed the amount to which the employee is entitled on that day.
  5. Withholding allowance certificates must be in the form and contain the information required by the Secretary.
  6. In addition to any criminal penalty provided by law, if an individual furnishes his or her employer an allowance certificate that contains information that has no reasonable basis and that results in a lesser amount of tax being withheld under this Article than would have been withheld if the individual had furnished reasonable information, the individual is subject to a penalty of fifty percent (50%) of the amount not properly withheld.

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1981 (Reg. Sess., 1982), c. 1277; 1989, c. 728, s. 1.43; 1997-109, s. 2; 2014-3, s. 14.5(b).

Effect of Amendments.

Session Laws 2014-3, s. 14.5(b), effective for taxable years beginning on or after January 1, 2014, rewrote the section.

§ 105-163.6. When employer must file returns and pay withheld taxes.

  1. General. —  A return is due quarterly or monthly as specified in this section. A return shall be filed with the Secretary in the manner required by the Secretary, shall report any payments of withheld taxes made during the period covered by the return, and shall contain any other information required by the Secretary.Withheld taxes are payable quarterly, monthly, or semiweekly, as specified in this section. If the Secretary finds that collection of the amount of taxes this Article requires an employer to withhold is in jeopardy, the Secretary may require the employer to file a return or pay withheld taxes at a time other than that specified in this section.
  2. Quarterly. —  An employer who withholds an average of less than two hundred fifty dollars ($250.00) of State income taxes from wages each month must file a return and pay the withheld taxes on a quarterly basis. A quarterly return covers a calendar quarter and is due by the last day of the month following the end of the quarter.
  3. Monthly. —  An employer who withholds an average of at least two hundred fifty dollars ($250.00) but less than two thousand dollars ($2,000) from wages each month must file a return and pay the withheld taxes on a monthly basis. A return for the months of January through November is due by the 15th day of the month following the end of the month covered by the return. A return for the month of December is due the following January 31.
  4. Semiweekly. —  An employer who withholds an average of at least two thousand dollars ($2,000) of State income taxes from wages each month shall file a return by the date set under the Code for filing a return for federal employment taxes attributable to the same wages and shall pay the withheld State taxes by the date set under the Code for depositing or paying federal employment taxes attributable to the same wages. The date set by the Code for depositing or paying federal employment taxes shall be determined without regard to § 6302(g) of the Code.An extension of time granted to file a return for federal employment taxes attributable to wages is an automatic extension of time for filing a return for State income taxes withheld from the same wages, and an extension of time granted to pay federal employment taxes attributable to wages is an automatic extension of time for paying State income taxes withheld from the same wages. An employer who pays withheld State income taxes under this subsection is not subject to interest on or penalties for a shortfall in the amount due if the employer would not be subject to a failure-to-deposit penalty had the shortfall occurred in a deposit of federal employment taxes attributable to the same wages and the employer pays the shortfall by the date the employer would have to deposit a shortfall in the federal employment taxes.
  5. Category. —  The Secretary shall monitor the amount of taxes withheld by an employer or estimate the amount of taxes to be withheld by a new employer and shall direct each employer to pay withheld taxes in accordance with the appropriate schedule. An employer shall file a return and pay withheld taxes in accordance with the Secretary’s direction until notified in writing to file and pay under a different schedule.

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; c. 1287, s. 7; 1975, 2nd Sess., c. 979, s. 1; 1977, c. 488; 1987, c. 622, s. 9; c. 813, s. 24; 1989 (Reg. Sess., 1990), c. 945, s. 10; 1993, c. 450, s. 6; 1993 (Reg. Sess., 1994), c. 661, s. 1; 1997-109, s. 2; 2001-427, s. 5(a), (b); 2013-414, s. 39(b).

Effect of Amendments.

Session Laws 2013-414, s. 39(b), effective August 1, 2013, substituted “in the manner required” for “on a form prepared” in the second sentence of the first paragraph of subsection (a).

§ 105-163.6A. Federal determinations.

If the amount of taxes an employer is required to withhold and pay under the Code is changed or corrected, the provisions of G.S. 105-159 apply to employers, pension payers, and every other payer required to withhold taxes under this Article. Failure of an employer to comply with this section does not, however, affect an individual’s right to a credit under G.S. 105-163.10 .

History. 1993 (Reg. Sess., 1994), c. 582, s. 4; 2007-491, s. 17; 2018-5, s. 38.3(d).

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.”

Session Laws 2018-5, s. 38.3(h), made the rewriting of this section by Session Laws 2018-5, s. 38.3(d), effective June 12, 2018, and applicable to federal amended returns filed on or after that date.

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 2007-491, s. 17, effective for taxable years beginning on or after January 1, 2007, substituted “six months” for “two years” in the first sentence, rewrote the second and third sentences of the former first paragraph and the first sentence of the former second paragraph as the present second sentence; and substituted “the Secretary must either refund” for “the Secretary shall either refund” near the beginning of the present third sentence. For applicability, see Editor’s note.

Session Laws 2018-5, s. 38.3(d), rewrote the section. For effective date and applicability, see editor’s note.

§ 105-163.7. Statement to employees; information to Secretary.

  1. Report to Employee. —  Every employer required to deduct and withhold from an employee’s wages under G.S. 105-163.2 shall furnish to the employee in respect to the remuneration paid by the employer to such employee during the calendar year, on or before January 31 of the succeeding year, or, if the employment is terminated before the close of the calendar year, within 30 days after the date on which the last payment of remuneration is made, duplicate copies of a written statement showing the following:
    1. The employer’s name, address, and taxpayer identification number.
    2. The employee’s name, address, and social security number.
    3. The total amount of wages or remuneration made.
    4. The total amount deducted and withheld under G.S. 105-163.2 .
  2. Informational Return to Secretary. —  Every employer shall annually file an informational return with the Secretary that contains the information given on each of the employer’s written statements to an employee. The Secretary may require additional information to be included on the informational return, provided the Secretary has given a minimum of 90 days’ notice of the additional information required. The informational return must be filed in an electronic format as prescribed by the Secretary and is due on or before January 31 of the succeeding year or, if the employer terminates its business before the close of the calendar year, on or before the last day of the month following the end of the calendar quarter in which the employer terminates its business, but no later than January 31 of the succeeding year. The informational return required by this subsection is in lieu of the report required by G.S. 105-154 .An employer that is not doing business in this State because it is a nonresident business performing disaster-related work during a disaster response period at the request of a critical infrastructure company is not required to file an information return with the Secretary. However, the employer must furnish to an employee, upon request, any information necessary for that person to properly file a State income tax return. The definitions and provisions in G.S. 166A-19.70 A apply to this paragraph.
  3. Repealed by Session Laws 2002-72, s. 16, effective August 12, 2002.
  4. Deduction Disallowance. —  The Secretary may request a person who fails to timely file statements of payment to another person with respect to wages, dividends, rents, or interest paid to that person to file the statements by a certain date. If the payer fails to file the statements by that date, and, in addition to any applicable penalty under G.S. 105-236 , the amounts claimed on the payer’s income tax return as deductions for salaries and wages or rents or interest shall be disallowed to the extent that the payer failed to comply with the Secretary’s request with respect to the statements.

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1989 (Reg. Sess., 1990), c. 945, s. 11; 1993 (Reg. Sess., 1994), c. 679, s. 8.3; 1997-109, s. 2; 2002-72, s. 16; 2015-259, s. 7.1(a); 2018-5, s. 38.10(n); 2019-187, s. 1(n); 2021-180, s. 42.13A(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.

Session Laws 2019-187, s. 3, made the last paragraph in subsection (b), as added by Session Laws 2019-187, s. 1(m), effective August 1, 2019, and applicable to disaster declarations on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2015-259, s. 7.1(a), effective for taxable years beginning on or after January 1, 2015, rewrote subsections (a) and (b). For applicability, see Editor’s note.

Session Laws 2018-5, s. 38.10(n), effective June 12, 2018, in subsection (b), in the heading, substituted “Informational Return” for “Report”, in the first sentence, substituted “annually file an information return” for “file an annual report”, in the second and third sentences, substituted “informational return” for “report”, deleted the former fourth sentence, which read: “The Secretary may, upon a showing of good cause, waive the electronic submission requirement.”, added the present fourth sentence, and, in the last sentence, substituted “The informational return” for “The report”; and added subsection (d).

Session Laws 2019-187, s. 1(m), added the last paragraph in subsection (b). For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 42.13A(d), effective November 18, 2021, in subsection (b), rewrote the former third and fourth sentences as the present third sentence.

§ 105-163.8. Liability of withholding agents.

  1. A withholding agent who withholds the proper amount of income taxes under this Article and pays the withheld amount to the Secretary is not liable to any person for the amount paid. A withholding agent who fails to withhold the proper amount of income taxes or pay the amount withheld to the Secretary is liable for the amount of tax not withheld or not paid. A withholding agent who fails to withhold the amount of income taxes required by this Article or who fails to pay withheld taxes by the due date for paying the taxes is subject to the penalties provided in Article 9 of this Chapter.
  2. Repealed by Session Laws 1998-212, s. 29A.14(g), effective January 1, 1999.
  3. If a withholding agent fails to file a return and pay the tax due under this Article or files a grossly incorrect or false or fraudulent return, the Secretary must estimate the tax due and assess the withholding agent based on the estimate.

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1989 (Reg. Sess., 1990), c. 945, s. 12; 1997-109, s. 2; 1998-212, s. 29A.14(g); 2021-180, s. 42.13A(e).

Editor’s Note.

Session Laws 2015-6, s. 2.9(a), (b), provides: “Notwithstanding G.S. 105-163.15 , the Secretary of Revenue may not impose interest with respect to an underpayment of income tax to the extent the underpayment was created or increased by the changes made in Section 2.2 of S.L. 2014-3 [which amended the deduction amounts in subsection (a)]. Notwithstanding G.S. 105-163.8 , a withholding agent is not liable for the amount of tax the agent fails to withhold to the extent the amount of tax not withheld was created or increased by the changes made in Section 2.2 of S.L. 2014-3.

“(b) This section is effective when it becomes law and applies to taxable years beginning on or after January 1, 2014, and before January 1, 2015, and to payroll periods beginning on or after January 1, 2014, and before January 1, 2015.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.13A(e), effective November 18, 2021, added subsection (c).

CASE NOTES

Allocation of Penalty Monies Collected. —

Monetary payments for a taxpayer’s noncompliance with a mandate of Chapter 105 are penalties and, therefore, subject to N.C. Const., Art. IX, § 7; thus, monies collected by the North Carolina Department of Revenue for late filings, underpayments, and for failing to comply with statutory or regulatory tax provisions are payable to public schools. N.C. Sch. Bds. Ass'n v. Moore, 359 N.C. 474 , 614 S.E.2d 504, 2005 N.C. LEXIS 694 (2005).

§ 105-163.9. Refund of overpayment to withholding agent.

A withholding agent who pays the Secretary more under this Article than the Article requires the agent to pay may obtain a refund of the overpayment by filing a request for a refund with the Secretary. No refund is allowed, however, if the withholding agent withheld the amount of the overpayment from the wages or compensation of the agent’s employees or contractors. A withholding agent must file a request for a refund within the time period set in G.S. 105-241.6 . Interest accrues on a refund as provided in G.S. 105-241.21 .

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1975, c. 74, s. 1; 1981 (Reg. Sess., 1982), c. 1223, s. 3; 1989 (Reg. Sess., 1990), c. 945, s. 13; 1997-109, s. 2; 2007-491, s. 18; 2008-187, s. 15.

Editor’s Note.

Session Laws 2007-491, s. 18, amended this section in the coded bill drafting format provided by G.S. 120-20.1 . In the third sentence, the act struck through “105-266” but failed to strike through the “G.S.” that immediately preceded it. Session Laws 2008-187, s. 15, corrected the oversight.

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. 18, effective January 1, 2008, substituted “a request” for “an application” in the first and third sentences, and substituted “G.S. 105-241.6” for “105-266” and “G.S. 105-241.21” for “G.S. 105-266” in the third and last sentences, respectively. For applicability, see Editor’s note.

Session Laws 2008-187, s. 15, effective August 7, 2008, deleted “G.S.” preceding “G.S. 105-241.6” in the third sentence.

§ 105-163.10. Withheld amounts credited to taxpayer for calendar year.

The amount deducted and withheld under this Article during any calendar year from the wages or compensation of an individual shall be allowed as a credit to that individual against the tax imposed by Article 4 of this Chapter for taxable years beginning in that calendar year. The amount deducted and withheld under this Article during any calendar year from the compensation of a nonresident entity shall be allowed as a credit to that entity against the tax imposed by Article 4 of this Chapter for taxable years beginning in that calendar year. If the nonresident entity is a pass-through entity, the entity shall pass through and allocate to each owner the owner’s share of the credit.

If more than one taxable year begins in the calendar year during which the withholding occurred, the amount shall be allowed as a credit against the tax for the last taxable year so beginning. To obtain the credit allowed in this section, the individual or nonresident entity must file with the Secretary one copy of the withholding statement required by G.S. 105-163.3 or G.S. 105-163.7 and any other information the Secretary requires.

History. 1959, c. 1259, s. 1; 1967, c. 1110, s. 4; 1973, c. 476, s. 193; 1989, c. 728, s. 1.44; 1991 (Reg. Sess., 1992), c. 930, s. 9; 1997-109, s. 2.

§§ 105-163.11 through 105-163.14. [Repealed]

Repealed by Session Laws 1985, c. 443, s. 1.

§ 105-163.15. Failure by individual to pay estimated income tax; interest.

  1. In the case of any underpayment of the estimated tax by an individual, the Secretary shall assess interest in an amount determined by applying the applicable annual rate established under G.S. 105-241.21 to the amount of the underpayment for the period of the underpayment.
  2. For purposes of subsection (a), the amount of the underpayment shall be the excess of the required installment, over the amount, if any, of the installment paid on or before the due date for the installment. The period of the underpayment shall run from the due date for the installment to whichever of the following dates is the earlier: (i) the fifteenth day of the fourth month following the close of the taxable year, or (ii) with respect to any portion of the underpayment, the date on which such portion is paid. A payment of estimated tax shall be credited against unpaid required installments in the order in which such installments are required to be paid.
  3. For purposes of this section there shall be four required installments for each taxable year with the time for payment of the installments as follows:
    1. First installment — April 15 of taxable year;
    2. Second installment — June 15 of taxable year;
    3. Third installment — September 15 of taxable year; and
    4. Fourth installment — January 15 of following taxable year.
  4. Except as provided in subsection (e), the amount of any required installment shall be twenty-five percent (25%) of the required annual payment. The term “required annual payment” means the lesser of:
    1. Ninety percent (90%) of the tax shown on the return for the taxable year, or, if no return is filed, ninety percent (90%) of the tax for that year; or
    2. One hundred percent (100%) of the tax shown on the return of the individual for the preceding taxable year, if the preceding taxable year was a taxable year of 12 months and the individual filed a return for that year.
  5. In the case of any required installment, if the individual establishes that the annualized income installment is less than the amount determined under subsection (d), the amount of the required installment shall be the annualized income installment, and any reduction in a required installment resulting from the application of this subsection shall be recaptured by increasing the amount of the next required installment determined under subsection (d) by the amount of the reduction and by increasing subsequent required installments to the extent that the reduction has not previously been recaptured.In the case of any required installment, the annualized income installment is the excess, if any, of (i) an amount equal to the applicable percentage of the tax for the taxable year computed by placing on an annualized basis the taxable income for months in the taxable year ending before the due date for the installment, over (ii) the aggregate amount of any prior required installments for the taxable year. The taxable income shall be placed on an annualized basis under rules prescribed by the Secretary. The applicable percentages for the required installments are as follows:
    1. First installment — twenty-two and one-half percent (22.5%);
    2. Second installment — forty-five percent (45%);
    3. Third installment — sixty-seven and one-half percent (67.5%); and
    4. Fourth installment — ninety percent (90%).
  6. No interest shall be imposed under subsection (a) if the tax shown on the return for the taxable year reduced by the tax withheld under this Article is less than the amount set in section 6654(e) of the Code or if the individual did not have any liability for tax under Part 2 of Article 4 for the preceding taxable year.
  7. For purposes of this section, the term “tax” means the tax imposed by Part 2 of Article 4 minus the credits against the tax allowed by this Chapter other than the credit allowed by this Article. The amount of the credit allowed under this Article for withheld income tax for the taxable year is considered a payment of estimated tax, and an equal part of that amount is considered to have been paid on each due date of the taxable year, unless the taxpayer establishes the dates on which all amounts were actually withheld, in which case the amounts so withheld are considered payments of estimated tax on the dates on which the amounts were actually withheld.
  8. If, on or before January 31 of the following taxable year, the taxpayer files a return for the taxable year and pays in full the amount computed on the return as payable, no interest shall be imposed under subsection (a) with respect to any underpayment of the fourth required installment for the taxable year.
  9. Notwithstanding subsections (c), (d), (e), and (h) of this section, an individual who is a farmer or fisherman for a taxable year is subject to the provisions of this subsection.
    1. One installment. —  The individual is required to make only one installment payment of tax for that taxable year. This installment is due on or before January 15 of the following taxable year. The amount of the installment payment must be the lesser of:
      1. Sixty-six and two-thirds percent (66 2/3%) of the tax shown on the return for the taxable year, or, if no return is filed, sixty-six and two-thirds percent (66 2/3%) of the tax for that year; or
      2. One hundred percent (100%) of the tax shown on the return of the individual for the preceding taxable year, if the preceding taxable year was a taxable year of 12 months and the individual filed a return for that year.
    2. Exception. —  If, on or before March 1 of the following taxable year, the taxpayer files a return for the taxable year and pays in full the amount computed on the return as payable, no interest is imposed under subsection (a) of this section with respect to any underpayment of the required installment for the taxable year.
    3. Eligibility. —  An individual is a farmer or fisherman for any taxable year if the individual’s gross income from farming or fishing, including oyster farming, for the taxable year is at least sixty-six and two-thirds percent (66 2/3%) of the total gross income from all sources for the taxable year, or the individual’s gross income from farming or fishing, including oyster farming, shown on the return of the individual for the preceding taxable year is at least sixty-six and two-thirds percent (66 2/3%) of the total gross income from all sources shown on the return.
  10. In applying this section to a taxable year beginning on any date other than January 1, there shall be substituted, for the months specified in this section, the months that correspond thereto. This section shall be applied to taxable years of less than 12 months in accordance with rules prescribed by the Secretary.
  11. This section shall not apply to any estate or trust.

History. 1959, c. 1259, s. 1; 1963, c. 785, ss. 3, 4; 1973, c. 476, s. 193; c. 1287, s. 7; 1977, c. 657, s. 5; c. 1114, s. 8; 1985, c. 443, s. 2; 1989, c. 692, s. 7.1; 1991 (Reg. Sess., 1992), c. 950, s. 1; 1997-109, s. 2; 1998-98, s. 71; 1998-212, s. 29A.14(h); 2000-126, s. 4; 2005-276, s. 6.37(l); 2007-491, s. 44(1)a.

Editor’s Note.

Session Laws 2005-276, s. 6.37(w), provides: “The Office of State Budget and Management shall develop a methodology for computing the actual costs of collection of civil penalties by State departments and agencies. This methodology shall apply to all State departments and agencies, effective July 1, 2006.”

Session Laws 2005-276, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2005’.”

Session Laws 2005-276, s. 46.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2005-2007 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2005-2007 fiscal biennium.”

Session Laws 2005-276, s. 46.5 is a severability clause.

Session Laws 2015-6, s. 2.9(a), (b), provides: “Notwithstanding G.S. 105-163.15 , the Secretary of Revenue may not impose interest with respect to an underpayment of income tax to the extent the underpayment was created or increased by the changes made in Section 2.2 of S.L. 2014-3 [which amended the deduction amounts in subsection (a)]. Notwithstanding G.S. 105-163.8 , a withholding agent is not liable for the amount of tax the agent fails to withhold to the extent the amount of tax not withheld was created or increased by the changes made in Section 2.2 of S.L. 2014-3.

“(b) This section is effective when it becomes law and applies to taxable years beginning on or after January 1, 2014, and before January 1, 2015, and to payroll periods beginning on or after January 1, 2014, and before January 1, 2015.”

Session Laws 2020-3, s. 1.1(a)-(d), provides: “(a) Interest Waiver. — As a result of the COVID-19 outbreak, the Secretary of Revenue has extended the franchise, corporate income, and individual income tax payment deadline from April 15, 2020, to July 15, 2020, and pursuant to G.S. 105-249.2 , the Secretary will not assess a penalty for failure to file a return or pay a tax due as long as the return is filed and the tax due is paid by July 15, 2020. Notwithstanding G.S. 105-241.21(b), the Secretary of Revenue shall also waive the accrual of interest from April 15, 2020, through July 15, 2020, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, 2020, through July 15, 2020. The relief from accrual of interest from April 15, 2020, through July 15, 2020, also includes interest imposed pursuant to G.S. 105-163.15 and G.S. 105-163.41 for payments due on or before July 15, 2020.

“(b) Refund Request. — For franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, 2020, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, 2020, and before July 15, 2020.

“(c) Time-Sensitive Actions. — Certain actions required to be taken by a taxpayer on or after April 1, 2020, and before July 15, 2020, will be considered timely if the request or petition is filed on or before July 15, 2020. This subsection applies to requests for Departmental review under G.S. 105-241.11 , petitions for a contested case hearing at the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes and G.S. 105-241.15 , and petitions for judicial review under Article 4 of Chapter 150B of the General Statutes and G.S. 105-241.16 .

“(d) This section is effective when it becomes law.”

Session Laws 2020-3, s. 5, is a severability clause.

Session Laws 2022-5, s. 1, provides: “Notwithstanding G.S. 105-163.15(i)(2), interest shall not be imposed under G.S. 105-163.15(a) with respect to any underpayment of the required installment for the tax year 2021 if, on or before April 15, 2022, a taxpayer who qualifies as an eligible farmer or fisherman under G.S. 105-163.15(i)(3) files a return for the tax year 2021 and pays in full the amount computed on the return as payable.”

Effect of Amendments.

Session Laws 2005-276, s. 6.37(l), effective July 1, 2005, in subsection (a), substituted “interest” for “a penalty”; in subsection (f), substituted “interest” for “addition to the tax”; and in subsection (h) and subdivision (i)(2), substituted “interest” for “addition to tax.”

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 subsection (a). For applicability, see Editor’s note.

CASE NOTES

Allocation of Penalty Monies Collected. —

Monetary payments for a taxpayer’s noncompliance with a mandate of Chapter 105 are penalties and, therefore, subject to N.C. Const., Art. IX, § 7; thus, monies collected by the North Carolina Department of Revenue for late filings, underpayments, and for failing to comply with statutory or regulatory tax provisions are payable to public schools. N.C. Sch. Bds. Ass'n v. Moore, 359 N.C. 474 , 614 S.E.2d 504, 2005 N.C. LEXIS 694 (2005).

§ 105-163.16. Overpayment refunded.

If the amount of wages or compensation withheld at the source under this Article exceeds the tax imposed by Article 4 of this Chapter against which the withheld tax is credited under G.S. 105-163.10 , the excess is considered an overpayment by the employee or contractor. If the amount of estimated tax paid under G.S. 105-163.15 exceeds the taxes imposed by Article 4 of this Chapter against which the estimated tax is credited under the provisions of this Article, the excess is considered an overpayment by the taxpayer. An overpayment shall be refunded as provided in Article 9 of this Chapter.

History. 1959, c. 1259, s. 1; 1967, c. 702, s. 2; 1973, c. 476, s. 193; c. 903, s. 3; 1975, c. 74, s. 2; 1979, c. 801, s. 71; 1981 (Reg. Sess., 1982), c. 1223, s. 1; 1983, c. 663, s. 2; c. 865, s. 1; 1985, c. 443, s. 3; 1987 (Reg. Sess., 1988), c. 1063, s. 2; 1989, c. 728, s. 1.45; 1989 (Reg. Sess., 1990), c. 814, s. 23; 1991, c. 45, s. 22; 1993, c. 315, s. 2; 1997-109, s. 2.

§§ 105-163.17, 105-163.18. [Repealed]

Repealed by Session Laws 1997, c. 109, s. 2, effective January 1, 1998.

§§ 105-163.19 through 105-163.21. [Repealed]

Repealed by Session Laws 1967, c. 1110, s. 4.

§ 105-163.22. Reciprocity.

The Secretary may, with the approval of the Attorney General, enter into agreements with the taxing authorities of states having income tax withholding statutes that govern the amounts to be withheld from the wages and salaries of residents of the other state or states under the provisions of this Article when the other state or states grant similar treatment to the residents of this State. The agreements may provide for recognition of the anticipated tax credits allowed under the provisions of G.S. 105-153.9 in determining the amounts to be withheld.

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1997-109, s. 2; 2014-3, s. 14.28.

Effect of Amendments.

Session Laws 2014-3, s. 14.28, effective May 29, 2014, in the first sentence, substituted “that govern” for “with such agreements to govern,” in the second sentence, substituted “G.S. 105-153.9” for “G.S. 105-151,” and made minor stylistic changes.

§ 105-163.23. Withholding from federal employees.

The Secretary is designated as the proper official to make request for and enter into agreements with the Secretary of the Treasury of the United States to provide for the compliance with this Article by the head of each department or agency of the United States in withholding of State income taxes from wages of federal employees and paying the same to this State. The Secretary is authorized, empowered, and directed to request and enter into these agreements.

History. 1959, c. 1259, s. 1; 1973, c. 476, s. 193; 1997-109, s. 2.

§ 105-163.24. Construction of Article.

This Article shall be liberally construed in pari materia with Article 4 of this Chapter to the end that taxes levied by Article 4 shall be collected with respect to wages and compensation by withholding agents’ withholding of the appropriate amounts and by individuals’ payments in installments of income tax with respect to income not subject to withholding.

History. 1959, c. 1259, s. 1; 1997-109, s. 2.

Article 4B. Filing of Declarations of Estimated Income Tax and Installment Payments of Estimated Income Tax by Corporations. [Repealed]

§§ 105-163.25 through 105-163.37.

Recodified as G.S. 105-163.38 through 105-163.44.

Editor’s Note.

This Article was rewritten by Session Laws 1983, c. 713, s. 86, and has been recodified as Article 4C of Chapter 105.

Article 4C. Filing of Declarations of Estimated Income Tax and Installment Payments of Estimated Income Tax by Corporations.

§ 105-163.38. Definitions.

The following definitions apply in this Article, unless the context requires otherwise:

  1. Code. — Defined in G.S. 105-228.90 . (1a) Corporation. — Defined in section 7701 of the Code.
  2. Estimated tax. — The amount of income tax the corporation estimates as the amount imposed by Article 4 for the taxable year.
  3. Fiscal year. — An accounting period of 12 months ending on the last day of any month other than December.
  4. Secretary. — The Secretary of Revenue.
  5. Taxable year. — The calendar year or fiscal year used as a basis to determine net income under Article 4. If no fiscal year has been established, “fiscal year” means the calendar year. In the case of a return made for a fractional part of the year under Article 4, or under rules prescribed by the Secretary, “taxable year” means the period for which the return is made.
  6. (Effective for taxable years beginning on or after January 1, 2022)   Taxed pass-through entity. — Defined in G.S. 105-153.3 .

History. 1959, c. 1259, s. 1A; 1973, c. 476, s. 193; 1983, c. 713, s. 86; 1989 (Reg. Sess., 1990), c. 984, s. 15; 1991 (Reg. Sess., 1992), c. 922, s. 8; 1993, c. 12, s. 10; 2021-180, s. 42.5(l).

Editor’s Note.

This Article is Article 4B, as rewritten by Session Laws 1983, c. 713, s. 86, and recodified. Where appropriate, the historical citations to the sections in the former Article have been added to corresponding sections in the Article as rewritten and recodified.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.5( l ), effective for taxable years beginning on or after January 1, 2022, added subdivision (6).

§ 105-163.39. Declarations of estimated income tax required.

  1. Declaration Required. —  Every corporation subject to taxation under Article 4 shall submit a declaration of estimated tax to the Secretary. This declaration is due at the time established in G.S. 105-163.40 , and payment of the estimated tax is due at the time and in the manner prescribed in that section.
  2. Content. —  In the declaration of estimated tax, the corporation shall state its estimated total net income from all sources for the taxable year, the proportion of its total net income allocable to this State, its estimated tax, and any other information required by the Secretary.
  3. Amendments to Declaration. —  Under rules prescribed by the Secretary, a corporation may amend a declaration of estimated tax.
  4. (Effective for taxable years beginning on or after January 1, 2022) Taxed Pass-Through Entity. —   This Article applies to every taxed pass-through entity in the same manner as a corporation subject to tax under Article 4 of this Chapter, except that G.S. 105-163.41(d)(5) shall not apply with respect to a taxable year of a taxed pass-through entity if it was not a taxed pass-through entity during its preceding taxable year.

History. 1959, c. 1259, s. 1A; 1973, c. 476, s. 193; 1983, c. 713, s. 86; 2021-180, s. 42.5(m).

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.5(m), effective for taxable years beginning on or after January 1, 2022, added subsection (d).

§ 105-163.40. Time for submitting declaration; time and method for paying estimated tax; form of payment.

  1. Due Dates of Declarations. —  Declarations of estimated tax are due at the same time as the corporation’s first installment payment. Installment payments are due as follows:
    1. If, before the 1st day of the 4th month of the taxable year, the corporation’s estimated tax equals or exceeds five hundred dollars ($500.00), the corporation shall pay the estimated tax in four equal installments on or before the 15th day of the 4th, 6th, 9th and 12th months of the taxable year.
    2. If, after the last day of the 3rd month and before the 1st day of the 6th month of the taxable year, the corporation’s estimated tax equals or exceeds five hundred dollars ($500.00), the corporation shall pay the estimated tax in three equal installments on or before the 15th day of the 6th, 9th and 12th months of the taxable year.
    3. If, after the last day of the 5th month and before the 1st day of the 9th month of the taxable year, the corporation’s estimated tax equals or exceeds five hundred dollars ($500.00), the corporation shall pay the estimated tax in two equal installments on or before the 15th day of the 9th and 12th months.
    4. If, after the last day of the 8th month and before the 1st day of the 12th month of the taxable year, the corporation’s estimated tax equals or exceeds five hundred dollars ($500.00), the corporation shall pay the estimated tax on or before the 15th day of the 12th month of the taxable year.
  2. Payment of Estimated Tax When Declaration Amended. —  When a corporation submits an amended declaration after making one or more installment payments on its estimated tax, the amount of each remaining installment shall be the amount that would have been payable if the estimate in the amended declaration was the original estimate, increased or decreased as appropriate by the amount computed by dividing:
    1. The absolute value of the difference between:
      1. The amount paid and
      2. The amount that would have been paid if the estimate in the amended declaration was the original estimate by
    2. The number of remaining installments.
  3. Short Taxable Year. —  Payment of estimated tax for taxable years of less than 12 months shall be made in accordance with rules promulgated by the Secretary.
  4. Form of Payment. —  A corporation that is required under the Code to pay its federal-estimated corporate income tax by electronic funds transfer must pay its State-estimated tax by electronic funds transfer.

History. 1959, c. 1259, s. 1A; 1973, c. 476, s. 193; 1983, c. 713, s. 86; 1989 (Reg. Sess., 1990), c. 984, s. 16; 1999-389, s. 7.

§ 105-163.41. Underpayment.

  1. Except as provided in subsection (d), if the amount of estimated tax paid by a corporation during the taxable year is less than the amount of tax imposed upon the corporation under Article 4 of this Chapter for the taxable year, the corporation must be assessed interest in an amount determined by multiplying the amount of the underpayment as determined under subsection (b), for the period of the underpayment as determined under subsection (c), by the percentage established as the rate of interest on assessments under G.S. 105-241.21 that is in effect for the period of the underpayment. For the purpose of this section, the amount of tax imposed under Article 4 of this Chapter is the net amount after subtracting the credits against the tax allowed by this Chapter other than the credit allowed by this Article.
  2. The amount of the underpayment shall be the difference between:
    1. The amount of the installment the corporation would have been required to pay if the corporation’s estimated tax equalled ninety percent (90%) of the tax imposed under Article 4 for the taxable year, assuming the same schedule of installments, or ninety percent (90%) of the tax imposed for the taxable year if the corporation made no installment payments; and
    2. The amount, if any, of the corresponding installment timely paid by the corporation.
  3. The period of the underpayment runs from the date the installment was required to be paid to the earlier of:
    1. The 15th day of the fourth month following the close of the taxable year, or
    2. With respect to any portion of the underpayment, the date on which the portion is paid. An installment payment of estimated tax is considered a payment of any previous underpayment only to the extent the payment exceeds the amount of the installment determined under subdivision (1) of subsection (b) for that installment date.
  4. Except as provided in subdivision (5) of this subsection, the interest for underpayment imposed by this section shall not be imposed if the total amount of all payments of estimated tax made on or before the last date prescribed for the payment of the installments equals or exceeds the amount that would have been required to be paid on or before that date if the estimated tax was equal to the least of:
    1. The tax shown on the return of the corporation for the preceding taxable year, if the corporation filed a return for the preceding taxable year and the preceding year was a taxable year of 12 months;
    2. An amount equal to the tax computed at the rates applicable to the taxable year but otherwise on the basis of the facts shown on the return of the corporation for, and the law applicable to, the preceding taxable year; or
    3. An amount equal to ninety percent (90%) of the tax for the taxable year computed by placing on an annualized basis the taxable income:
      1. For the first three months of the taxable year, in the case of the installment required to be paid in the 4th month;
      2. For the first three months or for the first five months of the taxable year, in the case of the installment required to be paid in the 6th month;
      3. For the first six months or for the first eight months of the taxable year, in the case of the installment required to be paid in the 9th month; and
      4. For the first nine months or for the first 11 months of the taxable year, in the case of the installment required to be paid in the 12th month of the taxable year.
    4. For purposes of this subdivision, the taxable income shall be placed on an annualized basis by multiplying by 12 the taxable income referred to in the preceding sentence, and dividing the resulting amount by the number of months in the taxable year (3, 5, 6, 8, 9, or 11 as the case may be) referred to in that sentence.
    5. In the case of a large corporation, as defined in section 6655 of the Code, subdivisions (1) and (2) of this subsection shall not apply.

History. 1959, c. 1259, s. 1A; 1973, c. 476, s. 193; 1977, c. 1114, s. 9; 1983, c. 713, s. 86; 1987 (Reg. Sess., 1988), c. 994, ss. 2, 3; 2001-414, s. 13; 2005-276, s. 6.37(m); 2007-491, s. 44(1)a; 2013-414, s. 3.

Editor’s Note.

Session Laws 2005-276, s. 6.37(w), provides: “The Office of State Budget and Management shall develop a methodology for computing the actual costs of collection of civil penalties by State departments and agencies. This methodology shall apply to all State departments and agencies, effective July 1, 2006.”

Session Laws 2005-276, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2005’.”

Session Laws 2005-276, s. 46.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2005-2007 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2005-2007 fiscal biennium.”

Session Laws 2005-276, s. 46.5 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 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 2009-451, s. 27A.1(c), provides in part: “Notwithstanding the provisions of G.S. 105-163.15 and G.S. 105-163.41 , no addition to tax may be made under those statutes for a taxable year beginning on or after January 1, 2009, and before January 1, 2011, with respect to any underpayment of income tax to the extent the underpayment was created or increased by this section.”

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 2020-3, s. 1.1(a)-(d), provides: “(a) Interest Waiver. — As a result of the COVID-19 outbreak, the Secretary of Revenue has extended the franchise, corporate income, and individual income tax payment deadline from April 15, 2020, to July 15, 2020, and pursuant to G.S. 105-249.2 , the Secretary will not assess a penalty for failure to file a return or pay a tax due as long as the return is filed and the tax due is paid by July 15, 2020. Notwithstanding G.S. 105-241.21(b), the Secretary of Revenue shall also waive the accrual of interest from April 15, 2020, through July 15, 2020, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, 2020, through July 15, 2020. The relief from accrual of interest from April 15, 2020, through July 15, 2020, also includes interest imposed pursuant to G.S. 105-163.15 and G.S. 105-163.41 for payments due on or before July 15, 2020.

“(b) Refund Request. — For franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, 2020, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, 2020, and before July 15, 2020.

“(c) Time-Sensitive Actions. — Certain actions required to be taken by a taxpayer on or after April 1, 2020, and before July 15, 2020, will be considered timely if the request or petition is filed on or before July 15, 2020. This subsection applies to requests for Departmental review under G.S. 105-241.11 , petitions for a contested case hearing at the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes and G.S. 105-241.15 , and petitions for judicial review under Article 4 of Chapter 150B of the General Statutes and G.S. 105-241.16 .

“(d) This section is effective when it becomes law.”

Session Laws 2020-3, s. 5, is a severability clause.

Effect of Amendments.

Session Laws 2005-276, s. 6.37(m), effective July 1, 2005, deleted “Penalty for” from the section heading; in subsection (a), substituted “interest” for “an additional tax as a penalty”; and in subsection (d), in the introductory paragraph, substituted “interest” for “penalty” and added “imposed by this section.”

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 subsection (a). For applicability, see Editor’s note.

Session Laws 2013-414, s. 3, effective August 23, 2013, in subsection (c), substituted “runs from” for “shall run from” in the introductory language; substituted “fourth month” for “3rd month” in subdivision (c)(1); and substituted “is considered” for “shall be considered” in the second sentence of subdivision (c)(2).

CASE NOTES

Allocation of Penalty Monies Collected. —

Monetary payments for a taxpayer’s noncompliance with a mandate of Chapter 105 are penalties and, therefore, subject to N.C. Const., Art. IX, § 7; thus, monies collected by the North Carolina Department of Revenue for late filings, underpayments, and for failing to comply with statutory or regulatory tax provisions are payable to public schools. N.C. Sch. Bds. Ass'n v. Moore, 359 N.C. 474 , 614 S.E.2d 504, 2005 N.C. LEXIS 694 (2005).

§ 105-163.42. [Repealed]

Repealed by Session Laws 1985 (Regular Session, 1986), c. 820.

§ 105-163.43. Overpayment refunded.

If the amount of estimated tax paid under this Article exceeds the taxes against which the estimated tax is credited pursuant to this Article, the excess is considered an overpayment by the taxpayer and shall be refunded as provided in Article 9 of this Chapter.

History. 1959, c. 1259, s. 1A; 1967, c. 1110, s. 5; 1973, c. 476, s. 193; 1983, c. 713, s. 86; 1993, c. 315, s. 1.

§ 105-163.44. [Repealed]

Repealed by Session Laws 2000-140, s. 66, effective July 21, 2000.

Article 5. Sales and Use Tax.

§ 105-164. [Repealed]

Repealed by Session Laws 1957, c. 1340, s. 5.

Part 1. Title, Purpose and Definitions.

§ 105-164.1. Short title.

This Article shall be known as the “North Carolina Sales and Use Tax Act.”

History. 1957, c. 1340, s. 5; 1998-98, s. 47.

Editor’s Note.

Session Laws 1998-98, s. 47, effective August 14, 1998, redesignated Division I as Part 1.

Session Laws 2012-74, s. 7, provides: “For purchases made on or after July 1, 2012, but before July 1, 2013, a company located at a ports facility for waterborne commerce that purchases specialized equipment to be used at the facility to unload or process bulk cargo to make it suitable for delivery to and use by manufacturing facilities is allowed a refund of all local sales and use taxes paid and a portion of State sales and use taxes paid on the purchases as provided in this section. The portion of the State sales and use taxes that may be refunded is equal to the excess of the State sales and use taxes paid over the amount that would have been due had the taxpayer been subject to tax on the eligible property as if it were mill machinery under Article 5F of Chapter 105 of the General Statutes. A request for a refund under this section must be in writing and must include any information and documentation required by the Secretary. A request for a refund under this section must be made on or after July 1, 2013, and is due before January 1, 2014. Refunds applied for after the due date are barred. Taxes for which a refund is allowed under this section are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .”

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 2015-6, 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.”

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.

Session Laws 2019-169, s. 5.3, provides: “The Revenue Laws Study Committee is directed to study issues associated with the underreporting of sales and use tax by franchisees, including whether franchisors should be required to annually report certain information about their franchisees to the Department of Revenue, such as their legal business name, location, and gross sales for each location. The Committee shall report its findings and any legislative recommendations on or before the convening of the 2020 Regular Session of the 2019-2020 General Assembly.”

Legal Periodicals.

For case law survey on sales tax, see 41 N.C.L. Rev. 508 (1963).

For article, “Constitutional Threats in the E-Commerce Jungle: First Amendment and Dormant Commerce Clause Limits on Amazon Laws and Use Tax Reporting Statutes,” see 89 N.C.L. Rev. 2011 (2011).

CASE NOTES

Constitutionality. —

The sales tax cannot constitutionally be imposed upon interstate sales since it would then be a tax upon the privilege of doing interstate business, and would constitute a burden upon interstate commerce in violation of the commerce clause of the United States Constitution. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The North Carolina Sales and Use Tax Act does not violate the equal protection clause of U.S. Const., Amend. XIV, and the principle of equitable taxation found in N.C. Const., Art. V, § 2. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

A state has the power to enact statutes which impose taxes on all businesses, including the press, in order to generate revenue so long as those statutes operate evenhandedly upon all similarly situated. The Sales and Use Tax Act imposes a uniform tax on all. Absent a discriminatory tax burden an appellant cannot be heard to complain that it, like all other businesses in the State, must bear its portion of the State’s revenue needs. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The purpose of the Sales and Use Tax Act is to impose a use tax, credited with any sales tax previously paid, upon the user of any tangible personal property in this State. Oscar Miller Contractor, Inc. v. North Carolina Tax Rev. Bd., 61 N.C. App. 725, 301 S.E.2d 511, 1983 N.C. App. LEXIS 2733 (1983).

The purpose of North Carolina’s sales and use tax is two-fold. The primary purpose is, of course, to generate revenue for the State. The sales tax is, in effect, a tax imposed upon the retail merchant as a privilege tax for the right to engage in that business. The tax is, however, designed to be passed on to the consumer. The second purpose of the sales and use tax scheme is to equalize the tax burden on all State residents. This is achieved through imposition of the use tax in certain situations where the sales tax is not applicable. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The chief function of the Sales and Use Tax Act is to prevent the evasion of a sales tax by persons purchasing tangible personal property outside of North Carolina for storage, use or consumption within the State. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Imposing a tax upon the retail sale of goods within the State without imposing a complementing tax on the in-state use of goods purchased outside the State might encourage North Carolina residents to shop in other states to avoid paying North Carolina sales tax. Therefore, the Sales and Use Tax Act imposes a use tax on items purchased outside the State and thus not subject to sales tax, which are brought into the State for storage, use or consumption in this State. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Power of Legislature. —

The power of the legislature to levy taxes of the character provided in this Article has long been settled. Duke v. State, 247 N.C. 236 , 100 S.E.2d 506, 1957 N.C. LEXIS 674 (1957).

The sales tax and the use tax may often bring about the same result but they are different in conception. They are assessments upon different transactions and are bottomed on distinguishable taxable events. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Distinction Between Sales Tax and Use Tax. —

A sales tax is assessed on the purchase price of property and is imposed at the time of sale; a use tax is assessed on the storage, use or consumption of property and takes effect only after such use begins. Colonial Pipeline Co. v. Clayton, 275 N.C. 215 , 166 S.E.2d 671, 1969 N.C. LEXIS 376 (1969).

Unlike a sales tax imposed on interstate sales, the use tax does not impermissibly burden interstate commerce since it is a tax imposed on the enjoyment of goods after the sale has already spent its interstate character. It is designed to complement the sales tax and to reach transactions which cannot constitutionally be subject to a sales tax. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The use tax removes, insofar as possible, the discrimination against local merchants resulting from the imposition of a sales tax and equalizes the burden of the tax on property sold locally and that purchased without the State. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Sales Tax Is a Privilege or License Tax. —

The legislature intended that the sales tax be primarily a privilege or license tax on retailers. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

The sales tax statute levies a tax upon the sale of tangible personal property in this State by a “retail” merchant as a privilege tax for engaging or continuing in the business of a retail merchant. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

Imposed on All Retailers, as a Class. —

The North Carolina law imposes the sales tax on all retailers, as a class, and applies it alike in its exactions and exemptions to all persons belonging to the prescribed class. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

Perfect equality in the collection of the tax by retailers from consumers is, as a practical matter, impossible as between almost any two or more retailers by reason of the differences in types of merchandise sold and selling methods. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

If property is used to produce something which will add to the taxpayer’s profit, but the thing produced will not be sold subject to the sales tax, the sale of the property is not a sale to a manufacturer within the meaning of the Sales and Use Tax Act. Such a sale is subject to the Use Tax at the rate of 4 percent (3 percent for the State and 1 percent for the county). Oscar Miller Contractor, Inc. v. North Carolina Tax Rev. Bd., 61 N.C. App. 725, 301 S.E.2d 511, 1983 N.C. App. LEXIS 2733 (1983).

Construction of Former Provisions of Article. —

As to the incidence of the sales tax where it is imposed upon a general class, as for instance retail merchants, the law is construed more strictly against the agency imposing the tax, and in favor of the taxpayer. Henderson v. Gill, 229 N.C. 313 , 49 S.E.2d 754, 1948 N.C. LEXIS 320 (1948).

For other decisions under former laws, see Powell v. Maxwell, 210 N.C. 211 , 186 S.E. 326, 1936 N.C. LEXIS 61 (1936); McCanless Motor Co. v. Maxwell, 210 N.C. 725 , 188 S.E. 389, 1936 N.C. LEXIS 211 (1936); Leonard v. Maxwell, 216 N.C. 89 , 3 S.E.2d 316, 1939 N.C. LEXIS 107 (1939).

§ 105-164.2. Purpose.

The taxes herein imposed shall be in addition to all other license, privilege or excise taxes and the taxes levied by this Article are to provide revenue for the support of the public school system of this State and for other necessary uses and purposes of the government and State of North Carolina.

History. 1957, c. 1340, s. 5.

CASE NOTES

The purpose of North Carolina’s sales and use tax is two-fold. The primary purpose is, of course, to generate revenue for the State. The sales tax is, in effect, a tax imposed upon the retail merchant as a privilege tax for the right to engage in that business. The tax is, however, designed to be passed on to the consumer. The second purpose of the sales and use tax scheme is to equalize the tax burden on all State residents. This is achieved through imposition of the use tax in certain situations where the sales tax is not applicable. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The chief function of the Sales and Use Tax Act is to prevent the evasion of a sales tax by persons purchasing tangible personal property outside of North Carolina for storage, use or consumption within the State. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The use tax removes, insofar as possible, the discrimination against local merchants resulting from the imposition of a sales tax and equalizes the burden of the tax on property sold locally and that purchased without the State. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

§ 105-164.3. Definitions.

The following definitions apply in this Article:

  1. Accommodation. — A hotel room, a motel room, a residence, a cottage, or a similar lodging facility for occupancy by an individual. (3) Accommodation facilitator. — A person that contracts, either directly or indirectly, with a provider of an accommodation to perform, either directly or indirectly, one or more of the activities listed in this subdivision. The term includes a real estate broker as defined in G.S. 93A-2 . The activities are:
    1. Market the accommodation and accept payment or collect credit card or other payment information for the rental of the accommodation.
    2. List the accommodation for rental on a forum, platform, or other application for a fee or other consideration.

      (5) Additional digital goods. — All of the following if transferred electronically:

      a. A magazine, a newspaper, a newsletter, a report, or another publication.

      b. A photograph.

    3. A greeting card.

      (7) Admission charge. — Gross receipts derived for the right to attend an entertainment activity. The term includes a charge for a single ticket, a multi-occasion ticket, a seasonal pass, and an annual pass; a membership fee that provides for admission; a cover charge; a surcharge; a convenience fee, a processing fee, a facility charge, a facilitation fee, or similar charge; or any other charges included in gross receipts derived from admission.

      (9) Admission facilitator. — A person who accepts payment of an admission charge to an entertainment activity and who is not the operator of the venue where the entertainment activity occurs.

      (11) Advertising and promotional direct mail. — Printed material that meets the definition of “direct mail” and the primary purpose of which is to attract public attention to an item, person, business, or organization, or to attempt to sell, popularize, or secure financial support for an item, person, business, or organization.

      (13) Affiliate. — Defined in G.S. 105-130.2 .

      (15) Amenity. — A feature that increases the value or attractiveness of an entertainment activity that allows a person access to items that are not subject to tax under this Article and that are not available with the purchase of admission to the same event without the feature. The term includes parking privileges, special entrances, access to areas other than general admission, mascot visits, and merchandise discounts. The term does not include any charge for food, prepared food, and alcoholic beverages subject to tax under this Article.

      (17) Analytical services. — Testing laboratories that are included in national industry 541380 of NAICS or medical laboratories that are included in national industry 621511 of NAICS.

      (19) Ancillary service. — A service associated with or incidental to the provision of a telecommunications service. The term includes detailed communications billing, directory assistance, vertical service, and voice mail service. A vertical service is a service, such as call forwarding, caller ID, three-way calling, and conference bridging, that allows a customer to identify a caller or manage multiple calls and call connections.

      (21) Aviation gasoline. — Defined in G.S. 105-449.60 .

      (23) Bundled transaction. — A retail sale of two or more distinct and identifiable items, at least one of which is taxable and one of which is nontaxable, for one nonitemized price. The term does not apply to real property or services to real property. Items are not sold for one nonitemized price if an invoice or another sales document made available to the purchaser separately identifies the price of each item. A bundled transaction does not include the retail sale of any of the following:

      a. An item and any packaging that accompanies the item and is exempt under G.S. 105-164.13(23).

      b. A sale of two or more items whose combined price varies, or is negotiable, depending on the items the purchaser selects.

      c. A sale of an item accompanied by a transfer of another item with no additional consideration.

    4. An item and the delivery or installation of the item.
    5. An item and any service necessary to complete the sale.

      (25) Business. — An activity a person engages in or causes another to engage in with the object of gain, profit, benefit, or advantage, either direct or indirect. The term does not include an occasional and isolated sale or transaction by a person who does not claim to be engaged in business.

      (27) Cable service. — The one-way transmission to subscribers of video programming or other programming service and any subscriber interaction required to select or use the service.

      (29) Candy. — A preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces that do not require refrigeration. The term does not include any preparation that contains flour.

      (31) Capital improvement. — One or more of the following:

      a. New construction, reconstruction, or remodeling.

      b. Performance of work that requires the issuance of a permit under the State Building Code, other than repair or replacement of electrical components, gas logs, water heater, and similar individual items that are not part of new construction, reconstruction, or remodeling.

      c. Installation of a transmission, distribution, or other network asset on land owned by a service provider or on a right-of-way or easement in favor of a service provider, notwithstanding that any separately stated charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction are included in the gross receipts derived from services subject to the combined general rate under G.S. 105-164.4 . For purposes of this sub-subdivision, the term “service provider” means a person, including a governmental entity, who provides any of the services listed in this sub-subdivision, and the term “governmental entity” means a State agency, the federal government, or a governmental entity listed in G.S. 105-164.14(c). The services are:

      1. Telecommunications service or ancillary service.
      2. Video programming.
      3. Electricity or piped natural gas.
      4. Water or sewer service.

        d. Installation of equipment or a fixture that is attached to real property and that meets one or more of the following conditions:

        1. Is capitalized and depreciated under Generally Accepted Accounting Principles or International Financial Reporting Standards.

        2. Is depreciated under the Code.

        3. Is expensed under Section 179 of the Code.

        e. Painting or wallpapering of real property, except where painting or wallpapering is incidental to the repair, maintenance, and installation services.

    6. Replacement or installation of a septic tank system, siding, roof, plumbing, electrical, commercial refrigeration, irrigation, sprinkler, or other similar system. The term does not include the repair, replacement, or installation of electrical or plumbing components, water heaters, gutters, and similar individual items that are not part of new construction, reconstruction, or remodeling.
    7. Replacement or installation of a heating or air conditioning unit or a heating, ventilation, or air conditioning system. The term does not include the repair, replacement, or installation of gas logs, water heaters, pool heaters, and similar individual items that are not part of new construction, reconstruction, or remodeling.
    8. Replacement or installation of roads, driveways, parking lots, patios, decks, and sidewalks.
    9. Services performed to resolve an issue that was part of a real property contract if the services are performed within six months of completion of the real property contract or, for new construction, within 12 months of the new structure being occupied for the first time.
    10. Landscaping.
    11. An addition or alteration to real property that is permanently affixed or installed to real property and is not an activity listed in subdivision (225) of this section as repair, maintenance, and installation services.

      (33) Certain digital property. — Specified digital products and additional digital goods. The term does not include an information service or an educational service.

      (35) Clothing. — All human wearing apparel suitable for general use.

      (37) Combined general rate. — The State’s general rate of tax set in G.S. 105-164.4(a) plus the sum of the rates of the local sales and use taxes authorized by Subchapter VIII of this Chapter for every county in this State.

      (39) Computer. — An electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions.

      (41) Computer software. — A set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task.

      (43) Consumer. — A person who stores, uses, or otherwise consumes in this State an item purchased or received from a retailer or supplier either within or without this State.

      (45) Custom computer software. — Computer software that is not prewritten computer software. The term includes a user manual or other documentation that accompanies the sale of the software.

      (47) Datacenter. — A facility that provides infrastructure for hosting or data processing services and that has power and cooling systems that are created and maintained to be concurrently maintainable and to include redundant capacity components and multiple distribution paths serving the computer equipment at the facility. Although the facility must have multiple distribution paths serving the computer equipment, a single distribution path may serve the computer equipment at any one time. The following definitions apply in this subdivision:

      a. Concurrently maintainable. — Capable of having any capacity component or distribution element serviced or repaired on a planned basis without interrupting or impeding the performance of the computer equipment.

      b. Multiple distribution paths. — A series of distribution paths configured to ensure that failure on one distribution path does not interrupt or impede other distribution paths.

      c. Redundant capacity components. — Components beyond those required to support the computer equipment.

      (49) Delivery charges. — Charges imposed by the retailer for preparation and delivery of an item to a location designated by the consumer.

      (51) Development tier. — The classification assigned to an area pursuant to G.S. 143B-437.08 .

      (53) Diaper. — An absorbent garment worn by humans who are incapable of, or have difficulty, controlling their bladder or bowel movements.

      (55) Dietary supplement. — A product that is intended to supplement the diet of humans and is required to be labeled as a dietary supplement under federal law, identifiable by the “Supplement Facts” box found on the label.

      (57) Digital audio work. — A work that results from the fixation of a series of musical, spoken, or other sounds, including a ringtone, that is transferred electronically.

      (59) Digital audiovisual work. — A series of related images, that when shown in succession, impart an impression of motion, together with accompanying sounds, if any, and that is transferred electronically.

      (61) Digital book. — A work that is generally recognized in the ordinary and usual sense as a book that is transferred electronically.

      (63) Digital code. — A code that gives a purchaser of the code a right to receive an item by electronic delivery or electronic access. A digital code may be obtained by an electronic means or by a tangible means. A digital code does not include a gift certificate or a gift card.

      (65) Direct mail. — Printed material delivered or distributed by the United States Postal Service or other delivery service to a mass audience or to addresses on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items is not billed directly to the recipients. The term includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. The term does not include multiple items of printed material delivered to a single address.

      (67) Direct-to-home satellite service. — Programming transmitted or broadcast by satellite directly to the subscribers’ premises without the use of ground equipment or distribution equipment, except equipment at the subscribers’ premises or the uplink process to the satellite.

      (69) Drug. — A compound, substance, or preparation or a component of one of these that meets any of the following descriptions and is not food, a dietary supplement, or an alcoholic beverage:

      a. Is recognized in the United States Pharmacopoeia, Homeopathic Pharmacopoeia of the United States, or National Formulary.

      b. Is intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease.

      c. Is intended to affect the structure or function of the body.

      (71) Durable medical equipment. — Equipment that meets all of the conditions of this subdivision. The term includes repair and replacement parts for the equipment. The term does not include mobility enhancing equipment.

      a. Can withstand repeated use.

      b. Primarily and customarily used to serve a medical purpose.

      c. Generally not useful to a person in the absence of an illness or injury.

      d. Not worn in or on the body.

      (73) Durable medical supplies. — Supplies related to use with durable medical equipment that are eligible to be covered under the Medicare or Medicaid program.

      (75) Educational service. — The delivery of instruction or training, whether provided in real time, on demand, or at another set time, by or on behalf of a qualifying educational entity where at least one of the following conditions applies:

      a. The instruction or training is part of the curriculum for an enrolled student.

      b. The instruction or training is encompassed within the institution’s accreditation or prepares an enrolled student for gainful employment in a recognized occupation.

      c. The participant is evaluated by an instructor. “Evaluated by an instructor” does not include being graded by, scored by, or evaluated by a computer program or an interactive, automated method.

      d. The participant is connected to the presenter or instructor via the Internet or other networks, allowing the participant to provide, receive, or discuss information through live interaction, contemporaneous with the presentation.

      (77) Electronic. — Relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

      (79) Eligible Internet datacenter. — A datacenter that satisfies each of the following conditions:

      a. The facility is used primarily or is to be used primarily by a business engaged in software publishing included in industry 511210 of NAICS or an Internet activity included in industry 519130 of NAICS.

      b. The facility is comprised of a structure or series of structures located or to be located on a single parcel of land or on contiguous parcels of land that are commonly owned or owned by affiliation with the operator of that facility.

      c. The facility is located or to be located in a county that was designated, at the time of application for the written determination required under sub-subdivision d. of this subdivision, either an enterprise tier one, two, or three area or a development tier one or two area pursuant to G.S. 105-129.3 or G.S. 143B-437.08 , regardless of any subsequent change in county enterprise or development tier status.

      d. The Secretary of Commerce has made a written determination that at least two hundred fifty million dollars ($250,000,000) in private funds has been or will be invested in real property or eligible business property, or a combination of both, at the facility within five years after the commencement of construction of the facility.

      (81) Eligible railroad intermodal facility. — Defined in G.S. 105-129.95 .

      (83) Engaged in business. — Any of the following:

      a. Maintaining, occupying, or using permanently or temporarily, directly or indirectly, or through a subsidiary or agent, by whatever name called, any office, place of distribution, sales or sample room, warehouse or storage place, or other place of business in this State, or permanently or temporarily, directly or through a subsidiary, having any representative, agent, sales representative, marketplace facilitator subject to the requirements of G.S. 105-164.4 J, or solicitor operating or transacting business by mobile phone application or other applications in this State. The fact that any corporate retailer, agent, or subsidiary engaged in business in this State may not be legally domesticated or qualified to do business in this State is immaterial.

      b. Maintaining in this State, either permanently or temporarily, directly or through a subsidiary, tangible personal property or certain digital property for the purpose of lease or rental.

      c. Making a remote sale, if one of the conditions listed in G.S. 105-164.8(b) is met.

      d. Shipping wine directly to a purchaser in this State as authorized by G.S. 18B-1001.1 .

      e. Making marketplace-facilitated sales subject to the requirements of G.S. 105-164.4J.

      (85) Entertainment activity. — An activity listed in this subdivision:

      a. A live performance or other live event of any kind, the purpose of which is for entertainment.

      b. A movie, motion picture, or film.

      c. A museum, a cultural site, a garden, an exhibit, a show, or a similar attraction.

      d. A guided tour at any of the activities listed in sub-subdivision c. of this subdivision.

      (87) Facilitator. — An accommodation facilitator, an admission facilitator, or a service contract facilitator.

      (89) Food. — Substances that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. The substances may be in liquid, concentrated, solid, frozen, dried, or dehydrated form. The term does not include an alcoholic beverage, as defined in G.S. 105-113.68 , or a tobacco product, as defined in G.S. 105-113.4 .

      (91) Food sold through a vending machine. — Food dispensed from a machine or another mechanical device that accepts payment.

      (93) Freestanding appliance. — A machine commonly thought of as an appliance operated by gas or electric current. Examples include a dishwasher, washing machine, clothes dryer, refrigerator, freezer, microwave, and range, regardless of whether the range is slide-in or drop-in.

      (95) Gross sales. — The sum total of the sales price of all sales of tangible personal property, digital property, and services.

      (97) Hub. — Either of the following:

      a. An interstate air courier’s hub is the interstate air courier’s principal airport within the State for sorting and distributing letters and packages and from which the interstate air courier has, or expects to have upon completion of construction, no less than 150 departures a month under normal operating conditions.

      b. An interstate passenger air carrier’s hub is the airport in this State that meets both of the following conditions:

      1. The air carrier has allocated to the airport under G.S. 105-338 more than sixty percent (60%) of its aircraft value apportioned to this State.
      2. The majority of the air carrier’s passengers boarding at the airport are connecting from other airports rather than originating at that airport.

        (99) In this (the) State. — Within the exterior limits of the State of North Carolina, including all territory within these limits owned by or ceded to the United States of America.

        (101) Incontinence underpad. — An absorbent product, not worn on the body, designed to protect furniture or other tangible personal property from soiling or damage due to human incontinence.

        (103) Information service. — A service that generates, acquires, stores, processes, or retrieves data and information and delivers it electronically to or allows electronic access by a consumer whose primary purpose for using the service is to obtain the processed data or information.

        (105) Interstate air business. — An interstate air courier, an interstate freight air carrier, or an interstate passenger air carrier.

        (107) Interstate air courier. — A person whose primary business is the furnishing of air delivery of individually addressed letters and packages for compensation, in interstate commerce, except by the United States Postal Service.

        (109) Interstate freight air carrier. — A person whose primary business is scheduled freight air transportation, as defined in the North American Industry Classification System adopted by the United States Office of Management and Budget, in interstate commerce.

        (111) Interstate passenger air carrier. — A person whose primary business is scheduled passenger air transportation, as defined in the North American Industry Classification System adopted by the United States Office of Management and Budget, in interstate commerce.

        (113) Item. — Tangible personal property, digital property, or a service, unless the context requires otherwise.

        (115) Jet fuel. — Defined in G.S. 105-449.60 .

        (117) Landscaping. A service that modifies the living elements of an area of land. Examples include the installation of trees, shrubs, or flowers on land; tree trimming; mowing; and the application of seed, mulch, pine straw, or fertilizer to an area of land. The term does not include services to trees, shrubs, flowers, or similar tangible personal property in pots or in buildings.

        (119) Large fulfillment facility. — A facility that satisfies both of the following conditions:

        a. The facility is used primarily for receiving, inventorying, sorting, repackaging, and distributing finished retail products for the purpose of fulfilling customer orders.

        b. The Secretary of Commerce has certified that an investment of private funds of at least one hundred million dollars ($100,000,000) has been or will be made in real and tangible personal property for the facility within five years after the date on which the first property investment is made and that the facility will achieve an employment level of at least 400 within five years after the date the facility is placed into service and maintain that minimum level of employment throughout its operation.

        (121) Lease or rental. — A transfer of possession or control of tangible personal property for a fixed or indeterminate term for consideration. The term does not include any of the following:

        a. A transfer of possession or control of property under a security agreement or deferred payment plan that requires the transfer of title upon completion of the required payments.

        b. A transfer of possession or control of property under an agreement that requires the transfer of title upon completion of required payments and payment of an option price that does not exceed the greater of one hundred dollars ($100.00) or one percent (1%) of the total required payments.

        c. The providing of tangible personal property along with an operator for a fixed or indeterminate period of time if the operator is necessary for the equipment to perform as designed. For the purpose of this sub-subdivision, an operator must do more than maintain, inspect, or set up the tangible personal property.

        (123) Livestock. — Cattle, sheep, goats, swine, horses, or mules.

        (125) Major recycling facility. — Defined in G.S. 105-129.25 .

        (127) Manufactured home. — A structure that is designed to be used as a dwelling and is manufactured in accordance with the specifications for manufactured homes issued by the United States Department of Housing and Urban Development.

        (129) Marketplace. — A physical or electronic place, forum, platform, application, or other method by which a marketplace seller sells or offers to sell items, the delivery of or first use of which is sourced to this State.

        (131) Marketplace-facilitated sale. — The sale of an item by a marketplace facilitator on behalf of a marketplace seller that occurs through a marketplace.

        (133) Marketplace facilitator. — A person that, directly or indirectly and whether through one or more affiliates, does both of the following:

        a. Lists or otherwise makes available for sale a marketplace seller’s items through a marketplace owned or operated by the marketplace facilitator.

        b. Does one or more of the following:

        1. Collects the sales price or purchase price of a marketplace seller’s items or otherwise processes payment.

        2. Makes payment processing services available to purchasers for the sale of a marketplace seller’s items.

        (135) Marketplace seller. — A person that sells or offers to sell items through a marketplace regardless of any of the following:

        a. Whether the person has a physical presence in this State.

        b. Whether the person is registered as a retailer in this State.

        c. Whether the person would have been required to collect and remit sales and use tax had the sales not been made through a marketplace.

        d. Whether the person would not have been required to collect and remit sales and use tax had the sales not been made through a marketplace.

        (137) Mixed transaction contract. — A contract that includes both a real property contract for a capital improvement and repair, maintenance, and installation services for real property that are not related to the capital improvement.

        (139) Mobile telecommunications service. — A radio communication service carried on between mobile stations or receivers and land stations and by mobile stations communicating among themselves and includes all of the following:

        a. Both one-way and two-way radio communication services.

        b. A mobile service that provides a regularly interacting group of base, mobile, portable, and associated control and relay stations for private one-way or two-way land mobile radio communications by eligible users over designated areas of operation.

        c. Any service for which a federal license is required in a personal communications service.

        (141) Mobility enhancing equipment. — Equipment that meets all of the conditions of this subdivision. The term includes repair and replacement parts for the equipment. The term does not include durable medical equipment.

        a. Primarily and customarily used to provide or increase the ability of an individual to move from one place to another.

        b. Appropriate for use either in a home or motor vehicle.

        c. Not generally used by a person with normal mobility.

        d. Not normally provided on a motor vehicle by a motor vehicle manufacturer.

        (143) Modular home. — A factory-built structure that is designed to be used as a dwelling, is manufactured in accordance with the specifications for modular homes under the North Carolina State Residential Building Code, and bears a seal or label issued by the Department of Insurance pursuant to G.S. 143-139.1 .

        (145) Modular homebuilder. — A person who furnishes for consideration a modular home to a purchaser that will occupy the modular home. The purchaser can be a person that will lease or rent the unit as real property.

        (147) Moped. — As defined in G.S. 20-4.01(27) j.

        (149) Motor vehicle. — A vehicle that is designed primarily for use upon the highways and is either self-propelled or propelled by a self-propelled vehicle, but does not include:

        a. A moped.

        b. Special mobile equipment.

        c. A tow dolly that is exempt from motor vehicle title and registration requirements under G.S. 20-51(10) or (11).

        d. A farm tractor or other implement of husbandry.

        e. A manufactured home, a mobile office, or a mobile classroom.

        f. Road construction or road maintenance machinery or equipment.

        (151) Motor vehicle service contract. — A service contract for a motor vehicle or for one or more components, systems, or accessories for a motor vehicle when sold by a motor vehicle dealer, by a motor vehicle service agreement company, or by a motor vehicle dealer on behalf of a motor vehicle service agreement company. For purposes of this subdivision, the term “motor vehicle dealer” has the same meaning as defined in G.S. 20-286 and the term “motor vehicle service agreement company” is a person other than a motor vehicle dealer that is an obligor of a service contract for a motor vehicle or for one or more components, systems, or accessories for a motor vehicle and who is not an insurer.

        (153) NAICS. — Defined in G.S. 105-228.90 .

        (155) Net taxable sales. — The gross sales or gross receipts of a retailer or another person taxed under this Article after deducting exempt sales and nontaxable sales.

        (157) New construction. — Construction of or site preparation for a permanent new building, structure, or fixture on land or an increase in the square footage of an existing building, structure, or fixture on land.

        (159) Nonresident retail or wholesale merchant. — A person who does not have a place of business in this State, is registered for sales and use tax purposes in a taxing jurisdiction outside the State, and is engaged in the business of acquiring, by purchase, consignment, or otherwise, tangible personal property or certain digital property and selling the property outside the State or in the business of providing a service.

        (161) Operator. — A person provided with the lease or rental of tangible personal property or a motor vehicle to operate, drive, or maneuver the tangible personal property or motor vehicle and whose presence, skill, knowledge, and expertise are necessary to bring about a desired or appropriate effect. The person must do more than calibrate, test, analyze, research, probe, or monitor the tangible personal property or motor vehicle.

        (163) Other direct mail. — Any direct mail that is not advertising and promotional mail regardless of whether advertising and promotional direct mail is included in the same mailing.

        (165) Over-the-counter drug. — A drug that contains a label that identifies the product as a drug as required by 21 C.F.R. § 201.66. The label includes either of the following:

        a. A “Drug Facts” panel.

        b. A statement of its active ingredients with a list of those ingredients contained in the compound, substance, or preparation.

        (167) Person. — Defined in G.S. 105-228.90 .

        (169) Place of primary use. — The street address representative of where the use of a customer’s telecommunications service primarily occurs. The street address must be the customer’s residential street address or primary business street address. For mobile telecommunications service, the street address must be within the licensed service area of the service provider. If the customer who contracted with the telecommunications provider for the telecommunications service is not the end user of the service, the end user is considered the customer for the purpose of determining the place of primary use.

        (171) Prepaid calling service. — A right that meets all of the following requirements:

        a. Authorizes the exclusive purchase of telecommunications service.

        b. Must be paid for in advance.

        c. Enables the origination of calls by means of an access number, authorization code, or another similar means, regardless of whether the access number or authorization code is manually or electronically dialed.

        d. Is sold in predetermined units or dollars whose number or dollar value declines with use and is known on a continuous basis.

        (173) Prepaid meal plan. — A plan offered by an institution of higher education that meets all of the following requirements:

        a. Entitles a person to food or prepared food.

        b. Must be billed or paid for in advance.

        c. Provides for predetermined units or unlimited access to food or prepared food but does not include a dollar value that declines with use.

        (175) Prepaid telephone calling service. — Prepaid calling service or prepaid wireless calling service.

        (177) Prepaid wireless calling service. — A right that meets all of the following requirements:

        a. Authorizes the purchase of mobile telecommunications service, either exclusively or in conjunction with other services.

        b. Must be paid for in advance.

        c. Is sold in predetermined units or dollars whose number or dollar value declines with use and is known on a continuous basis.

        (179) Prepared food. — Food that meets at least one of the conditions of this subdivision. Prepared food does not include food the retailer sliced, repackaged, or pasteurized but did not heat, mix, or sell with eating utensils.

        a. It is sold in a heated state or it is heated by the retailer.

        b. It consists of two or more foods mixed or combined by the retailer for sale as a single item. This sub-subdivision does not include foods containing raw eggs, fish, meat, or poultry that require cooking by the consumer as recommended by the Food and Drug Administration to prevent food borne illnesses.

        c. It is sold with eating utensils provided by the retailer, such as plates, knives, forks, spoons, glasses, cups, napkins, and straws. A plate does not include a container or packaging used to transport the food.

        (181) Prescription. — An order, formula, or recipe issued orally, in writing, electronically, or by another means of transmission by a physician, dentist, veterinarian, or another person licensed to prescribe drugs.

        (183) Prewritten computer software. — Computer software, including prewritten upgrades, that is not designed and developed by the author or another creator to the specifications of a specific purchaser. The term includes software designed and developed by the author or another creator to the specifications of a specific purchaser when it is sold to a person other than the specific purchaser.

        (185) Production company. — A person engaged in the business of making original motion picture, television, or radio images for theatrical, commercial, advertising, or educational purposes.

        (187) Professional motorsports racing team. — A racing team that satisfies all of the following conditions:

        a. The team is operated for profit.

        b. The team does not claim a deduction under section 183 of the Code.

        c. The team competes in at least sixty-six percent (66%) of the races sponsored in a race series in a single season by a motorsports sanctioning body.

        (189) Property management contract. — A written contract obligating a person to provide five or more real property management services.

        (191) Prosthetic device. — A replacement, corrective, or supporting device worn on or in the body that meets one of the conditions of this subdivision. The term includes repair and replacement parts for the device. The conditions are as follows:

        a. Artificially replaces a missing portion of the body.

        b. Prevents or corrects a physical deformity or malfunction.

        c. Supports a weak or deformed portion of the body.

        (193) Purchase. — Acquired for consideration or consideration in exchange for a service, regardless of any of the following:

        a. Whether the acquisition was effected by a transfer of title or possession, or both, or a license to use or consume.

        b. Whether the transfer was absolute or conditional regardless of the means by which it was effected.

        c. Whether the consideration is a price or rental in money or by way of exchange or barter.

        (195) Purchase price. — The term has the same meaning as the term “sales price” when applied to an item subject to use tax.

        (197) Qualified aircraft. — An aircraft with a maximum take-off weight of more than 9,000 pounds but not in excess of 15,000 pounds.

        (199) Qualified jet engine. — An engine certified pursuant to Part 33 of Title 14 of the Code of Federal Regulations.

        (201) Qualifying datacenter. — A datacenter that satisfies each of the following conditions:

        a. The datacenter certifies that it satisfies or will satisfy the wage standard for the development tier area or zone in which the datacenter is located. There is no wage standard for a development tier one area. If an urban progress zone or an agrarian growth zone is not in a development tier one area, then the wage standard for that zone is 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 in which the datacenter is located. The wage standard for a development tier two area or a development tier three area is an average weekly wage that is at least equal to one hundred ten percent (110%) of the lesser 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 in which the datacenter is located.

        b. The Secretary of Commerce has made a written determination that at least seventy-five million dollars ($75,000,000) in private funds has been or will be invested by one or more owners, users, or tenants of the datacenter within five years of the date the owner, user, or tenant of the datacenter makes its first real or tangible property investment in the datacenter on or after January 1, 2012. Investments in real or tangible property in the datacenter made prior to January 1, 2012, may not be included in the investment required by this subdivision.

        c. The datacenter certifies that it provides or will provide health insurance for all of its full-time employees as long as the datacenter operates. The datacenter provides health insurance if it pays or will pay 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 .

        (203) Qualifying educational entity. — An entity listed in this subdivision. For purposes of this definition, references to the United States Code mean the United States Code as enacted as of January 1, 2020. The entities are:

        a. An elementary or secondary school, as defined in 20 U.S.C. § 7801.

        b. An institution of higher education, as defined in 20 U.S.C. § 1002.

        (205) Real property. — Any one or more of the following:

        a. Land.

        b. Building or structure on land.

        c. Permanent fixture on land.

        d. A manufactured home or a modular home on land.

        (207) Real property contract. — A contract between a real property contractor and another person to perform a capital improvement to real property.

        (209) Real property contractor. — A person that contracts to perform a real property contract in accordance with G.S. 105-164.4H. The term includes a general contractor, a subcontractor, or a builder for purposes of this Article.

        (211) Real property management services. — Any of the following activities:

        a. Hiring and supervising employees for the real property.

        b. Providing a person to manage the real property.

        c. Receiving and applying revenues received from property owners or tenants of the real property.

        d. Providing repair, maintenance, and installation services to comply with obligations of a homeowners’ association or a landlord under a lease, rental, or management agreement.

        e. Arranging for a third party to provide repair, maintenance, and installation services.

        f. Incurring and paying expenses for the management, repair, and maintenance of the real property.

        g. Handling administrative affairs for the real property.

        (213) Real property manager. — A person that provides real property management services pursuant to a property management contract.

        (215) Reconstruction. — Rebuild or construct again a prior existing permanent building, structure, or fixture on land and may include a change in the square footage from the prior existing building, structure, or fixture on land.

        (217) Related member. — Defined in G.S. 105-130.7 A.

        (219) Remodeling. — A transaction comprised of multiple services performed by one or more persons to restore, improve, alter, or update real property that may otherwise be subject to tax as repair, maintenance, and installation services if separately performed. The term includes a transaction where the internal structure or design of one or more rooms or areas within a room or building are substantially changed. The term does not include a single service that is included in repair, maintenance, and installation services. The term does not include a transaction where the true purpose is repair, maintenance, and installation services no matter that another service included in repair, maintenance, and installation services is performed that is incidental to the true purpose of the transaction; examples include repair of sheetrock that includes applying paint, replacement of cabinets that includes installation of caulk or molding, and the installation of hardwood floors that includes installation of shoe molding.

        (221) Remote sale. — A sale of an item ordered by mail, telephone, Internet, mobile phone application, or another method by a retailer who receives the order in another state and delivers the item or makes it accessible to a person in this State or causes the item to be delivered or made accessible to a person in this State or performs a service sourced to this State. It is presumed that a resident of this State who makes an order was in this State at the time the order was made.

        (223) Renovation. — Same meaning as the term “remodeling.”

        (225) Repair, maintenance, and installation services. — The term includes the activities listed in this subdivision and applies to tangible personal property, motor vehicles, certain digital property, and real property. The term does not include a service used to fulfill a real property contract taxed in accordance with G.S. 105-164.4H. The included activities are:

        a. To keep or attempt to keep property or a motor vehicle in working order to avoid breakdown and prevent deterioration or repairs. Examples include to clean, wash, or polish property.

        b. To calibrate, refinish, restore, or attempt to calibrate, refinish, or restore property or a motor vehicle to proper working order or good condition. This activity may include replacing or putting together what is torn or broken.

        c. To troubleshoot, identify, or attempt to identify the source of a problem for the purpose of determining what is needed to restore property or a motor vehicle to proper working order or good condition. The term includes activities that may lead to the issuance of an inspection report.

        d. To install, apply, connect, adjust, or set into position tangible personal property or certain digital property. The term includes floor refinishing and the installation of carpet, flooring, floor coverings, windows, doors, cabinets, countertops, and other installations where the item being installed may replace a similar existing item. The replacement of more than one of a like-kind item, such as replacing one or more windows, is repair, maintenance, and installation services. The term does not include an installation defined as a capital improvement under subdivision (31)d. of this section and substantiated as a capital improvement under G.S. 105-164.4H(a1).

        e. To inspect or monitor property or install, apply, or connect tangible personal property or certain digital property on a motor vehicle or adjust a motor vehicle.

        (227) Retail sale or sale at retail. — The sale, lease, or rental for any purpose other than for resale, sublease, or subrent.

        (229) Retailer. — Any of the following persons:

        a. A person engaged in business of making sales at retail, offering to make sales at retail, or soliciting sales at retail of items sourced to this State. When the Secretary finds it necessary for the efficient administration of this Article to regard any sales representatives, solicitors, representatives, consignees, peddlers, or truckers as agents of the dealers, distributors, consignors, supervisors, employers, or persons under whom they operate or from whom they obtain the items sold by them regardless of whether they are making sales on their own behalf or on behalf of these dealers, distributors, consignors, supervisors, employers, or persons, the Secretary may so regard them and may regard the dealers, distributors, consignors, supervisors, employers, or persons as “retailers” for the purpose of this Article.

        b. A person, other than a real property contractor, engaged in business of delivering, erecting, installing, or applying tangible personal property or certain digital property for use in this State.

        c. A person engaged in business of making a remote sale, if one of the conditions listed in G.S. 105-164.8(b) is met.

        d. A person required to collect the State tax levied under this Article or the local taxes levied under Subchapter VIII of this Chapter and under Chapter 1096 of the 1967 Session Laws.

        e. A marketplace facilitator that is subject to the requirements of G.S. 105-164.4J or a facilitator that is required to collect and remit the tax under this Article.

        (231) Retailer-contractor. — A person that acts as a retailer when it makes a sale at retail and as a real property contractor when it performs a real property contract.

        (233) Ringtone. — A digitized sound file that is downloaded onto a device and that may be used to alert the user of the device with respect to a communication.

        (235) Sale or selling. — The transfer for consideration of title, license to use or consume, or possession of tangible personal property or certain digital property or the performance for consideration of a service. The transfer or performance may be conditional or in any manner or by any means. The term applies to the following:

        a. Fabrication of tangible personal property for consumers by persons engaged in business who furnish either directly or indirectly the materials used in the fabrication work.

        b. Furnishing or preparing tangible personal property consumed on the premises of the person furnishing or preparing the property or consumed at the place at which the property is furnished or prepared.

        c. A transaction in which the possession of the tangible personal property or certain digital property is transferred but the seller retains title or security for the payment of the consideration.

        d. A lease or rental.

        e. Transfer of a digital code.

        f. An accommodation.

        g. A service contract.

        h. Any other item subject to tax under this Article.

        (237) Sales price. — The total amount or consideration for which an item is sold, leased, or rented. The consideration may be in the form of cash, credit, property, or services. The sales price must be valued in money, regardless of whether it is received in money.

        a. The term includes all of the following:

        1. The retailer’s cost of the item sold.

        2. The cost of materials used, labor or service costs, interest, losses, all costs of transportation to the retailer, all taxes imposed on the retailer, and any other expense of the retailer.

      3. Charges by the retailer for any services necessary to complete the sale.
      4. Delivery charges.
      5. Installation charges.
      6. Repealed by Session Laws 2007-244, s. 1, effective October 1, 2007.
      7. Credit for trade-in. The amount of any credit for trade-in is not a reduction of the sales price.
      8. The amount of any discounts that are reimbursable by a third party and can be determined at the time of sale through any of the following:
        1. Presentation by the consumer of a coupon or other documentation.
        2. Identification of the consumer as a member of a group eligible for a discount.
        3. The invoice the retailer gives the consumer.

          b. The term does not include any of the following:

          1. Discounts that are not reimbursable by a third party, are allowed by the retailer, and are taken by a consumer on a sale.

          2. Interest, financing, and carrying charges from credit extended on the sale, if the amount is separately stated on the invoice, bill of sale, or a similar document given to the consumer.

          3. Any taxes imposed directly on the consumer that are separately stated on the invoice, bill of sale, or similar document given to the consumer.

          (239) Satellite digital audio radio service. — A radio communication service in which audio programming is digitally transmitted by satellite to an earth-based receiver, whether directly or via a repeater station.

          (241) Secondary metals recycler. — A person that gathers and obtains ferrous metals, nonferrous metals, and products that have served their original economic purpose and that converts them by processes, including sorting, cutting, classifying, cleaning, baling, wrapping, shredding, or shearing into a new or different product for sale consisting of prepared grades.

          (243) Secretary. — The Secretary of the North Carolina Department of Revenue.

          (245) Service contract. — A contract where the obligor under the contract agrees to maintain, monitor, inspect, repair, or provide another service included in the definition of repair, maintenance, and installation services to certain digital property, tangible personal property, or real property for a period of time or some other defined measure. The term does not include a single service included in repair, maintenance, or installation services, but does include a contract where the obligor may provide a service included in the definition of repair, maintenance, and installation services as a condition of the contract. The term includes a service contract for a pool, fish tank, or similar aquatic feature and a home warranty. Examples include a warranty agreement other than a manufacturer’s warranty or dealer’s warranty provided at no charge to the purchaser, an extended warranty agreement, a maintenance agreement, a repair agreement, or a similar agreement or contract.

          (247) Service contract facilitator. — A person who contracts with the obligor of a service contract to market the service contract and accepts payment from the purchaser for the service contract.

          (249) Soft drink. — A nonalcoholic beverage that contains natural or artificial sweeteners. The term does not include beverages that contain one or more of the following:

          a. Milk or milk products.

          b. Soy, rice, or similar milk substitutes.

          c. More than fifty percent (50%) vegetable or fruit juice.

          (251) Special mobile equipment. — Any of the following:

          a. A vehicle that has a permanently attached crane, mill, well-boring apparatus, ditch-digging apparatus, air compressor, electric welder, feed mixer, grinder, or other similar apparatus is driven on the highway only to get to and from a nonhighway job and is not designed or used primarily for the transportation of persons or property.

          b. A vehicle that has permanently attached special equipment and is used only for parade purposes.

          c. A vehicle that is privately owned, has permanently attached fire-fighting equipment, and is used only for fire-fighting purposes.

          d. A vehicle that has permanently attached playground equipment and is used only for playground purposes.

          (253) Specified digital products. — Digital audio works, digital audiovisual works, and digital books.

          (255) State agency. — A unit of the executive, legislative, or judicial branch of State government, such as a department, a commission, a board, a council, or The University of North Carolina. The term does not include a local board of education.

          (257) Storage. — The keeping or retention in this State for any purpose, except sale in the regular course of business, of tangible personal property or certain digital property for any period of time purchased from a person in business.

          (259) Streamlined Agreement. — The Streamlined Sales and Use Tax Agreement as amended as of December 14, 2018.

          (261) Tangible personal property. — Personal property that may be seen, weighed, measured, felt, or touched or is in any other manner perceptible to the senses. The term includes electricity, water, gas, steam, and prewritten computer software.

          (263) Taxing area. — Any of the following specific geographic areas:

          a. A street address.

          b. The area within a nine-digit zip code.

          c. The area within a five-digit zip code.

          (265) Taxing district. — A county or any other district, by or for which ad valorem taxes or sales taxes are levied, excluding the State.

          (267) Taxpayer. — Any person liable for taxes under this Article.

          (269) Telecommunications service. — The electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points. The term includes any transmission, conveyance, or routing in which a computer processing application is used to act on the form, code, or protocol of the content for purposes of the transmission, conveyance, or routing, regardless of whether it is referred to as voice-over Internet protocol or the Federal Communications Commission classifies it as enhanced or value added. The term does not include the following:

          a. An information service.

          b. The sale, installation, maintenance, or repair of tangible personal property.

          c. Directory advertising and other advertising.

          d. Billing and collection services provided to a third party.

          e. Internet access service.

          f. Radio and television audio and video programming service, regardless of the medium of delivery, and the transmission, conveyance, or routing of the service by the programming service provider. The term includes cable service and audio and video programming service provided by a mobile telecommunications service provider.

          g. Ancillary service.

          h. Certain digital property.

          (271) Transferred electronically. — Obtained by the purchaser by means other than tangible storage media and includes delivered or accessed electronically.

          (273) Use. — The exercise of any right, power, or dominion whatsoever over an item by the purchaser of the item. The term includes withdrawal from storage, distribution, installation, affixation to real or personal property, and exhaustion or consumption of the item by the owner or purchaser. The term does not include a sale of an item in the regular course of business.

          (275) Use tax. — The tax imposed by Part 2 of this Article.

          (277) Video programming. — Programming provided by, or generally considered comparable to programming provided by, a television broadcast station, regardless of the method of delivery.

          (279) Wholesale merchant. — A person engaged in the business of any of the following:

          a. Making wholesale sales.

          b. Buying or manufacturing items and selling them to a registered person or nonresident retail or wholesale merchant for resale.

          c. Manufacturing, producing, processing, or blending any articles of commerce and maintaining a store, warehouse, or any other place that is separate and apart from the place of manufacture or production for the sale or distribution of the articles, other than bakery products, to another for the purpose of resale.

          (281) Wholesale sale. — A sale of an item for the purpose of resale. The term includes a sale of certain digital property for reproduction into certain digital property or tangible personal property offered for sale. The term does not include a sale to a user or consumer not for resale or, in the case of certain digital property, not for reproduction and sale of the reproduced property.

History. 1957, c. 1340, s. 5; 1959, c. 1259, s. 5; 1961, c. 1213, s. 1; 1967, c. 1110, s. 6; 1973, c. 476, s. 193; c. 1287, s. 8; 1975, c. 104; c. 275, s. 6; 1979, c. 48, s. 2; c. 71; c. 801, s. 72; 1983, c. 713, ss. 87, 88; 1983 (Reg. Sess., 1984), c. 1097, ss. 4, 5; 1985, c. 23; 1987, c. 27; c. 557, s. 3.1; c. 854, ss. 2, 3; 1987 (Reg. Sess., 1988), c. 1044, s. 3; c. 1096, ss. 1-3; 1989, c. 692, s. 3.2; 1989 (Reg. Sess., 1990), c. 813, s. 13; 1991, c. 45, s. 15; c. 79, ss. 1, 3; c. 689, s. 190.1(a); 1991 (Reg. Sess., 1992), c. 949, s. 3; 1993, c. 354, s. 16; c. 484, s. 1; c. 507, s. 1; 1995 (Reg. Sess., 1996), c. 649, s. 2; 1996, 2nd Ex. Sess., c. 14, ss. 13, 14; 1997-6, s. 7; 1997-370, s. 1; 1997-426, s. 4; 1998-22, s. 4; 1998-55, ss. 7, 13; 1998-98, ss. 13.1(a), 106; 1999-337, s. 28(a), (b); 1999-360, s. 6(a)-(c); 1999-438, s. 4; 2000-153, s. 4; 2000-173, s. 9; 2001-347, ss. 2.1-2.7; 2001-414, s. 14; 2001-424, s. 34.17(b); 2001-430, ss. 1, 2; 2001-476, s. 18(a); 2001-489, s. 3(a); 2002-16, ss. 1, 2, 3; 2002-170, s. 6; 2003-284, s. 45.2; 2003-400, ss. 13, 14; 2003-402, s. 12; 2004-124, s. 32B.3; 2004-170, ss. 18, 19; 2005-276, ss. 33.2, 33.3; 2006-33, s. 1; 2006-66, ss. 24.10(a), 24.17(a); 2006-151, s. 2; 2006-162, s. 5(a); 2006-168, ss. 4.1, 4.3; 2006-252, ss. 2.25(a), (a1), (c), 2.26; 2007-244, s. 1; 2007-323, ss. 31.14(a), 31.20(a), 31.23(b); 2008-107, s. 28.12(a); 2009-445, s. 11; 2009-451, s. 27A.3(d), (g); 2010-91, ss. 1, 2; 2010-166, s. 3.3; 2011-330, ss. 15(a), (b), 31(c); 2012-79, s. 2.7; 2013-316, s. 6(a); 2013-414, ss. 8, 23(a); 2014-3, ss. 4.1(a), 6.1(a), 7.1(a), 14.7; 2015-6, ss. 2.1(b), 2.10; 2015-241, s. 32.18(a); 2015-259, ss. 3(a), 6(a), 4.1(a), 4.2(a); 2015-268, s. 10.1(g); 2016-5, ss. 3.2(a), 3.2(b), 5.5(a); 2016-90, s. 13(h); 2016-92, s. 2.2; 2016-94, s. 38.5(d); 2017-39, s. 5; 2017-57, ss. 38.8(d), 38.9(a); 2017-102, s. 5.2(b); 2017-204, ss. 2.1, 2.9(i); 2018-5, s. 38.5(a), (b), (x); 2019-169, ss. 3.1(a), 3.1(b), 3.4(b), 3.5(a), 3.9(a)-(c), 3.13(a); 2019-177, s. 9(b); 2019-237, s. 8.1(b); 2019-246, ss. 4(a), (d), (h), (j), (m), (p), 7(a), 8; 2020-6, ss. 1(b), 3(a), (c).

Renumbering of Subdivisions Within this Section.

Session Laws 2019-169, s. 3.1(c), provides, in part, that: “The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-164.3 to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory section.” At the direction of the Revisor of Statutes, the definitions herein have been completely renumbered, skipping every other number to accommodate future additions, and references throughout the General Statutes to subdivisions herein have been conformed accordingly.

Session Laws 2019-246, s. 4(p), provides: “The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-164.3 to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory section.” Pursuant to this authority, the subdivisions in this section have been renumbered to maintain numeric order and so that the definitions remain in alphabetical order.

Session Laws 2020-6, s. 3(c), provides: “The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-164.3 to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory section. Pursuant to this authority, the subdivisions in this section have been renumbered to maintain numeric order and so that the definitions remain in alphabetical order.”

Editor’s Note.

Session Laws 1987 (Reg. Sess., 1988), c. 1096, s. 6 provides: “It is the intent of the General Assembly that the Department of Revenue shall collect all of the sales and use taxes due to the State and local governments. Notwithstanding the provisions of G.S. 105-268.1 , the Secretary of Revenue may, without seeking prior approval of the Governor and the Council of State, enter into agreements with any other state to coordinate and promote collection of sales and use taxes by retailers making mail order sales, as defined in this act.”

Session Laws 2001-476, s. 18(c), provides: “This section becomes effective January 1, 2002, and applies to sales made on or after that date. The Codifier is authorized to modify G.S. 105-164.3 to change the format of the existing definitions to match the format of the new definitions enacted during 2001, but not to change the format of the new definitions enacted in 2001 to match the format of the existing definitions. The Codifier is authorized to renumber these definitions as necessary to maintain their alphabetical order.” The definitions have been renumbered as above at the direction of the Revisor of Statutes.

Session Laws 2002-146, s. 9, provides: “It is the intent of the General Assembly that the provisions of this act not be expanded. If a court of competent jurisdiction holds any provision of this act invalid, the section containing that provision is repealed. The repeal of a section of this act under this section does not affect other provisions of this act that may be given affect without the invalid provision.”

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

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 2006-252, s. 2.25(a), which made amendments similar to Session Laws 2006-168, did not take effect because House Bill 2744, 2005 General Assembly (2006-168) became law.

Session Laws 2014-3, s. 7.2(a), (b), as amended by Session Laws 2015-6, s. 2.1(a), provides: “(a) This act shall not be construed to affect the interpretation of any statute that is the subject of a State tax audit for taxable years beginning before January 1, 2015, or litigation that is a direct result of such audit.

“(b) A seller who collected and remitted sales or use tax in accordance with an interpretation of the law by the Secretary in the form of a rule, bulletin, or directive published before the effective date of this act is not liable to a purchaser for any overcollected sales or use tax that was collected in accordance with the rule, bulletin, or directive.”

Session Laws 2015-6, s. 2.23(c), provides: “Notwithstanding G.S. 105-164.13(62), as amended by S.L. 2014-3 and by subsection (a) of this section, the sales and use tax exemption in G.S. 105-164.13(62) applies to an item used pursuant to a service contract that meets the definition of a “service contract” as defined in G.S. 105-164.3(38b), notwithstanding that the service contract was sold before January 1, 2014, and effective on, before, or after January 1, 2014.”

This section was amended by Session Laws 2015-241, s. 32.18(a), in the coded bill drafting format provided by G.S. 120-20.1 . Subdivision (35)b, as set out in the act, fails to take into account changes made by Session Laws 2014-3, s. 7.1(a). Subdivision (35)b is set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2016-94, s. 38.5(a), provides: “A retailer is not liable for an undercollection of sales or use tax as a result of the changes made under Section 32.18 of S.L. 2015-241 and under Part V of S.L. 2015-259 if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax. This applies only to the period beginning March 1, 2016, and ending December 31, 2016.”

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.

Session Laws 2016-94, s. 38.5(q) made the amendments to this section by Session Laws 2016-94, s. 38.5(d) and applicable to sales made on or after January 1, 2017.

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2017-57 s. 38.8(f), made subdivision (37g), as added by Session Laws 2017-57, s. 38.8(d), effective July 1, 2018, and applicable to sales made on or after that date.

Session Laws 2017-57, s. 38.9(c), made subdivision (16f), as added by Session Laws 2017-57, s. 38.9(a), effective July 1, 2017, and applicable to sales made on or after that date.

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 2017-102, s. 5.2(b), provides: “The Revisor of Statutes is authorized to reletter the definitions in G.S. 20-4.01(27) and G.S. 20-4.01(32b) to place them in alphabetical order. The Revisor of Statutes may conform any citations that change as a result of the relettering.” Pursuant to that authority, the reference to G.S. 20-4.01(27) d1. in subdivision (22) was changed to G.S. 20-4.01(27)j.

Session Laws 2017-204, s. 2.13, made the amendment to the section by Session Laws 2017-204, s. 2.1, effective retroactively to January 1, 2017, and applicable to sales and purchases made on or after that date. Any amendments that increase sales or tax liability are effective August 11, 2017.

Session Laws 2017-204, s. 2.9(i), was contingent upon House Bill 59, 2017 Regular Session, becoming law. House Bill 59 was enacted as Session Laws 2017-39.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Session Laws 2018-5, s. 38.5(aa), provides, in part: “Subsection (a) of this section [which amended subdivision (20b)] is effective retroactively to January 1, 2017. If the amendment to G.S. 105-164.3(20b), as enacted by subsection (a) of this section, increases sales and use tax liability, then it is effective when this section becomes law.”

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. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2018-2019 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2018-2019 fiscal year.”

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

Session Laws 2019-169, s. 3.1(c), made the amendment to subdivision (2f) of this section by Session Laws 2019-169, s. 3.1(b), effective October 1, 2019, and applicable to sales occurring on or after that date.

Session Laws 2019-169, s. 3.9(a), (b), as amended by Session Laws 2019-246, s. 7(a), repealed Session Laws 2018-5, s. 38.5(x), which amended the definition of “Prosthetic device” and added the definition of “Property management contract.” The definitions were subsequently reordered and amended by Session Laws 2019-169, s. 3.9(c).

Session Laws 2019-169, s. 3.9(g), as amended by Session Laws 2019-246, s. 7(a), made subdivisions (157), (177) and (179), as added by Session Laws 2019-169, s. 3.9(c), effective July 26, 2019, and further provided: “The provisions of G.S. 105-164.15 A apply to the implementation of this change as if it is a decrease in the tax rate.”

Session Laws 2019-169, s. 3.13(c), made the amendments to this section by Session Laws 2019-169, s. 3.13(a), effective October 1, 2019, and applicable to sales occurring on or after that date.

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.”

Session Laws 2019-246, s. 4(q), made the amendments to this section by Session Laws 2019-246, s. 4(a), (d), (h), (j), (m), and (p), effective February 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2019-246, s. 4(n), provides: “There is no obligation to collect the sales and use tax required by this section retroactively.”

Session Laws 2019-246, s. 4(o), is a severability clause.

Session Laws 2020-6, s. 1(e), made subdivision (123), as added by Session Laws 2020-6, s. 1(b), effective July 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2020-6, s. 3(e), made the amendments to this section by Session Laws 2020-6, s. 3(a), effective retroactively to October 1, 2019, and applicable to sales occurring on or after that date.

Effect of Amendments.

Session Laws 2003-284, s. 45.2, effective July 15, 2003, rewrote the section.

Session Laws 2003-400, ss. 13 and 14, effective January 1, 2004, and applicable to sales of modular homes on and after that date, rewrote subdivision (20); and added subdivisions (21b) and (21c).

Session Laws 2003-402, s. 12, effective October 1, 2003, added the last sentence in subdivision (9).

Session Laws 2004-124, s. 32B.3, effective October 1, 2004, and applicable to sales made on or after that date, inserted subdivisions (14c) and (15b).

Session Laws 2004-170, ss. 18 and 19, effective August 2, 2004, substituted “heat, mix, or sell with eating utensils” for “otherwise process” in subdivision (28); and inserted subdivision (37)a.7.

Session Laws 2005-276, ss. 33.2 and 33.3, effective October 1, 2005, recodified subdivisions (4a) and (4b) as subdivisions (4b) and (4c), respectively; added subdivisions (1a), (4a), (4d), (37a), (37b) and (45a); and in subdivision (10), inserted “an alcoholic beverage, as defined in G.S. 105-113.68 , or a” and made a related stylistic change.

Session Laws 2006-33, s. 1, effective January 1, 2007, added subdivision (1); rewrote subdivision (27); added present subdivision (27a) and redesignated former subdivisions (27)a through (27)d as present subdivisions (27b)a through (27b)d; added subdivision (27a); and rewrote subdivisions (45a) and (48).

Session Laws 2006-66, s. 24.10(a), effective July 1, 2007, and applicable to purchases made on or after that date, added present subsection (30a) and redesignated former subsection (30a) as present subsection (30b).

Session Laws 2006-66, s. 24.17(a), effective July 10, 2006, as amended by Session Laws 2006-168, s. 4.3, added new subdivisions (8e) and (23a). For effective date and applicability, see editor’s note.

Session Laws 2006-151, s. 2, effective January 1, 2007, added subdivision (50c).

Session Laws 2006-162, s. 5(a), effective July 24, 2006, rewrote subdivision (49).

Session Laws 2006-168, s. 4.1, effective July 27, 2006, inserted the quotation marks around “Internet service providers and Web search portals” in subdivision (8e).

Session Laws 2006-252, s. 2.25(a1), effective January 1, 2007, inserted “or a development tier one or two area,” “or G.S. 143B-437.08 ,” and “or development” in subdivision (8e)c.

Session Laws 2006-252, s. 2.26, effective January 1, 2007, rewrote subdivision (23a).

Session Laws 2007-244, s. 1, effective October 1, 2007, added subdivision (1b); redesignated former subdivisions (1a) and (1b) as subdivisions (1d) and (1f), respectively; rewrote subdivision (12); deleted former sub-subdivision (37)(a)6. which read: “The value of exempt personal property given to the consumer when taxable and exempt personal property are bundled together and sold by the retailer as a single product or piece of merchandise.”; added sub-subdivision (37)(a)8.; substituted “Discounts that are not reimbursable” for “Discounts, including cash, term, or coupons, that are not reimbursed” in sub-subdivision (37)(b)1.; and substituted “as of June 23, 2007” for “in November 2005” in subdivision (45a).

Session Laws 2007-323, s. 31.14(a), effective October 1, 2007, and applicable to sales made on or after October 1, 2007, added subdivision (37b); redesignated former subdivision (37b) as subdivision (37d); and substituted “ ‘school supply’ or ‘school art supply’ ” for “ ‘school supply’ a ‘school art supply’, or ‘school instruction material’ ” in subdivision (37d).

Session Laws 2007-323, s. 31.20(a), effective July 31, 2007, added the subdivision designated herein as subdivision (1).

Session Laws 2007-323, s. 31.23.(b), effective January 1, 2007, and applicable to sales made on or after January 1, 2007, added subdivision (8f).

Session Laws 2008-107, s. 28.12(a), effective July 16, 2008, and applicable to sales made on or after that date, added subdivision (8g).

Session Laws 2009-445, s. 11, effective August 7, 2009, substituted “May 12, 2009” for “June 23, 2007” in subdivision (45a).

Session Laws 2009-451, s. 27A.3(d), effective January 1, 2010, and applicable to sales made on or after that date, deleted subdivisions (5d) and (17a).

Session Laws 2009-451, s. 27A.3(g), effective August 7, 2009, added subdivisions (1e) and (1g); redesignated former subdivisions (1b), (1d), and (1f) as subdivisions (1i), (1k), and (1m), respectively; rewrote subdivision (1k); in subdivision (5), substituted “A person who stores, uses, or otherwise consumes” for “Means and includes every person storing, using or otherwise consuming” near the beginning, and inserted “digital property, or a service” near the middle; redesignated former subdivision (5c) as present subdivision (5b); added present subdivision (5c); added present subdivision (7a); redesignated former subdivision (7a) as present subdivision (7c); in the introductory language of subdivision (8e), substituted “datacenter” for “data center” in the subdivision heading, and “datacenter” for “facility” near the beginning; rewrote subdivision (9); in subdivision (12), substituted “property, digital property, and” for “property and”; in subdivision (14), substituted “North Carolina, including all territory within these limits” for “North Carolina and includes all territory within such limits”; added subdivision (14a); deleted subdivision (18); in subdivision (24), deleted “Means and includes” from the beginning, and substituted “a retailer” for “the retailer” near the middle; in subdivision (25), inserted “is registered for sales and use tax purposes in a taxing jurisdiction outside the State, and” and “or digital property” and substituted “State or in the business of providing a service” for “State, and is registered for sales and use tax purposes in a taxing jurisdiction outside the State”; in subdivision (26), substituted “Defined” for “The same meaning as”; in subdivision (32), in the introductory language, substituted “consideration, regardless of any of the following” for “a consideration whether” and made related punctuation changes throughout, added “Whether” at the beginning of subdivisions (32)a. through c., and deleted the last paragraph, which read: “It shall also include the procuring of a retailer to erect, install or apply tangible personal property for use in this State.”; added subdivision (33c); rewrote subdivision (35); added subdivision (35c); rewrote subdivision (36); in subdivision (37), inserted “digital property” in the first sentence of the introductory language; rewrote subdivision (44); deleted subdivision (45); and rewrote subdivisions (48)a., (48)h., (49), (51), and (52).

Session Laws 2010-91, ss. 1 and 2, effective July 1, 2010, and applicable to sales made on or after that date, rewrote subdivision (8e)a., which formerly read: “The facility is used primarily or is to be used primarily by a business engaged in ‘Internet service providers and Web search portals’ industry 51811, as defined by NAICS”; and rewrote subdivision (23a), which formerly read: “NAICS. — Defined in G.S. 105-129.81 .”

Session Laws 2010-166, s. 3.3, effective July 1, 2010, added subdivision (6a).

Session Laws 2011-330, s. 15(a) and 31(c), effective June 27, 2011, rewrote subdivision (23a), which formerly read: “”The North American Industry Classification System adopted by the United States Office of Management and Budget as of December 31, 2002”; updated the federal reference in subdivision (25a); deleted “wireline” following “Prepaid” in subdivision (26b); rewrote subdivision (30a)b., which formerly read: “A majority of the revenues of the team is derived from sponsorship of the racing team and prize money”; and inserted “in a race series” in subdivision (30a)c.

Session Laws 2011-330, s. 15(b), effective June 27, 2011, and applicable retroactively to purchases made on or after January 1, 2005, added subdivision (33b).

Session Laws 2012-79, s. 2.7, effective June 26, 2012, rewrote subdivision (25a), in sub-subdivisions (26b)d. and (27a)c., inserted “predetermined”; in the introductory paragraph of subdivision (36), substituted “title, license to use or consume,” for “title”; and in subdivision (45a), substituted “December 19, 2011” for “May 12, 2009”.

Session Laws 2013-316, s. 6(a), effective January 1, 2014, added subdivision (38b). For applicability, see editor’s note.

Session Laws 2013-414, ss. 8 and 23(a), effective August 23, 2013, added present subdivision (1); redesignated former subdivisions (1) through (1e) as present subdivisions (1a) through (1f), respectively; added present subdivision (25a); redesignated former subdivision (25a) as subdivision (25b); rewrote subdivision (37b), which formerly read “School instructional material. — Defined in the Streamlined Agreement”; in subdivision (44)a., inserted “is able to document that at the time the purchaser,” “the property is designated,” and “the purchaser”; and substituted “May 24, 2012” for “December 19, 2011” in subdivision (45a).

Session Laws 2014-3, s. 4.1(a), effective May 29, 2014, inserted present subdivision (27a), and redesignated former subdivisions (26b), (27), and (27a) as present subdivisions (27), (27b), and (27c), respectively. See Editor’s note for applicability.

Session Laws 2014-3, s. 6.1(a), effective October 1, 2014, rewrote subdivision (38b). See Editor’s note for applicability.

Session Laws 2014-3, s. 7.1(a), effective January 1, 2015, inserted “or supplier” in subdivision (5); added subdivision (33a); rewrote sub-subdivision (35)b.; and added subdivision (35a). See Editor’s note for applicability.

Session Laws 2014-3, s. 14.7, effective May 29, 2014, in subdivision (24), deleted “retail” preceding “sales”; in subdivision (35), in the introductory language, deleted “the” preceding “business”; and in subdivision (45a), substituted “October 30, 2013” for “May 24, 2012.”

Session Laws 2015-6, s. 2.10, effective April 9, 2015, rewrote the introductory language of subdivision (35); added “A person engaged in business of” at the beginning of subdivisions (35)a. through (35)c.; and added subdivision (35)d.

Session Laws 2015-241, s. 32.18(a), effective March 1, 2016, added subdivisions (33d) and (35b); inserted “or consideration in exchange for a service” in the introductory paragraph of subdivision (32); added the last sentence in subdivision (33a); in subdivision (35)b., inserted “unless the person is one or more of the following:” at the end of the introductory paragraph and added subdivisions 1. and 2.; inserted “regardless of whether the property is becomes a part of or affixed to real property” in the first sentence of subdivision (38b); and made punctuation changes. For applicability, see editor’s note.

Session Laws 2015-259, s. 3(a), effective effective January 1, 2016, and applicable to sales made on or after that date, added subdivision (33c) and redesignated former subdivisions (33a), (33b), and (33c) as present subdivisions (33d), (33e), and (33f), respectively.

Session Laws 2015-259, s. 4.1(a), added subdivisions (1h) and (16b). For effective date and applicability, see Editor’s notes.

Session Laws 2015-259, s. 4.2(a), added subdivisions (33a) and (33b). For effective date and applicability, see Editor’s notes.

Session Laws 2015-259, s. 6(a), effective September 30, 2015, added subdivision (25a). See Editor’s note.

Session Laws 2015-268, s. 10.1(g), effective March 1, 2016, substituted “property becomes a part of or is affixed” for “property is becomes a part of or affixed” in the first sentence of subdivision (38b). For applicability, see Editor’s note.

Session Laws 2016-5, ss. 3.2(a), 5.5(a), effective May 11, 2016, deleted subdivisions (3), (4), and (8g), (37b), (37d), and (42); added the last sentence in subdivision (28)c.; in subdivision (33c), rewrote sub-subdivison a. and added sub-subdivision c.; and substituted “amended as of September 17, 2015” for “amended as of October 30, 2013” in subdivision (45a).

Session Laws 2016-5, s. 3.2(b), effective January 1, 2017, rewrote subdivision (44).

Session Laws 2016-90, s. 13(h), effective December 1, 2016, rewrote subdivision (22). See editor’s note for applicability.

Session Laws 2016-92, s. 2.2, effective July 11, 2016, made a stylistic change in subdivision (33c)c.

Session Laws 2016-94, s. 38.5(d), effective January 1, 2017, reenacted and amended subdivision (3), which formerly read: ‘Clothing. — All human wearing apparel suitable for general use including coats, jackets, hats, hosiery, scarves, and shoes’; added subdivisions (16e), (23a), (33d), and (33e); redesignated subdivisions (23a), (33d), (33e), (33f), and (33g) as subdivisions (23c), (33f), (33g), (33h), and (33i), respectively, and rewrote subdivisions (33f) and (33i); deleted subdivision (34a); in subdivision (35), substituted “property for storage, use, or consumption in this State, or services sourced to this State” for “property, or services for storage, use, or consumption in this State,” rewrote subdivision b., and in subdivision d., inserted “State” near the beginning, and substituted “this Article or the local taxes levied under Subchapter VIII of this Chapter and under Chapter 1096 of the 1967 Session Laws” for “G.S. 105-164.4(a)”; in subdivision (35a), substituted “makes a sale” for “sells tangible personal property” and “a real property contract” for “real property contracts”; added subdivisions (36)f. through h.; and rewrote subdivision (38b). See editor’s note for applicability.

Session Laws 2017-39, s. 5, effective June 21, 2017, deleted subdivision (31); and substituted “December 16, 2016” for “September 17, 2015” in subdivision (45a).

Session Laws 2017-57, s. 38.8(d), added subdivision (37g). For effective date and applicability, see editor’s note.

Session Laws 2017-57, s. 38.9(a), added subdivision (16f). For effective date and applicability, see editor’s note.

Session Laws 2017-204, s. 2.1, inserted subdivisions (1d), (2c), (20b), (24a), and (33k); inserted the present second sentence in subdivision (1i); rewrote subdivision (16e); rewrote subdivision (23a); substituted “home on land” for “home that is placed on a permanent foundation” in subdivision (33d)d.; deleted “construction, reconstruction, or remodeling with respect to” following “to perform” in subdivision (33e); substituted “this Article” for “G.S. 105-164.4H” in the last sentence of subdivision (33f); inserted present subdivisions (33g) and (33i); redesignated former subdivisions (33g) and (33h) as present subdivisions (33h) and (33j), respectively; redesignated former subdivision (33i) as subdivision (33 l ), and rewrote the introductory language, added the present last sentence in subdivision (33 l )c., and added the second through fourth sentences in subdivision (33 l )d.; and rewrote subdivision (38b). For effective date and applicability, and for redesignation of subdivision, see editor’s notes.

Session Laws 2017-204, s. 2.9(i), effective August 11, 2017, substituted “May 11, 2017” for “December 16, 2016” in subdivision (45a).

Session Laws 2018-5, s. 38.5(a), added “for real property” in subdivision (20b). For effective date and applicability, see editor’s note.

Session Laws 2018-5, s. 38.5(b), effective June 12, 2018, substituted “services” for “service” throughout; in sub-subdivision (2c)k., substituted “An addition” for “Addition”; in subdivision (11d), deleted “installation of” preceding “a dishwasher”; in subdivision (24), substituted “or gross receipts of a retailer or another person” for “of the business of a retailer”; in sub-subdivision (33c)a., added “or will satisfy” in the first sentence; in sub-subdivision (33c)c., in the first sentence, added “or will provide” and “as long as the datacenter operates”, and in the second sentence, added “or will pay”; in subdivision (33i), in the third sentence, added “service that is included in” and in the last sentence, inserted “service included in”; in sub-subdivision (33 l )d., in the first sentence, substituted “property or digital property” for “property, digital property, or a motor vehicle”, in the second sentence, deleted “a single” preceding “repair, maintenance”, and in the last sentence, added “and substantiated as a capital improvement under G.S. 105-164.4 H(a1)”; in sub-subdivision (33 l )e., substituted “install, apply, or connect tangible personal property or digital property on a motor vehicle or adjust a motor vehicle” for “a motor vehicle, but does not include security or similar monitoring services for real property”; in subdivision (36), in the introductory paragraph, substituted “term applies to” for “term includes”; in sub-sub-subdivision (37)a.7., added the second sentence; in sub-sub-subdivision (37)a.8., in the introductory paragraph, substituted “The amount of any discounts” for “Discounts”; in subdivision (38b), added “service included in” in the second sentence; in subdivision (45a), substituted “May 3, 2018” for “May 11, 2017”; rewrote subdivision (49); and made minor stylistic changes throughout.

Session Laws 2019-169, s. 3.1(a), effective July 26, 2019, inserted “certain” preceding “digital” throughout this section; in subdivision (1), substituted “an item” for “a product” twice in the first sentence, and deleted the second sentence which read: “As used in this subdivision, ‘product’ means tangible personal property, digital property, or a service.”; in subdivision (1 l ), substituted “items” and “an item” for “products” and “a product” throughout, and, in the introductory paragraph, substituted “nontaxable” for “exempt” and made a stylistic change; added subdivision (2f); deleted subdivision (4d), which read: “Computer supply. — An item that is considered a ‘school computer supply’ under the Streamlined Agreement.”; substituted “an item” for “tangible personal property or services” in subdivision (5); substituted “an item” for “personal property or services” in subdivision (6); in sub-subdivision (9)a., in the first sentence, deleted “for selling or delivering tangible personal property, digital property, or a service for storage, use, or consumption” following “place of business” near the middle, and deleted “in the selling or delivering” following “State” at the end; substituted “sales of items” for “retail sales of tangible personal property, digital property, and services” in subdivision (12); added subdivision (16a); substituted “or similar tangible personal property” for “and similar items” in the second sentence of subdivision (16e); rewrote subdivision (33j), which formerly read: “Remote sale. — A sale of tangible personal property or digital property ordered by mail, by telephone, via the Internet, or by another similar method, to a purchaser who is in this State at the time the order is remitted, from a retailer who receives the order in another state and delivers the property or causes it to be delivered to a person in this State. It is presumed that a resident of this State who remits an order was in this State at the time the order was remitted.”; inserted “The included activities are:” in the introductory paragraph and made minor stylistic changes in (33)( l ); substituted “items” for “tangible personal property, digital property for storage, use, or consumption in this State, or services” in the first sentence of sub-subdivision (35)a.; inserted “tangible personal” and “or certain digital property” in sub-subdivision (36)c.; substituted “an item is sold” for “tangible personal property, digital property, or services are sold” in the introductory paragraph of subdivision (37); substituted “item” for “property” in sub-sub-subdivision (37)a.1.; substituted “products” for “items” in subdivision (37g); substituted “December 14, 2018” for “May 3, 2018” in subdivision (45a); rewrote sub-subdivision (48)h., which formerly read: “Digital property that is delivered or accessed electronically, including an audio work, an audiovisual work, or any other item subject to tax under G.S. 105-164.4(a)(6b).”; in subdivision (49), substituted “an item” for “tangible personal property, digital property, or a service” in the first and last sentences, and substituted “item” for “property or service” in the first and second sentences; substituted “items and selling them to a registered person” for “tangible personal property, digital property, or a service and selling it to a registered resident” in sub-subdivision (51)b.; and, in subdivision (52), substituted “an item” for “tangible personal property, digital property, or a service” in the first sentence and inserted “property” in the second sentence.

Session Laws 2019-169, s. 3.1(b), substituted “electronically and that” for “electronically” and “property” for “property, and would be taxable under this Article if sold in a tangible medium” in the introductory paragraph of subdivision (2f). For effective date and applicability, see editor’s note. For complete renumbering of subdivisions, see the note at the beginning of the editor’s notes.

Session Laws 2019-169, ss. 3.4(b), 3.5(a), effective July 26, 2019, rewrote sub-subdivision (2c)c., which formerly read: “Installation of utilities on utility-owned land, right-of-way, or easement, notwithstanding that charges for such may be included in the gross receipts derived from services subject to the combined general rate under G.S. 105-164.4 .”; and added subdivisions (46d) and (46e). For complete renumbering of subdivisions, see the note at the beginning of the editor’s notes.

Session Laws 2019-169, s. 3.9(c), added subdivisions (157), (177), and (179). For effective date and applicability, see editor’s note. For complete renumbering of subdivisions, see the note at the beginning of the editor’s notes.

Session Laws 2019-169, s. 3.13(a), added subdivisions (6b) and (14a); and redesignated former subdivision (14a) as subdivision (14b). For effective date and applicability, see editor’s note. For complete renumbering of subdivisions, see the note at the beginning of the editor’s notes.

Session Laws 2019-177, s. 9(b), effective July 26, 2019, substituted “The conditions are as follows:” for the bracketed phrase at the end of the introductory paragraph of subdivision (30b). For complete renumbering of subdivisions, see the note at the beginning of the editor’s notes.

Session Laws 2019-237, s. 8.1(b), effective November 1, 2019, substituted “tangible personal property, digital property, and services” for “items” in subdivision (95); and deleted “certain” preceding “digital property” in subdivision 113. For renumbering of subdivisions, see notes for Session Laws 2019-246, s. 4(p) and Session Laws 2020-6, s. 3(c).

Session Laws 2019-246, s. 4(a), (d), (h), (j), (m), and (p), added definitions of “Accommodation,” “Accommodation facilitator,” “Admission charge,” “Admission facilitator,” “Amenity,” “Entertainment activity,” “Facilitator,” “Marketplace,” “Marketplace-facilitated sale,” “Marketplace facilitator,” “Marketplace seller,” and “Service contract facilitator” in subdivisions (1), (1a), (1b), (1c), (2a), (2b), (66), (66a), (104), (104a), (104b), (104c), and (212); substituted “or transacting business by mobile phone application or other applications in this State” for “in this State in the selling or delivering” in the first sentence of sub-subdivision (65)a.; added sub-subdivision (65)e.; substituted “A person” for “A person, other than a facilitator” in sub-subdivision (195)d., and added subdivision (195)e. For effective date, and applicability, see editors’ note. For renumbering of subdivisions, see notes for Session Laws 2019-246, s. 4(p) and Session Laws 2020-6, s. 3(c).

Session Laws 2019-246, s. 8, effective November 8, 2019, in subdivision (95), substituted “tangible personal property, digital property, and services” for “items.” For renumbering of subdivisions, see notes for Session Laws 2019-246, s. 4(p) and Session Laws 2020-6, s. 3(c).

Session Laws 2020-6, s. 1(b), added the definition for “Livestock” in subdivision (123). For effective date and applicability, see editor’s note.

Session Laws 2020-6, s. 3(a), added the definitions of “Additional digital goods,” “Digital book,” “Educational service,” “Qualifying educational entity,” “Specified digital products,” and “Transferred electronically”; and rewrote the definitions of “Certain digital property,” “Digital audio work,” and “Digital audiovisual work,” in subdivisions (33), (57), and (59). For effective date and applicability, see editor’s note. For renumbering of subdivisions, see notes for Session Laws 2019-246, s. 4(p) and Session Laws 2020-6, s. 3(c).

Legal Periodicals.

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former G.S. 105-89.1.

Constitutionality. —

Citizens lacked standing to appeal a trial court’s grant of a G.S. 1A-1 , N.C. R. Civ. P. 12(b)(1) motion to dismiss by the State of North Carolina, various State officials, and two companies, in a case challenging G.S. 105-164.3 and G.S. 105-164.13 . The citizens had asserted that the 2006 Current Operations Appropriations Act was violative of the uniformity in taxation provisions of N.C. Const., Art. V, § 2(1) and 2(2) and the law of the land clause of N.C. Const., Art. I, § 19. Munger v. State, 202 N.C. App. 404, 689 S.E.2d 230, 2010 N.C. App. LEXIS 282 (2010).

“Business.” —

Online travel companies were not retailers (and therefore not subject to tax) under the plain language of G.S. 105-164.4(a)(3) because a business that arranged for the rental of hotel rooms over the internet, but that did not physically provide the rooms, was not a business that was of a similar type to a hotel, motel, or tourist home or camp; any different conclusion would have been inconsistent with the canon of ejusdem generis. Pitt County v. Hotels.Com, L.P., 553 F.3d 308, 2009 U.S. App. LEXIS 552 (4th Cir. 2009).

“Cash Discount”. —

The size of a discount is irrelevant if it is given in consideration for payment within a prescribed time, in which case it is a “cash discount” within the meaning of subdivision (6). Walls & Marshall Fuel Co. v. North Carolina Dep't of Revenue, 95 N.C. App. 151, 381 S.E.2d 815, 1989 N.C. App. LEXIS 676 (1989).

Where taxpayer who sold fuel oil offered an 8 cents per gallon discount to its customers if the bill was paid within three days from delivery, the price reduction option fell within the recognized meaning of “cash discount,” because it was a deduction from the billed price which the seller allowed for payment within a certain time. Walls & Marshall Fuel Co. v. North Carolina Dep't of Revenue, 95 N.C. App. 151, 381 S.E.2d 815, 1989 N.C. App. LEXIS 676 (1989).

Bank as Automobile Dealer. —

Where a dealer in automobiles has sold to the bank, to which he was indebted, his automobiles on hand, for the purpose of securing the debt, under further provisions that he was to sell and collect and hold the proceeds in trust for the purpose stated and has thereafter left the State and the bank has assumed to continue the sales and make collection therefor, the bank may not avoid payment of the tax upon the ground that it was not a dealer, etc., in contemplation of the statute, and thus evade the practical efficiency of the statute and reduce it to a nullity. American Exch. Nat'l Bank v. Lacy, 188 N.C. 25 , 123 S.E. 475, 1924 N.C. LEXIS 2 (1924).

“Retailer”. —

Out-of-state seller of printed materials was properly considered a retailer under N.C. Gen. Stat. § 105-164.3(35) (2010) where it transferred title or possession of the products to North Carolina purchasers at a location outside of North Carolina on F.O.B. terms. Quad Graphics, Inc. v. N.C. Dep't of Revenue, 2021 NCBC 37, 2021 NCBC LEXIS 56 (N.C. Super. Ct. June 23, 2021).

“Storage”. —

Subdivision (17) [now (44)] limits “storage” to the keeping or retention of personal property purchased from a retailer, thus excluding from the tax the storage of personal property not so acquired. The commas inserted by the 1973 amendment make this clear as to “storage” thereafter. In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

“Use”. —

Under this section as it stood before the 1975 amendment to subdivision (19) [now (45)], it was held that a taxable “use” did not include a processing of material into a different product, which resulting product was, itself, to be transported outside the State and used outside the State exclusively, regardless of who the user there might be. In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

There is no limitation upon the definition of “use” contained in subdivision (18) [now (49)]. In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

Subdivision (18) [now (49)] does not stand alone. Subdivision (19) [now (45)] is part of the definition of “use.” In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

Where a taxpayer purchased and used parts, supplies, and materials to fulfill its optional maintenance agreements, whereby the taxpayer serviced the equipment which it sold or leased to its customers, the optional maintenance agreements constituted a taxable use of tangible personal property within the meaning of G.S. 105-164.3(49) and not a sale under G.S. 105-164.3(36). Technocom Bus. Sys. v. N.C. Dep't of Revenue, 219 N.C. App. 207, 723 S.E.2d 151, 2012 N.C. App. LEXIS 286 (2012).

The terms “storage” and “use,” as used in G.S. 105-164.6 , must be given the meaning stated in the definitions under subdivisions (17), (18) and (19) [now (44), (49), and (45), respectively] of this section. In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

“Nonresident retailor wholesale merchant.” —

Where plaintiff, a wholesale candy merchant, sold its products to purchasers outside of North Carolina who resold the products and plaintiff shipped the products directly to their customers, some of whom were located in North Carolina, the purchasers met the definition of ‘nonresident retail or wholesale merchants’ under G.S. 105-164.3(10) [now (25)], and plaintiff was incorrectly assessed wholesale taxes under (former) G.S. 105-164.5(2). VSA, Inc. v. Faulkner, 126 N.C. App. 421, 485 S.E.2d 348, 1997 N.C. App. LEXIS 369 (1997).

Use of Fabric by Furniture Manufacturer in Producing Swatch Books. —

Under this section as it stood before the 1975 amendment to subdivision (19) [now (45)], it was held that the use, in North Carolina, by a furniture manufacturer of fabric in the production of swatch books for distribution, without charge, to its potential customers, in or out of this State, was not a “use” within the definition of that word contained in subdivisions (18) and (19) [now (44) and (45)] of this section, and no tax thereon was imposed by G.S. 105-164.6 . In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

Raw Materials As Tangible Personal Property. —

Raw materials, purchased out-of-state and incorporated out-of-state into building components, which were then used in the construction of buildings in North Carolina, were tangible personal property that was subject to the use tax found in G.S. 105-164.6(b). Morton Bldgs., Inc. v. Tolson, 172 N.C. App. 119, 615 S.E.2d 906, 2005 N.C. App. LEXIS 1579 (2005).

Burden on Lessor to Show That Leasing Transactions Constituted Sale for Resale. —

A lessor of television sets who had not procured resale certificates from any of its customers had the burden to show that its leasing transactions constituted a sale for resale, entitling the lessor to an exemption from the sales tax. Telerent Leasing Corp. v. High, 8 N.C. App. 179, 174 S.E.2d 11, 1970 N.C. App. LEXIS 1513 (1970).

Leasing of Television Set to Motel or Hotel Owner Not Sale for Resale. —

Leasing of a television set to a motel or hotel owner for use in a room rented to transients is not a sale for resale as contemplated by the North Carolina Sales and Use Tax Act. Telerent Leasing Corp. v. High, 8 N.C. App. 179, 174 S.E.2d 11, 1970 N.C. App. LEXIS 1513 (1970).

Temporary Custody of Tapes for Purpose of Rebroadcast Was Not a “Sale”. —

The word “sale” under a former statute did not embrace a transaction whereby a radio broadcasting station was given temporary custody of transcription tapes or records in order to rebroadcast the programs contained thereon. Watson Indus. v. Shaw, 235 N.C. 203 , 69 S.E.2d 505, 1952 N.C. LEXIS 376 (1952).

“Motor Vehicles”. —

Auto trucks were held to come within the designation of “automobiles” as used in a former statute taxing the manufacturers of automobiles. State v. Evans, 205 N.C. 434 , 171 S.E. 640, 1933 N.C. LEXIS 582 (1933).

Photographer’s Sitting Fee. —

Taxpayer, a photography business, was liable for sales tax on “sitting fee” charges that preceded the sale of printed photos because the sitting fee charges were charges for labor to fabricate the printed photos and thus were part of the sales price of the printed photos as defined by G.S. 105-164.3(16) for sales tax purposes. Carolina Photography, Inc. v. Hinton, 196 N.C. App. 337, 674 S.E.2d 724, 2009 N.C. App. LEXIS 357 (2009).

Part 2. Taxes Levied.

§ 105-164.4. Tax imposed on retailers and certain facilitators.

  1. A privilege tax is imposed on a retailer engaged in business in the State at the percentage rates of the retailer’s net taxable sales or gross receipts, listed in this subsection. The general rate of tax is four and three-quarters percent (4.75%). The percentage rates are as follows:
    1. The general rate of tax applies to the following items sold at retail:
      1. The sales price of each article of tangible personal property that is not subject to tax under another subdivision in this section. A sale of a freestanding appliance is a retail sale of tangible personal property.
      2. The sales price of certain digital property. The tax applies regardless of whether the purchaser of the property has a right to use it permanently or to use it without making continued payments. The sale at retail or the use, storage, or consumption in this State of a digital code is treated the same as the sale at retail or the use, storage, or consumption in this State of certain digital property for which the digital code relates.
      3. The sales price of or gross receipts derived from repair, maintenance, and installation services to tangible personal property or certain digital property, regardless of whether the tangible personal property or certain digital property is taxed under another subdivision in this section or is subject to a maximum tax under another subdivision in this section. Repair, maintenance, and installation services generally include any tangible personal property or certain digital property that becomes a part of or is applied to a purchaser’s property. The use tax exemption in G.S. 105-164.27 A(a3) may apply to these services. Repair, maintenance, and installation services for real property are taxable under subdivision (16) of this subsection. (1a) The general rate applies to the sales price of each of the following items sold at retail, including all accessories attached to the item when it is delivered to the purchaser:

        a. A manufactured home.

        b. A modular home. The sale of a modular home to a modular homebuilder is considered a retail sale, no matter that the modular home may be used to fulfill a real property contract. A person who sells a modular home at retail is allowed a credit against the tax imposed by this subdivision for sales or use tax paid to another state on tangible personal property incorporated in the modular home. The retail sale of a modular home occurs when a modular home manufacturer sells a modular home to a modular homebuilder or directly to the end user of the modular home.

        c. An aircraft. The maximum tax is two thousand five hundred dollars ($2,500) per article.

      4. A qualified jet engine.

        (1b) The rate of three percent (3%) applies to the sales price of each boat sold at retail, including all accessories attached to the boat when it is delivered to the purchaser. The maximum tax is one thousand five hundred dollars ($1,500) per article.

        (1c), (1d)and(1e)Repealed by Session Laws 2005-276, s. 33.4(b), effective January 1, 2006.

        (1f) Repealed by Session Laws 2013-316, s. 4.1(c), effective July 1, 2014, and applicable to gross receipts billed on or after July 1, 2014.

        a. Repealed by Session Laws 2007-397, s. 10(b), effective October 1, 2007, and applicable to sales occurring on or after that date.

        b. Repealed by Session Laws 2006-66, s. 24.19(a), effective July 1, 2007, and applicable to sales made on or after that date.

        c. Repealed by Session Laws 2007-397, s. 10(b), effective October 1, 2007, and applicable to sales occurring on or after that date.

        (1g) Repealed by Session Laws 2004-110, s. 6.1, effective October 1, 2004, and applicable to sales of electricity made on or after that date.

        (1h) Expired pursuant to Session Laws 2004-110, s. 6.4, effective for sales made on or after October 1, 2007.

        (1i) Repealed by Session Laws 2007-397, s. 10(a), effective October 1, 2007, and applicable to sales occurring on or after that date.

        (1j) Repealed by Session Laws 2007-397, s. 10(f), effective July 1, 2010, and applicable to sales occurring on or after that date.

    2. The applicable percentage rate applies to the gross receipts derived from the lease or rental of tangible personal property by a person who is engaged in business of leasing or renting tangible personal property, or is a retailer and leases or rents property of the type sold by the retailer. The applicable percentage rate is the rate and the maximum tax, if any, that applies to a sale of the property that is leased or rented. A person who leases or rents property shall also collect the tax imposed by this section on the separate retail sale of the property.
    3. The general rate applies to the gross receipts derived from the rental of an accommodation. These rentals are taxed in accordance with G.S. 105-164.4 F.
    4. Every person engaged in the business of operating a dry cleaning, pressing, or hat-blocking establishment, a laundry, or any similar business, engaged in the business of renting clean linen or towels or wearing apparel, or any similar business, or engaged in the business of soliciting cleaning, pressing, hat blocking, laundering or linen rental business for any of these businesses, is considered a retailer under this Article. A tax at the general rate of tax is levied on the gross receipts derived by these retailers from services rendered in engaging in any of the occupations or businesses named in this subdivision. The tax imposed by this subdivision does not apply to receipts derived from coin, token, or card-operated washing machines, extractors, and dryers. The tax imposed by this subdivision does not apply to gross receipts derived from services performed for resale by a retailer that pays the tax on the total gross receipts derived from the services.

      (4a) Repealed by Session Laws 2013-316, s. 4.1(c), effective July 1, 2014, and applicable to gross receipts billed on or after July 1, 2014.

      (4b) A person who sells tangible personal property at a specialty market or other event, other than the person’s own household personal property, is considered a retailer under this Article. A tax at the general rate of tax is levied on the sales price of each article sold by the retailer at the specialty market or other event. The term “specialty market” has the same meaning as defined in G.S. 66-250 .

      (4c) The combined general rate applies to the gross receipts derived from providing telecommunications service and ancillary service, including any separately stated charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction. A person who provides telecommunications service or ancillary service is considered a retailer under this Article. These services are taxed in accordance with G.S. 105-164.4 C.

      (4d) The general rate applies to the gross receipts derived from the sale or recharge of prepaid telephone calling service. The tax applies regardless of whether tangible personal property, such as a card or a telephone, is transferred. The tax applies to a service that is sold in conjunction with prepaid wireless calling service. Prepaid telephone calling service is taxable at the point of sale instead of at the point of use and is sourced in accordance with G.S. 105-164.4B. Prepaid telephone calling service taxed under this subdivision is not subject to tax as a telecommunications service.

    5. Repealed by Session Laws 1998-212, s. 29A.1(a), effective May 1, 1999.
    6. The combined general rate applies to the gross receipts derived from providing video programming to a subscriber in this State, including any separately stated charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction. A cable service provider, a direct-to-home satellite service provider, and any other person engaged in the business of providing video programming is considered a retailer under this Article.

      (6a) The general rate applies to the gross receipts derived from providing satellite digital audio radio service. For services received by a mobile or portable station, the service is sourced to the subscriber’s business or home address. A person engaged in the business of providing satellite digital audio radio service is a retailer under this Article.

      (6b) Repealed by Session Laws 2019-169, s. 3.2, effective July 26, 2019.

    7. The combined general rate applies to the sales price of antique spirituous liquor and spirituous liquor other than mixed beverages. As used in this subdivision, the terms “antique spirituous liquor”, “spirituous liquor”, and “mixed beverage” have the meanings provided in G.S. 18B-101 .
    8. Repealed by Session Laws 2015-259, s. 4.2(b), effective October 1, 2015, and applicable to sales made on or after that date.
    9. The combined general rate applies to the gross receipts derived from sales of electricity and piped natural gas, including any separately stated charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction.
    10. The general rate of tax applies to the gross receipts derived from an admission charge to an entertainment activity. Gross receipts derived from an admission charge to an entertainment activity are taxable in accordance with G.S. 105-164.4G.
    11. The general rate of tax applies to the sales price of or the gross receipts derived from a service contract. A service contract is taxed in accordance with G.S. 105-164.4I.
    12. The general rate of tax applies to the sales price of or gross receipts derived from a prepaid meal plan. A bundle that includes a prepaid meal plan is taxable in accordance with G.S. 105-164.4D.
    13. Repealed by Session Laws 2017-204, s. 2.2. For effective date and applicability, see Editor’s note.
    14. , (14a)Expired pursuant to Session Laws 2014-39, s. 1(e), effective July 1, 2015.
    15. The combined general rate applies to the gross receipts derived from the sale of aviation gasoline and jet fuel.
    16. The general rate applies to the sales price of or the gross receipts derived from repair, maintenance, and installation services for real property and generally includes any tangible personal property or certain digital property that becomes a part of or is applied to a purchaser’s property. A mixed transaction contract and a real property contract are taxed in accordance with G.S. 105-164.4H. A property management contract is taxable in accordance with G.S. 105-164.4K.
  2. The tax levied in this section shall be collected from the retailer and paid by him at the time and in the manner as hereinafter provided. A person engaging in business as a retailer shall pay the tax required on the net taxable sales of the business at the rates specified when proper books are kept showing separately the gross proceeds of taxable and nontaxable sales of items subject to tax under subsection (a) of this section in a form that may be accurately and conveniently checked by the Secretary or the Secretary’s duly authorized agent. If the records are not kept separately, the tax shall be paid on the gross sales of the business and the exemptions and exclusions provided by this Article are not allowed. The tax levied in this section is in addition to all other taxes whether levied in the form of excise, license, privilege, or other taxes. The requirements of this subsection apply to facilitators liable for tax under this Article.
  3. Certificate of Registration. —  Before a person may engage in business as a retailer or a wholesale merchant in this State, the person must obtain a certificate of registration from the Department in accordance with G.S. 105-164.29 . A facilitator that is liable for tax under this Article must obtain a certificate of registration from the Department in accordance with G.S. 105-164.29 .

History. 1957, c. 1340, s. 5; 1959, c. 1259, s. 5; 1961, c. 826, s. 2; 1963, c. 1169, ss. 3, 11; 1967, c. 1110, s. 6; c. 1116; 1969, c. 1075, s. 5; 1971, c. 887, s. 1; 1973, c. 476, s. 193; c. 1287, s. 8; 1975, c. 752; 1977, c. 903; 1977, 2nd Sess., c. 1218; 1979, c. 17, s. 1; c. 22; c. 48, s. 1; c. 527, s. 1; c. 801, s. 73; 1981, c. 984, ss. 1, 2; 1981 (Reg. Sess., 1982), cc. 1207, 1273; 1983, c. 510; c. 713, ss. 89, 93; c. 805, ss. 1, 2; 1983 (Reg. Sess., 1984), c. 1065, ss. 1, 2, 4; c. 1097, ss. 6, 13; 1985, c. 704; 1985 (Reg. Sess., 1986), c. 925; c. 1005; 1987, c. 557, ss. 4, 5; c. 800, ss. 2, 3; c. 854, s. 1; 1987 (Reg. Sess., 1988), c. 1044, s. 4; 1989, c. 692, ss. 3.1, 3.3, 8.4(8); c. 770, s. 74.4; 1989 (Reg. Sess., 1990), c. 813, ss. 14, 15; 1991, c. 598, s. 5; c. 689, s. 311; c. 690, s. 1; 1993, c. 372, s. 1; c. 484, s. 2; 1995, c. 17, s. 6; c. 477, s. 1; 1996, 2nd Ex. Sess., c. 13, ss. 1.1, 9.1, 9.2; 1997-475, s. 1.1; 1998-22, s. 5; 1998-55, ss. 8, 14; 1998-98, ss. 13.2, 48(a), (b); 1998-121, ss. 3, 5; 1998-197, s. 1; 1998-212, s. 29A.1(a); 1999-337, ss. 29, 30; 1999-360, s. 3(a), (b); 1999-438, s. 1; 2000-140, s. 67(a); 2001-424, ss. 34.13(a), 34.17(a), 34.23(b), 34.25(a); 2001-430, ss. 3, 4, 5; 2001-476, ss. 17(b)-(d), (f); 2001-487, ss. 67(b), 122(a)-(c); 2002-16, s. 4; 2003-284, s. 38.1; 2003-400, s. 15; 2004-110, ss. 6.1, 6.2, 6.3; 2005-144, s. 9.1; 2005-276, ss. 33.1, 33.4(a), (b); 2006-33, ss. 2, 11; 2006-66, ss. 24.1(a), (b), (c), 24.19(a), (b); 2006-151, s. 3; 2007-145, s. 9(a); 2007-323, ss. 31.2(a), (b), 31.16.3(h), 31.16.4(g); 2007-397, s. 10(a)-(f); 2009-451, s. 27A.2(b), (e); 2010-31, s. 31.6(a); 2010-123, s. 10.2; 2011-330, s. 16; 2013-316, ss. 3.1(a), 4.1(c), (e), 5(b), 6(b); 2013-414, ss. 9, 40; 2014-3, ss. 4.1(b), 5.1(a), (f), 6.1(b), 7.1(b), 8.1(a), 14.8; 2014-39, s. 1(a); 2015-6, s. 2.1(b); 2015-98, s. 1(h); 2015-241, s. 32.18(b); 2015-259, ss. 4.1(b), 4.2(b); 2016-92, s. 2.3; 2016-94, s. 38.5(e); 2017-204, s. 2.2; 2018-5, s. 38.5(c); 2019-169, ss. 3.2, 3.4(a), 3.9(d); 2019-246, s. 7(a); 2020-58, s. 3.4.

Editor’s Note.

Session Laws 1998-121, s. 2, effective August 27, 1998, and applicable to taxes payable on or after July 1, 1998, repealed “Part 2 of Division II of Article 5 of Chapter 105.” This act probably intended to repeal G.S. 105-164.5 , which was the only section in Part 2 of Division II of Article 5. Effective August 14, 1998, Session Laws 1998-98, ss. 48(a) and (b) to 54, merged G.S. 105-164.4 to 105-164.12B into Division II, redesignated the Divisions of Article 5 as Part 1 to 8 with former Division II as Part 2 ( G.S. 105-164.4 to 105-164.12B). Subsequently 1998-217, s. 59, effective October 31, 1998, rewrote 1998-121, s. 2 to refer only to G.S. 105-164.5 .

Session Laws 2001-424, ss. 34.17(a) and 34.23(b) both added a subdivision (a)(6) to this section. The subdivision added by s. 34.23(b) has been renumbered (a)(7) at the direction of the Revisor of Statutes.

Session Laws 2001-424, s. 34.13(a), effective October 16, 2001, and applicable to sales made on or after that date, substituted “four and one-half percent (4 1/ 2%)” for “four percent” in the introductory language of subsection (a).

Session Laws 2001-424, s. 34.13(b), provides: “The provisions of this section [s. 34.13 of Session Laws 2001-424] increasing the general rate of State sales tax do not apply to construction materials purchased to fulfill a lump-sum or unit-price contract entered into or awarded before the effective date of the increase or entered into or awarded pursuant to a bid made before the effective date of the increase when the construction materials would otherwise be subject to the increased rate of tax provided under this section [s. 34.13 of Session Laws 2001-424].”

Session Laws 2001-424, s. 34.13(c), which amended the introductory language in subsection (a), as amended by Session Laws 2003-284, s. 38.1, as amended by Session Laws 2005-144, s. 9.1, as amended by Session Laws 2005-276, s. 33.1, as amended by 2006-66, s. 24.1(a), provides: “This section [s. 34.13 of Session Laws 2001-424] becomes effective October 16, 2001, and applies to sales made on or after that date. This section does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this section 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 2006-66, s. 24.1(a), deleted the second sentence, which read: “This section is repealed effective for sales made on or after July 1, 2007.”

Session Laws 2001-424, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2001’.”

Session Laws 2001-424, s. 36.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2001-2003 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2001-2003 fiscal biennium.”

Session Laws 2001-424, s. 36.5 is a severability clause.

Session Laws 2001-476, s. 17(f), as amended by Session Laws 2001-487, s. 122(b) and (c), effective July 1, 2005, and applicable to sales made on or after that date, rewrote the table in subdivision (a)(1g)b.

Session Laws 2001-476, s. 17(g), as amended by Session Laws 2001-487, s. 122(c), provides: “Subsections (b) and (c) of this section become effective January 1, 2002, and apply to sales made on or after that date. Subsection (f) of this section becomes effective July 1, 2005, and applies to sales made on or after that date. The remainder of this section is effective when it becomes law.”

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 2004-110, s. 6.4, provided for the expiration of subdivision (a)(1h) for sales made on or after October 1, 2007.

Session Laws 2004-110, s. 8.1, 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 the effective date of its amendment or repeal; nor does this act 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 2004-110, s. 6.2, reenacted subdivision (a)(1f)b, which had been repealed by Session Laws 2001-476, s. 17(b), effective January 1, 2002, and applicable to sales made on or after that date.

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

Session Laws 2009-451, s. 27A.2(a), provides: “Notwithstanding G.S. 105-164.4(a) , the general rate of tax for sales made on or after September 1, 2009, and before October 1, 2009, is five and one-half percent (5.5%).”

Session Laws 2009-451, s. 27A.2(e), provides: “This section does not apply to construction materials purchased to fulfill a lump-sum or unit-price contract entered into or awarded before the effective date of the increase or entered into or awarded pursuant to a bid made before the effective date of the increase when the construction materials would otherwise be subject to the increased rate of tax provided in this section.”

Session Laws 2009-451, s. 27A.2(f), as amended by Session Laws 2013-414, s. 51, provides: “Subsections (a) and (e) of this section are effective when they become law. The remainder of this section becomes effective October 1, 2009. Subsection (b) applies to sales made on or after October 1, 2009, and subsections (c) and (d) apply to distributions for months beginning on or after October 1, 2009. Subsections (b) through (d) of this section expire July 1, 2011. The general State rate of tax in effect on or after July 1, 2011, applies to gross receipts received on or after July 1, 2011, pursuant to a lease or rental agreement entered into during the period September 1, 2009, through June 30, 2011, for a definite, stipulated period of time. This section does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this section 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 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 2009-575, s. 22, provides: “If Senate Bill 202, 2009 Regular Session, becomes law, then a retailer is not liable for an overcollection or undercollection of sales tax if the retailer has made a good faith effort to comply with the law and collect the proper amount of tax and has, due to the change under Section 27A.2 of Senate Bill 202, 2009 Regular Session, in the rate of tax imposed under G.S. 105-164.4(a) , overcollected or undercollected the amount of sales tax that is due. This subsection applies only to the period beginning September 1, 2009, and ending October 1, 2009.” Senate Bill 202 is Session Laws 2009-451.

Session Laws 2010-31, s. 31.6(g), stated, in part, in its prefatory language that “This act becomes effective January 1, 2011.” The prefatory language was amended by Session Laws 2010-123 s. 10.2, to read “This section becomes effective January 1, 2011.”

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.

Session Laws 2011-330, s. 23, provides: “A facilitator is not liable for an overcollection or undercollection of sales tax or local occupancy tax if the facilitator has made a good faith effort to comply with the law and collect the proper amount of tax as the result of the change under Section 31.6 of S.L. 2010-31 regarding a facilitator’s collection and remittance obligations imposed under G.S. 105-164.4(a)(3), 153A-155(c), and 160A-215(c). This applies only to the period beginning January 1, 2011, and ending April 1, 2011.”

Subdivision (a)(16) was enacted as subdivision (a)(15) by Session Laws 2015-241, s. 32.18(b). It has been redesignated at the direction of the Revisor of Statutes.

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 .”

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 subdivision (a)(7) by Session Laws 2015-98, s. 1(h), 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 2015-241, s. 32.18(b), added a new subdivision (a)(15), effective March 1, 2016. Session Laws 2015-259, s. 4.1(b), also added a new subdivision (a)(15), effective January 1, 2016. At the direction of the Revisor of Statutes the subdivision added by Session Laws 2015-241, s. 32.18(b), has been redesignated as subdivision (a)(16).

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 2016-94, s. 38.5(a), provides: “A retailer is not liable for an undercollection of sales or use tax as a result of the changes made under Section 32.18 of S.L. 2015-241 and under Part V of S.L. 2015-259 if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax. This applies only to the period beginning March 1, 2016, and ending December 31, 2016.”

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.”

Session Laws 2016-94, s. 38.5(q) made the amendments to this section by Session Laws 2016-94, s. 38.5(d) applicable to sales made on or after January 1, 2017.

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

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 2019-169, s. 3.9(g), as amended by Session Laws 2019-246, s. 7(a), made the amendment to subdivision (a)(16) by Session Laws 2019-169, s. 3.9(d), effective July 26, 2019, and further provided: “The provisions of G.S. 105-164.15 A apply to the implementation of this change as if it is a decrease in the tax rate.”

Effect of Amendments.

Session Laws 2003-400, s. 15, effective January 1, 2004 and applicable to sales of modular homes on and after that date, added subdivision (a)(8).

Session Laws 2004-110, ss. 6.1, 6.2 and 6.3, effective October 1, 2004, and applicable to sales of electricity made on or after that date, repealed subdivision (a)(1g); reenacted subdivision (a)(1f)b; and added subdivision (1h). See Editor’s note for expiration of subdivision (a)(1h).

Session Laws 2005-276, s. 33.4(a), effective October 1, 2005, and s. 33.4(b), effective January 1, 2006, in subdivision (a)(1b), substituted “aircraft or boat” for “aircraft, boat, railway car, or locomotive”; deleted subdivisions (a)(1c) through (a)(1e); in subdivision (a)(4c) and (a)(7), substituted “combined general rate” for “rate of six percent (6%)”; and rewrote subdivision (a)(6); and added subdivision (a)(6a).

Session Laws 2006-33, s. 2, effective January 1, 2007, in subdivision (a)(4c), inserted “service and ancillary” preceding “service” in the first sentence, and “or ancillary service” in the second sentence and rewrote the last sentence; and added the third sentence in subdivision (a)(4d).

Session Laws 2006-33, s. 11, effective July 1, 2006, and applicable to purchases made on or after that date, rewrote subdivision (a)(8).

Session Laws 2006-66, s. 24.1(b), effective December 1, 2006, and applies to sales made on or after that date, substituted “four and one-quarter percent (4.25%)” for “four and one half percent (4 1/2%)” in the introductory language of subsection (a).

Session Laws 2006-66, s. 24.1(c), as amended by Session Laws 2007-145, s. 9(a), effective July 1, 2007, and applicable to sales made on or after that date, substituted “four percent (4%)” for “four and one quarter percent (4.25%)” in the introductory language of subsection (a). The amendment to subsection (a) made by Session Laws 2006-66, s. 24.1(c), was repealed by Session Laws 2007-323, s. 31.2(a), (b), effective July 31, 2007.

Session Laws 2006-66, s. 24.19(a), effective July 1, 2007, and applicable to sales made on or after that date, repealed subdivision (a)(1f)b.

Session Laws 2006-66, s. 24.19(b), effective July 1, 2007, and applicable to sales made on or after that date, added new subdivision (a)(1i).

Session Laws 2006-151, s. 3, effective January 1, 2007, in subdivision (a)(6), substituted “video programming” for “any of the following broadcast services” in the first sentence, and rewrote the second sentence, which read: “A person engaged in the business of providing any of these services is considered a retailer under this Article: a. Direct-to-home satellite service. b. Cable service.”

Session Laws 2007-323, s. 31.16.3(h), effective October 1, 2008, and applicable to sales occurring on or after October 1, 2008, substituted “four and one-half percent (4.5%)” for “four and one quarter percent (4.25%)” at the end of the introductory language of subsection (a).

Session Laws 2007-323, s. 31.16.4(g), effective October 1, 2009, and applicable to sales occurring on or after October 1, 2009, substituted “four and three-quarters percent (4.75%)” for “four and one half percent (4.5%)” at the end of the introductory language of subsection (a).

Session Laws 2007-397, s. 10(a)-(c), effective October 1, 2007, and applicable to sales occurring on or after that date, repealed subdivision (a)(1i); rewrote subdivision (a)(1f); and added subdivision (a)(1j).

Session Laws 2007-397, s. 10(d), effective July 1, 2008, and applicable to sales occurring on or after that date, substituted “one and four-tenths percent (1.4%)” for “one and eight-tenths percent (1.8%)” in subdivision (a)(1j).

Session Laws 2007-397, s. 10(e), effective July 1, 2009, and applicable to sales occurring on or after that date, substituted “eight-tenths percent (0.8%)” for “one and four-tenths percent (1.4%)” in subdivision (a)(1j).

Session Laws 2007-397, s. 10(f), effective July 1, 2010, and applicable to sales occurring on or after that date, repealed subdivision (a)(1j).

Session Laws 2009-451, s. 27A.2(b), effective October 1, 2009, and applicable to sales made on or after that date, and expiring July 1, 2011, substituted “five and three-quarters percent (5.75%)” for “four and three-quarters percent (4.75%)” in the introductory language of subsection (a).

Session Laws 2009-451, s. 27A.3(e), effective January 1, 2010, and applicable to sales made on or after that date, added subdivision (a)(6b).

Session Laws 2010-31, s. 31.6(a), as amended by Session Laws 2010-123, s. 10.2, effective January 1, 2011, and applicable to gross receipts derived from the rental of an accommodation that a consumer occupies or has the right to occupy on or after that date, rewrote subdivision (a)(3).

Session Laws 2011-330, s. 16, effective June 27, 2011, in the first paragraph of subdivision (a)(3), inserted the clause (i) and (ii) designations, added clause (iii), and made a minor stylistic change.

Session Laws 2013-316, ss. 3.1(a), 5(b), and 6(b), effective January 1, 2014, in subdivision (a)(1a), substituted “general rate” for “rate of two percent (2%)” and deleted the second and third sentences; substituted “general rate” for “rate of two and one-half percent (2.5%)” in subdivision (a)(8); and added subdivisions (a)(10) and (a)(11). For applicability, see editor’s notes.

Session Laws 2013-316, s. 4.1(c), (e), effective July 1, 2014, repealed subdivisions (a)(1f) and (a)(4a) and added subdivision (a)(9). For applicability, see editor’s note.

Session Laws 2013-414, ss. 9 and 40, effective August 23, 2013, in the third paragraph of subdivision (a)(3), deleted “within three business days of receiving the notice” following “facilitator is completed and,” and added “no later than 10 days after the end of each calendar month” at the end of the third sentence; and, in the introductory language of subdivision (a)(6b), inserted “sales price of” and “that is sold at retail and” in the first sentence.

Session Laws 2014-3, s. 4.1(b), effective May 29, 2014, added subdivision (a)(12). See Editor’s note for applicability.

Session Laws 2014-3, s. 5.1(a), effective May 29, 2014, in subsection (a), inserted the present second sentence in the introductory paragraph, and rewrote subdivision (a)(10). See Editor’s note for applicability.

Session Laws 2014-3, s. 6.1(b), effective October 1, 2014, in subsection (a)(11), inserted “or the gross receipts derived from” in the first sentence and added the last sentence. See Editor’s note for applicability.

Session Laws 2014-3, s. 7.1(b), effective January 1, 2015, added subdivision (a)(13). See Editor’s note for applicability.

Session Laws 2014-3, s. 8.1(a), effective June 1, 2014, in the introductory language of subsection (a), in the first sentence, deleted “following” preceding “percentage rates” and substituted “listed in this subsection” for “as appropriate”, and added the last sentence. See Editor’s note for applicability.

Session Laws 2014-3, s. 14.8, effective May 29, 2014, in subsection (a), inserted “engaged in business in the State” in the first sentence of the first paragraph, inserted “or other event” twice in subdivision (a)(4b), and rewrote the first sentence in subdivision (a)(4d); rewrote subsection (b); in subsection (c), inserted “in this State” in the first sentence, and added the second sentence; and made a minor stylistic change.

Session Laws 2014-39, s. 1(a), added subdivisions (a)(14) and (a)(14a). See Editor’s note, for effective date, applicability, and expiration.

Session Laws 2015-98, s. 1(h), inserted “antique spirituous liquor and” in the first sentence, and inserted “antique spirituous liquor” and made related changes in the second sentence. For effective date, see editor’s notes.

Session Laws 2015-241, s. 32.18(b), effective March 1, 2016, added subdivision (a)(15). For applicability, see editor’s note.

Session Laws 2015-259, s. 4.1(b), added subdivision (a)(15). For effective date and applicability, see Editor’s note.

Session Laws 2015-259, s. 4.2(b), rewrote subdivision (a)(1a), substituted “the boat” for “the item” in the first sentence of subdivision (a)(1b), and deleted subdivision (a)(8), which read: “The general rate applies to the sales price of each modular home sold at retail, including all accessories attached to the modular home when it is delivered to the purchaser. The sale of a modular home to a modular homebuilder is considered a retail sale. A person who sells a modular home at retail is allowed a credit against the tax imposed by this subdivision for sales or use tax paid to another state on tangible personal property incorporated in the modular home. The retail sale of a modular home occurs when a modular home manufacturer sells a modular home to a modular homebuilder or directly to the end user of the modular home.” For effective date and applicability, see Editor’s note.

Session Laws 2016-92, s. 2.3, effective July 11, 2016, added “and certain facilitators” to the section heading; added the last sentence in subsection (b); and substituted “under this Article” for “under G.S. 105-164.4 F” in subsection (c).

Session Laws 2016-94, s. 38.5(e), effective January 1, 2017, added the last sentence in subdivision (a)(1); in the first sentence of subdivision (a)(13), substituted “an item or service subject to tax under this Article” for “tangible personal property” and substituted “or to fulfill a real property contract” for “in erecting structures, building on, or otherwise improving, altering, or repairing real property”; and added “and includes any tangible to a purchaser’s property that becomes a part of or is applied to a purchaser’s property” at the end of subdivision (16). See editor’s note for applicability.

Session Laws 2017-204, s. 2.2, inserted the second sentence in subdivision (a)(1); added “no matter that the modular home may be used to fulfill a real property contract” at the end of the first sentence of sub-subdivision (a)(1a)b.; deleted former subdivision (a)(13), which concerned the general rate of tax; and, in subdivision (a)(16), inserted “generally” in the first sentence, and added the last sentence. For effective date and applicability, see editor’s note.

Session Laws 2018-5, s. 38.5(c), effective June 12, 2018, in subdivision (a)(1), added the third sentence; in subdivision (a)(1a), in the introductory paragraph, substituted “purchaser, and to the sales price of or the gross receipts derived from repair, maintenance, and installation services for each of the following items. The items taxable under this subdivision are as follows:” for “purchaser:”; in sub-subdivision (a)(1a)c., added the last sentence; in subdivision (a)(1b), added the last sentence; in subdivision (a)(6b), in the introductory paragraph, added the third sentence; and in subdivision (a)(16), added “for real property” in the first sentence.

Session Laws 2019-169, ss. 3.2, 3.4(a), effective July 26, 2019, inserted “including any separately stated charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction” in subdivisions (4c), (6) and (9); rewrote subdivision (1); substituted “to the purchaser” for “to the purchaser, and to the sales price of or the gross receipts derived from repair, maintenance, and installation services for each of the following items. The items taxable under this subdivision are as follows” in the introductory paragraph of subdivision (1a); deleted the former last sentence of sub-subdivision (1a)c., which read: “The maximum tax does not apply to the sales price of or gross receipts derived from repair, maintenance, and installation services, but the use tax exemption in G.S. 105-164.27 A(a3) may apply to these services.”; deleted the former last sentence of subdivision (1b), which read: “The maximum tax does not apply to the sales price of or gross receipts derived from the sales price of or gross receipts derived from repair, maintenance, and installation services, but the use tax exemption in G.S. 105-164.27 A(a3) may apply to these services.”; deleted subdivision (6b); and inserted “certain” in subdivision (16).

Session Laws 2019-169, s. 3.9(d), in subdivision (a)(16), inserted “certain” in the first sentence and added the last sentence. For effective date and applicability, see editor’s note.

Session Laws 2020-58, s. 3.4, effective June 30, 2020, added the last sentence in sub-subdivision (a)(1)b.

Legal Periodicals.

For article, “Transferring North Carolina Real Estate Part I: How the Present System Functions,” see 49 N.C.L. Rev. 413 (1971).

For survey of 1979 tax law, see 58 N.C.L. Rev. 1548 (1980).

For survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

See legislative survey, 21 Campbell L. Rev. 323 (1999).

For article, “A Time for Action: Reforming the North Carolina Tax Code,” see 88 N.C.L. Rev. 1A (2010).

For article, “Constitutional Threats in the E-Commerce Jungle: First Amendment and Dormant Commerce Clause Limits on Amazon Laws and Use Tax Reporting Statutes,” see 89 N.C.L. Rev. 2011 (2011).

CASE NOTES

Analysis

I.General Consideration

The purpose of North Carolina’s sales and use tax scheme is two-fold. The primary purpose is, of course, to generate revenue for the State. The sales tax is, in effect, a tax imposed upon the retail merchant as a privilege tax for the right to engage in that business. The tax is, however, designed to be passed on to the consumer. The second purpose of the sales and use tax scheme is to equalize the tax burden on all State residents. This is achieved through imposition of the use tax in certain situations where the sales tax is not applicable. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The chief function of the Sales and Use Tax Act is to prevent the evasion of a sales tax by persons purchasing tangible personal property outside of North Carolina for storage, use or consumption within the State. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Constitutionality. —

G.S. 105-164.4(a)(6), which imposes a sales tax on direct-to-home satellite service, but not on cable television service, does not discriminate against satellite providers in favor of cable companies on its face and in its practical effect because the differential tax results solely from differences between the nature of the provision of satellite and cable services, and not from the geographical location of the businesses. DirecTV, Inc. v. State, 178 N.C. App. 659, 632 S.E.2d 543, 2006 N.C. App. LEXIS 1651 (2006).

Distinctions Between Sales and Use Taxes and Property Taxes. —

See Sykes v. Clayton, 274 N.C. 398 , 163 S.E.2d 775, 1968 N.C. LEXIS 793 (1968).

Sales and Use Taxes Differ in Conception. —

While a sales tax and a use tax in many instances may bring about the same result, they are different in conception. They are assessments upon different transactions and are bottomed on distinguishable taxable events. Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673 , 151 S.E.2d 574, 1966 N.C. LEXIS 1282 (1966); In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The purpose of the use tax as indicated by the legislative histories of use and sales taxes is to impose the same burdens on out-of-state purchases as the sales tax imposes on purchases within the State. Rent-A-Car Co. v. Lynch, 39 N.C. App. 709, 251 S.E.2d 917, 1979 N.C. App. LEXIS 2563 , rev'd, 298 N.C. 559 , 259 S.E.2d 564, 1979 N.C. LEXIS 1383 (1979).

A sales tax is a tax on the freedom of purchase. Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673 , 151 S.E.2d 574, 1966 N.C. LEXIS 1282 (1966).

Hence, It Burdens Interstate Commerce. —

A sales tax, when applied to interstate transactions, is a tax on the privilege of doing interstate business, creates a burden on interstate commerce, and runs counter to the Commerce Clause of the federal Constitution. Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673 , 151 S.E.2d 574, 1966 N.C. LEXIS 1282 (1966).

And the sales tax cannot constitutionally be imposed upon interstate sales since it would then be a tax upon the privilege of doing interstate business, and would constitute a burden upon interstate commerce in violation of the commerce clause of the United States Constitution. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

But Use Tax Is Tax on Enjoyment After Sale Has Spent Interstate Character. —

A use tax is a tax on the enjoyment of that which was purchased after a sale has spent its interstate character. Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673 , 151 S.E.2d 574, 1966 N.C. LEXIS 1282 (1966).

The use tax does not impermissibly burden interstate commerce since it is a tax imposed on the enjoyment of goods after the sale has already spent its interstate character. It is designed to complement the sales tax and to reach transactions which cannot constitutionally be subject to a sales tax. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Merchants are statutory agents for the collection of the tax on sales, which is definitely imposed upon the consumer, and their responsibility arises on the assumption that they must so collect. Henderson v. Gill, 229 N.C. 313 , 49 S.E.2d 754, 1948 N.C. LEXIS 320 (1948).

The sales tax is a tax on the retailer. In re Newsom Oil Co., 273 N.C. 383 , 160 S.E.2d 98, 1968 N.C. LEXIS 607 (1968).

This section imposes the sales tax on all retailers, as a class, and applies it alike in its exactions and exemptions to all persons belonging to the prescribed class. Fisher v. Jones, 15 N.C. App. 737, 190 S.E.2d 663, 1972 N.C. App. LEXIS 2017 (1972).

And Is a Privilege Tax. —

Taxes under this section are not imposed upon the consumer, but are rather a privilege tax for engaging in business. Telerent Leasing Corp. v. High, 8 N.C. App. 179, 174 S.E.2d 11, 1970 N.C. App. LEXIS 1513 (1970).

This section imposes a privilege or license tax upon retailers and not a tax on purchasers or consumers. Fisher v. Jones, 15 N.C. App. 737, 190 S.E.2d 663, 1972 N.C. App. LEXIS 2017 (1972).

The sales tax is primarily a privilege or license tax on retailers, and not a tax on consumers. Rent-A-Car Co. v. Lynch, 39 N.C. App. 709, 251 S.E.2d 917, 1979 N.C. App. LEXIS 2563 , rev'd, 298 N.C. 559 , 259 S.E.2d 564, 1979 N.C. LEXIS 1383 (1979).

But Sales Tax Intended to Be Passed on to Consumer. —

Even though the sales tax is primarily a license or privilege tax on retailers, the intent of the law is that the sales tax be passed on to the consumer. Rent-A-Car Co. v. Lynch, 39 N.C. App. 709, 251 S.E.2d 917, 1979 N.C. App. LEXIS 2563 , rev'd, 298 N.C. 559 , 259 S.E.2d 564, 1979 N.C. LEXIS 1383 (1979).

No Double Taxation. —

The sales/use tax is, by its terms, levied upon the “retailer.” There is, perforce, no double levy on any one object of taxation, where the two different sections of the sales/use tax impose two separate taxes on two separate people for two separate transactions. Telerent Leasing Corp. v. High, 8 N.C. App. 179, 174 S.E.2d 11, 1970 N.C. App. LEXIS 1513 (1970).

Perfect Equality in Collection of Tax Is Impossible. —

Perfect equality in the collection of the tax by retailers from consumers is, as a practical matter, impossible as between almost any two or more retailers by reason of the differences in types of merchandise sold and selling methods. If the accidents of trade lead to inequality or hardships, the consequences must be accepted as inherent in government by law instead of government by edict. Fisher v. Jones, 15 N.C. App. 737, 190 S.E.2d 663, 1972 N.C. App. LEXIS 2017 (1972).

Taxable event for assessment of the sales tax occurs at the time of sale and purchase within the State. Colonial Pipeline Co. v. Clayton, 275 N.C. 215 , 166 S.E.2d 671, 1969 N.C. LEXIS 376 (1969).

The language in the exemption under subdivision (1) of this section, “the tax levied under this subdivision,” refers to the sales or use tax imposed under this section. Rent-A-Car Co. v. Lynch, 39 N.C. App. 709, 251 S.E.2d 917, 1979 N.C. App. LEXIS 2563 , rev'd, 298 N.C. 559 , 259 S.E.2d 564, 1979 N.C. LEXIS 1383 (1979).

Provisos Create Class of Transactions Taxed at Lower Rate. —

Provisos incorporated into this section create a class of transactions as to which the tax is computed at a smaller percentage of the sale price, coupled in some instances with a limitation of the maximum tax to be imposed on account of the sale of any single article within the category. Hatteras Yacht Co. v. High, 265 N.C. 653 , 144 S.E.2d 821 (1965)decided prior to the second 1967 amendment .

And Are Strictly Construed. —

A proviso in a statute taxing certain transactions at a lower rate than that made applicable in general, or providing that as to certain transactions the total tax shall not exceed a specified amount, there being no such limitation generally, is a partial exemption and is, therefore, to be strictly construed against the claim of such special or preferred treatment. Hatteras Yacht Co. v. High, 265 N.C. 653 , 144 S.E.2d 821, 1965 N.C. LEXIS 1072 (1965).

The expression “total net taxable sales” and expressions of similar purport, as used in this Article, means the total of all retail sales, except those excluded in whole or in part by Part 1 of Division II, which imposes and levies the tax, and except those which are exempt under G.S. 105-164.13 . Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

Retail merchants may themselves make retail purchases. Long Mfg. Co. v. Johnson, 264 N.C. 12 , 140 S.E.2d 744, 1965 N.C. LEXIS 1101 (1965).

And when they do, they must like any other purchaser, pay the retail sales tax. Long Mfg. Co. v. Johnson, 264 N.C. 12 , 140 S.E.2d 744, 1965 N.C. LEXIS 1101 (1965).

Retailer as Actual User and Ultimate Consumer. —

Petitioner’s sale of propane gas tanks to retailers, who brought them for the purpose of placing them on the premises of their retail gas customers, constituted retail sales upon which petitioner should have collected the sales tax from the retailers, who were not purchasing the particular property for resale or rental, but were the actual users and ultimate consumers of the tanks in question. Long Mfg. Co. v. Johnson, 264 N.C. 12 , 140 S.E.2d 744, 1965 N.C. LEXIS 1101 (1965).

Lessor Has Burden to Show That Leasing Transactions Constituted Sale for Resale. —

A lessor of television sets who had not procured resale certificates from any of its customers had the burden to show that its leasing transactions constituted a sale for resale, entitling the lessor to an exemption from the sales tax. Telerent Leasing Corp. v. High, 8 N.C. App. 179, 174 S.E.2d 11, 1970 N.C. App. LEXIS 1513 (1970).

Erroneous Advice of Agent of Department of Revenue. —

The State is not estopped to collect the retail sales tax levied by this section by the action of an agent of the Department of Revenue in erroneously advising the merchant that certain sales were not subject to the tax, notwithstanding that the merchant was thereby deprived of the opportunity to collect the tax from his customers. Henderson v. Gill, 229 N.C. 313 , 49 S.E.2d 754, 1948 N.C. LEXIS 320 (1948).

Exemption from State Sales Tax Does Not Preclude Local Sales Taxation. —

The limitation, in G.S. 105-467(1), of local sales tax to sales “subject to” the State sales tax refers not to those transactions for which a state sales tax is actually assessed, but to any transaction described in subdivision (1) of this section without regard to whether the transaction might be exempted or excluded from taxation by the operation of G.S. 105-164.13 . Thus, exemption from state sales tax does not preclude the assessment of a local sales tax. Gregory Poole Equipment Co. v. Coble, 38 N.C. App. 483, 248 S.E.2d 378, 1978 N.C. App. LEXIS 2223 (1978), aff'd, 297 N.C. 19 , 252 S.E.2d 729, 1979 N.C. LEXIS 1111 (1979).

Taxpayer Has Burden of Showing Lower Tax Rate Applies. —

When a taxing statute provides a lower tax rate than is generally applied, a partial exemption is created; the taxpayer claiming an exemption has the burden of showing that he comes within that exception. Deep River Farms, Ltd. v. Lynch, 58 N.C. App. 165, 292 S.E.2d 752, 1982 N.C. App. LEXIS 2737 (1982).

Plaintiff was entitled to a refund of $1,500, because that sum was the rate by which the previous tax was computed, when the relevant purchases were made in North Carolina, which imposed a sales tax at the rate of 3-percent up to a maximum of $1,500 and the Michigan Use Tax Act, MCLS 205.91 et seq., did not specifically address the implications of an out-of-state purchase where the amount of sales or use tax collected had a cap; North Carolina’s sales tax cap should be included in the computation of the taxpayer’s refund entitlement in order to give effect to the entirety of both G.S. 105-164.4(a)(1b) and MCLS 205.94(1)(e). Fisher & Co. v. Dep't of Treasury, 282 Mich. App. 207, 769 N.W.2d 740, 2009 Mich. App. LEXIS 604 (Mich. Ct. App. 2009).

Building Materials. —

For decisions under the former statute relating to tax on building materials, see Watson Indus. v. Shaw, 235 N.C. 203 , 69 S.E.2d 505, 1952 N.C. LEXIS 376 (1952); Robinson & Hale, Inc. v. Shaw, 242 N.C. 486 , 87 S.E.2d 909, 1955 N.C. LEXIS 519 (1955).

A sales tax on retailers who sell merchandise through vending machines (including items sold for less than ten cents where it is impossible to recoup the tax from the purchaser) does not violate constitutional provisions relating to due process and equal protection. Fisher v. Jones, 15 N.C. App. 737, 190 S.E.2d 663, 1972 N.C. App. LEXIS 2017 (1972).

Online travel companies were not retailers (and therefore not subject to tax) under the plain language of G.S. 105-164.4(a)(3) because a business that arranged for the rental of hotel rooms over the internet, but that did not physically provide the rooms, was not a business that was of a similar type to a hotel, motel, or tourist home or camp; any different conclusion would have been inconsistent with the canon of ejusdem generis. Pitt County v. Hotels.Com, L.P., 553 F.3d 308, 2009 U.S. App. LEXIS 552 (4th Cir. 2009).

Online travel companies had no liability under the respective ordinances of Wake, Dare, Buncombe, and Mecklenburg Counties in North Carolina for failure to collect and remit an occupancy tax on the sale price the companies imposed on consumers because the companies were neither operators, nor retailers within the meaning of N.C. Gen. Stat. § 105-164.4(a)(3). Therefore, the counties were not authorized to impose the taxes on the companies’ gross receipts under N.C. Gen. Stat. § 153A-146. Wake County v. Hotels.com, L.P., 235 N.C. App. 633, 762 S.E.2d 477, 2014 N.C. App. LEXIS 897 (2014).

Cape Hatteras Electric Membership Corporation. —

Although G.S. 105-164.4(a)(4a) and G.S. 105-228.90(b)(5) standing alone served as a basis for imposing sales tax on the Cape Hatteras Electric Membership Corporation (CHEMC), An Act To Declare Cape Hatteras Electric Membership Corporation To Be A Public Agency And Provide That It Shall Be Exempt From Certain Taxation exempted CHEMC from sales tax as sales tax was only levied on those entities that were already subject to the franchise tax, and in essence did not increase the tax burden. Cape Hatteras Elec. Mbrshp. Corp. v. Lay, 210 N.C. App. 92, 708 S.E.2d 399, 2011 N.C. App. LEXIS 307 (2011).

II.Manufacturing

Term “Manufacturing” Not Definable with Complete Precision. —

The term “manufacturing” as used in tax statutes is not susceptible of an exact and all-embracing definition, for it has many applications and meanings. Master Hatcheries, Inc. v. Coble, 286 N.C. 518 , 212 S.E.2d 150, 1975 N.C. LEXIS 1247 (1975).

A commercial hatchery is a manufacturing industry or plant within the meaning of paragraph (1)h (now (1d)b.). Master Hatcheries, Inc. v. Coble, 286 N.C. 518 , 212 S.E.2d 150, 1975 N.C. LEXIS 1247 (1975).

A restaurant is not a manufacturer as that term is used in subdivision (1)(h) (now (1d)b) of this section. Hed, Inc. v. Powers, 84 N.C. App. 292, 352 S.E.2d 265, 1987 N.C. App. LEXIS 2477 (1987).

III.Fuels.

When Fuel Exempted from Sales and Use Taxes. —

When fuel is the product of a mine and sold by the producer in its original unmanufactured state, it is exempt from sales and use taxes. Duke Power Co. v. Clayton, 274 N.C. 505 , 164 S.E.2d 289, 1968 N.C. LEXIS 807 (1968).

IV.Machinery Used in Agriculture

Hydroponic Growing Systems Are Not “Machines”. —

The definition of “machines” in paragraph g of subdivision (1) (now (1d)a.) of this section does not include a greenhouse-like structure used for hydroponic growing of tomatoes, as the hydroponic growing systems required substantial human activity within the system in order for the tomatoes to be cultivated and harvested. Deep River Farms, Ltd. v. Lynch, 58 N.C. App. 165, 292 S.E.2d 752, 1982 N.C. App. LEXIS 2737 (1982).

V.Leases and Rentals

The language in subdivision (2) clearly contemplates a rental paid periodically in cash or in commodities or services having a monetary value. Long Mfg. Co. v. Johnson, 264 N.C. 12 , 140 S.E.2d 744, 1965 N.C. LEXIS 1101 (1965).

Taxing of Both Rental of Room and Leasing of Television Located Therein. —

The imposition of a sales/use tax on the gross rental of a motel or hotel room as well as on the gross proceeds from the leasing of a television set located in that room does not constitute double taxation. Telerent Leasing Corp. v. High, 8 N.C. App. 179, 174 S.E.2d 11, 1970 N.C. App. LEXIS 1513 (1970).

Monthly Equipment and Maintenance Charges. —

Where a corporation that designed, manufactured, leased and sold computers and other business machines and equipment, in leasing such machines and equipment, required lessees to agree to pay both a “monthly equipment charge” and a “base monthly maintenance charge,” both charges were part of the gross proceeds derived from the renting of machines and equipment within the contemplation of this section. Sperry Corp. v. Lynch, 76 N.C. App. 327, 332 S.E.2d 757, 1985 N.C. App. LEXIS 3857 (1985).

VI.Cleaning and Laundering Facilities

Cleaning and Laundering Facilities. —

A coin-operated laundry, which is a commercial establishment in which automatic washing machines, dryers and dry-cleaning machines are installed for the use and convenience of the general public, is a “launderette” or “launderall” as those terms are used in subdivision (4) of this section and is subject to the tax levied upon laundries in that subdivision. Fisher v. Jones, 15 N.C. App. 737, 190 S.E.2d 663, 1972 N.C. App. LEXIS 2017 (1972).

Apartment Owners Must Pay Sales Tax on Laundry Machine Receipts. —

The General Assembly did not intend by the 1975 amendment to G.S. 105-85 , exempting apartment owners from the privilege license tax on laundries, to exclude the payment of sales tax by apartment owners on the gross receipts from coin-operated washers and dryers. Master Hatcheries, Inc. v. Coble, 286 N.C. 518 , 212 S.E.2d 150, 1975 N.C. LEXIS 1247 (1975).

Online travel companies were not “hotel operators” as contemplated by G.S. 105-164.4(a)(3); thus, the companies were neither retailers subjected to the North Carolina state sales tax under G.S. 105-164.4(a)(3) nor were they subjected to allegations by Pitt County that they underpaid the Occupancy Tax imposed by Pitt County, N.C. Code of Ordinances § 8-50 et seq., which levied this tax on the gross receipts derived from the rental of accommodations subject to sales tax under State law. Pitt County v. Hotels.com, L.P., 2007 U.S. Dist. LEXIS 85910 (E.D.N.C. Aug. 12, 2007), aff'd, 553 F.3d 308, 2009 U.S. App. LEXIS 552 (4th Cir. 2009).

VII.Decisions Under Former Law

Editor’s Note. —

The cases below were decided under former G.S. 105-37.1 and G.S. 105-38.1 .

Constitutionality. —

Imposition of a privilege tax on a live entertainment business under, G.S. 105-37.1 , after the application of this tax to movie theaters had been legislatively removed, without a rational basis, was unconstitutional. Deadwood, Inc. v. N.C. Dep't of Revenue, 148 N.C. App. 122, 557 S.E.2d 596, 2001 N.C. App. LEXIS 1275 (2001), rev'd, 356 N.C. 407 , 572 S.E.2d 103, 2002 N.C. LEXIS 1114 (2002).

Legislature had a rational basis for taxing businesses hosting live entertainment differently than moving picture shows, because the former placed greater demands on public resources, created greater risks, and generated larger revenues than the latter. Deadwood, Inc. v. N.C. Dep't of Revenue, 356 N.C. 407 , 572 S.E.2d 103, 2002 N.C. LEXIS 1114 (2002).

Taxpayer’s payment of sales tax on admissions it received for entertainment did not relieve it of payment of a tax under this provision. Deadwood, Inc. v. N.C. Dep't of Revenue, 148 N.C. App. 122, 557 S.E.2d 596, 2001 N.C. App. LEXIS 1275 (2001), rev'd, 356 N.C. 407 , 572 S.E.2d 103, 2002 N.C. LEXIS 1114 (2002).

OPINIONS OF ATTORNEY GENERAL

conducted on the business premises of a rug cleaner but is not applicable to gross receipts from rug cleaning services conducted on the premises of the rug cleaner’s customer. See opinion of Attorney General to Mr. Eric L. Gooch, Sales and Use Tax Division, N.C. Department of Revenue, 42 N.C. Op. Att'y Gen. 35 (1972).

§ 105-164.4A. [Repealed]

Repealed by Session Laws 2005-276, s. 33.5, effective January 1, 2006.

§ 105-164.4B. Sourcing principles.

  1. General Principles. —  The following principles apply in determining where to source the sale of an item for the seller’s purpose and do not alter the application of the tax imposed under G.S. 105-164.6 . Except as otherwise provided in this section, a service is sourced where the purchaser can potentially first make use of the service. These principles apply regardless of the nature of the item, except as otherwise noted in this section:
    1. When a purchaser receives an item at a business location of the seller, the sale is sourced to that business location.
    2. When a purchaser or purchaser’s donee receives an item at a location specified by the purchaser and the location is not a business location of the seller, the sale is sourced to the location where the purchaser or the purchaser’s donee receives the item.
    3. When subdivisions (1) and (2) of this subsection do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller’s business when use of this address does not constitute bad faith.
    4. When subdivisions (1), (2), and (3) of this subsection do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser’s payment instrument, if no other address is available, when use of this address does not constitute bad faith.
    5. When subdivisions (1), (2), (3), and (4) of this subsection do not apply, including the circumstance in which the seller is without sufficient information to apply the rules, the location will be determined based on the following:
      1. Address from which tangible personal property was shipped,
      2. Address from which the digital good or the computer software delivered electronically was first available for transmission by the seller, or
      3. Address from which the service was provided.
  2. Periodic Rental Payments. —  When a lease or rental agreement requires recurring periodic payments, the payments are sourced as follows:
    1. For leased or rented property, the first payment is sourced in accordance with the principles set out in subsection (a) of this section and each subsequent payment is sourced to the primary location of the leased or rented property for the period covered by the payment. This subdivision applies to all property except a motor vehicle, an aircraft, transportation equipment, and a utility company railway car.
    2. For leased or rented property that is a motor vehicle or an aircraft but is not transportation equipment, all payments are sourced to the primary location of the leased or rented property for the period covered by the payment.
    3. For leased or rented property that is transportation equipment, all payments are sourced in accordance with the principles set out in subsection (a) of this section.
    4. For a railway car that is leased or rented by a utility company and would be transportation equipment if it were used in interstate commerce, all payments are sourced in accordance with the principles set out in subsection (a) of this section.
  3. Transportation Equipment Defined. —  As used in the section, the term “transportation equipment” means any of the following used to carry persons or property in interstate commerce: a locomotive, a railway car, a commercial motor vehicle as defined in G.S. 20-4.01 , or an aircraft. The term includes a container designed for use on the equipment and a component part of the equipment.
  4. Exceptions. —  This section does not apply to the following:
    1. Telecommunications services. —  Telecommunications services are sourced in accordance with G.S. 105-164.4 C.
    2. Direct mail. —  Direct mail is sourced in accordance with G.S. 105-164.4 E.
    3. Florist wire sale. —  A florist wire sale is sourced to the business location of the florist that takes an order for the sale. A “florist wire sale” is a sale in which a retail florist takes a customer’s order and transmits the order to another retail florist to be filled and delivered.
  5. Accommodations. —  The rental of an accommodation, as defined in G.S. 105-164.4 F, is sourced to the location of the accommodation.
  6. Certain Digital Property. —  A purchaser receives certain digital property when the purchaser takes possession of the property or makes first use of the property, whichever comes first.
  7. Prepaid Meal Plan. —  The gross receipts derived from a prepaid meal plan are sourced to the location where the food or prepared food is available to be consumed by the person.
  8. Admissions. —  The gross receipts derived from an admission charge, as defined in G.S. 105-164.4 G, are sourced in accordance with G.S. 105-164.4 G.
  9. Computer Software Renewal. —  The gross receipts derived from the renewal of a service contract for prewritten software is generally sourced pursuant to subdivision (a) of this section. However, sourcing the renewal to an address where the purchaser received the underlying prewritten software does not constitute bad faith provided the seller has not received information from the purchaser that indicates a change in the location of the underlying software.

History. 2001-347, s. 2.9; 2002-16, s. 5; 2003-284, s. 45.3; 2004-170, s. 20; 2006-33, s. 3; 2006-66, s. 24.13(a); 2008-187, s. 42; 2009-445, s. 12; 2010-31, s. 31.6(b); 2010-123, s. 10.2; 2011-330, s. 29; 2012-79, s. 2.8; 2013-414, s. 23(b); 2014-3, ss. 4.1(c), 5.1(b); 2016-5, s. 3.3; 2017-204, s. 2.3; 2018-5, s. 38.5(d); 2019-169, s. 3.3(a).

Editor’s Note.

A new G.S. 105-164.4 B, relating to tax on telecommunications, was enacted by Session Laws 2001-430, s. 6, effective January 1, 2002, and recodified as G.S. 105-164.4 C by Session Laws 2001-487, s. 67(a), also effective January 1, 2002.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

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 2010-31, s. 31.6(g), stated, in part, in its prefatory language that “This act becomes effective January 1, 2011.” The prefatory language was amended by Session Laws 2010-123 s. 10.2, to read “This section becomes effective January 1, 2011.”

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.

Subsection (g), as added by Session Laws 2014-3, s. 5.1(b), was redesignated as subsection (h) at the direction of the Revisor of Statutes.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Effect of Amendments.

Session Laws 2003-284, s. 45.3, effective July 15, 2003, rewrote the section heading; in subsection (a), added “General” preceding “Principles”; redesignated and rewrote former subsection (b) as subsection (d); and inserted new subsections (b) and (c).

Session Laws 2004-170, s. 20, effective August 2, 2004, substituted “address from which tangible personal property was shipped or from which a service was provided” for “billing address of the purchaser” in subdivision (a)(3)c.

Session Laws 2006-33, s. 3, effective January 1, 2007, in subdivision (a)(3)b, substituted “wireless calling” for “telephone calling service that authorizes the purchase of mobile telecommunications.”

Session Laws 2006-66, s. 24.13(a), effective July 1, 2006, and applicable to lease or rental payments made on or after that date, substituted “equipment, and a utility company railway car” for “equipment” at the end of subdivision (b)(1); added subdivision (b)(4) and made a minor stylistic change.

Session Laws 2008-187, s. 42, effective August 7, 2008, substituted “subdivision (a)(3)” for “subsection (a)” in subdivision (d)(2).

Session Laws 2009-445, s. 12, effective August 7, 2009, in subdivision (d)(2), in the introductory language, substituted “following descriptions is sourced to the location where the property delivered, and direct mail that does not meet one of these descriptions is sourced to the location from which the direct mail was shipped” for “conditions of this subdivision is sourced to the location where the property is delivered. In all other cases, direct mail is sourced in accordance with the principles principle set out in subdivision (a)(3) of this section”; and added subdivision (d)(3).

Session Laws 2010-31, s. 31.6(b), as amended by Session Laws 2010-123, s. 10.2, effective January 1, 2011, and applicable to gross receipts derived from the rental of an accommodation that a consumer occupies or has the right to occupy on or after that date, added subsection (e).

Session Laws 2011-330, s. 29, effective June 27, 2011, added subsection (f).

Session Laws 2012-79, s. 2.8, effective June 26, 2012, rewrote subsection (a).

Session Laws 2013-414, s. 23(b), effective August 23, 2013, rewrote subdivision (d)(2).

Session Laws 2014-3, s. 4.1(c), effective May 29, 2014, added subsection (g). See Editor’s note for applicability.

Session Laws 2014-3, s. 5.1(b), effective May 29, 2014, added subsection (g) (redesignated as subsection (h) — see note). See Editor’s note for applicability.

Session Laws 2016-5, s. 3.3, effective May 11, 2016, substituted “as defined in G.S. 105-164.4 F” for “as defined in G.S. 105-164.4 (a)(3)” in subsection (e).

Session Laws 2017-204, s. 2.3, added the second sentence in the introductory paragraph of subsection (a). For effective date and applicability, see editor’s note.

Session Laws 2018-5, s. 38.5(d), effective June 12, 2018, in subsection (a), added “for the seller’s purpose and do not alter the application of the tax imposed under G.S. 105-164.6 ” at the end of the first sentence; and added subsection (i).

Session Laws 2019-169, s. 3.3(a), effective July 26, 2019, substituted “item”, or “an item” for “product” or “a product” throughout subsection (a); and, in subsection (f), added “Certain” in the heading and inserted “certain” in the text.

§ 105-164.4C. Telecommunications service and ancillary service.

  1. General. —  The gross receipts derived from providing telecommunications service or ancillary service in this State are taxed at the rate set in G.S. 105-164.4 (a)(4c). Telecommunications service is provided in this State if the service is sourced to this State under the sourcing principles set out in subsections (a1) and (a2) of this section. Ancillary service is provided in this State if the telecommunications service to which it is ancillary is provided in this State. The definitions and provisions of the federal Mobile Telecommunications Sourcing Act apply to the sourcing and taxation of mobile telecommunications services. (a1) General Sourcing Principles. — The following general sourcing principles apply to telecommunications services. If a service falls within one of the exceptions set out in subsection (a2) of this section, the service is sourced in accordance with the exception instead of the general principle.
    1. Flat rate. —  A telecommunications service that is not sold on a call-by-call basis is sourced to this State if the place of primary use is in this State.
    2. General call-by-call. —  A telecommunications service that is sold on a call-by-call basis and is not a postpaid calling service is sourced to this State in the following circumstances:
      1. The call both originates and terminates in this State.
      2. The call either originates or terminates in this State and the telecommunications equipment from which the call originates or terminates and to which the call is charged is located in this State. This applies regardless of where the call is billed or paid.
    3. Postpaid. —  A postpaid calling service is sourced to the origination point of the telecommunications signal as first identified by either the seller’s telecommunications system or, if the system used to transport the signal is not the seller’s system, by information the seller receives from its service provider.

      (a2) Sourcing Exceptions. — The following telecommunications services and products are sourced in accordance with the principles set out in this subsection:

      (1) Mobile. — Mobile telecommunications service is sourced to the place of primary use, unless the service is prepaid wireless calling service or is air-to-ground radiotelephone service. Air-to-ground radiotelephone service is a postpaid calling service that is offered by an aircraft common carrier to passengers on its aircraft and enables a telephone call to be made from the aircraft. The sourcing principle in this subdivision applies to a service or product provided as an adjunct to mobile telecommunications service if the charge for the service or product is included within the term “charges for mobile telecommunications services” under the federal Mobile Telecommunications Sourcing Act.

      (2) Prepaid. — Prepaid telephone calling service is sourced in accordance with G.S. 105-164.4 B.

      (3) Private. — Private telecommunications service is sourced in accordance with subsection (e) of this section.

  2. Repealed by Session Laws 2006-33, s. 4, effective January 1, 2007.
    1. -(10) Repealed by Session Laws 2006-33, s. 4, effective January 1, 2007.

    (11) Repealed by Session Laws 2005-276, s. 33.7, effective October 1, 2005.

    (12)-(16) Repealed by Session Laws 2006-33, s. 4, effective January 1, 2007.

  4. Recodified as G.S. 105-164.4 D by Session Laws 2006-151, s. 4, effective January 1, 2007.
  5. Private Line. —  The gross receipts derived from private telecommunications service are sourced as follows:
    1. If all the customer’s channel termination points are located in this State, the service is sourced to this State.
    2. If all the customer’s channel termination points are not located in this State and the service is billed on the basis of channel termination points, the charge for each channel termination point located in this State is sourced to this State.
    3. If all the customer’s channel termination points are not located in this State and the service is billed on the basis of channel mileage, the following applies:
      1. A charge for a channel segment between two channel termination points located in this State is sourced to this State.
      2. Fifty percent (50%) of a charge for a channel segment between a channel termination point located in this State and a channel termination point located in another state is sourced to this State.
    4. If all the customer’s channel termination points are not located in this State and the service is not billed on the basis of channel termination points or channel mileage, a percentage of the charge for the service is sourced to this State. The percentage is determined by dividing the number of channel termination points in this State by the total number of channel termination points.
  6. Call Center Cap. —  The gross receipts tax on telecommunications service that originates outside this State, terminates in this State, and is provided to a call center that has a direct pay permit issued by the Department under G.S. 105-164.27 A may not exceed fifty thousand dollars ($50,000) a calendar year. This cap applies separately to each legal entity.
  7. Credit. —  A taxpayer who pays a tax legally imposed by another state on a telecommunications service taxable under this section is allowed a credit against the tax imposed in this section.
  8. Definitions. —  The following definitions apply in this section:
    1. Ancillary service. — Defined in G.S. 105-164.3 . (1a) Call-by-call basis. — A method of charging for a telecommunications service whereby the price of the service is measured by individual calls.
    2. Call center. — Defined in G.S. 105-164.27 A.
    3. Mobile telecommunications service. — Defined in G.S. 105-164.3 .
    4. Place of primary use. — Defined in G.S. 105-164.3.
    5. Postpaid calling service. — A telecommunications service that is charged on a call-by-call basis and is obtained by making payment at the time of the call either through the use of a credit or payment mechanism, such as a bank card, travel card, credit card, or debit card, or by charging the call to a telephone number that is not associated with the origination or termination of the telecommunications service. A postpaid calling service includes a service that meets all the requirements of a prepaid telephone calling service, except the exclusive use requirement.
    6. Prepaid telephone calling service. — Defined in G.S. 105-164.3.
    7. Private telecommunications service. — Telecommunications service that entitles a subscriber of the service to exclusive or priority use of a communications channel or group of channels.
    8. Telecommunications service. — Defined in G.S. 105-164.3.

History. 2001-430, s. 6; 2001-487, ss. 67(a), (c), 69(b); 2002-16, s 10; 2002-16, ss. 6, 7, 8, 9, 11, 14.; 2003-416, s. 16(a); 2005-276, ss. 33.6, 33.7; 2006-33, s. 4; 2006-151, s. 4; 2011-330, s. 17; 2013-414, s. 41.

Editor’s Note.

Session Laws 2001-430, s. 15, provides: “The Department of Revenue must report to the Revenue Laws Study Committee by October 1, 2003, on the amounts collected under this act and on the distributions made to local governments, including the amounts received by them from the sales and use tax on prepaid calling arrangements. On or before October 1, 2007, the Department must report to the Revenue Laws Study Committee any recommendations it has, if any, to adjust the distributions made to local governments. The Department must consult with the North Carolina League of Municipalities in developing its recommendations.”

This section was formerly G.S. 105-164.4 B. It was recodified by Session Laws 2001-487, s. 67(a), effective January 1, 2002.

G.S. 105-164.4 C(d) was recodified as G.S. 105-164.4 D by Session Laws 2006-151, s. 4, effective January 1, 2007.

Subdivision (h)(1) was added by Session Laws 2006-33, s. 4, as subdivision (h)(01), and was redesignated at the direction of the Revisor of Statutes. Subdivision (h)(1) was redesignated as (h)(1a) to preserve alphabetical order at the direction of the Revisor of Statutes.

Session Laws 2006-151, s. 20, is a severability clause.

Effect of Amendments.

Session Laws 2002-16, ss. 6-11, effective August 1, 2002, and applicable to taxable services reflected on bills dated after August 1, 2002, rewrote subsections (a), (b)(1), (e), and (h); in subsection (c)(2), substituted “prepaid telephone calling service” for “prepaid telephone calling arrangement”; and added subsections (a1) and (a2).

Session Laws 2002-16, ss. 10, 14, effective January 1, 2004, and applicable to taxable services reflected on bills dated on or after January 1, 2004, rewrote (a1)(3); and added (e)(4).

Session Laws 2003-416, s. 16.(a), effective August 14, 2003, deleted “interstate” following “receipts tax on” in subsection (f).

Session Laws 2005-276, ss. 33.6 and 33.7, effective October 1, 2005, in subdivision (b)(2), inserted “voice mail,”; and repealed subdivision (c)(11).

Session Laws 2006-33, s. 4, effective January 1, 2007, rewrote the section catchline; in subsection (a), added “or ancillary service” following “providing telecommunications service” in the first sentence, and added the third sentence; in subdivision (a2)(1), deleted “authorized by a” preceding “prepaid” and substituted “wireless” for “telephone” thereafter; deleted former subsections (b) and (c); added subdivision (h)(01); and added “wireline” preceding “telephone calling service” in the last sentence of subdivision (h)(5).

Session Laws 2011-330, s. 17, effective June 27, 2011, deleted “wireline” following “prepaid” in the last sentence of subdivision (h)(5).

Session Laws 2013-414, s. 41, effective August 1, 2013, inserted “or product” twice in the third sentence of subdivision (a2)(1).

§ 105-164.4D. Bundled transactions.

  1. Tax Application. —  Tax applies to the sales price of a bundled transaction unless one of the following applies:
    1. Fifty percent (50%) test. —  All of the items in the bundle are tangible personal property, the bundle includes one or more of the exempt items listed in this subdivision, and the price of the taxable items in the bundle does not exceed fifty percent (50%) of the price of the bundle:
      1. Food exempt under G.S. 105-164.13 B.
      2. A drug exempt under G.S. 105-164.13 (13).
      3. Medical devices, equipment, or supplies exempt under G.S. 105-164.13(12).
    2. Allocation. —  The bundle includes a service, and the retailer determines an allocated price for each item in the bundle based on a reasonable allocation of revenue that is supported by the retailer’s business records kept in the ordinary course of business. In this circumstance, tax applies to the allocated price of each taxable item in the bundle.
    3. Ten percent (10%) test. —  The price of the taxable items in the bundle does not exceed ten percent (10%) of the price of the bundle, and no other subdivision in this subsection applies.
    4. Prepaid meal plan. —  The bundle includes a prepaid meal plan and a dollar value that declines with use. In this circumstance, tax applies to the allocated price of the prepaid meal plan. The tax applies to items purchased with the dollar value that declines with use as the dollar value is presented for payment.
    5. Tuition, room, and meals. —  The bundle includes tuition, room, and meals offered by an institution of higher education. In this circumstance, tax applies to the allocated price of the meals. The institution determines the allocated price for meals based on a reasonable allocation of revenue that is supported by the institution’s business records kept in the ordinary course of business.
    6. Repealed by Session Laws 2017-204, s. 2.5(a). For effective date and applicability, see editor’s note.
  2. Determining Threshold. —  A retailer of a bundled transaction subject to this section may use either the retailer’s purchase price or the retailer’s sales price to determine if the transaction meets the fifty percent (50%) test or the ten percent (10%) test set out in subdivisions (a)(1) and (a)(3) of this section. A retailer may not use a combination of purchase price and sales price to make this determination. If a bundled transaction subject to subdivision (a)(3) of this section includes a service contract, the retailer must use the full term of the contract in determining whether the transaction meets the threshold set in the subdivision.

History. 2006-151, ss. 4, 5; 2007-244, s. 2; 2014-3, s. 4.1(d); 2016-5, s. 3.7(a); 2016-94, s. 38.5(f); 2017-204, s. 2.5(a); 2019-169, s. 3.3(b).

Editor’s Note.

This section was subsection (d) of G.S. 105-164.4 C. It has been recodified and rewritten as G.S. 105-164.4 D by Session Laws 2006-151, ss. 4 and 5, effective January 1, 2007.

Session Laws 2006-151, s. 20 is a severability clause.

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.”

Session Laws 2016-94, s. 38.5(q) made subdivision (a)(6) of this section, as added by Session Laws 2016-94, s. 38.5(f), applicable to sales made on or after January 1, 2017.

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Effect of Amendments.

Session Laws 2006-151, s. 5, effective January 1, 2007, deleted “telecommunications” following “When a taxable” in the introductory paragraph of the section.

Session Laws 2007-244, s. 2, effective October 1, 2007, substituted “transactions” for “services” in the section heading; and rewrote the section.

Session Laws 2014-3, s. 4.1(d), effective May 29, 2014, added subdivisions (a)(4) and (a)(5). See Editor’s note for applicability.

Session Laws 2016-5, s. 3.7(a), effective May 11, 2016, substituted “purchase price” for “cost price” throughout subsection (b).

Session Laws 2016-94, s. 38.5(f), effective January 1, 2017, added subdivision (a)(6). See editor’s note for applicability.

Session Laws 2017-204, s. 2.5(a), repealed subdivision (a)(6). For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 3.3(b), effective July 26, 2019, substituted “items” or “item” for “products” or “product” throughout subsection (a).

§ 105-164.4E. Direct Mail.

  1. Advertising and Promotional Direct Mail. —  The following sourcing principles apply to advertising and promotional direct mail.
    1. To the location where the direct mail is delivered if it is purchased pursuant to a direct pay permit issued under G.S. 105-164.27 A(a1), or if it is purchased with an exemption certificate claiming direct mail and bearing the direct mail permit number issued under G.S. 105-164.27 A(a1).
    2. To the location where the direct mail is delivered if the purchaser provides the seller with information to show the jurisdictions to which the direct mail is to be delivered.
    3. To the location from which the direct mail was shipped if subdivision (1) or (2) of this subsection does not apply.
  2. Other Direct Mail. —  The following sourcing principles apply to other direct mail:
    1. To the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller’s business when use of this address does not constitute bad faith.
    2. To the jurisdictions where the direct mail is delivered if it is purchased pursuant to a direct pay permit issued under G.S. 105-164.27 A(a1), or if it is purchased with an exemption certificate claiming direct mail and bearing the direct mail permit number issued under G.S. 105-164.27 A(a1).
  3. Relief From Liability. —  In the absence of bad faith, a seller is relieved of:
    1. All obligations to collect, pay, or remit any tax on any direct mail transaction where the purchaser issues a direct pay permit issued under G.S. 105-164.27 A(a1), or if it is purchased with an exemption certificate claiming direct mail and bearing the direct mail permit number issued under G.S. 105-164.27 A(a1).
    2. Further obligation to collect any additional tax on the sale of advertising and promotional direct mail where the seller sourced the sale according to delivery information provided by the purchaser.

History. 2013-414, s. 23(c).

§ 105-164.4F. Accommodation rentals.

  1. Repealed by Session Laws 2019-246, s. 4(e), effective February 1, 2020, and applicable to sales occurring on or after that date.
  2. Tax. —  The gross receipts derived from the rental of an accommodation are taxed at the general rate set in G.S. 105-164.4 . Gross receipts derived from the rental of an accommodation include the sales price of the rental of the accommodation. The sales price of the rental of an accommodation is determined as if the rental were a rental of tangible personal property. The sales price of the rental of an accommodation made by an accommodation facilitator includes any charges or fees, by whatever name called, charged by the accommodation facilitator to the purchaser of the accommodation that are necessary to complete the rental. The tax is due and payable by the retailer in accordance with G.S. 105-164.16 . (b1) Retailer. — Except as otherwise provided in subsection (c) of this section, the retailer of the rental of an accommodation is one or more of the persons listed below that collects the payment, or a portion of the payment, for the rental of the accommodation. In the event the person who collects the payment cannot be determined or is a third party that is not listed in this subsection, and subsection (c) of this section does not apply, the provider of the accommodation shall be considered the retailer of the transaction. The retailer is liable for reporting and remitting the tax due on the portion of the gross receipts derived from the rental of the accommodation that the retailer collects. The retailer may be one or more of the following:
    1. The provider of the accommodation.
    2. An accommodation facilitator.
  3. Certain Accommodation Facilitator Transactions. —  This subsection applies only to an accommodation facilitator that is operated by or on behalf of a hotel or a hotel corporation, that facilitates the rental of hotel accommodations solely for the hotel or the hotel corporation’s owned or managed hotels and franchisees, and that collects payment, or a portion of the payment, for the rental of an accommodation. An accommodation facilitator subject to this subsection is not considered the retailer of the rental of the accommodation. The accommodation facilitator must send the retailer the tax due on the sales price, or the portion of the sales price, the accommodation facilitator collected no later than 10 days after the end of each calendar month. An accommodation facilitator that does not send the retailer the tax due on the sales price, or the portion of the sales price the accommodation facilitator collected, is liable for the amount of tax the accommodation facilitator fails to send. An accommodation facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the Secretary. Tax payments received by a retailer from an accommodation facilitator are held in trust by the retailer for remittance to the Secretary. A retailer that receives a tax payment from an accommodation facilitator must remit the amount received to the Secretary. A retailer is not liable for tax due but not received from an accommodation facilitator. (c1) Accommodation Facilitator Report. — An accommodation facilitator must file with the Secretary an annual report by March 31 of each year for the prior calendar year for accommodation rentals it makes. The annual report must be provided in electronic format and include the property owner’s name, the property owner’s mailing address, the physical location of the accommodation, and gross receipts information for the rentals. The report may only be used by the Secretary, and any person receiving the report, pursuant to G.S. 105-259 , for tax compliance purposes.
  4. Repealed by Session Laws 2019-246, s. 4(e), effective February 1, 2020, and applicable to sales occurring on or after that date.
  5. Exemptions. —  The tax imposed by this section does not apply to the following:
    1. A private residence, cottage, or similar accommodation that is rented for fewer than 15 days in a calendar year unless the rental of the accommodation is made by an accommodation facilitator.
    2. An accommodation supplied to the same person for a period of 90 or more continuous days.
    3. An accommodation arranged or provided to a person by a school, camp, or similar entity where a tuition or fee is charged to the person for enrollment in the school, camp, or similar entity.

History. 2014-3, s. 8.1(b); 2019-246, s. 4(e).

Editor’s Note.

Session Laws 2014-3, s. 8.1(d), made this section effective June 1, 2014, and applicable to gross receipts derived from the rental of an accommodation that a person occupies or has the right to occupy on or after that date.

Session Laws 2014-3, 8.1(c), as amended by Session Laws 2015-6, s. 2.2(a), provides: “With respect to the change in this section regarding the rental of a private residence, cottage, or similar accommodation that is rented for fewer than 15 days in a calendar year and that is listed with a real estate broker or agent, the following provisions apply:

“(1) A retailer is liable for an overcollection of sales tax or occupancy tax for the rental of such an accommodation that is occupied or available to be occupied for nights beginning June 14, 2012, and ending June 30, 2014, and must remit the tax collected.

“(2) A retailer is not liable for an undercollection of sales tax or occupancy tax for the rental of such an accommodation that is occupied or available to be occupied for nights beginning June 1, 2014, and ending June 30, 2014, if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax.”

Session Laws 2019-246, s. 4(q), made the rewriting of this section by Session Laws 2019-246, s. 4(e), effective February 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2019-246, s. 4(n), provides: “There is no obligation to collect the sales and use tax required by this section retroactively.”

Session Laws 2019-246, s. 4(o), is a severability clause.

Effect of Amendments.

Session Laws 2019-246, s. 4(e), rewrote the section. For effective date and applicability, see editor’s note.

§ 105-164.4G. Entertainment activity.

  1. Repealed by Session Laws 2019-246, s. 4(i), effective February 1, 2020, and applicable to sales occurring on or after that date.
  2. Tax. —  The gross receipts derived from an admission charge to an entertainment activity are taxed at the general rate set in G.S. 105-164.4 . The tax is due and payable by the retailer in accordance with G.S. 105-164.16 . For purposes of the tax imposed by this section, the retailer is the applicable person listed below:
    1. The operator of the venue where the entertainment activity occurs, unless the retailer and the admission facilitator have a contract between them allowing for dual remittance, as provided in subsection (d) of this section.
    2. The person that provides the entertainment and that receives admission charges directly from a purchaser.
    3. A person other than a person listed in subdivision (1) or (2) of this subsection that receives gross receipts derived from an admission charge sold at retail.
  3. Admission Facilitator. —  An admission facilitator must report to the retailer with whom it has a contract the admission charge a consumer pays to the admission facilitator for an entertainment activity. The admission facilitator must send the retailer the portion of the gross receipts the admission facilitator owes the retailer and the tax due on the gross receipts derived from an admission charge no later than 10 days after the end of each calendar month. An admission facilitator that does not send the retailer the tax due on the gross receipts derived from an admission charge is liable for the amount of tax the admission facilitator fails to send to the retailer. An admission facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the Secretary. Tax payments received by a retailer from an admission facilitator are held in trust by the retailer for remittance to the Secretary. A retailer that receives a tax payment from an admission facilitator must remit the amount received to the Secretary. A retailer is not liable for tax due but not received from an admission facilitator. The requirements imposed by this subsection on a retailer and an admission facilitator are considered terms of the contract between the retailer and the admission facilitator.
  4. Dual Remittance. —  The tax due on the gross receipts derived from an admission charge may be partially reported and remitted to the operator of the venue for remittance to the Department and partially reported and remitted by the admission facilitator directly to the Department. The portion of the tax not reported and remitted to the operator of the venue must be reported and remitted directly by the admission facilitator to the Department. An admission facilitator that elects to remit tax under the dual remittance option is required to obtain a certificate of registration in accordance with G.S. 105-164.29 . An admission facilitator is subject to the provisions of Article 9 of this Chapter.
  5. Exceptions. —  The tax imposed by this section does not apply to the following:
    1. An amount paid solely for the right to participate, other than to be a spectator, in sporting activities. Examples of these types of charges include bowling fees, golf green fees, and gym memberships.
    2. Tuition, registration fees, or charges to attend instructional seminars, conferences, or workshops for educational purposes, notwithstanding that entertainment activity may be offered as an ancillary purpose of an event listed in this subdivision.
    3. A political contribution.
    4. A charge for lifetime seat rights, lease, or rental of a suite or box for an entertainment activity, provided the charge is separately stated on an invoice or similar billing document given to the purchaser at the time of sale.
    5. An amount paid solely for transportation.
    6. An amount paid for the right to participate, other than to be a spectator, in the following activities:
      1. Rock climbing, skating, skiing, snowboarding, sledding, zip lining, or other similar activities.
      2. Instruction classes related to the activities included in sub-subdivision a. of this subdivision.
      3. Riding on a carriage, boat, train, plane, horse, chairlift, or other similar rides.
      4. Amusement rides, including a waterslide.
  6. Exemptions. —  The sale at retail and the use, storage, or consumption in this State of the following gross receipts derived from an admission charge to an entertainment activity are specifically exempt from the tax imposed by this Article:
    1. The portion of a membership charge that is deductible as a charitable contribution under section 170 of the Code or that is described in section 170(l)(2) of the Code.
    2. A donation that is deductible as a charitable contribution under section 170 of the Code or that is described in section 170(l)(2) of the Code.
    3. Charges for an amenity. If charges for amenities are separately stated on a billing document given to the purchaser at the time of the sale, then the tax does not apply to the separately stated charges for amenities. If charges for amenities are not separately stated on the billing document given to the purchaser at the time of the sale, then the transaction is a bundled transaction and taxed in accordance with G.S. 105-164.4 D except that G.S. 105-164.4 D(a)(3) does not apply.
    4. An event that is sponsored by an elementary or secondary school. For purposes of this exemption, the term “school” is an entity regulated under Chapter 115C of the General Statutes.
    5. An event sponsored solely by a nonprofit entity that is exempt from tax under Article 4 of this Chapter if all of the following conditions are met:
      1. The entire proceeds of the activity are used exclusively for the entity’s nonprofit purposes.
      2. The entity does not declare dividends, receive profits, or pay salary or other compensation to any members or individuals.
      3. The entity does not compensate any person for participating in the event, performing in the event, placing in the event, or producing the event. For purposes of this subdivision, the term “compensate” means any remuneration included in a person’s gross income as defined in section 61 of the Code.
    6. An event sponsored by a farmer that takes place on farmland and is related to farming activities, such as a corn maze or a tutorial on raising crops or animals. For purposes of this exemption, a farmer is a person who holds a qualifying farmer sales tax exemption certificate and farmland is land that is enrolled in the present-use value program under G.S. 105-277.3 .
  7. Sourcing. —  An admission charge to an entertainment activity is sourced to the location where admission to the entertainment activity may be gained by a person. When the location where admission may be gained is not known at the time of the receipt of the gross receipts for an admission charge, the sourcing principles in G.S. 105-164.4 B(a) apply.

History. 2014-3, s. 5.1(c); 2015-6, s. 2.11; 2016-5, s. 3.4; 2017-204, s. 2.10(a); 2018-5, s. 38.5(e), (u); 2019-169, s. 3.3(c); 2019-246, s. 4(i).

Editor’s Note.

Session Laws 2014-3, s. 5.1(g), made this section effective May 29, 2014, and applicable to gross receipts derived from an admission charge sold at retail on or after that date, except for subdivisions (f)(4) and (f)(5), which become effective January 1, 2015, and are applicable to gross receipts derived from an admission charge sold at retail on or after that date.

The references to “section 170 of the Code” in subdivisions (f)(1) and (f)(2) refer to section 170 of the Internal Revenue Code, 26 U.S.C. § 170. The reference to “section 61 of the Code” in sub-subdivision (f)(5)c. refers to section 61 of the Internal Revenue Code, 26 U.S.C. § 61.

Session Laws 2017-204, s. 2.10(b) made subdivision (f)(6), as added by Session Laws 2017-204, s. 2.10(a), effective retroactively to January 1, 2014.

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

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 2019-246, s. 4(q), made the amendment of this section by Session Laws 2019-246, s. 4(i), effective February 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2019-246, s. 4(n), provides: “There is no obligation to collect the sales and use tax required by this section retroactively.”

Session Laws 2019-246, s. 4(o), is a severability clause.

Effect of Amendments.

Session Laws 2015-6, s. 2.11, effective April 9, 2015, inserted “sale at retail and the use, storage, or consumption in this State of the” in the introductory paragraph of subsection (f); and substituted “An admission charge” for “Admission” in subsection (g).

Session Laws 2016-5, s. 3.4, effective May 11, 2016, added subdivision (b)(3).

Session Laws 2017-204, s. 2.10(a), effective retroactively to January 1, 2014, added subdivision (f)(6).

Session Laws 2018-5, s. 38.5(e), (u), effective June 12, 2018, in subdivision (e)(1), substituted “solely for the right to participate, other than to be a spectator” for “for the right to participate”; added subdivision (e)(6); and in subdivisions (f)(1) and (2), added “or that is described in section 170 ( l )(2) of the Code” at the end.

Session Laws 2019-169, s. 3.3(c), effective July 26, 2019, added “notwithstanding that entertainment activity may be offered as an ancillary purpose of an event listed in this subdivision” at the end of subdivision (e)(2); and substituted “activities” for “items” in sub-subdivision (e)(6)b.

Session Laws 2019-246, s. 4(i), deleted subsection (a); added “admission” in subdivision (b)(1); in subsection (c), substituted “Admission Facilitator” for “Facilitator”, and substituted “admission facilitator” for “facilitator” throughout, and made stylistic change. For effective date and applicability, see editor’s note.

§ 105-164.4H. Real property contract.

  1. Applicability. —  A real property contractor is the consumer of the tangible personal property or certain digital property that the real property contractor purchases, installs, or applies for others to fulfill a real property contract and that becomes part of real property or used to fulfill the contract. A retailer engaged in business in the State shall collect tax on the sales price of an item sold at retail to a real property contractor unless a statutory exemption in G.S. 105-164.13 or G.S. 105-164.13 E applies. Where a real property contractor purchases tangible personal property or certain digital property for storage, use, or consumption in this State, or a service sourced to this State, and the tax due is not paid at the time of purchase, the provisions of G.S. 105-164.6 apply except as provided in subsection (b) of this section. (a1) Substantiation. — Generally, services to real property are retail sales of or the gross receipts derived from repair, maintenance, and installation services and subject to tax in accordance with G.S. 105-164.4(a)(16), unless a person substantiates that a transaction is subject to tax as a real property contract in accordance with subsection (a) of this section, subject to tax as a mixed transaction in accordance with subsection (d) of this section, or the transaction is not subject to tax. A person may substantiate that a transaction is a real property contract or a mixed transaction by records that establish the transaction is a real property contract or by receipt of an affidavit of capital improvement. The receipt of an affidavit of capital improvement, absent fraud or other egregious activities, establishes that the subcontractor or other person receiving the affidavit should treat the transaction as a capital improvement, and the transaction is subject to tax in accordance with subsection (a) of this section. A person that issues an affidavit of capital improvement is liable for any additional tax due on the transaction, in excess of tax paid on related purchases under subsection (a) of this section, if it is determined that the transaction is not a capital improvement but rather the transaction is subject to tax as a retail sale. A person who receives an affidavit of capital improvement from another person, absent fraud or other egregious activities, is not liable for any additional tax on the gross receipts from the transaction if it is determined that the transaction is not a capital improvement.The Secretary may establish guidelines for transactions where an affidavit of capital improvement is not required, but rather a person may establish by records that such transactions are subject to tax in accordance with subsection (a) of this section.
  2. Retailer-Contractor. —  This section applies to a retailer-contractor as follows:
    1. Acting as a real property contractor. —  A retailer-contractor acts as a real property contractor when it contracts to perform a real property contract. A retailer-contractor that purchases tangible personal property or certain digital property to be installed or applied to real property to fulfill the contract may purchase those items exempt from tax under a certificate of exemption pursuant to G.S. 105-164.28 provided the retailer-contractor also purchases inventory or services from the seller for resale. When the property is withdrawn from inventory and installed or applied to real property, use tax must be accrued and paid on the retailer-contractor’s purchase price of the property. Property that the retailer-contractor withdraws from inventory for use that does not become part of real property is also subject to the tax imposed by this Article.
    2. Acting as a retailer. —  A retailer-contractor is acting as a retailer when it makes a sale at retail. (b1) Repealed by Session Laws 2017-204, s. 2.4(a). For effective date and applicability, see Editor’s note.
  3. Erroneous Collection if Separately Stated. —  An invoice or other documentation issued to a person by a real property contractor shall not separately state any amount for tax for a real property contract. Any amount for tax separately stated on an invoice or other documentation given to a person by a real property contractor is an erroneous collection and must be remitted to the Secretary.
  4. Mixed Transaction Contract. —  A mixed transaction contract is taxable as follows:
    1. If the allocated sales price of the taxable repair, maintenance, and installation services included in the contract is less than or equal to twenty-five percent (25%) of the contract price, then the repair, maintenance, and installation services portion of the contract, and the items used to perform those services, are taxable as a real property contract in accordance with this section.
    2. If the allocated sales price of the taxable repair, maintenance, and installation services included in the contract is greater than twenty-five percent (25%) of the contract price, then sales and use tax applies to the sales price of or the gross receipts derived from the taxable repair, maintenance, and installation services portion of the contract. The person must determine an allocated price for the taxable repair, maintenance, and installation services in the contract based on a reasonable allocation of revenue that is supported by the person’s business records kept in the ordinary course of business. Any purchase of tangible personal property or certain digital property to fulfill the real property contract is taxed in accordance with this section.
  5. Repealed by Session Laws 2017-204, s. 2.4(a). For effective date and applicability, see Editor’s note.

History. 2014-3, s. 7.1(c); 2015-6, s. 2.1(b); 2016-5, s. 3.5; 2016-94, s. 38.5(c), (g); 2016-123, ss. 11.2, 11.3(b), 11.4(a), 11.5; 2017-204, s. 2.4(a), (b); 2018-5, s. 38.5(s); 2019-169, s. 3.3(d).

Editor’s Note.

Session Laws 2014-3, s. 7.3, as amended by Session Laws 2015-6, s. 2.1(b), made this section effective January 1, 2015, and applicable to withdrawals of items from inventory for contracts entered into on or after that date, sales on or after that date, and contracts entered into on or after that date.

Session Laws 2014-3, s. 7.2(a), (b), as amended by Session Laws 2015-6, s. 2.1(a), provides: “(a) This act shall not be construed to affect the interpretation of any statute that is the subject of a State tax audit for taxable years beginning before January 1, 2015, or litigation that is a direct result of such audit.

“(b) A seller who collected and remitted sales or use tax in accordance with an interpretation of the law by the Secretary in the form of a rule, bulletin, or directive published before the effective date of this act is not liable to a purchaser for any overcollected sales or use tax that was collected in accordance with the rule, bulletin, or directive.”

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.”

Session Laws 2016-94, s. 38.5(q) made the amendments to this section by Session Laws 2016-94, s. 38.5(c), applicable retroactively to January 1, 2015.

Session Laws 2016-94, s. 38.5(q) made the amendments to this section by Session Laws 2016-94, s. 38.5(g), as amended by Session Laws 2016-123, s. 11.5, applicable to sales made on or after January 1, 2017.

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2016-123, s. 11.3(c), made the amendment to sub-subdivision (e)(1)f. by Session Laws 2016-123, s. 11.3(b), applicable to sales made on or after January 1, 2017.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Effect of Amendments.

Session Laws 2016-5, s. 3.5, effective May 11, 2016, substituted “applied” for “affixed” throughout subsection (b).

Session Laws 2016-94, s. 38.5(c), effective July 14, 2016, deleted “and the provisions of G.S. 105-164.11(a)(2) do not apply” following “Secretary” at the end of subsection (c). See editor’s note for applicability.

Session Laws 2016-94, s. 38.5(g), as amended by Session Laws 2016-123, s. 11.5, effective January 1, 2017, rewrote the section. See editor’s note for applicability.

Session Laws 2016-123, s. 11.2, effective July 1, 2016, made a stylistic change in subdivision (d)(2).

Session Laws 2016-123, s. 11.3(b), effective January 1, 2017, substituted “sprinkler, or other similar system” for “sprinkler system, or other similar systems” at the end of subdivision (e)(1)f. See editor’s note for applicability.

Session Laws 2016-123, s. 11.4(a), effective January 1, 2017, deleted “for income tax purposes” preceding “under one or more of the following” in subdivision (e)(1)d.

Session Laws 2017-204, s. 2.4(a) and (b), substituted “personal property or digital property” for “personal property, digital property, or service” in the first sentence of subsection (a); inserted subsection (a1); in subdivision (b)(1), deleted “or a service” following “real property” in the second sentence, and “or when the service is deemed used” preceding “use tax” in the third sentence; repealed subsection (b1); rewrote subsection (d); and repealed subsection (e). For effective date and applicability, see editor’s note.

Session Laws 2018-5, s. 38.5(s), effective June 12, 2018, made a minor punctuation change in the first sentence of subsection (a1).

Session Laws 2019-169, s. 3.3(d), effective July 26, 2019, inserted “certain” and substituted “an item”, or variants, for “the tangible personal property, digital property, or service” throughout the section; and deleted “items” following “inventory” in the second sentence of subdivision (b)(1).

§ 105-164.4I. Service contracts.

  1. Tax. —  The sales price of or the gross receipts derived from a service contract or the renewal of a service contract sold at retail is subject to the general rate of tax set in G.S. 105-164.4 and is sourced in accordance with the sourcing principles in G.S. 105-164.4 B. The retailer of a service contract is required to collect the tax due at the time of the retail sale of the contract and is liable for payment of the tax. The tax is due and payable in accordance with G.S. 105-164.16 .The retailer of a service contract is the applicable person listed below:
    1. When a service contract is sold at retail to a purchaser by the obligor under the contract, the obligor is the retailer.
    2. When a service contract is sold at retail to a purchaser by a service contract facilitator on behalf of the obligor under the contract, the service contract facilitator is the retailer unless the provisions of subdivision (3) of this subsection apply.
    3. When a service contract is sold at retail to a purchaser by a service contract facilitator on behalf of the obligor under the contract and there is an agreement between the service contract facilitator and the obligor that states the obligor will be liable for the payment of the tax, the obligor is the retailer. The service contract facilitator must send the retailer the tax due on the sales price of or gross receipts derived from the service contract no later than 10 days after the end of each calendar month. A service contract facilitator that does not send the retailer the tax due on the sales price or gross receipts is liable for the amount of tax the service contract facilitator fails to send. A service contract facilitator is not liable for tax sent to a retailer but not remitted by the retailer to the Secretary. Tax payments received by a retailer from a service contract facilitator are held in trust by the retailer for remittance to the Secretary. A retailer that receives a tax payment from a service contract facilitator must remit the amount received to the Secretary. A retailer is not liable for tax due but not received from a service contract facilitator. The requirements imposed by this subdivision on a retailer and a service contract facilitator are considered terms of the agreement between the retailer and the service contract facilitator. (a1) Mixed Service Contract. — A service contract for real property that includes two or more services, one of which is subject to tax under this Article and one of which is not subject to tax under this Article, is taxable in accordance with this subsection. Tax applies to the sales price of or gross receipts derived from a mixed service contract unless one of the following applies:

      (1) Allocation. — The person determines an allocated price for the taxable portion of the service contract based on a reasonable allocation of revenue that is supported by the person’s business records kept in the ordinary course of business. In this circumstance, tax applies to the allocated price of the taxable portion of the service contract.

      (2) Ten percent (10%) test. — The allocated price of the taxable portion of the service contract does not exceed ten percent (10%) of the price of the contract.

  2. Repealed by Session Laws 2017-204, s. 2.5(a). For effective date and applicability, see editor’s note.
  3. Repealed by Session Laws 2018-5, s. 38.5(f), effective June 12, 2018.
  4. Basis of Reporting. —  A retailer who sells or derives gross receipts from a service contract must report those sales on an accrual basis of accounting, notwithstanding that the retailer reports tax on the cash basis for other sales at retail. The tax on the sales price of or the gross receipts derived from a service contract is due at the time of the retail sale, notwithstanding any portion that may be financed. If the sales price of or the gross receipts derived from the service contract is financed in whole or in part, the financed amount of the sales price of or the gross receipts derived from the service contract included in each payment is exempt from sales tax if the amount is separately stated in the contract and on the billing statement or other documentation provided to the purchaser at the time of the sale.
  5. Repealed by Session Laws 2019-246, s. 4(k), effective February 1, 2020, and applicable to sales occurring on or after that date.

History. 2014-3, s. 6.1(c); 2015-241, s. 32.18(c); 2015-259, ss. 4.2(c), 5(a), 6(c); 2016-5, s. 3.24(a); 2016-94, s. 38.5(h); 2017-57, s. 38.8(b); 2017-204, s. 2.5(a), (b); 2018-5, s. 38.5(f); 2019-246, s. 4(k).

Editor’s Note.

Session Laws 2014-3, s. 6.1(j), made this section effective October 1, 2014, and applicable to gross receipts derived from a service contract sold at retail on or after that date.

Session Laws 2016-94, s. 38.5(a), provides: “A retailer is not liable for an undercollection of sales or use tax as a result of the changes made under Section 32.18 of S.L. 2015-241 and under Part V of S.L. 2015-259 if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax. This applies only to the period beginning March 1, 2016, and ending December 31, 2016.”

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.”

Session Laws 2016-94, s. 38.5(q) made the amendments to this section by Session Laws 2016-94, s. 38.5(h) applicable to sales made on or after January 1, 2017.

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2017-57 s. 38.8(b), repealed subdivision (b)(4), effective July 1, 2018. However, before that delayed repeal could go into effect, Session Laws 2017-204, s. 2.5(a), repealed subsection (b) in its entirety, effective retroactively to January 1, 2017.

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. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.

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

Session Laws 2019-246, s. 4(q), made the amendment of this section by Session Laws 2019-246, s. 4(k), effective February 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2019-246, s. 4(n), provides: “There is no obligation to collect the sales and use tax required by this section retroactively.”

Session Laws 2019-246, s. 4(o), is a severability clause.

Effect of Amendments.

Session Laws 2015-241, s. 32.18(c), effective March 1, 2016, rewrote subsection (c). For applicability, see editor’s note.

Session Laws 2015-259, s. 4.2(c), added subdivision (b)(5). For effective date and applicablity, see Editor’s note.

Session Laws 2015-259, s. 5(a), effective March 1, 2016, and applicable to service contracts purchased on or after date, deleted “other than a motor vehicle exempt from tax under G.S. 105-164.13(32)” at the end of subdivision (b)(1).

Session Laws 2015-259, s. 6(c), effective September 30, 2015, rewrote subdivision (b)(3). For applicability provision, see Editor’s note.

Session Laws 2016-5, s. 3.24(a), effective May 11, 2016, in subdivision (b)(3), in the first sentence, inserted “leased, or rented” following “purchased” near the beginning, inserted “or related member” near the middle, and inserted “sales tax exemption under G.S. 105-164.13(65) or G.S. 105-164.13(65a) or a” near the end. See editor’s note for applicability.

Session Laws 2016-94, s. 38.5(h), effective January 1, 2017, added the last sentence in subdivision (b)(1); and added subdivisions (b)(6) and (b)(7). See editor’s note for applicability.

Session Laws 2017-57 s. 38.8(b), effective July 1, 2018, repealed subdivision (b)(4).

Session Laws 2017-204, s. 2.5(a) and (b), inserted subsection (a1); repealed subsection (b); and rewrote subsection (c). For effective date and applicability, see editor’s note.

Session Laws 2018-5, s. 38.5(f), effective June 12, 2018, deleted subsection (c), related to exceptions.

Session Laws 2019-246, s. 4(k), substituted “service contract facilitator” for “facilitator” throughout subdivisions (a)(2) and (a)(3); and deleted subsection (e), which read: “Definition. — For purposes of this section, the term ‘facilitator’ means a person who contracts with the obligor of the service contract to market the service contract and accepts payment from the purchaser for the service contract.” For effective date and applicability, see editor’s note.

§ 105-164.4J. Marketplace-facilitated sales.

  1. Scope. —  This section applies to a marketplace facilitator engaged in business in this State.
  2. Payment of Tax. —  A marketplace facilitator subject to this section is considered the retailer of each marketplace-facilitated sale it makes and is liable for collecting and remitting the sales and use tax on all such sales. A marketplace facilitator is required to comply with the same requirements and procedures as all other retailers registered or who are required to be registered to collect and remit sales and use tax in this State. A marketplace facilitator is required to collect and remit sales tax as required by this section regardless of whether a marketplace seller for whom it makes a marketplace-facilitated sale meets any of the following conditions:
    1. Has a physical presence in this State.
    2. Is required to be registered to collect and remit sales and use tax in this State.
    3. Would have been required to collect and remit sales and use tax in this State had the sale not been made through a marketplace.
    4. Would not have been required to collect and remit sales and use tax in this State had the sale not been made through a marketplace.
  3. Report. —  A marketplace facilitator must provide or make available to each marketplace seller the information listed in this subsection with respect to marketplace-facilitated sales that are made on behalf of the marketplace seller and that are sourced to this State. The information may be provided in any format and shall be provided or made available no later than 10 days after the end of each calendar month. The required information to be provided or made available to each marketplace seller is as follows:
    1. Gross sales.
    2. The number of separate transactions.
  4. Liability Relief. —  The Department shall not assess a marketplace facilitator for failure to collect the correct amount of tax due if the marketplace facilitator can demonstrate to the Secretary’s satisfaction that all of the circumstances listed in this subsection apply. This subsection does not apply with regard to a marketplace-facilitated sale for which the marketplace facilitator is the marketplace seller or if the marketplace facilitator and the marketplace seller are affiliates. If a marketplace facilitator is not assessed for tax due under this section, the marketplace seller is liable for the tax due under this section provided the marketplace seller is engaged in business in this State. The circumstances that a marketplace facilitator must demonstrate are as follows:
    1. The failure to collect the correct amount of tax was due to incorrect information given to the marketplace facilitator by the marketplace seller.
    2. The marketplace facilitator did not receive specific written advice from the Secretary for the transaction at issue.
  5. Refund of Tax. —  If a purchaser receives a refund on any portion of the sales price from a marketplace facilitator who collected and remitted the tax on the retail sale, the provisions of G.S. 105-164.11 A(a) apply.
  6. Class Actions. —  No class action may be brought against a marketplace facilitator in any court of this State on behalf of customers arising from or in any way related to an overpayment of sales or use tax collected on facilitated sales by a marketplace facilitator, regardless of whether that claim is characterized as a tax refund claim. Nothing in this subsection affects a customer’s right to seek a refund as provided under G.S. 105-164.11 .
  7. Agreements. —  Nothing in this section shall be construed to interfere with the ability of a marketplace facilitator and a marketplace seller to enter into an agreement with each other regarding the fulfillment of the requirements of this Article, except that an agreement may not require a marketplace seller to collect and remit sales and use tax on marketplace-facilitated sales.
  8. Use Tax Obligation. —  Nothing in this section affects the obligation of any purchaser to remit use tax for any taxable transaction for which a marketplace facilitator does not collect and remit sales or use tax.
  9. Limitation. —  This section does not apply to an accommodation facilitator, an admission facilitator, or a service contract facilitator whose collection and remittance requirements are set out in G.S. 105-164.4 F, 105-164.4G, and 105-164.4I, respectively.
  10. Grace Period. —  The Department shall take no action to assess a person for any tax due for a filing period beginning on or after February 1, 2020, and ending prior to October 1, 2020, with respect to any of the circumstances listed in this subsection. This subsection does not apply to (i) a person that received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period, (ii) a person that collected tax and failed to remit it to the Department, or (iii) the retail sale of inventory that was held for resale. The applicable circumstances are:
    1. The person sells tangible personal property on behalf of the owner of the tangible personal property, or the owner’s estate, whether by auction or through the pricing of items, and the sale was conducted at the owner’s home or farm.
    2. The person sells fixtures and equipment held for use in operating a retail or wholesale business on behalf of a business, whether by auction or through the pricing of items, and the sale is conducted at the business location.

History. 2019-246, s. 4(c); 2020-6, s. 1(d); 2020-58, s. 3.3(a).

Editor’s Note.

Session Laws 2019-246, s. 4(q), made this section effective February 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2019-246, s. 4(n), provides: “There is no obligation to collect the sales and use tax required by this section retroactively.”

Session Laws 2019-246, s. 4(o), is a severability clause.

Session Laws 2020-58, s. 3.3(b), made the amendment to subsections (a) and (b) by Session Laws 2020-58, s. 3.3(a), effective July 1, 2020, and applicable to sales occurring on or after that date.

Effect of Amendments.

Session Laws 2020-6, s. 1(d), effective June 5, 2020, added subsection (j).

Session Laws 2020-58, s. 3.3(a), rewrote subsection (a); and substituted “subject to this section” for “that meets the threshold in subsection (a) of this section” in the first sentence of the introductory paragraph of subsection (b). For effective date and applicability, see editor’s note.

§ 105-164.4K. Property management contracts.

  1. Taxability of Services under a Property Management Contract. —  Repair, maintenance, and installation services taxable under this Article and provided by a real property manager under a property management contract are subject to sales and use tax in the following circumstances:
    1. Repair, maintenance, installation services provided by the real property manager for an additional charge.
    2. The real property manager arranges for a third party to provide the repair, maintenance, and installation services and the real property manager imposes an additional contract amount or charge for the arranging of these services.
    3. More than twenty-five percent (25%) of the time spent managing the real property for a billing or invoice period is attributable to repair, maintenance, and installation services taxable under this Article and not excluded by subsection (b) of this section. The tax applies to the sales price of or the gross receipts derived from the taxable repair, maintenance, and installation services portion of the property management contract. The real property manager must determine an allocated sales price for the repair, maintenance, and installation services portion of the property management contract based on a reasonable allocation of revenue that is supported by the person’s business records kept in the ordinary course of business. The charges for the taxable repair, maintenance, and installation services must be separately stated on the invoice or similar billing document given to the customer at the time of the sale.
  2. Exclusions. —  The tax imposed by this Article does not apply to the following repair, maintenance, and installation services if the services are provided by the real property manager pursuant to a property management contract:
    1. To troubleshoot, identify, or attempt to identify the source of a problem for the purpose of determining what is needed to restore the real property to working order or good condition.
    2. To inspect or monitor the real property, including the normal operation of all systems that are part of the real property.
  3. Substantiation. —  Generally, repair, maintenance, and installation services are subject to tax in accordance with G.S. 105-164.4(a)(16), unless a person substantiates that the services are not taxable as real property management services provided under a property management contract in accordance with subsection (a)(3) of this section, excluded from tax in accordance with subsection (b) of this section, or not subject to tax. A real property manager may substantiate that no more than twenty-five percent (25%) of the time spent managing the real property for a billing or invoice period is attributable to repair, maintenance, and installation services taxable under this Article and not excluded by subsection (b) of this section. The substantiation must be based on a reasonable approximation of the real property management services provided and supported by the person’s business records kept in the ordinary course of business. The substantiation must be contemporaneously provided for each billing or invoice period and maintained in the business records.
  4. Real Property Management Services. —  This subsection applies when repair, maintenance, and installation services otherwise taxable under this Article are not subject to sales and use tax. A real property manager is the consumer of the items that the real property manager purchases, installs, applies, or otherwise uses to fulfill a property management contract. A retailer engaged in business in the State shall collect tax on the sales price of an item sold at retail to a real property manager unless a statutory exemption in G.S. 105-164.13 applies.
  5. Real Property Manager Acting as Retailer. —  This subsection applies when repair, maintenance, and installation services provided by a real property manager are subject to sales and use tax under this section. A real property manager acts as a retailer and makes a sale at retail when it provides repair, maintenance, and installation services taxable under this section unless a statutory exemption in G.S. 105-164.13 applies.
  6. Grace Period. —  The Department shall take no action to assess any tax due for a filing period beginning on or after January 1, 2019, and ending prior to January 1, 2021, if the retailer failed to collect sales tax on repair, maintenance, and installation services taxable under this section. This subsection does not apply if the retailer received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period. The limitations in G.S. 105-244.3 apply to this subsection.

History. 2019-169, s. 3.9(e); 2019-246, s. 7(a).

Editor’s Note.

Session Laws 2019-169, s. 3.9(g), as amended by Session Laws 2019-246, s. 7(a), made this section, as added by Session Laws 2019-169, s. 3.9(e), effective July 26, 2019, and further provided: “The provisions of G.S. 105-164.15 A apply to the implementation of this change as if it is a decrease in the tax rate.”

§ 105-164.5. [Repealed]

Repealed by Session Laws 1998-121, s. 2, as amended by Session Laws 1998-217, s. 59, and applicable to taxes payable on or after July 1, 1998.

§ 105-164.5A. [Repealed]

Repealed by Session Laws 1961, c. 1213, s. 3.

§ 105-164.6. Complementary use tax.

  1. Tax. —  An excise tax at the applicable rate and maximum tax, if any, set in G.S. 105-164.4 is imposed on the following items if the item is subject to tax under G.S. 105-164.4 :
    1. Tangible personal property purchased, leased, or rented inside or outside this State for storage, use, or consumption in this State. This subdivision includes tangible personal property that becomes part of a building or another structure.
    2. Certain digital property purchased inside or outside this State for storage, use, or consumption in this State.
    3. Services sourced to this State.
  2. Liability. —  The tax imposed by this section is payable by the person who purchases, leases, or rents the items listed in subdivision (a) of this section. If an item purchased becomes a part of real property in the State, the real property contractor, the retailer-contractor, the subcontractor, the lessee, and the owner are jointly and severally liable for the tax, except as provided in G.S. 105-164.4 H(a1) regarding receipt of an affidavit of capital improvement. The liability of a real property contractor, a retailer-contractor, a subcontractor, a lessee, or an owner who did not purchase the item is satisfied by receipt of an affidavit from the purchaser certifying that the tax has been paid.
  3. Credit. —  A credit is allowed against the tax imposed by this section for the following:
    1. The amount of sales or use tax paid on the item to this State, provided the tax is stated and charged separately on the invoice or other document of the retailer given to the purchaser at the time of the sale, except as otherwise provided in G.S. 105-164.7 , or provided the retailer remitted the tax subsequent to the sale and the purchaser obtains such documentation. Payment of sales or use tax to this State on an item by a retailer extinguishes the liability of a purchaser for the tax imposed under this section.
    2. The amount of sales or use tax due and paid on the item to another state. If the amount of tax paid to the other state is less than the amount of tax imposed by this section, the difference is payable to this State. The credit allowed by this subdivision does not apply to tax paid to a state that does not grant a similar credit for sales or use taxes paid in North Carolina.
  4. , (e) Repealed by Session Laws 2005-276, s. 33.8, effective October 1, 2005. (f) Registration. — A person must obtain a certificate of registration in accordance with G.S. 105-164.29 under any of the following circumstances:
    1. Before the person engages in business in this State selling or delivering items for storage, use, or consumption in this State.
    2. If the person is a facilitator that is liable for tax under this Article.

      (g) Repealed by Session Laws 1995, c. 7, s. 1.

History. 1957, c. 1340, s. 5; 1959, c. 1259, s. 5; 1961, c. 826, s. 2; 1967, c. 1110, s. 6; 1973, c. 476, s. 193; 1979, c. 17, s. 2; c. 48, ss. 3, 4; c. 179, s. 3; c. 527, s. 2; 1979, 2nd Sess., c. 1100, s. 1; c. 1175; 1981, cc. 18, 65; 1983, c. 713, s. 90; 1983 (Reg. Sess., 1984), c. 1065, s. 3; 1989, c. 692, s. 3.4; 1991, c. 689, s. 312; c. 690, s. 3; 1995, c. 7, s. 1; c. 17, s. 7; 1998-121, s. 4; 1999-438, s. 1.1; 2001-414, s. 15; 2003-416, ss. 17, 24(a); 2005-276, s. 33.8; 2006-162, s. 6; 2009-451, s. 27A.3(h); 2011-330, s. 25(a); 2013-414, s. 10; 2014-3, s. 14.9(a); 2017-39, s. 6; 2017-204, s. 2.4(c); 2018-5, s. 38.5(g); 2019-169, s. 3.3(e).

Editor’s Note.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Session Laws 2018-5, s. 38.5(aa), made the amendment of subsection (b) of this section by Session Laws 2018-5, s. 38.5(g), effective retroactively to January 1, 2017, and applicable to sales and purchases made on or after that date.

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 2003-416, s. 17, effective August 14, 2003, added the first sentence of the last paragraph in subsection (f).

Session Laws 2003-416, s. 24.(a), effective August 14, 2003, inserted “use” in the section heading.

Session Laws 2005-276, s. 33.8, effective October 1, 2005, rewrote the section.

Session Laws 2006-162, s. 6, effective July 24, 2006, inserted “or use” in the middle of the first sentence of subdivision (c)(2).

Session Laws 2009-451, s. 27A.3(h), effective August 7, 2009, inserted “or digital property” in subdivisions (a)(1) and (a)(2), and in the first sentence of subsection (b); and inserted “digital property, or a service” in the first sentence of the first paragraph of subsection (f).

Session Laws 2011-330, s. 25(a), effective June 27, 2011, inserted “due and” in the first sentence of subdivision (c)(2).

Session Laws 2013-414, s. 10, effective August 23, 2013, added “provided the tax is stated . . . obtains such documentation” at the end of the first sentence of subdivision (c)(1).

Session Laws 2014-3, s. 14.9(a), effective May 29, 2014, rewrote subsection (f).

Session Laws 2017-39, s. 6, effective June 21, 2017, substituted “under this Article” for “pursuant to G.S. 105-164.4 F” in subdivision (f)(2).

Session Laws 2017-204, s. 2.4(c), rewrote subsection (b). For effective date and applicability, see editor’s note.

Session Laws 2018-5, s. 38.5(g), substituted “G.S. 105-164.4H(a1)” for “G.S. 105-164.4H(a).” For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 3.3(e), effective July 26, 2019, rewrote subsection (a); in subsection (b), substituted “the items listed in subdivision (a) of this section” for “tangible personal property or digital property or who purchases a service” in the first sentence, substituted “an item” for “the property” in the second sentence, and substituted “item” for “property” in the last sentence; and substituted “items” for “tangible personal property, digital property, or a service” in subdivision (f)(1).

Legal Periodicals.

For survey of 1979 tax law, see 58 N.C.L. Rev. 1548 (1980).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former statutes relating to the levy of compensating use taxes.

Constitutionality. —

The constitutionality of a use tax has long been established. Colonial Pipeline Co. v. Clayton, 275 N.C. 215 , 166 S.E.2d 671, 1969 N.C. LEXIS 376 (1969).

The purpose of North Carolina’s sales and use tax scheme is two-fold. The primary purpose is, of course, to generate revenue for the State. The sales tax is, in effect, a tax imposed upon the retail merchant as a privilege tax for the right to engage in that business. The tax is, however, designed to be passed on to the consumer. The second purpose of the sales and use tax scheme is to equalize the tax burden on all State residents. This is achieved through imposition of the use tax in certain situations where the sales tax is not applicable. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Sales Tax and Use Tax Are Complementary. —

The use tax and the sales tax law, taken and applied together, provide a uniform tax upon either the sale or use of all tangible personal property irrespective of where it may be purchased. That is, the sales tax and the use tax are complementary and functional parts of one system of taxation. Johnston v. Gill, 224 N.C. 638 , 32 S.E.2d 30, 1944 N.C. LEXIS 451 (1944).

The use tax is designed to complement the sales tax and to reach transactions which cannot be subject to a sales tax by reason of its burden on interstate commerce. Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673 , 151 S.E.2d 574, 1966 N.C. LEXIS 1282 (1966).

But Differ from Each Other in Conception. —

While a sales tax and a use tax in many instances may bring about the same result, they are different in conception. They are assessments upon different transactions and are bottomed on distinguishable taxable events. Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673 , 151 S.E.2d 574, 1966 N.C. LEXIS 1282 (1966); In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Distinctions Between Sales and Use Taxes and Property Taxes. —

See Sykes v. Clayton, 274 N.C. 398 , 163 S.E.2d 775, 1968 N.C. LEXIS 793 (1968).

The purpose of the use tax is to remove, insofar as possible, the discrimination against local merchants resulting from the imposition of a sales tax, and to equalize the burden of the tax on property sold locally and that purchased without the State. Watson Indus. v. Shaw, 235 N.C. 203 , 69 S.E.2d 505, 1952 N.C. LEXIS 376 (1952).

The use tax is not a sales tax. Its chief function is to prevent the evasion of the sales tax by persons purchasing tangible personal property outside of North Carolina for storage, use, or consumption within the State. Thus it prevents unfair competition on the part of out-of-state merchants. Johnston v. Gill, 224 N.C. 638 , 32 S.E.2d 30, 1944 N.C. LEXIS 451 (1944).

The purpose of the use tax is to impose the same burdens on out-of-state purchases as the sales tax imposes on purchases within the State. Colonial Pipeline Co. v. Clayton, 275 N.C. 215 , 166 S.E.2d 671, 1969 N.C. LEXIS 376 (1969).

Use tax does not aim at or discriminate against interstate commerce. It is laid upon every purchaser, within the State, of goods for consumption, regardless of whether they have been transported in interstate commerce. Its only relationship to interstate commerce arises from the fact that immediately preceding the transfer of possession to the purchaser within the State, which is the taxable event regardless of the time and place of passing of title, the merchandise had been transported in interstate commerce and brought to its journey’s end. Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673 , 151 S.E.2d 574, 1966 N.C. LEXIS 1282 (1966).

A sales tax is a tax on the freedom of purchase and, when applied to interstate transactions, it is a tax on the privilege of doing interstate business, creates a burden on interstate commerce and runs counter to the Commerce Clause of the federal Constitution. Conversely, a use tax is a tax on the enjoyment of that which was purchased after a sale has spent its interstate character. Atwater-Waynick Hosiery Mills, Inc. v. Clayton, 268 N.C. 673 , 151 S.E.2d 574, 1966 N.C. LEXIS 1282 (1966).

A use tax does not discriminate against interstate commerce since it is laid upon every purchaser, within the State, of goods for consumption, regardless of whether they have been transported in interstate commerce. Colonial Pipeline Co. v. Clayton, 275 N.C. 215 , 166 S.E.2d 671, 1969 N.C. LEXIS 376 (1969).

The use tax does not impermissibly burden interstate commerce since it is a tax imposed on the enjoyment of goods after the sale has already spent its interstate character. It is designed to complement the sales tax and to reach transactions which cannot constitutionally be subject to a sales tax. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Provisions of this statute cannot be extended beyond clear import of language used, or their operation enlarged so as to embrace matters not specifically pointed out. Watson Indus. v. Shaw, 235 N.C. 203 , 69 S.E.2d 505, 1952 N.C. LEXIS 376 (1952).

The terms “storage” and “use,” as used in this section, must be given the meaning stated in the definitions under subdivisions (17), (18) and (19) [now (44), (49), and (45), respectively] of G.S. 105-164.3 . In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

Taxable Event for Assessment of Use Tax. —

Regardless of the time and place of passing title, the taxable event for assessment of the use tax occurs when possession of the property is transferred to the purchaser within the taxing state for storage, use or consumption. Colonial Pipeline Co. v. Clayton, 275 N.C. 215 , 166 S.E.2d 671, 1969 N.C. LEXIS 376 (1969).

If property is used to produce something which will add to the taxpayer’s profit but the thing produced will not be sold subject to the sales tax, the sale of the property is not a sale to a manufacturer within the meaning of the Sales and Use Tax Act. Such a sale is subject to the Use Tax at the rate of four percent (three percent for the State and one percent for the county). Oscar Miller Contractor, Inc. v. North Carolina Tax Rev. Bd., 61 N.C. App. 725, 301 S.E.2d 511, 1983 N.C. App. LEXIS 2733 (1983).

When Fuel Exempt from Sales and Use Taxes. —

When fuel is the product of a mine and sold by the producer in its original unmanufactured state, it is exempt from sales and use taxes. Duke Power Co. v. Clayton, 274 N.C. 505 , 164 S.E.2d 289, 1968 N.C. LEXIS 807 (1968).

Soliciting Orders. —

Where one is engaged within this State in a regular business of soliciting orders for tailor-made clothing on commission, part of which he collects at the time the order is taken, and the clothes are shipped by the maker, who collects the balance of the price directly from the purchaser, such transaction is subject to the use tax and the solicitor is a retailer and an agent for collecting the use tax, for which he is liable on his failure to do so. Johnston v. Gill, 224 N.C. 638 , 32 S.E.2d 30, 1944 N.C. LEXIS 451 (1944).

Prerequisites to Assessment of Tax. —

See Watson Indus. v. Shaw, 235 N.C. 203 , 69 S.E.2d 505, 1952 N.C. LEXIS 376 (1952).

Dominion over, Possession of, or Title to Property Must Be Acquired by Purchaser. —

See Watson Indus. v. Shaw, 235 N.C. 203 , 69 S.E.2d 505, 1952 N.C. LEXIS 376 (1952).

Lease of Transcription Tape to Broadcasting Station. —

The former statute could not be construed to impose a tax on a broadcasting station where it purchased the right to rebroadcast programs recorded on a transcription tape and was given temporary custody of the tape in order to make use of the purchase. Watson Indus. v. Shaw, 235 N.C. 203 , 69 S.E.2d 505, 1952 N.C. LEXIS 376 (1952).

Food, such as peanuts, pretzels, and other “munchies” offered by respondent restaurants to customers purchasing beverages at their bars, meals offered without charge to restaurant managers, and matches provided free of charge to customers were not subject to use tax under subsection (a) because respondents included the cost of all the various items in their menu-item prices and collected sales taxes on those items. In re Rock-Ola Cafe, 111 N.C. App. 683, 433 S.E.2d 236, 1993 N.C. App. LEXIS 856 (1993).

Raw Materials As Tangible Personal Property. —

Raw materials, purchased out-of-state and incorporated out-of-state into building components, which were then used in the construction of buildings in North Carolina, were tangible personal property that was subject to the use tax found in G.S. 105-164.6(b). Morton Bldgs., Inc. v. Tolson, 172 N.C. App. 119, 615 S.E.2d 906, 2005 N.C. App. LEXIS 1579 (2005).

Statute of Limitations. —

The collection of a use or excise tax being subject to the same statute of limitations, which applies to the collection of the sales tax, a use or excise tax which accrued in the year 1937 was held barred by the three-year statute of limitations when assessed in 1942. Standard Fertilizer Co. v. Gill, 225 N.C. 426 , 35 S.E.2d 275, 1945 N.C. LEXIS 337 (1945).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. Eric L. Gooch, Director, Sales and Use Tax Division, N.C. Department of Revenue, 40 N.C. Op. Att'y Gen. 887 (1969).

§ 105-164.6A. Voluntary collection of use tax by sellers.

  1. Voluntary Collection Agreements. —  The Secretary may enter into agreements with sellers pursuant to which the seller agrees to collect and remit on behalf of its customers State and local use taxes due on items the seller sells. For the purpose of this section, a seller is a person who is engaged in the business of selling items for use in this State and who does not have sufficient nexus with this State to be required to collect use tax on the sales.
  2. Mandatory Provisions. —  The agreements must contain the following provisions:
    1. The seller is not liable for use tax not paid to it by a customer.
    2. A customer’s payment of a use tax to the seller relieves the customer of liability for the use tax.
    3. The seller must remit all use taxes it collects from customers on or before the due date specified in the agreement, which may not be later than 31 days after the end of a quarter or other collection period. The collection period cannot be more often than annually if the seller’s State and local tax collections are less than one thousand dollars ($1,000) in a calendar year.
    4. A seller who fails to remit use taxes collected on behalf of its customers by the due date specified in the agreement is subject to the interest and penalties provided in Article 9 of this Chapter with respect to the taxes to the same extent as if the seller were a retailer and were required to collect use taxes under this Article.
  3. Optional Provisions. —  The agreements may contain the following provisions:
    1. The seller will collect the use tax only on items that are subject to the general rate of tax.
    2. The seller will collect local use taxes only to the extent they are at the same rate in every unit of local government in the State.
    3. The seller will remit the tax and file reports in the form prescribed by the Secretary.
    4. Other provisions establishing the types of transactions on which the seller will collect tax and prescribing administrative procedures and requirements.

History. 1996, 2nd Ex. Sess., c. 14, s. 11; 2000-120, s. 4; 2003-284, s. 45.4; 2009-451, s. 27A.3(i); 2019-169, s. 3.3(f).

Editor’s Note.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

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.

Effect of Amendments.

Session Laws 2003-284, s. 45.4, effective July 15, 2003, added the last sentence in subdivision (b)(3).

Session Laws 2009-451, s. 27A.3(i), effective August 7, 2009, inserted “digital property, or services” in the first and last sentences of subsection (a).

Session Laws 2019-169, s. 3.3(f), effective July 26, 2019, in subsection (a), deleted “of tangible personal property, digital property, or services” following “items” in the first sentence, and substituted “items” for “tangible personal property, digital property, or services” in the second sentence.

§ 105-164.7. Retailer or facilitator to collect sales tax from purchaser as trustee for State.

The sales tax imposed by this Article is intended to be passed on to the purchaser of a taxable item and borne by the purchaser instead of by the retailer. A retailer must collect the tax due on an item when sold at retail. The requirements of this section apply to facilitators liable for tax under this Article. The tax is a debt from the purchaser to the retailer until paid and is recoverable at law by the retailer in the same manner as other debts. A retailer is considered to act as a trustee on behalf of the State when it collects tax from the purchaser on a taxable sale. The tax must be stated and charged separately on the invoices or other documents of the retailer given to the purchaser at the time of the sale except for either of the following:

  1. Vending machine sales.
  2. Where a retailer displays a statement indicating the sales price includes the tax.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 2000-19, s. 1.3; 2006-162, s. 7; 2009-451, s. 27A.3(j); 2012-79, s. 2.9; 2016-92, s. 2.4; 2018-5, s. 38.5(v); 2019-169, s. 3.3(g).

Effect of Amendments.

Session Laws 2006-162, s. 7, effective July 24, 2006, substituted “charge the tax to or to collect” for “charge to or collect” near the end of the next to the last sentence.

Session Laws 2009-451, s. 27A.3(j), effective August 7, 2009, rewrote the section.

Session Laws 2012-79, s. 2.9, effective June 26, 2012, added the last sentence in the introductory paragraph; and added subdivisions (1) and (2).

Session Laws 2016-92, s. 2.4, effective July 11, 2016, inserted “or facilitator” in the section heading; and added the third sentence in the introductory paragraph.

Session Laws 2018-5, s. 38.5(v), effective June 12, 2018, in the first sentence, added “or service”, in the second sentence, substituted “an item or service when sold” for “an item when the item is sold”, and, in the fifth sentence, substituted “on a taxable sale” for “of a taxable item.”

Session Laws 2019-169, s. 3.3(g), effective July 26, 2019, deleted “or service” following “item” in the first and second sentences of the introductory paragraph.

CASE NOTES

Editor’s Note. —

The cases below were decided prior to the 2000 amendment to this section.

Sales Tax Intended to Be Passed on to Consumer. —

Even though the sales tax is primarily a license or privilege tax on retailers, the intent of the law is that the sales tax be passed on to the consumer. Rent-A-Car Co. v. Lynch, 39 N.C. App. 709, 251 S.E.2d 917, 1979 N.C. App. LEXIS 2563 , rev'd, 298 N.C. 559 , 259 S.E.2d 564, 1979 N.C. LEXIS 1383 (1979).

But this section does not relieve the retailer of any tax liability; it provides him a ready legal means for recoupment. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

Failure to Charge or Collect Tax Does Not Affect Retailer’s Liability. —

The tax must be added to the purchase price and constitutes a debt from purchaser to retailer until paid, but failure to charge or collect the tax from purchaser shall not affect retailer’s liability. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

The retailer is not to be excused from liability merely because it is to his advantage to make use of a method of selling which will not permit him to keep a proper record of sales or to make the collections required by law. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962); Fisher v. Jones, 15 N.C. App. 737, 190 S.E.2d 663, 1972 N.C. App. LEXIS 2017 (1972).

Failure to charge or collect the tax from purchaser does not relieve the retailer of any tax liability. Fisher v. Jones, 15 N.C. App. 737, 190 S.E.2d 663, 1972 N.C. App. LEXIS 2017 (1972).

Notwithstanding that it is the intent of the law that the sales tax shall be passed on to the customer and that it not be borne by the retailer, the retailer is liable to the Secretary for the tax if he fails to collect it from his vendee or, in a proper case, from his lessee. Long Mfg. Co. v. Johnson, 264 N.C. 12 , 140 S.E.2d 744, 1965 N.C. LEXIS 1101 (1965).

Effect of Failure to Add Tax at Proper Time. —

In an action to determine who was liable to the Secretary of Revenue for the sales tax from a transaction, plaintiff retailer could not collect from defendant purchaser for sales taxes on materials sold by plaintiff to defendant where plaintiff failed to add sales taxes to the sales price of the material at the “time of selling or delivering or taking an order” as required by this section. Carolina-Atlantic Distribs., Inc. v. Teachey's Insulation, Inc., 51 N.C. App. 705, 277 S.E.2d 460, 1981 N.C. App. LEXIS 2289 (1981).

In bankruptcy proceedings, both collected and uncollected sales taxes under this section will be accorded unlimited priority of payment pursuant to 11 U.S.C. § 507(a)-(7)(C), which accords priority status to taxes required to be collected by a party and held for the government. In re Taylor Tobacco Enters., Inc., 106 B.R. 441, 1989 U.S. Dist. LEXIS 12300 (E.D.N.C. 1989).

§ 105-164.8. Retailer’s obligation to collect tax; remote sales subject to tax.

  1. Obligation. —  A retailer is required to collect the tax imposed by this Article notwithstanding any of the following:
    1. That the purchaser’s order or the contract of sale is delivered, mailed, or otherwise transmitted by the purchaser to the retailer at a point outside this State as a result of solicitation by the retailer through the medium of a catalogue or other written advertisement.
    2. That the purchaser’s order or the contract of sale is made or closed by acceptance or approval outside this State, or before any tangible personal property or certain digital property that is part of the order or contract enters this State.
    3. That the purchaser’s order or the contract of sale provides that the property shall be or is in fact procured or manufactured at a point outside this State and shipped directly to the purchaser from the point of origin.
    4. That the property is mailed to the purchaser in this State or a point outside this State or delivered to a carrier outside this State f.o.b. or otherwise and directed to the purchaser in this State regardless of whether the cost of transportation is paid by the retailer or by the purchaser.
    5. That the property is delivered directly to the purchaser at a point outside this State.
    6. Any combination in whole or in part of any two or more of the foregoing statements of fact, if it is intended that the property purchased be brought to this State for storage, use, or consumption in this State.
  2. Remote Sales. —  A retailer who makes a remote sale is engaged in business in this State and is subject to the tax levied under this Article if at least one of the following conditions is met:
    1. The retailer is a corporation engaged in business under the laws of this State or a person domiciled in, a resident of, or a citizen of, this State.
    2. The retailer maintains retail establishments or offices in this State, whether the remote sales thus subject to taxation by this State result from or are related in any other way to the activities of the establishments or offices.
    3. The retailer solicits or transacts business in this State by employees, independent contractors, agents, or other representatives, whether the remote sales subject to taxation by this State result from or are related in any other way to the solicitation or transaction of business. A retailer is presumed to be soliciting or transacting business by an independent contractor, agent, or other representative if the retailer enters into an agreement with a person of this State under which the person, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet Web site or otherwise, to the retailer. This presumption applies only if the cumulative gross receipts from sales by the retailer to purchasers in this State who are referred to the retailer by all persons with this type of agreement with the retailer is in excess of ten thousand dollars ($10,000) during the preceding four quarterly periods. This presumption may be rebutted by proof that the person with whom the retailer has an agreement did not engage in any solicitation in the State on behalf of the seller that would satisfy the nexus requirement of the United States Constitution during the four quarterly periods in question.
    4. Repealed by Session Laws 1991, c. 45, s. 16.
    5. The retailer, by purposefully or systematically exploiting the market provided by this State by any media-assisted, media-facilitated, or media-solicited means, including direct mail advertising, distribution of catalogs, computer-assisted shopping, television, radio or other electronic media, telephone solicitation, magazine or newspaper advertisements, or other media, creates nexus with this State. A nonresident retailer who purchases advertising to be delivered by television, by radio, in print, on the Internet, or by any other medium is not considered to be engaged in business in this State based solely on the purchase of the advertising.
    6. Through compact or reciprocity with another jurisdiction of the United States, that jurisdiction uses its taxing power and its jurisdiction over the retailer in support of this State’s taxing power.
    7. The retailer consents, expressly or by implication, to the imposition of the tax imposed by this Article. For purposes of this subdivision, evidence that a retailer engaged in the activity described in subdivision (5) is prima facie evidence that the retailer consents to the imposition of the tax imposed by this Article.
    8. The retailer is a holder of a wine shipper permit issued by the ABC Commission pursuant to G.S. 18B-1001.1 .
    9. The retailer makes remote sales sourced to this State, including sales as a marketplace seller, for the previous or the current calendar year that meet either of the following:
      1. Gross sales in excess of one hundred thousand dollars ($100,000).
      2. Two hundred or more separate transactions.
    10. The retailer is a marketplace facilitator that makes sales, including all marketplace-facilitated sales for all marketplace sellers, sourced to this State for the previous or the current calendar year that meet either of the following:
      1. Gross sales in excess of one hundred thousand dollars ($100,000).
      2. Two hundred or more separate transactions.
  3. Local Tax. —  A retailer who is required to collect the tax imposed by this Article must collect a local use tax on a transaction if a local sales tax does not apply to the transaction. The sourcing principles in G.S. 105-164.4 B determine whether a local sales tax or a local use tax applies to a transaction. A “local sales tax” is a tax imposed under Chapter 1096 of the 1967 Session Laws or by Subchapter VIII of this Chapter, and a local use tax is a use tax imposed under that act or Subchapter.

History. 1957, c. 1340, s. 5; 1987 (Reg. Sess., 1988), c. 1096, s. 4; 1991, c. 45, s. 16; 2001-347, s. 2.10; 2003-402, s. 13; 2003-416, s. 24(b), (c); 2009-451, s. 27A.3(a); 2019-6, s. 5.2; 2019-169, s. 3.3(h); 2019-246, s. 4(b).

Editor’s Note.

Session Laws 1967, c. 1096, referred to in subsection (c) of this section, relates to sales and use tax for Mecklenburg County.

Session Laws 2019-246, s. 4(q), made the amendment of subsection (b) of this section by Session Laws 2019-246, s. 4(b), effective February 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2019-246, s. 4(n), provides: “There is no obligation to collect the sales and use tax required by this section retroactively.”

Session Laws 2019-246, s. 4(o), is a severability clause.

Effect of Amendments.

Session Laws 2003-402, s. 13, effective October 1, 2003, in subsection (b), inserted “at least” preceding “one of the following” in the introductory language, added subdivision (b)(8), and made minor stylistic and punctuation changes throughout.

Session Laws 2003-416, ss. 24(b) and (c), effective August 14, 2003, rewrote the subsection headings in subsections (a) and (c).

Session Laws 2009-451, s. 27A.3(a), effective August 7, 2009, substituted “remote” for “mail order” throughout the section; in subsection (a), rewrote the introductory language, in subdivision (a)(2), substituted “any tangible” for “said tangible” and inserted “or digital property that is part of the order or contract,” substituted “the property” for “said property” in subdivisions (a)(3) through (a)(5), in subdivision (a)(6), deleted “tangible personal” preceding “property purchased,” and made minor punctuation and stylistic changes throughout; and in subsection (b), in subdivision (b)(2), substituted “the establishments” for “such establishments,” rewrote subdivision (b)(3), added the last sentence of subdivision (b)(5), and, in subdivision (b)(7), substituted “is prima facie” for “shall be prima facie” in the last sentence.

Session Laws 2019-6, s. 5.2, effective March 20, 2019, added subdivision (b)(9).

Session Laws 2019-169, s. 3.3(h), effective July 26, 2019, inserted “certain” preceding “digital property” in subdivision (a)(2).

Session Laws 2019-246, s. 4(b), in subdivision (b)(3), substituted “person” for “resident” throughout and deleted “thus” preceding “subject to” in the first sentence; substituted the introductory language of (b)(9) for language which read: “he retailer, with respect to remote sales into North Carolina, for the previous or current calendar year, had one or more of the following:”; and added subdivision (b)(10). For effective date and applicability, see editor’s note.

§ 105-164.9. Advertisement to absorb tax unlawful.

Any retailer who shall by any character or public advertisement offer to absorb the tax levied in this Article or in any manner directly or indirectly advertise that the tax herein imposed is not considered an element in the price to the purchaser shall be guilty of a Class 1 misdemeanor. Any violations of the provisions of this section reported to the Secretary shall be reported by him to the Attorney General of the State to the end that such violations may be brought to the attention of the solicitor of the court of the county or district whose duty it is to prosecute misdemeanors in the jurisdiction. It shall be the duty of such solicitor to investigate such alleged violations and if he finds that this section has been violated prosecute such violators in accordance with the law.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 1993, c. 539, s. 704; 1994, Ex. Sess., c. 24, s. 14(c).

§ 105-164.10. Retail tax calculation.

For the convenience of the retailer in collecting the tax due under this Article, the Secretary must prescribe tables that compute the tax due on sales. The Secretary must issue a separate table for each rate of tax that may apply to a sale. A retailer is not required to collect tax due under this Article based on a bracket system.

In computing tax due under this Article, the tax computation must be carried to the third decimal place and must round up to the next cent whenever the third decimal place is greater than four. A person liable for tax under this Article may elect to compute the tax due on a transaction on an item or invoice basis and the rounding rule is applied to the aggregate tax due.

History. 1957, c. 1340, s. 5; 1961, c. 826, s. 2; 1973, c. 476, s. 193; 1991, c. 689, s. 313; 2013-316, s. 5(e); 2014-3, s. 5.1(f); 2017-204, s. 2.9(h).

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. 105-164.4 G, regardless of when the initial sale of a ticket to the event occurred.”

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 2013-316, s. 5(e), effective January 1, 2014, substituted “tax calculation” for “bracket system” in the section heading; and substituted “Secretary must” for “Secretary shall” in the first and second sentences, and deleted “including the general rate established in G.S. 105-164.4 , preferential rates, and combined State and local rates. Use of the tables prescribed by the Secretary does not relieve a retailer of liability for the applicable rate of tax due on the gross receipts of net taxable sales of the retailer” following “sale” at the end. For applicability, see editor’s note.

Session Laws 2017-204, s. 2.9(h), effective August 11, 2017, in the first paragraph, deleted “by rounding off the amount of tax due to the nearest whole cent” following “on sales” at the end of the first sentence, and added the last sentence; and added the second paragraph.

CASE NOTES

Constitutionality. —

This section does not render the sales tax unconstitutional as violating the due process clause of the State Constitution or U.S. Const., Amend. XIV. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

The seller of goods through vending machines was in no position to attack the sales tax statute as discriminatory in that no tax is collected on sales of less than 10¢, where approximately 76% of the seller’s receipts came from items priced at 10¢ or above, and thus assuming the average sale to be 20¢, the seller must have collected 5% on more than three fourths of its total receipts. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

Bracket system is for the convenience of the retailer. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

The 1957 act made no material change in the effect of the bracket system, which had previously been in force pursuant to a regulation of the Secretary of Revenue, and made no change in the nature of the tax by reason of the inclusion of the bracket system in the act itself. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

Retailer Not Relieved of Liability. —

The legislature was careful to state, in all instances where administrative provisions might be construed to shift the burden of the tax from retailer to purchaser, that such provisions do not relieve the retailer from his privilege tax liability. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

Goods Not Exempt Because of Smallness of Unit Price. —

This Article in no particular exempts goods from the tax on retailers because of smallness of unit price. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

Section Has Reference to Sales, Not Unit Price of Goods. —

The bracket system provides that a retailer shall collect from a purchaser “no amount on sales of less than 10¢,” and it has reference to sales, not unit price of goods. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

If a customer buys two or more items priced at less than ten cents each so that the sale amounts to ten cents or more, the retailer’s failure to collect said tax from the purchaser shall not affect the retailer’s liability to the State. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

§ 105-164.11. Excessive and erroneous collections.

  1. Remittance of Overcollections to Secretary. —  When tax is collected for any period on a taxable sale in excess of the total amount that should have been collected or is collected on an exempt or nontaxable sale, the total amount collected must be remitted to the Secretary. If the Secretary determines that the seller overcollected the sales tax on a transaction, the Secretary shall take only one of the actions listed in this subsection. This subsection shall be construed with other provisions of this Article and given effect so as to result in the payment to the Secretary of the total amount collected as tax if it is in excess of the amount that should have been collected.
    1. If the Secretary determines that the seller overcollected tax on a transaction, the Secretary may allow a refund of the tax. The Secretary may allow the refund only if the seller gives the purchaser credit for or a refund of the overcollected tax. The Secretary shall not refund the overcollected tax to the seller if the seller has elected to offset a use tax liability on a related transaction with the overcollected sales tax under subdivision (2) of this subsection.
    2. If the Secretary determines that a seller who overcollected sales tax on a transaction is instead liable for a use tax on a related transaction, the Secretary may allow the seller to offset the use tax liability with the overcollected sales tax. The Secretary shall not allow an offset if the seller has elected to receive a refund of the overcollected tax under subdivision (1) of this subsection. The decision by a seller to receive an offset of tax liability rather than a refund of the overcollected tax does not affect the liability of the seller to the purchaser for the overcollected tax.
    3. If neither subdivision (1) nor (2) of this subsection applies, the Secretary shall retain the total amount collected on the transaction.
  2. Refund Procedures First Remedy. —  The first course of remedy available to purchasers seeking a refund of over-collected sales or use taxes from the seller are the customer refund procedures provided in this Chapter or otherwise provided by administrative rule, bulletin, or directive on the law issued by the Secretary. Where a person recovers tax under G.S. 105-164.11 B, a refund or credit under this section is not allowed by the Secretary.
  3. Cause of Action Against Seller. —  A cause of action against the seller for over-collected sales or uses taxes does not accrue until a purchaser has provided written notice to a seller and the seller has had 60 days to respond. The notice to the seller must contain the information necessary to determine the validity of the request.
  4. Presumption of Reasonable Business Practice. —  In connection with a purchaser’s request from the seller of over-collected sales or use taxes, a seller shall be presumed to have a reasonable business practice if, in the collection of sales and use taxes, the seller uses either a provider or a system, including a proprietary system, that is certified by the State and the seller has remitted to the State all taxes collected less any deductions, credits, or collection allowances.
  5. Reliance on Written Advice. —  A seller who requests specific written advice from the Secretary and who collects and remits sales or use tax in accordance with the written advice the Secretary gives the seller is not liable to a purchaser for any overcollected sales or use tax that was collected in accordance with the written advice. Subsection (a) of this section governs when a seller may obtain a refund for overcollected tax.

History. 1957, c. 1340, s. 5; 1959, c. 1259, s. 5; 1961, c. 826, s. 2; 1973, c. 476, s. 193; 1991 (Reg. Sess., 1992), c. 1007, s. 4; 2004-22, s. 1; 2009-413, s. 1; 2011-293, s. 1; 2018-5, s. 38.5(i).

Editor’s Note.

Session Laws 2011-293, s. 1, which rewrote subsection (a), was applicable to tax liabilities that accrue on or after July 1, 2011.

Session Laws 2015-6, 2.13(b), as amended by Session Laws 2016-5, s. 3.12(b), provides in part: “A contractor who paid sales and use tax on an item exempt from sales and use tax pursuant to G.S. 105-164.13 E(c), as enacted by this section, may request a refund from the retailer, and the retailer may, upon issuance of the refund or credit, request a refund for the overpayment of tax under G.S. 105-164.11(a)(1).”

Session Laws 2018-5, s. 38.5(aa), provides, in part: “Subsection (k) of this section is effective retroactively to July 1, 2014. A person who paid sales and use tax for a return period ending prior to the date this section becomes law on an item exempt from sales and use tax pursuant to G.S. 105-164.13 E, as amended by subsection (k) of this section, 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 subsection (k) of this section. A request for a refund must be made on or before October 1, 2018. Notwithstanding G.S. 105-241.6 , a request for a refund received after this date is barred and the provisions of G.S. 105-164.11 do not apply.”

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 2004-22, s. 1, effective June 25, 2004, designated the formerly undesignated provisions as subsection (a); added the subsection (a) catchline; and added subsections (b) through (d).

Session Laws 2009-413, s. 1, effective August 5, 2009, added subsection (e).

Session Laws 2011-293, s. 1, effective July 1, 2011, and applicable to tax liabilities that accrue on or after that date, rewrote subsection (a).

Session Laws 2018-5, s. 38.5(i), effective June 12, 2018, added the last sentence in subsection (b).

CASE NOTES

Applicability. —

While it was arguable that G.S. 105-164.11 applied since the sales tax collected from the Cape Hatteras Electric Membership Corporation (CHEMC) was exempt, the more specific terms of former G.S. 105-267 applied to the CHEMC’s suit, and therefore the judgment was to be collected as in other cases such that CHEMC did not have to demonstrate that it had credited its customers prior to receiving the ordered refund. Cape Hatteras Elec. Mbrshp. Corp. v. Lay, 210 N.C. App. 92, 708 S.E.2d 399, 2011 N.C. App. LEXIS 307 (2011).

G.S. 105-164.11 was not applicable because the optional maintenance agreements which a taxpayer sold to customers constituted a taxable use of tangible personal property within the meaning of G.S. 105-164.3(49) and not a sale under G.S. 105-164.3(36). G.S. 105-164.11 only applied to taxes collected on exempt or nontaxable sales. Technocom Bus. Sys. v. N.C. Dep't of Revenue, 219 N.C. App. 207, 723 S.E.2d 151, 2012 N.C. App. LEXIS 286 (2012).

§ 105-164.11A. Refund of tax paid on rescinded sale or cancellation of service.

  1. Refund. —  A retailer is allowed a refund of sales tax remitted on a rescinded sale or cancelled service. A sale is rescinded when the purchaser returns an item to the retailer and receives a refund, in whole or in part, of the sales price paid, including a refund of the pro rata amount of the sales tax based on the taxable amount of the sales price refunded. A service is cancelled when the service is terminated and the purchaser receives a refund, in whole or in part, of the sales price paid, including a refund of the pro rata amount of the sales tax paid based on the taxable amount of the sales price refunded. A retailer entitled to a refund under this section may reduce taxable receipts by the taxable amount of the refund for the period in which the refund occurs or may request a refund of an overpayment as provided in G.S. 105-241.7 , provided the tax has been refunded to the purchaser. The records of the retailer must clearly reflect and support the claim for refund for an overpayment of tax or adjustment to taxable receipts for the period in which the refund occurs.
  2. Service Contract. —  When a service contract is cancelled and a purchaser receives a refund, in whole or in part, of the sales price paid for the service contract, the purchaser may receive a refund of the pro rata amount of the sales tax paid based on the taxable amount of the sales price refunded as provided in this subsection:
    1. Refund from retailer. —  If the purchaser receives a refund on any portion of the sales price for a service contract purchased from the retailer required to remit the tax on the retail sale of the service contract, then the provisions of subsection (a) of this section apply.
    2. Refund application. —  If the purchaser receives a refund on any portion of the sales price for a service contract from a person other than the retailer required to remit the tax on the retail sale of the service contract, then the amount refunded to the purchaser by the person does not have to include the sales tax on the taxable amount of the refund. If the amount refunded to the purchaser by the person does not include the sales tax paid, then the purchaser may apply to the Department for a refund of the pro rata amount of the tax paid based on the taxable amount of the service contract refunded to the purchaser. The application for a refund by a purchaser must be made on a form prescribed by the Secretary, supported by documentation on the taxable amount of the service contract refunded to the purchaser from the person who refunded that amount, and filed within 30 days after the purchaser receives a refund. An application for a refund filed by the purchaser after the due date is barred. Taxes for which a refund is allowed directly to the purchaser for sales tax paid on a service contract are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .

History. 2014-3, s. 6.1(d).

Editor’s Note.

Session Laws 2014-3, s. 6.1(j), made this section effective October 1, 2014, and applicable to gross receipts derived from a service contract sold at retail on or after that date.

§ 105-164.11B. Recover sales tax paid.

A retailer who pays sales and use tax on an item that is separately stated on an invoice or similar billing document given to the retailer at the time of sale and subsequently resells the item at retail, without the item being used by the retailer, may recover the sales or use tax originally paid to a seller as provided in this section. A retailer entitled to recover tax under this section may reduce taxable receipts by the taxable amount of the purchase price of the item resold for the period in which the retail sale occurs. A recovery of tax allowed under this section is not an overpayment of tax and, where such recovery is taken, a refund of the tax originally paid may not be requested from the seller pursuant to the authority under G.S. 105-164.11 . Any amount for tax recovered under this section in excess of tax due for a reporting period under this Article is not subject to refund. Any tax recovered under this section may be carried forward to a subsequent reporting period and taken as an adjustment to taxable receipts. The records of the retailer must clearly reflect and support the adjustment to taxable receipts for the period in which the adjustment is made.

History. 2018-5, s. 38.5(h); 2019-169, s. 3.3(i).

Editor’s Note.

Session Laws 2018-5, s. 38.5(aa), 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 2019-169, s. 3.3(i), effective July 26, 2019, substituted “item” for “property or services” throughout the section; substituted “an item that is separately stated on an invoice or similar billing document given to the retailer at the time of sale” for “property or services” in the first sentence, “may” for “should” in the third sentence, and inserted “from the seller” in the third sentence of this section.

§ 105-164.12. [Repealed]

Repealed by Session Laws 2001-347, s. 2.11, effective January 1, 2002.

§ 105-164.12A. Electric golf cart and battery charger considered a single article.

The sale of an electric golf cart and a battery charger that is not physically attached to the golf cart is considered the sale of a single article of tangible personal property in imposing tax under this Article if the battery charger is designed to recharge the golf cart and is sold to the purchaser of the golf cart when the golf cart is sold.

History. 1985 (Reg. Sess., 1986), c. 901.

§ 105-164.12B. Tangible personal property sold below cost with conditional contract.

  1. Conditional Contract Defined. —  A conditional contract is a contract in which all of the following conditions are met:
    1. A seller transfers an item of tangible personal property to a consumer on the condition that the consumer enter into an agreement to purchase services on an ongoing basis for a minimum period of at least six months.
    2. The agreement requires the consumer to pay a cancellation fee to the seller if the consumer cancels the contract for services within the minimum period.
    3. For the item transferred, the seller charges the consumer a price that, after any price reduction the seller gives the consumer, is below the purchase price the seller paid for the item. The seller’s purchase price is presumed to be no greater than the price the seller paid, as shown on the seller’s purchase invoice, for the same item within 12 months before the seller entered into the conditional contract.
  2. Tax. —  If a seller transfers an item of tangible personal property as part of a conditional contract, a sale has occurred. The sales price of the item is presumed to be the retail price at which the item would sell in the absence of the conditional contract. Sales tax at the general rate under G.S. 105-164.4(a) is due at the time of the transfer on the following:
    1. Any part of the presumed sales price the consumer pays at that time, if the service in the contract is taxable at the combined general rate.
    2. The presumed sales price, if the service in the contract is not taxable at the combined general rate.
    3. The percentage of the presumed sales price that is equal to the percentage of the service in the contract that is not taxable at the combined general rate, if any part of the service in the contract is not taxable at the combined general rate.
  3. -(f). Repealed by Session Laws 2007-244, s. 3, effective October 1, 2007.

History. 1996, 2nd Ex. Sess., c. 13, s. 5.1; 2001-414, ss. 16, 17; 2006-151, s. 6; 2007-244, s. 3; 2016-5, s. 3.8(a).

Editor’s Note.

Session Laws 1996, Second Extra Session, c. 13, s. 10.2(5), made this section effective on the earliest date practicable (November 1, 1996), and provides that the earliest date practicable is considered to be the first day of the third month following the ratification of the act (August 2, 1996). The act further provides that this section is applicable to sales made on or after the effective date.

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. 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.”

Effect of Amendments.

Session Laws 2006-151, s. 6, effective January 1, 2007, substituted “Tangible personal property bundled with service contract” for “Bundled transactions” in the section heading.

Session Laws 2007-244, s. 3, effective October 1, 2007, substituted “sold below cost with conditional” for “bundled with” in the section heading; in the introductory language of subsection (a), substituted “Conditional Service Contract” for “Bundled Transaction” in the subsection catchline, and substituted “conditional service contract is a contract” for “bundled transaction is a transaction”; substituted “seller” for “service provider” in subdivision (a)(2); rewrote subdivision (a)(3) and subsection (b); and deleted former subsections (c) through (f).

Session Laws 2016-5, s. 3.8(a), effective May 11, 2016, deleted “service” following “conditional” in the section heading, and throughout the section; in subsection (b), in the second sentence of the introductory language, inserted “at the general rate under G.S. 105-164.4(a) ”; and added subdivision (3).

§ 105-164.12C. Items given away by merchants.

If a retailer engaged in the business of selling prepared food or drink for immediate or on-premises consumption also gives prepared food or drink to its patrons or employees free of charge, for the purpose of this Article, the food or drink given away is considered sold along with the food or drink sold. If a retailer gives an item of inventory to a customer free of charge on the condition that the customer purchase a similar or related item, the item given away is considered sold along with the item sold. In all other cases, items given away or used by any retailer or wholesale merchant are not considered sold, whether or not the retailer or wholesale merchant recovers its cost of the items from sales of other items.

History. 2012-79, s. 2.10(a); 2019-169, s. 3.3(j).

Editor’s Note.

Session Laws 2012-79, s. 2.10(b), made this section retroactively effective August 7, 2009.

Effect of Amendments.

Session Laws 2019-169, s. 3.3(j), effective July 26, 2019, substituted “item” or “items” for “property” throughout the section; substituted “food or drink” for “property” twice in the first sentence; and made minor stylistic changes.

Part 3. Exemptions and Exclusions.

§ 105-164.13. Retail sales and use tax.

The sale at retail and the use, storage, or consumption in this State of the following items are specifically exempted from the tax imposed by this Article:

Agricultural Group.

  1. Repealed by Session Laws 2013-316, s. 3.3(b), effective July 1, 2014, and applicable to sales made on or after that date.

    (1a), (1b) Repealed by Session Laws 2013-316, s. 3.3(b), effective July 1, 2014, and applicable to sales made on or after that date.

  2. Repealed by Session Laws 2001, c. 514, s. 1, effective February 1, 2002. (2a) Repealed by Session Laws 2013-316, s. 3.3(b), effective July 1, 2014, and applicable to sales made on or after that date.

    (2b) Items for a farmer may be exempt as provided in G.S. 105-164.13 E.

  3. Products of forests and mines in their original or unmanufactured state when such sales are made by the producer in the capacity of producer.
  4. Cotton, tobacco, peanuts or other farm products sold to manufacturers for further manufacturing or processing.

    (4a) Repealed by Session Laws 2013-316, s. 3.3(b), effective July 1, 2014, and applicable to sales made on or after that date.

    (4b) Products of a farm sold in their original state by the producer of the products if the producer is not primarily a retail merchant and ice used to preserve agriculture, aquaculture and commercial fishery products until the products are sold at retail.

    (4c), (4d) Repealed by Session Laws 2013-316, s. 3.3(b), effective July 1, 2014, and applicable to sales made on or after that date.

    (4e) Repealed by Session Laws 2006-162, s. 8(b), effective July 24, 2006.

    (4f) Sales of the following to a person who is engaged in the commercial logging business:

    1. Logging machinery. — Logging machinery is machinery used to harvest raw forest products for transport to first market.
    2. Attachments and repair parts for logging machinery.
    3. Lubricants applied to logging machinery.
    4. Fuel used to operate logging machinery.

      Industrial Group.

      (4g) A wood chipper that meets all of the following requirements:

      a. It is designed to be towed by a motor vehicle.

      b. It is assigned a 17-digit vehicle identification number by the National Highway Transportation Safety Association.

      c. It is sold to a person who purchases a motor vehicle in this State that is to be registered in another state and who uses the purchased motor vehicle to tow the wood chipper to the state in which the purchased motor vehicle is to be registered.

  5. Manufactured products produced and sold by manufacturers or producers to other manufacturers, producers, or registered retailers or wholesale merchants, for the purpose of resale except as modified by G.S. 105-164.3(279). This exemption does not extend to or include retail sales to users or consumers not for resale. (5a) Repealed by Session Laws 2017-57, s. 38.8(c), as amended by Session Laws 2017-212, s. 7.2(a), effective July 1, 2018, and applicable to sales made on or after that date.

    (5b) Sales to a telephone company regularly engaged in providing telecommunications service to subscribers on a commercial basis of central office equipment, switchboard equipment, private branch exchange equipment, terminal equipment other than public pay telephone terminal equipment, and parts and accessories attached to the equipment.

    (5c) Sales of towers, broadcasting equipment, and parts and accessories attached to the equipment to a radio or television company licensed by the Federal Communications Commission.

    (5d) Sales of broadcasting equipment and parts and accessories attached to the equipment to a cable service provider. For the purposes of this subdivision, “broadcasting equipment” does not include cable.

    (5e) Sales of mill machinery or mill machinery parts or accessories to any of the persons listed in this subdivision. For purposes of this subdivision, the term “accessories” does not include electricity. The persons are:

    1. A manufacturing industry or plant. A manufacturing industry or plant does not include (i) a delicatessen, cafe, cafeteria, restaurant, or another similar retailer that is principally engaged in the retail sale of food prepared by it for consumption on or off its premises or (ii) a production company.
    2. A contractor or subcontractor if the purchase is for use in the performance of a contract with a manufacturing industry or plant.
    3. A subcontractor if the purchase is for use in the performance of a contract with a general contractor that has a contract with a manufacturing industry or plant.

      (5f) Sales to a major recycling facility of any of the following tangible personal property for use in connection with the facility:

      a. Cranes, structural steel crane support systems, and foundations related to the cranes and support systems.

      b. Port and dock facilities.

      c. Rail equipment.

    4. Material handling equipment.

      (5g) Sales of equipment, or an attachment or repair part for equipment, that meets all of the following requirements:

      a. Is sold to a company primarily engaged at the establishment in research and development activities in the physical, engineering, and life sciences included in industry group 54171 of NAICS.

      b. Is capitalized by the company for tax purposes under the Code.

      c. Is used by the company at the establishment in the research and development of tangible personal property.

      (5h) Sales of equipment, or an attachment or repair part for equipment, that meets all of the following requirements:

      a. Is sold to a company primarily engaged at the establishment in software publishing activities included in industry group 5112 of NAICS.

      b. Is capitalized by the company for tax purposes under the Code.

      c. Is used by the company at the establishment in the research and development of tangible personal property.

      (5i) Sales of equipment, or an attachment or repair part for equipment, that meets all of the following requirements:

      a. Is sold to a company primarily engaged at the establishment in industrial machinery refurbishing activities included in industry group 811310 of NAICS.

      b. Is capitalized by the company for tax purposes under the Code.

      c. Is used by the company at the establishment in repairing or refurbishing tangible personal property.

      (5j) Sales of the following to a company located at a ports facility for waterborne commerce:

      a. Machinery and equipment that is used at the facility to unload or to facilitate the unloading or processing of bulk cargo to make it suitable for delivery to and use by manufacturing facilities.

      b. Parts, accessories, or attachments used to maintain, repair, replace, upgrade, improve, or otherwise modify such machinery and equipment.

      (5k) Sales of the following to a secondary metals recycler:

      a. Equipment, or an attachment or repair part for equipment, that (i) is capitalized by the person for tax purposes under the Code, (ii) is used by the person in the secondary metals recycling process, and (iii) is not a motor vehicle or an attachment or repair part for a motor vehicle.

      b. Fuel, piped natural gas, or electricity for use at the person’s facility at which the primary activity is secondary metals recycling.

      (5 l ) Sales of equipment, or an attachment or repair part for equipment, that meets all of the following requirements:

      a. Is sold to a company primarily engaged at the establishment in processing tangible personal property for the purpose of extracting precious metals, as defined in G.S. 66-406 , to determine the value for potential purchase.

      b. Is capitalized by the company for tax purposes under the Code.

      c. Is used by the company in the process described in this subdivision.

      (5m) Sales of equipment, or an attachment or repair part for equipment, that meets all of the following requirements:

      a. Is sold to a company that is engaged in the fabrication of metal work and that has annual gross receipts, including the gross receipts of all related persons, as defined in G.S. 105-163.010 , from the fabrication of metal work of at least eight million dollars ($8,000,000).

      b. Is capitalized by the company for tax purposes under the Code.

      c. Is used by the company at the establishment in the fabrication or manufacture of metal products or used by the company to create equipment for the fabrication or manufacture of metal products.

      (5n) Sales of repair or replacement parts for a ready-mix concrete mill, regardless of whether the mill is freestanding or affixed to a motor vehicle, to a company that primarily sells ready-mix concrete.

      (5o) Sales of equipment, or an accessory, an attachment, or a repair part for equipment, that meets all of the following requirements:

      a. Is sold to a large fulfillment facility or to a contractor or subcontractor if the purchase is for use in the performance of a contract with the large fulfillment facility.

      b. Is used at the facility for any of the following purposes:

      1. In the distribution process, which includes receiving, inventorying, sorting, repackaging, or distributing finished retail products.
      2. Baling previously used packaging for resale, sanitizing required by federal law, or material handling.

        c. Is not electricity.

        If the level of investment or employment required by G.S. 105-164.3(119)b. is not timely made, achieved, or maintained, then the exemption provided under this subdivision is forfeited. If the exemption is forfeited due to a failure to timely make the required investment or to timely achieve the minimum required employment level, then the exemption provided under this subdivision is forfeited on all purchases. If the exemption is forfeited due to a failure to maintain the minimum required employment level once that level has been achieved, then the exemption provided under this subdivision is forfeited for those purchases occurring on or after the date the taxpayer fails to maintain the minimum required employment level. A taxpayer that forfeits an exemption under this subdivision is liable for all past sales and use taxes avoided as a result of the forfeiture, computed at the applicable State and local rates from the date the taxes would otherwise have been due, plus interest at the rate established under G.S. 105-241.21 . Interest is computed from the date the sales or use tax would otherwise have been due. The past taxes and interest are due 30 days after the date of forfeiture. A taxpayer that fails to pay the past taxes and interest by the due date is subject to the provisions of G.S. 105-236 .

        (5p) Sales of equipment, or an attachment or repair part for equipment, which is used in cutting, shaping, polishing, and finishing rough cut slabs and blocks of natural and engineered stone and stone-like products and sold to a company primarily engaged in the business of providing made-to-order countertops, walls, or tubs.

        (5q) Sales of machinery, equipment, parts, and accessories to the following permittees for use in the manufacture of the following items and supplies and ingredients used or consumed by the permittee in the manufacturing process:

        a. The holder of an unfortified winery permit for the manufacture of unfortified wine, as authorized in G.S. 18B-1101 .

        b. The holder of a fortified winery permit for the manufacture of fortified wine, as authorized in G.S. 18B-1102 .

        c. The holder of a brewer permit for the manufacture of malt beverages, as authorized in G.S. 18B-1104 .

        d. The holder of a distillery permit for the manufacture of spirituous liquor, as authorized in G.S. 18B-1105 .

  6. Repealed by Session Laws 1989 (Regular Session, 1990), c. 1068, s. 1.
  7. Sales of products of waters in their original or unmanufactured state when such sales are made by the producer in the capacity of producer. Fish and seafoods are likewise exempt when sold by the fisherman in that capacity.
  8. Sales to a manufacturer of tangible personal property that enters into or becomes an ingredient or component part of tangible personal property that is manufactured. This exemption does not apply to sales of electricity.

    (8a) Sales to a small power production facility, as defined in 16 U.S.C. § 796(17)(A), of fuel and piped natural gas used by the facility to generate electricity.

  9. Boats, fuel oil, lubricating oils, machinery, equipment, nets, rigging, paints, parts, accessories, and supplies sold to any of the following:
    1. The holder of a standard commercial fishing license issued under G.S. 113-168.2 for principal use in commercial fishing operations.
    2. The holder of a shellfish license issued under G.S. 113-169.2 for principal use in commercial shellfishing operations.
    3. The operator of a for-hire vessel, as defined in G.S. 113-174 , for principal use in the commercial use of the boat.
  10. Sales of the following to commercial laundries or to pressing and dry cleaning establishments:
    1. Articles or materials used for the identification of garments being laundered or dry cleaned, wrapping paper, bags, hangers, starch, soaps, detergents, cleaning fluids and other compounds or chemicals applied directly to the garments in the direct performance of the laundering or the pressing and cleaning service.
    2. Laundry and dry-cleaning machinery, parts and accessories attached to the machinery, and lubricants applied to the machinery.
    3. Fuel and piped natural gas used in the direct performance of the laundering or the pressing and cleaning service. The exemption does not apply to electricity.

      Motor Fuels Group.

      (10a) Sales of the following to a major recycling facility:

      a. Lubricants and other additives for motor vehicles or machinery and equipment used at the facility.

      b. Materials, supplies, parts, and accessories, other than machinery and equipment, that are not capitalized by the taxpayer and are used or consumed in the manufacturing and material handling processes at the facility.

      c. Electricity used at the facility.

      (10b) Recodified as G.S. 105-164.13(10a)c. by Session Laws 2005-276, s. 33.9, effective January 1, 2006.

  11. Any of the following fuel:
    1. Motor fuel, as taxed in Article 36C of this Chapter, except motor fuel for which a refund of the per gallon excise tax is allowed under G.S. 105-449.105 A, G.S. 105-449.106(c) or G.S. 105-449.107 .
    2. Alternative fuel taxed under Article 36D of this Chapter, unless a refund of that tax is allowed under G.S. 105-449.107 . (11a) Sales of diesel fuel to railroad companies for use in rolling stock other than motor vehicles. The definitions in G.S. 105-333 apply in this subdivision.

      (11b) (Expires January 1, 2024) Sales of aviation gasoline and jet fuel to an interstate air business for use in a commercial aircraft. For purposes of this subdivision, the term “commercial aircraft” has the same meaning as defined in subdivision (45a) of this section. This exemption also applies to aviation gasoline and jet fuel purchased for use in a commercial aircraft in interstate or foreign commerce by a person whose primary business is scheduled passenger air transportation. This subdivision expires January 1, 2024.

  12. Sales of any of the following:
    1. Prosthetic devices for human use.
    2. Mobility enhancing equipment sold on a prescription.
    3. Durable medical equipment sold on prescription.
    4. Durable medical supplies sold on prescription.
    5. Human blood, including whole, plasma, and derivatives.
    6. Human tissue, eyes, DNA, or an organ.
  13. All of the drugs listed in this subdivision, including their packaging materials and any instructions or information about the drugs included in the package with them. This subdivision does not apply to pet food or feed for animals. The drugs exempt under this subdivision are as follows:
    1. Drugs required by federal law to be dispensed only on prescription.
    2. Over-the-counter drugs sold on prescription. This sub-subdivision does not apply to purchases of over-the-counter drugs by hospitals and other medical facilities for use and treatment of patients.
    3. Insulin.

      (13a) Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 16.

      (13b) Repealed by Session Laws 1999, c. 438, s. 7, effective October 1, 1999.

      (13c) Repealed by Session Laws 2013-316, s. 3.2(a), effective January 1, 2014, and applicable to sales made on or after that date.

      (13d) Sales of diapers or incontinence underpads on prescription by an enrolled State Medicaid/Health Choice provider for use by beneficiaries of the State Medicaid program when the provider is reimbursed by the State Medicaid program or a Medicaid managed care organization, as defined in 42 U.S.C. § 1396b(m).

      Printed Materials Group.

  14. Public school books on the adopted list, the selling price of which is fixed by State contract.

    (14a) Recodified as subdivision (33a) by Session Laws 2000-120, s. 5, effective July 14, 2000.

    Transactions Group.

  15. Accounts of purchasers, representing taxable sales, on which the tax imposed by this Article has been paid, that are found to be worthless and actually charged off for income tax purposes may, at corresponding periods, be deducted from gross sales. In the case of a municipality that sells electricity, the account may be deducted if it meets all the conditions for charge-off that would apply if the municipality were subject to income tax. Any accounts deducted pursuant to this subdivision must be added to gross sales if afterwards collected. For purposes of this exemption, a worthless account of a purchaser is a “bad debt” as allowed under section 166 of the Code. The amount calculated pursuant to section 166 of the Code must be adjusted to exclude financing charges or interest, sales or use taxes charged on the sales price, uncollectible amounts on property that remains in the possession of the seller until the full purchase price is paid, expenses incurred in attempting to collect any debt, and repossessed property.
  16. Sales of an article repossessed by the vendor if tax was paid on the sales price of the article.

    Exempt Status Group.

  17. Sales which a state would be without power to tax under the limitations of the Constitution or laws of the United States or under the Constitution of this State.

    Unclassified Group.

  18. Repealed by Session Laws 2005-276, s. 33.9, effective January 1, 2006.
  19. Repealed by Session Laws 1991, c. 618, s. 1.
  20. Sales by blind merchants operating under supervision of the Department of Health and Human Services.
  21. The lease or rental of motion picture films used for exhibition purposes where the lease or rental of such property is an established business or part of an established business or the same is incidental or germane to said business of the lessee.
  22. The lease or rental of films, motion picture films, transcriptions and recordings to radio stations and television stations operating under a certificate from the Federal Communications Commission.

    (22a) Sales of audiovisual masters made or used by a production company in making visual and audio images for first generation reproduction. For the purpose of this subdivision, an “audiovisual master” is an audio or video film, tape, or disk or another audio or video storage device from which all other copies are made.

  23. Sales of the following packaging:
    1. Wrapping paper, labels, wrapping twine, paper, cloth, plastic bags, cartons, packages and containers, cores, cones or spools, wooden boxes, baskets, coops and barrels, including paper cups, napkins and drinking straws and like articles sold to manufacturers, producers and retailers, when such materials are used for packaging, shipment or delivery of tangible personal property which is sold either at wholesale or retail and when such articles constitute a part of the sale of such tangible personal property and are delivered with it to the customer.
    2. A container that is used as packaging by the owner of the container or another person to enclose tangible personal property for delivery to a purchaser of the property and is required to be returned to its owner for reuse.
  24. Sales of fuel and other tangible personal property for use or consumption by or on ocean-going vessels which ply the high seas in interstate or foreign commerce in the transport of freight and/or passengers for hire exclusively, when delivered to an officer or agent of such vessel for the use of such vessel; provided, however, that sales of fuel and other tangible personal property made to officers, agents, members of the crew or passengers of such vessels for their personal use shall not be exempted from payment of the sales tax.
  25. Sales by merchants on the Cherokee Indian Reservation when such merchants are authorized to do business on the Reservation and are paying the tribal gross receipts levy to the Tribal Council.
  26. Food and prepared food sold within the school building during the regular school day. For purposes of this exemption, the term “school” is an entity regulated under Chapter 115C of the General Statutes.

    (26a) Food and prepared food sold not for profit by a public school cafeteria to a child care center that participates in the Child and Adult Care Food Program of the Department of Health and Human Services.

    (26b) Food, prepared food, soft drinks, candy, and other tangible personal property sold not for profit for or at an event that is sponsored by an elementary or secondary school when the net proceeds of the sales will be given or contributed to the school or to a nonprofit charitable organization, one of whose purposes is to serve as a conduit through which the net proceeds will flow to the school. For purposes of this exemption, the term “school” is an entity regulated under Chapter 115C of the General Statutes.

  27. Repealed by Session Laws 2013-316, s. 3.2(a), effective January 1, 2014, and applicable to sales made on or after that date.

    (27a) Repealed by Session Laws 2013-316, s. 3.4(a), effective July 1, 2014, and applicable to purchases made on or after that date.

  28. Repealed by Session Laws 2013-316, s. 3.2(a), effective January 1, 2014, and applicable to sales made on or after that date.
  29. Repealed by Session Laws 2005-435, s. 30, effective September 27, 2005.

    (29a) Repealed by Session Laws 1995 (Regular Session, 1996), c. 646, s. 5.

  30. Repealed by Session Laws 2014-3, s. 8.3(a), effective October 1, 2014, and applicable to sales made on or after that date.
  31. Sales of meals not for profit to elderly and incapacitated persons by charitable or religious organizations not operated for profit which are entitled to the refunds provided by G.S. 105-164.14(b), when such meals are delivered to the purchasers at their places of abode.

    (31a) Food and prepared food sold by a church or religious organization not operated for profit when the proceeds of the sales are actually used for religious activities.

    (31b) Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 16.

  32. Sales of motor vehicles, the sale of a motor vehicle body to be mounted on a motor vehicle chassis when a certificate of title has not been issued for the chassis, and the sale of a motor vehicle body mounted on a motor vehicle chassis that temporarily enters the State so the manufacturer of the body can mount the body on the chassis. For purposes of this subdivision, a park model RV, as defined in G.S. 105-187.1 , is a motor vehicle.
  33. Tangible personal property purchased solely for the purpose of export to a foreign country for exclusive use or consumption in that or some other foreign country, either in the direct performance or rendition of professional or commercial services, or in the direct conduct or operation of a trade or business, all of which purposes are actually consummated, or purchased by the government of a foreign country for export which purpose is actually consummated. “Export” shall include the acts of possessing and marshalling such property, by either the seller or the purchaser, for transportation to a foreign country, but shall not include devoting such property to any other use in North Carolina or the United States. “Foreign country” shall not include any territory or possession of the United States.In order to qualify for this exemption, an affidavit of export indicating compliance with the terms and conditions of this exemption, as prescribed by the Secretary of Revenue, must be submitted by the purchaser to the seller, and retained by the seller to evidence qualification for the exemption.If the purposes qualifying the property for exemption are not consummated, the purchaser shall be liable for the tax which was avoided by the execution of the aforesaid affidavit as well as for applicable penalties and interest and the affidavit shall contain express provision that the purchaser has recognized and assumed such liability.The principal purpose of this exemption is to encourage the flow of commerce through North Carolina ports that is now moving through out-of-state ports. However, it is not intended that property acquired for personal use or consumption by the purchaser, including gifts, shall be exempt hereunder.

    (33a) Tangible personal property sold by a retailer to a purchaser inside or outside this State, when the property is delivered by the retailer in this State to a common carrier or to the United States Postal Service for delivery to the purchaser or the purchaser’s designees outside this State and the purchaser does not subsequently use the property in this State. This exemption includes printed material sold by a retailer to a purchaser inside or outside this State when the printed material is delivered directly to a mailing house, to a common carrier, or to the United States Postal Service for delivery to a mailing house in this State that will preaddress and presort the material and deliver it to a common carrier or to the United States Postal Service for delivery to recipients outside this State designated by the purchaser.

  34. Repealed by Session Laws 2016-5, s. 3.9(a), effective January 1, 2017, and applicable to sales made on or after that date.
  35. Sales by a nonprofit civic, charitable, educational, scientific, literary, or fraternal organization when all of the conditions listed in this subdivision are met. This exemption does not apply to gross receipts derived from an admission charge to an entertainment activity.
    1. The sales are conducted only upon an annual basis for the purpose of raising funds for the organization’s activities.
    2. The proceeds of the sale are actually used for the organization’s activities.
    3. The products sold are delivered to the purchaser within 60 days after the first solicitation of any sale made during the organization’s annual sales period.
  36. Advertising supplements and any other printed matter ultimately to be distributed with or as part of a newspaper.
  37. Repealed by Session Laws 2001-424, s. 34.23(a), effective December 1, 2001, and applicable to sales made on or after that date.
  38. Food and other products lawfully purchased under the Supplemental Nutrition Assistance Program, 7 U.S.C. § 2011, and supplemental foods lawfully purchased with a food instrument issued under the Special Supplemental Nutrition Program, 42 U.S.C. § 1786, and supplemental foods purchased for direct distribution by the Special Supplemental Nutrition Program.
  39. Sales of paper, ink, and other tangible personal property to commercial printers and commercial publishers for use as ingredients or component parts of free distribution periodicals and sales by printers of free distribution periodicals to the publishers of these periodicals. As used in this subdivision, the term “free distribution periodical” means a publication that is continuously published on a periodic basis monthly or more frequently, is provided without charge to the recipient, and is distributed in any manner other than by mail.
  40. Sales to the Department of Transportation.
  41. Sales of mobile classrooms to local boards of education or to local boards of trustees of community colleges.
  42. Tangible personal property that is purchased by a retailer for resale or is manufactured or purchased by a wholesale merchant for resale and then withdrawn from inventory and donated by the retailer or wholesale merchant to either a governmental entity or a nonprofit organization, contributions to which are deductible as charitable contributions for federal income tax purposes.
  43. Custom computer software. Custom computer software and the portion of prewritten computer software that is modified or enhanced if the modification or enhancement is designed and developed to the specifications of a specific purchaser and the charges for the modification or enhancement are separately stated on the invoice or similar billing document given to the purchaser at the time of the sale.

    (43a) Computer software that meets any of the following descriptions:

    1. It is purchased to run on an enterprise server operating system. The exemption includes a purchase or license of computer software for high-volume, simultaneous use on multiple computers that is housed or maintained on an enterprise server or end users’ computers. The exemption includes software designed to run a computer system, an operating program, or application software.
    2. It is sold to a person who operates a datacenter and is used within the datacenter.
    3. It is sold to a person who provides cable service, telecommunications service, or video programming and is used to provide ancillary service, cable service, Internet access service, telecommunications service, or video programming.

      (43b) Computer software or certain digital property that becomes a component part of other computer software or certain digital property that is offered for sale or of a service that is offered for sale.

  44. Repealed by Session Laws 2013-316, s. 4.1(d), effective July 1, 2014, and applicable to gross receipts billed on or after that date.
  45. Sales of aircraft lubricants, aircraft repair parts, and aircraft accessories to an interstate passenger air carrier for use at its hub.

    (45a) Sales to an interstate air business of tangible personal property that becomes a component part of or is dispensed as a lubricant into commercial aircraft during its maintenance, repair, or overhaul. For the purpose of this subdivision, commercial aircraft includes only aircraft that has a certified maximum take-off weight of more than 12,500 pounds and is regularly used to carry for compensation passengers, commercial freight, or individually addressed letters and packages.

    (45b) Sales of the following items to an interstate air courier for use at its hub:

    1. Aircraft lubricants, aircraft repair parts, and aircraft accessories.
    2. Materials handling equipment, racking systems, and related parts and accessories for the storage or handling and movement of tangible personal property at an airport or in a warehouse or distribution facility.

      (45c) Sales of aircraft simulators to a company for flight crew training and maintenance training.

      (45d) Parts and accessories for use in the repair or maintenance of a qualified aircraft or a qualified jet engine.

  46. Sales of electricity by a municipality whose only wholesale supplier of electric power is a federal agency and who is required by a contract with that federal agency to make payments in lieu of taxes.
  47. An amount charged as a deposit on a beverage container that is returnable to the vendor for reuse when the amount is refundable or creditable to the vendee, whether or not the deposit is separately charged.
  48. An amount charged as a deposit on an aeronautic, automotive, industrial, marine, or farm replacement part that is returnable to the vendor for rebuilding or remanufacturing when the amount is refundable or creditable to the vendee, whether or not the deposit is separately charged. This exemption does not include tires or batteries.
  49. Repealed by Session Laws 2015-241, s. 32.18(d), effective March 1, 2016, and applicable to sales occurring on or after March 1, 2016, and to gross receipts derived from repair, maintenance, and installation services provided on or after March 1, 2016.

    (49a) Delivery charges for delivery of direct mail if the charges are separately stated on an invoice or similar billing document given to the purchaser at the time of sale.

  50. Fifty percent (50%) of the sales price of tangible personal property sold through a coin-operated vending machine, other than tobacco and newspapers.
  51. Water delivered by or through main lines or pipes for either commercial or domestic use or consumption.
  52. Items subject to sales and use tax under G.S. 105-164.4 , other than electricity, telecommunications service, and ancillary service as defined in G.S. 105-164.3 , if all of the following conditions are met:
    1. The items are purchased by a State agency for its own use and in accordance with G.S. 105-164.29 A.
    2. The items are purchased pursuant to a valid purchase order issued by the State agency that contains the exemption number of the agency and a description of the property purchased, or the items purchased are paid for with a State-issued check, electronic deposit, credit card, procurement card, or credit account of the State agency.
    3. For all purchases other than by an agency-issued purchase order,  the agency must provide to or have on file with the retailer the agency’s exemption number.
  53. Sales to a professional land surveyor of tangible personal property on which custom aerial survey data is stored in digital form or is depicted in graphic form. Data is custom if it was created to the specifications of the professional land surveyor purchasing the property. A professional land surveyor is a person licensed as a surveyor under Chapter 89C of the General Statutes.
  54. The following telecommunications services and charges:
    1. Telecommunications service that is a component part of or is integrated into a telecommunications service that is resold. This exemption does not apply to service purchased by a pay telephone provider who uses the service to provide pay telephone service. Examples of services that are resold include carrier charges for access to an intrastate or interstate interexchange network, interconnection charges paid by a provider of mobile telecommunications service, and charges for the sale of unbundled network elements. An unbundled network element is a network element, as defined in 47 U.S.C. § 153(29), to which access is provided on an unbundled basis pursuant to 47 U.S.C. § 251(c)(3).
    2. Pay telephone service.
    3. 911 charges imposed under G.S. 143B-1403 and remitted to the 911 Fund under that section.
    4. Charges for telecommunications service made by a hotel, motel, or another entity whose gross receipts are taxable under G.S. 105-164.4(a)(3) when the charges are incidental to the occupancy of the entity’s accommodations.
    5. Telecommunications service purchased or provided by a State agency or a unit of local government for the State Network or another data network owned or leased by the State or unit of local government.
  55. Sales of electricity for use at an eligible Internet datacenter and eligible business property to be located and used at an eligible Internet datacenter. As used in this subdivision, “eligible business property” is property that is capitalized for tax purposes under the Code and is used either:
    1. For the provision of a service included in the business of the primary user of the datacenter, including equipment cooling systems for managing the performance of the property.
    2. For the generation, transformation, transmission, distribution, or management of electricity, including exterior substations and other business personal property used for these purposes.
    3. To provide related computer engineering or computer science research.If the level of investment required by G.S. 105-164.3(79)d. is not timely made, then the exemption provided under this subdivision is forfeited. If the level of investment required by G.S. 105-164.3(79)d. is timely made but any specific eligible business property is not located and used at an eligible Internet datacenter, then the exemption provided for such eligible business property under this subdivision is forfeited. If the level of investment required by G.S. 105-164.3(79)d. is timely made but any portion of the electricity is not used at an eligible Internet datacenter, then the exemption provided for such electricity under this subdivision is forfeited. A taxpayer that forfeits an exemption under this subdivision is liable for all past taxes avoided as a result of the forfeited exemption, computed from the date the taxes would have been due if the exemption had not been allowed, plus interest at the rate established under G.S. 105-241.21 . If the forfeiture is triggered due to the lack of a timely investment required by G.S. 105-164.3(79)d., then interest is computed from the date the taxes would have been due if the exemption had not been allowed. For all other forfeitures, interest is computed from the time as of which the eligible business property or electricity was put to a disqualifying use. The past taxes and interest are due 30 days after the date the exemption is forfeited. A taxpayer that fails to pay the past taxes and interest by the due date is subject to the provisions of G.S. 105-236 . (55a) Sales of electricity for use at a qualifying datacenter and datacenter support equipment to be located and used at the qualifying datacenter. As used in this subdivision, “datacenter support equipment” is property that is capitalized for tax purposes under the Code and is used for one of the following purposes:

      a. The provision of a service or function included in the business of an owner, user, or tenant of the datacenter.

      b. The generation, transformation, transmission, distribution, or management of electricity, including exterior substations, generators, transformers, unit substations, uninterruptible power supply systems, batteries, power distribution units, remote power panels, and other capital equipment used for these purposes.

      c. HVAC and mechanical systems, including chillers, cooling towers, air handlers, pumps, and other capital equipment used for these purposes.

    4. Hardware and software for distributed and mainframe computers and servers, data storage devices, network connectivity equipment, and peripheral components and equipment.
    5. To provide related computer engineering or computer science research.If the level of investment required by G.S. 105-164.3(201) is not timely made, the exemption provided under this subdivision is forfeited. If the level of investment required by G.S. 105-164.3(201) is timely made but any specific datacenter support equipment is not located and used at the qualifying datacenter, the exemption provided for such datacenter support equipment under this subdivision is forfeited. If the level of investment required by G.S. 105-164.3(201) is timely made but any portion of electricity is not used at the qualifying datacenter, the exemption provided for such electricity under this subdivision is forfeited. A taxpayer that forfeits an exemption under this subdivision is liable for all past taxes avoided as a result of the forfeited exemption, computed from the date the taxes would have been due if the exemption had not been allowed, plus interest at the rate established under G.S. 105-241.21 . If the forfeiture is triggered due to the lack of a timely investment required by G.S. 105-164.3(201), interest is computed from the date the taxes would have been due if the exemption had not been allowed. For all other forfeitures, interest is computed from the time as of which the datacenter support equipment or electricity was put to a disqualifying use. The past taxes and interest are due 30 days after the date the exemption is forfeited. A taxpayer that fails to pay the past taxes and interest by the due date is subject to the provisions of G.S. 105-236 .
  56. Sales to the owner or lessee of an eligible railroad intermodal facility of intermodal cranes, intermodal hostler trucks, and railroad locomotives that reside on the premises of the facility and are used at the facility.
  57. Fuel, electricity, and piped natural gas sold to a manufacturer for use in connection with the operation of a manufacturing facility. The exemption does not apply to the following:
    1. Electricity used at a facility at which the primary activity is not manufacturing.
    2. Fuel or piped natural gas that is used solely for comfort heating at a manufacturing facility where there is no use of fuel or piped natural gas in a manufacturing process.

      (57a) Repealed by Session Laws 2017-57, s. 38.8(c), as amended by Session Laws 2017-212, s. 7.2(a), effective July 1, 2018, and applicable to sales made on or after that date.

  58. Tangible personal property purchased with a client assistance debit card issued for disaster assistance relief by a State agency or a federal agency or instrumentality.
  59. Interior design services provided in conjunction with the sale of tangible personal property.
  60. Gross receipts derived from an admission charge to an entertainment activity are exempt as provided in G.S. 105-164.4 G.
  61. A motor vehicle service contract. (61a) The sales price of or the gross receipts derived from the repair, maintenance, and installation services and service contracts listed in this subdivision are exempt from tax. Except as otherwise provided in this subdivision, an item used to fulfill either repair, maintenance, and installation services or service contracts exempt from tax under this subdivision is taxable. The list of repair, maintenance, and installation services and service contracts exempt from tax under this subdivision is as follows:
    1. A service and a service contract for an item exempt from tax under this Article, except as otherwise provided in this subdivision. Items used to fulfill a service or service contract exempt under this sub-subdivision are exempt from tax under this Article. This exemption does not apply to water for a pool, fish tank, or similar aquatic feature or to a motor vehicle, except as provided under subdivision (62a) of this section and fees under sub-subdivision b. of this subdivision.
    2. A motor vehicle emissions and safety inspection fee imposed pursuant to G.S. 20-183.7 , provided the fee is separately stated on the invoice or other documentation provided to the purchaser at the time of the sale.
    3. A service performed for a person by a related member.
    4. Cleaning of real property, except where the service constitutes a part of the gross receipts derived from the rental of an accommodation subject to tax under G.S. 105-164.4 or for a pool, fish tank, or other similar aquatic feature. Examples of cleaning of real property include custodial services, window washing, mold remediation services, carpet cleaning, removal of debris from gutters, removal of dust and other pollutants from ductwork, and power washing other than for a pool.
    5. A service on roads, driveways, parking lots, and sidewalks.
    6. Removal of waste, trash, debris, grease, snow, and other similar tangible personal property from property, other than a motor vehicle. The exemption applies to a household or a commercial trash collection and removal service. The exemption applies to the removal of septage from property, including motor vehicles, but does not include removal of septage from portable toilets.
    7. The following inspections:
      1. An inspection performed where the results are included in a report for the sale or financing of real property.
      2. An inspection of the structural integrity of real property, provided the charge for the inspection is separately stated on the invoice or other documentation given to the purchaser at the time of the sale.
      3. An inspection to a system that is a capital improvement under G.S. 105-164.3(31)f., provided the inspection is to fulfill a safety requirement and provided the charge for the inspection is separately stated on the invoice or other documentation given to the purchaser at the time of the sale.
    8. Alteration and repair of clothing, except where the service constitutes a part of the gross receipts derived from the rental of clothing subject to tax under G.S. 105-164.4 or for alteration and repair of belts and shoes.
    9. Pest control service. For purposes of this exemption, the term “pest control service” means the application of pesticides to real property.
    10. Moving service. For purposes of this exemption, the term “moving service” means a service for hire to transport or relocate a person’s existing belongings to or from any destination.
    11. Self-service vehicle wash or vacuum and limited-service vehicle wash. For purposes of this sub-subdivision, the following definitions apply:
      1. Limited-service vehicle wash. — The cleaning of a vehicle by mechanical means where the only activities performed by an employee include one or more of the following: (i) receiving payment for the transaction, (ii) guiding the vehicle into the entrance or exit of a conveyor, (iii) applying low-pressure spray of chemicals to the vehicle prior to the cleaning of the vehicle, or (iv) placing protective tape or covers on the vehicle prior to cleaning. The term does not include any activity whereby an employee physically touches the vehicle for the purpose of cleaning or restoring the vehicle, enters or cleans any part of the interior of the vehicle, or performs an activity on the vehicle other than one of those listed in this sub-sub-subdivision.
      2. Self-service vehicle wash or vacuum. — The cleaning of a vehicle by a customer without any cleaning or restoring activity performed by an employee.
    12. Services performed on a transmission, distribution, or other network asset on land owned by a service provider or on a right-of-way or an easement in favor of a service provider. This exemption does not apply to charges billed to a customer for repair, maintenance, and installation services or a contribution in aid of construction and are included in the gross receipts derived from items subject to the combined general rate under G.S. 105-164.4. The terms “service provider” and “governmental entity” have the same meaning as defined in G.S. 105-164.3(31)c.
    13. Any of the following:
      1. A qualified aircraft.
      2. A qualified jet engine.
      3. An aircraft with a gross take-off weight of more than 2,000 pounds.
    14. Funeral-related service, including a service for the burial of remains. This exemption does not apply to the sale of tangible personal property, such as caskets, headstones, and monuments.
    15. A service performed on an animal, such as hoof shoeing and microchipping a pet.
    16. A security or similar monitoring contract for real property. The exemption provided in this subdivision does not apply to charges for repair, maintenance, and installation services to repair security, alarm, and other similar monitoring systems for real property.
    17. A contract to provide a certified operator for a wastewater system.

      (61b) Items purchased for resale under an exemption certificate in accordance with G.S. 105-164.28 or under a direct pay certificate in accordance with G.S. 105-164.27 A.

      (61c) Installation charges that are a part of the sales price of tangible personal property purchased by a real property contractor to fulfill a real property contract for an item that is installed or applied to real property, provided the installation charges are separately stated and identified as such on the invoice or other documentation given to the real property contractor at the time of the sale. The exemption also applies to installation charges by a retailer-contractor when performing installation services for a real property contract. The exemption includes any labor costs provided by the real property contractor, including employees’ wages, or labor purchased from a third party that would otherwise be included in the definition of “purchase price.”

      (61d) Installation charges that are a part of the sales price of or gross receipts derived from repair, maintenance, and installation services or installation charges only purchased by a real property contractor to fulfill a real property contract, provided the installation charges are separately stated and identified as such on the invoice or other documentation given to the real property contractor at the time of the sale. The exemption also applies to installation charges by a retailer-contractor when performing a real property contract. The exemption includes any labor costs provided by the real property contractor, including employees’ wages, or labor purchased from a third party that would otherwise be included in the definition of “purchase price.”

  62. An item, including repair, maintenance, and installation services, purchased or used to fulfill a service contract taxable under this Article if the purchaser of the contract is not charged for the item. This exemption does not apply to the purchase of tangible personal property or certain digital property used to fulfill a service contract for real property where the charge being covered would otherwise be subject to tax as a real property contract. For purposes of this exemption, the term “item” does not include a tool, equipment, supply, or similar tangible personal property that is not deemed to be a component or repair part of the tangible personal property, real property, or certain digital property for which a service contract is sold to a purchaser. (62a) A replacement item, a repair part, or repair, maintenance, and installation services to maintain or repair tangible personal property or a motor vehicle pursuant to a manufacturer’s warranty or a dealer’s warranty. For purposes of this subdivision, the following definitions apply:
    1. Dealer’s warranty. — An explicit warranty the seller of an item extends to the purchaser of the item as part of the purchase price of the item.
    2. Manufacturer’s warranty. — An explicit warranty the manufacturer of an item extends to the purchaser of the item as part of the purchase price of the item.

      (62b) The amount of repair, maintenance, and installation services for a boat, an aircraft, or a qualified jet engine for which the purchaser elects for the seller to collect and remit the tax due under G.S. 105-164.27 A(a3).

  63. Food and prepared food to be provided to a person entitled to the food and prepared food under a prepaid meal plan subject to tax under G.S. 105-164.4(a)(12). This exemption applies to packaging including wrapping paper, labels, plastic bags, cartons, packages and containers, paper cups, napkins and drinking straws, and like articles that meet all of the following requirements:
    1. Used for packaging, shipment, or delivery of the food and prepared food.
    2. Constitute a part of the sale of the food and prepared food.
    3. Delivered with the food and prepared food.
  64. Fifty percent (50%) of the sales price of a modular home or a manufactured home, including all accessories attached when delivered to the purchaser.
  65. (Expires January 1, 2024)  This subdivision expires January 1, 2024. Sales of the following to a professional motorsports racing team or a related member of a team for use in competition in a sanctioned race series:
    1. The sale, lease, or rental of an engine.
    2. The sales price of or gross receipts derived from a service contract on, or repair, maintenance, and installation services for, a transmission, an engine, rear-end gears, and any tangible personal property that is purchased, leased, or rented and that is exempt from tax under this subdivision or that is allowed a sales tax refund under G.S. 105-164.14 A(a)(5).
    3. The gross receipts derived from an agreement to provide an engine to a professional motorsports racing team or related member of a team for use in competition in a sanctioned race series, where such agreement does not meet the definition of a “service contract” as defined in G.S. 105-164.3 but may meet the definition of the term “lease or rental” as defined in G.S. 105-164.3 . (65a) (Expires January 1, 2024) An engine or a part to build or rebuild an engine for the purpose of providing an engine under an agreement to a professional motorsports racing team or a related member of a team for use in competition in a sanctioned race series. This subdivision expires January 1, 2024.
  66. Storage of a motor vehicle, provided the charge is separately stated on the invoice or other documentation provided to the purchaser at the time of the sale.
  67. Towing services, provided the charge is separately stated on the invoice or other documentation provided to the purchaser at the time of the sale.
  68. Sales of wastewater dispersal products approved by the Department of Health and Human Services under Article 11 of Chapter 130A of the General Statutes.
  69. Sales of non-coin currency, investment metal bullion, and investment coins. For purposes of this subdivision, the following definitions apply:
    1. Investment coins. — Numismatic coins or other forms of money and legal tender manufactured of metal under the laws of the United States or any foreign nation with a fair market value greater than any statutory or nominal value of such coins.
    2. Investment metal bullion. — Any elementary precious metal that has been put through a process of smelting or refining and that is in such state or condition that its value depends upon its content and not upon its form. The term does not include fabricated precious metal that has been processed or manufactured for one or more specific and customary industrial, professional, or artistic uses.
    3. Non-coin currency. — Forms of money and legal tender manufactured of a material other than metal under the laws of the United States or any foreign nation with a fair market value greater than any statutory or nominal value of such currency.
  70. Gross receipts derived from a rental of an accommodation are exempt as provided in G.S. 105-164.4 F.
  71. Sales of items to the North Carolina Life and Health Insurance Guaranty Association.
  72. Sales of a digital audio work or a digital audiovisual work that is a qualifying education expense under G.S. 115C-595(a)(3) to the operator of a home school as defined in G.S. 115C-563 .
  73. Sales of a digital audio work or digital audiovisual work that consists of nontaxable service content when the electronic transfer of the digital audio work or digital audiovisual work occurs contemporaneously with the provision of the nontaxable service in real time.

History. 1957, c. 1340, s. 5; 1959, c. 670; c. 1259, s. 5; 1961, c. 826, s. 2; cc. 1103, 1163; 1963, c. 1169, ss. 7-9; 1965, c. 1041; 1967, c. 756; 1969, c. 907; 1971, c. 990; 1973, c. 476, s. 143; c. 708, s. 1; cc. 1064, 1076; c. 1287, s. 8; 1975, 2nd Sess., c. 982; 1977, c. 771, s. 4; 1977, 2nd Sess., c. 1219, s. 43.6; 1979, c. 46, ss. 1, 2; c. 156, s. 1; c. 201; c. 625, ss. 1, 2; c. 801, ss. 74, 75; 1979, 2nd Sess., c. 1099, s. 1; 1981, cc. 14, 207, 982; 1983, c. 156; c. 570, s. 21; c. 713, ss. 91, 92; c. 873; c. 887; 1983 (Reg. Sess., 1984), c. 1071, s. 1; 1985, c. 114, s. 4; c. 555; c. 656, ss. 24, 25; 1985 (Reg. Sess., 1986), c. 953; c. 973; c. 982, s. 2; 1987, c. 800, s. 1; 1987 (Reg. Sess., 1988), c. 937; 1989, c. 692, ss. 3.5, 3.6; c. 748, s. 1; 1989 (Reg. Sess., 1990), c. 989; c. 1060; c. 1068, ss. 1, 2; 1991, c. 45, s. 17; c. 79, s. 2; c. 618, s. 1; c. 689, s. 314; 1991 (Reg. Sess., 1992), c. 931, ss. 1, 2; c. 935, s. 1; c. 940, s. 1; c. 949, s. 1; c. 1007, s. 44; 1993, c. 484, s. 3; c. 513, s. 11; 1993 (Reg. Sess., 1994), c. 739, s. 1; 1995, c. 390, s. 14; c. 451, s. 1; c. 477, ss. 2, 3; 1995 (Reg. Sess., 1996), c. 646, ss. 4, 5; c. 649, s. 1; 1996, 2nd Ex. Sess., c. 14, ss. 15, 16; 1997-369, s. 2; 1997-370, s. 2; 1997-397, s. 1; 1997-423, s. 3; 1997-443, s. 11A.118(a); 1997-456, s. 27; 1997-506, s. 36; 1997-521, s. 1; 1998-22, s. 6; 1998-55, ss. 9, 15; 1998-98, ss. 14, 14.1, 49, 107; 1998-146, s. 9; 1998-171, s. 10(a), (b); 1998-225, s. 4.3; 1999-337, s. 31; 1999-360, s. 7(a)-(c); 1999-438, ss. 5-12; 2000-120, s. 5; 2000-153, s. 5; 2001-347, s. 2.12; 2001-424, s. 34.23(a); 2001-476, s. 17(e); 2001-509, s. 1; 2001-514, s. 1; 2002-184, s. 9; 2003-284, ss. 45.5, 45.5A; 2003-349, s. 11; 2003-416, ss. 18(a), 21; 2003-431, s. 1; 2004-124, ss. 32B.2, 32B.4; 2005-276, s. 33.9; 2005-435, ss. 30, 31; 2006-19, s. 1; 2006-33, s. 5; 2006-66, s. 24.17(b); 2006-162, ss. 8(a), 8(b); 2006-168, s. 4.2; 2006-252, s. 2.25(b); 2007-244, s. 4; 2007-323, s. 31.23(c); 2007-368, s. 1; 2007-383, s. 6; 2007-397, ss. 10(g), 10(h); 2007-491, s. 44(1)a; 2007-500, s. 1; 2007-527, ss. 10, 27; 2008-107, ss. 28.6(a), 28.20(a); 2009-451, s. 27A.3(f), (k); 2009-511, s. 1; 2010-91, s. 3; 2010-147, s. 6.1; 2011-330, s. 18; 2012-79, s. 1.4; 2013-316, ss. 3.2(a), (b), 3.3(b), 3.4(a), 4.1(d), 5(c), 6(c); 2013-360, s. 7.4(e); 2013-414, ss. 11(a), 58(e); 2014-3, ss. 4.1(e), 5.1(d)-(f), 6.1(c), (f), 8.3(a), (b); 2014-100, s. 37.3(a); 2015-6, ss. 2.12, 2.23(a); 2015-241, ss. 7A.3, 32.18(d), (e); 2015-259, ss. 3(b), 4.1(c), 4.2(d), 5(b), (c), 6(b); 2015-261, s. 5(a), (b); 2016-5, ss. 3.9(a), (b), 3.11(a), 3.19(b), 3.23(a); 2016-92, ss. 2.1(a), 2.5; 2016-94, ss. 38.2(c), 38.5(i), (p); 2016-123, s. 11.1; 2017-57, s. 38.8(a), (c), 38.9(b); 2017-102, s. 15.1; 2017-139, s. 1; 2017-181, s. 1; 2017-204, ss. 2.6, 2.9(a), 2.11(b), 2.12(a); 2017-212, s. 7.2(a); 2018-5, s. 38.5(j), (y); 2019-6, ss. 4.9, 5.1, 5.3; 2019-169, ss. 3.3(k), 3.4(c), 3.9(a), (b), 3.10, 3.11(a), 3.12, 3.13(b); 2019-237, ss. 4(a), 5(a), 8.1(a); 2019-246, ss. 6, 7(a); 2020-6, ss. 2(a), 3(b); 2021-150, s. 25.1.

Editor’s Note.

Subdivisions (39)(1) through (39)(4) were redesignated as subdivisions (39)a. to (39)d. pursuant to Session Laws 1997-456, s. 27, which authorized the Revisor of Statutes to renumber or reletter sections and parts of sections having a number or letter designation that is incompatible with the General Assembly’s computer database.

Session Laws 1998-22, s. 6 and Session Laws 1998-55, s. 9 each added a subdivision (44). The subdivision (44) added by Session Laws 1998-55, s. 9 was to go into effect on January 1, 2001; it was redesignated as subdivision (45) at the direction of the Revisor of Statutes. This subdivision was subsequently repealed by Session Laws 1999-360, s. 7(a), effective retroactively to May 1, 1999, and hence never went into effect. The present subdivision (45) was added by Session Laws, 1999-360, s. 7(b), effective respectively as of May 1, 1999.

Session Laws 2001-347, s. 2.12, added subdivisions (5a), (47), (48), (49) and (50). See editor’s note for effective dates.

Session Laws 2001-347, s. 3.2, makes subdivision (5a) effective January 1, 2006, and subdivisions (47) through (50) effective January 1, 2002.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

Session Laws 2003-284, s. 45.12, provides that the amendments to subdivisions (12), (13), and (43), and the additions of subdivisions (43A) and (51) by s. 45.5 are effective July 15, 2003, and the amendment to subdivision (50) by s. 45.5A is effective January 1, 2004.

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 2006-19, s. 3, provides: “This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended by this act before the effective date of this act, nor does it affect the right to any refund of a tax that accrued under the amended statute before the effective date of its amendment.”

Session Laws 2007-323, s. 31.23(c), and Session Laws 2007-397, s. 10(h), each added a new subdivision (56). The subdivision added by Session Laws 2007-397 has been renumbered as subdivision (57) at the direction of the Revisor of Statutes.

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.

Session Laws 2007-397, s. 15 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 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 2007-525, s. 14, provides: “The Revenue Laws Study Committee may study whether to continue the sales tax exemption for nutritional supplements sold by a chiropractic physician at a chiropractic office to a patient as part of the patient’s plan of treatment.”

Session Laws 2008-107, s. 28.6(b), provides, in part, that the amendment to this section by s. 28.6(a), is applicable to purchases made on or after August 1, 2008.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2015-6, s. 2.23(c), provides: “Notwithstanding G.S. 105-164.13(62), as amended by S.L. 2014-3 and by subsection (a) of this section, the sales and use tax exemption in G.S. 105-164.13(62) applies to an item used pursuant to a service contract that meets the definition of a “service contract” as defined in G.S. 105-164.3(38b), notwithstanding that the service contract was sold before January 1, 2014, and effective on, before, or after January 1, 2014.”

Session Laws 2015-241, s. 7A.3, provides in part: “The Revisor of Statutes may conform names and titles changed by this section and may correct statutory references as required by this section throughout the General Statutes. In making the changes authorized by this section, the Revisor may also adjust subject and verb agreement and the placement of conjunctions.” Pursuant to this authority, “G.S. 143B-1403” was substituted for “G.S. 62A-43” in subdivision (54)c at the direction of the Revisor of Statutes.

Session Laws 2016-94, s. 38.5(a), provides: “A retailer is not liable for an undercollection of sales or use tax as a result of the changes made under Section 32.18 of S.L. 2015-241 and under Part V of S.L. 2015-259 if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax. This applies only to the period beginning March 1, 2016, and ending December 31, 2016.”

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.”

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2017-57, s. 38.8(e), provides: “Sales of mill machinery to manufacturers and certain industrial processors have historically enjoyed preferential tax treatment, whether in the form of a reduced wholesale tax, a preferential rate of sales and use tax, or a one-percent (1%) privilege tax with an eighty-dollar ($80.00) cap per article. Despite the nature of the tax, the operational language has remained virtually unchanged for over 60 years and lacks clear guidance with regard to its application. Specifically, Article 5F of Chapter 105 of the General Statutes, and its predecessors, did not define ‘manufacturing industry or plant’ or ‘mill machinery.’ This lack of guidance has resulted in a substantial body of administrative interpretation being developed over the years by the Department of Revenue. These interpretations are not included in the statutes and may not necessarily comport with the traditional definition of manufacturing, but they may be consistent with the General Assembly’s intent to provide preferential tax treatment to certain industrial equipment.

“This act repeals the one-percent (1%) privilege tax on mill machinery and mill machinery parts and accessories and substitutes a sales and use tax exemption for the items. However, the General Assembly recognizes that, once this transition has occurred, efforts need to be made to provide more guidance and specificity to taxpayers and the Department of Revenue with respect to the treatment of manufacturing and industrial processing equipment. Therefore, the Revenue Laws Study Committee is directed to study ways in which to clarify the scope of the sales and use tax exemption for mill machinery, as enacted by this act, by modernizing and further defining the statutory language and by incorporating existing administrative interpretations of the Department of Revenue, to the extent the General Assembly desires to maintain those interpretations.

“The Committee may report its findings, together with any recommended legislation, to the 2018 Regular Session of the 2017 General Assembly upon its convening. The study may include an examination of the following:

“(1) The criteria that had to be met under prior law to qualify for the preferential rate under Article 5F of Chapter 105 of the General Statutes and whether that criteria should be incorporated into or otherwise clarified in the corresponding sales and use tax exemption, as enacted by this act, including the following:

“a. What constitutes an eligible manufacturer or industrial processor.

“b. The extent to which a business’s activities must consist of manufacturing or processing items for sale in order for the sales and use tax exemption, as enacted by this act, to apply.

“c. The types of activities that qualify as manufacturing or industrial processing.

“d. The types of machinery, parts, accessories, and other supplies that are eligible for the exemption and the degree to which they must be used in that process to qualify.

“(2) A review of the Department’s administrative interpretations of the mill machinery statute, in all its forms, and whether and how to incorporate those interpretations into the statutes.

“(3) Terminology used by surrounding states in their statutory provisions that provide a sales and use tax exemption for manufacturing equipment.

“(4) Any other issues the Committee deems relevant.”

Session Laws 2017-57 s. 38.8(f), made the repeal of subdivisions (5a) and (57a) by Session Laws 2017-57, s. 38.8(a), as amended by Session Laws 2017-212, s. 7.2(a), effective July 1, 2018, and applicable to sales made on or after that date.

Session Laws 2017-57 s. 38.8(f), made subdivisions (5e) through (5n), as added by Session Laws 2017-57, s. 38.8(c), effective July 1, 2018, and applicable to sales made on or after that date.

Session Laws 2017-57, s. 38.9(c), made subdivision (5o), as added by Session Laws 2017-57, s. 38.9(b), effective July 1, 2017, and applicable to sales made on or after that date.

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. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2017-2019 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2017-2019 fiscal biennium.”

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

Session Laws 2017-139, s. 4, made the rewriting of subdivision (68) of this section by Session Laws 2017-139, s. 1, effective July 1, 2017, and applicable to sales made on or after that date, and further provided: “As soon as practicable after this act becomes law, but no later than 30 days after that date, the Department of Health and Human Services shall notify the Department of Revenue of all existing wastewater dispersal product approvals.”

Session Laws 2017-181, s. 2 made subdivision (69) as added by Session Laws 2017-181, s. 1, effective July 1, 2017, and applicable to sales made on or after that date.

Subdivision (1) as added by Session Laws 2017-204, s. 2.9(a), was renumbered as subdivision (2b) at the direction of the Revisor of Statutes.

Session Laws 2017-204, s. 2.12(b) made subdivision (61a)m., as amended by Session Laws 2017-204, s. 2.12(a), effective July 1, 2019, and applicable to sales made on or after that date.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Session Laws 2018-5, 38.5(aa), as amended by Session Laws 2019-6, s. 5.1, provides: “G.S. 105-164.13(5e), as enacted by Section 38.8(c) of S.L. 2017-57 and amended by subsection (j) of this section, is effective 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. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2018-2019 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2018-2019 fiscal year.”

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

Session Laws 2019-169, s. 3.1(c), provides, in part, that: “The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-164.3 to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory section.” At the direction of the Revisor of Statutes, references were conformed in subdivisions (5), (5o), (55), (55a), and (61c).

Session Laws 2019-169, s. 3.9(a), (b), as amended by Session Laws 2019-246, s. 7(a), repealed Session Laws 2018-5, s. 38.5(y), which had added subdivision (61a)r., effective January 1, 2020.

Session Laws 2019-169, s. 3.11(b), made the amendments to subdivision (61a)k. by Session Laws 2019-169, s. 3.11(a), effective October 1, 2019, and applicable to sales made on or after that date. Session Laws 2019-169, s. 3.12(b), made subdivision (5p) as added by Session Laws 2019-169, s. 3.12(a), effective October 1, 2019, and applicable to sales made on or after that date.

Session Laws 2019-169, s. 3.13(c), made subdivision (13d) of this section as added by Session Laws 2019-169, s. 3.13(b), effective October 1, 2019, and applicable to sales occurring on or after that date.

Session Laws 2019-169, s. 3.1(c), provides, in part, that: “The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-164.3 to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory section.” At the direction of the Revisor of Statutes, references were conformed in subdivisions (5), (5o), (55), (55a), and (61c).

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.”

Session Laws 2020-6, s. 2(b), provides: “Refund. — A large fulfillment facility is allowed a refund of all North Carolina State and local sales and use taxes paid by the large fulfillment facility, or paid by a contractor or subcontractor on the large fulfillment facility’s behalf, for purchases of items eligible for exemption under G.S. 105-164.13(5o), as amended by this section, if the purchase was made on or after April 1, 2020, but before July 1, 2020. A request for a refund under this section must be in writing and must include any information and documentation required by the Secretary. A request for a refund under this section must be made on or after July 1, 2020, and is due before October 1, 2020. A refund allowed under this section is not an overpayment of tax and does not accrue interest as provided in G.S. 105-241.21 .”

Session Laws 2020-6, s. 2(c), made the amendments to subdivision (5o) by Session Laws 2020-6, s. 2(a), effective July 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2020-6, s. 3(e), made subdivisions (72) and (73), as added by Session Laws 2020-6, s. 3(b), effective retroactively to October 1, 2019, and applicable to sales occurring on or after that date.

Session Laws 2021-150, s. 25.2, made subdivision (5q) of this section, as added by Session Laws 2021-150, s. 25.1, effective October 1, 2021, and applicable to sales made on or after that date.

Effect of Amendments.

Session Laws 2003-284, ss. 45.5 and 45.5A, rewrote subdivisions (12), (13), and (43); inserted subdivision (43a); in subdivision (50), deleted “closed container soft drinks and” following “other than”; and added subdivision (51). See Editor’s note for effective dates.

Session Laws 2003-349, s. 11, effective July 27, 2003, at the end of the first sentence in subdivision (15), deleted “provided, however, they must be added to gross sales if afterwards collected,” and added the second and third sentences.

Session Laws 2003-416, ss. 18(a) and 21, effective August 14, 2003, inserted “and services” following “personal property” in the introductory paragraph, and substituted “105-164.3(51)” for “105-164.3(23)” in the first sentence of subdivision (5).

Session Laws 2003-431, s. 1, effective July 1, 2004, and applicable to sales made on or after that date, added subdivision (52).

Session Laws 2004-124, ss. 32B.2 and 32B.4, inserted “plastic mulch, plant bed covers” in subdivision (1); reenacted and rewrote subdivision (39); added subdivisions (45a) and (49a); and added subdivision (53). See editor’s note for effective dates.

Session Laws 2005-276, s. 33.9, effective October 1, 2005, rewrote subdivision (1); added subdivision (1a); added sub-subdivision (2a)e.; in subdivision (4c), in the introductory language, inserted “items concerning the housing, raising, or feeding of animals”; rewrote subdivision (4d); added subdivision (4e); in subdivision (5a), substituted “Products” for “Mill machinery and mill machinery parts and accessories”; added subdivisions (5b) through (5d); rewrote subdivisions (10) and (10a); designated subdivision (10b) as sub-subdivision (10a)c.; deleted subdivision (18); rewrote subdivision (45) and added subdivision (45b).

Session Laws 2005-435, ss. 30 and 31, effective January 1, 2006, deleted former subdivision (29), which read: “Sales to the North Carolina Museum of Art of paintings and other objects or works of art for public display, the purchases of which are financed in whole or in part by gifts or donations”; and inserted “continuously” preceding “published on a periodic basis” in the second sentence of subdivision (39).

Session Laws 2006-19, s. 1, effective July 1, 2006, and applicable to items purchased on or after that date, added subdivision (4f).

Session Laws 2006-33, s. 5, effective January 1, 2007, added subdivision (54).

Session Laws 2006-66, s. 24.17(b), effective October 1, 2006, and applicable to sales made on or after that date, added new subdivision (55).

Session Laws 2006-162, ss. 8(a) and (b), effective July 24, 2006, rewrote (1a) which read: “A container sold to a farmer, as defined in subdivision (1) of this section, used for a purpose set out in that subdivision or in packaging and transporting the farmer’s product for sale”; and deleted former (4e) which read: “A grain, feed, or soybean storage facility, and parts and accessories attached to the facility.”

Session Laws 2006-168, s. 4.2, and Session Laws 2006-252, s. 2.25(b), effective October 1, 2006, and applicable to sales made on or after that date, substituted “such” for “the” twice in the last undesignated paragraph in the fourth sentence of the last paragraph of subdivision (55).

Session Laws 2007-244, s. 4, effective October 1, 2007, rewrote subdivision (9).

Session Laws 2007-323, s. 31.23(c), effective January 1, 2007, and applicable to sales made on or after January 1, 2007, added subdivision (56).

Session Laws 2007-368, s. 1, effective October 1, 2007, and applicable to sales made on or after that date, added subdivision (27a).

Session Laws 2007-383, s. 6, effective January 1, 2008, rewrote subdivision (54)c.

Session Laws 2007-397, ss. 10(g), (h), effective July 1, 2010, and applicable to sales occurring on or after that date, rewrote sub-subdivision (1)d.; and added subdivision (1b) and the subdivision designated herein as subdivision (57).

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 fourth sentence of the last paragraph of subdivision (55). For applicability, see Editor’s note.

Session Laws 2007-500, s. 1, effective October 1, 2007, and applicable to sales made on or after that date, inserted “baler twine” following “potting soil” in subdivision (1)(a).

Session Laws 2007-527, ss. 10, 27, effective August 31, 2007, in subsection (38), substituted “7 U.S.C. § 2011” for “7 U.S.C. § 51”; and in subsection (52), inserted “and ancillary service as defined in G.S. 105-164.4 ”; and made minor stylistic changes.

Session Laws 2008-107, ss. 28.6(a) and 28.20(a), effective August 1, 2008, added subdivisions (58) and (59). For applicability, see Editor’s note.

Session Laws 2009-451, s. 27A.3(f), effective January 1, 2010, and applicable to sales made on or after that date, in subdivision (5b), substituted “telecommunications” for “telephone” near the beginning; in subdivision (28), deleted “and sales of magazines by magazine vendors making door-to-door sales” from the end; rewrote subdivision (43a); and added subdivision (43b).

Session Laws 2009-451, s. 27A.3(k), effective August 7, 2009, inserted “digital property” in the introductory language.

Session Laws 2009-511, s. 1, effective October 1, 2009, and applicable to sales made on or after that date, rewrote subdivision (45) and added subdivision (45c).

Session Laws 2010-91, s. 3, effective July 1, 2010, and applicable to sales made on or after that date, in the introductory and last paragraphs of subdivision (55), twice substituted “datacenter” for “data center”; and in sub-subdivision (55)a., substituted “provision of a service included in the business of the primary user of the datacenter” for “provision of Internet service or Web search portal services as contemplated by G.S. 105-164.3(8e)a.”

Session Laws 2010-147, s. 6.1, effective July 1, 2009, and applicable to sales made on or after that date, added subdivision (4g).

Session Laws 2011-330, s. 18, effective June 27, 2011, added “for human use” in subdivision (12)a.; substituted “Department of Health and Human Services” for “Department of Public Instruction” in subdivision (26a); inserted “by the retailer” in subdivision (33a); twice substituted “Nutrition Program” for “Food Program” in subdivision (38); and added “on the invoice at the time of sale” at the end of subdivision (49).

Session Laws 2012-79, s. 1.4, effective June 26, 2012, in subdivision (11)a., substituted “taxed in Article 36C of this Chapter” for “defined in G.S. 105 449.60”; in subdivision (49), substituted “an invoice or similar billing document given to the purchaser” for “the invoice”; and, in subdivision (49a), substituted “purchaser at the time of sale” for “purchaser”.

Session Laws 2013-316, s. 3.2(a), (b), effective January 1, 2014, deleted subdivisions (13c), (27), and (28); and rewrote subdivision (26), which formerly read “Food sold not for profit by public or private school cafeterias within school buildings during the regular school day.” For applicability, see editor’s note.

Session Laws 2013-316, s. 3.3(b), effective July 1, 2014, repealed subdivisions (1), (1a), (1b), (2a), (4a), (4c), and (4d). For applicability, see editor’s note.

Session Laws 2013-316, s. 3.4(a), effective July 1, 2014, repealed subdivision (27a). For applicability, see editor’s note.

Session Laws 2013-316, s. 4.1(d), effective July 1, 2014, repealed subdivision (44). For applicability, see editor’s note.

Session Laws 2013-316, ss. 5(c) and 6(c), effective January 1, 2014, added subdivisions (60) through (62). For applicability, see editor’s note.

Session Laws 2013-360, s. 7.4(e), effective July 1, 2013, in subdivision (54)e., inserted “or product” and substituted “State Network” for “North Carolina Information Highway.”

Session Laws 2013-414, s. 11(a), effective August 23, 2013, inserted “and prepared food” in subdivisions (26), (26a), and (31a); substituted “Prepared food and food” for “Meals and food products” in subdivision (27); in subdivision (33a), substituted “inside or outside” for “within or without,” and added the second sentence; in subdivision (43a)a., substituted “purchased” for “designed,” and added the second and third sentences; and added the second sentence in subdivision (57).

Session Laws 2013-414, s. 58(e), effective January 1, 2014, added the second and third sentence in subdivision (60)e.; and added subdivision (61)c. For applicability, see editor’s note.

Session Laws 2014-3, s. 4.1(e), effective May 29, 2014, in subdivision (26), deleted “not for profit by a nonpublic or public school, including a charter school and a regional school” preceding “within the school” in the first sentence, and added the second sentence. See Editor’s note for applicability.

Session Laws 2014-3, s. 5.1(d), effective January 1, 2015, rewrote subdivision (60). See Editor’s note for applicability.

Session Laws 2014-3, s. 5.1(e), effective May 29, 2014, added the last sentence in subdivision (34); and, in subdivision (35), substituted “conditions listed in this subdivision are met.” for “following conditions are met:” in the first sentence, and added the last sentence. See Editor’s note for applicability.

Session Laws 2014-3, s. 6.1(e), (f), effective October 1, 2014, rewrote subdivisions (61) and (62). See Editor’s note for applicability.

Session Laws 2014-3, s. 8.3(a), effective October 1, 2014, repealed subdivision (30). See Editor’s note for applicability.

Session Laws 2014-3, s. 8.3(b), effective October 1, 2014, added “and newspapers” at the end of subdivision (50). See Editor’s note for applicability.

Session Laws 2014-100, s. 37.3(a), added subdivision (64). See Editor’s note for effective date and applicability.

Session Laws 2015-6, s. 2.12, effective April 9, 2015, inserted “and piped natural gas” in subdivision (8a); in subdivision (10)c. substituted “Fuel and piped natural gas” for “Fuel, other than electricity” at the beginning, and added the second sentence; and substituted “Fuel, piped natural gas, and electricity” for “Fuel and electricity” in subdivision (57).

Session Laws 2015-6, s. 2.23(a), effective October 1, 2014, in subdivision (62), inserted “taxable under this Article” in the first sentence and deleted the former second sentence which read: “This exemption does not apply to an item used to maintain or repair tangible personal property pursuant to a service contract exempt from tax under G.S. 105-164.4 I(b).”

Session Laws 2015-241, s. 7A.3, effective September 18, 2015, substituted “G.S. 143B-1403” for “G.S. 62A-43” in subdivision (54)c.

Session Laws 2015-241, s. 32.18(d), (e), effective March 1, 2016, deleted subdivision (49) and added subdivisions (61a) and (61b), and inserted “or repair, maintenance, and installation services” near the beginning of subdivision (62). For applicability, see editor’s note.

Session Laws 2015-259, s. 3(b), effective January 1, 2016, and applicable to sales made on or after that date, added subdivision (55a).

Session Laws 2015-259, s. 4.1(c), added subdivision (11b). For effective date and applicability, see Editor’s notes.

Session Laws 2015-259, s. 4.2(d), added subdivision (45d). For effective date and applicability, see Editor’s note.

Session Laws 2015-259, s. 5(b), effective March 1, 2016, and applicable to service contracts purchased on or after date, added subdivision (62a).

Session Laws 2015-259, s. 5(c), effective March 1, 2016, and applicable to service contracts purchased on or after date, in subdivision (61a), substituted “an item, other than a motor vehicle,” for “an item” in the first sentence and added the last sentence; and in subdivision (62), in the first sentence, deleted “or a motor vehicle” following “personal property” and substituted “the item or services” for “the item”, added the present second sentence, and deleted “or motor vehicle” following “personal property” in the last sentence.

Session Laws 2015-259, s. 6(b), effective September 30, 2015, added subdivision (65).

Session Laws 2015-261, s. 5(a), (b), effective September 30, 2015, rewrote subdivision (65) and added subdivision (65a).

Session Laws 2016-5, s. 3.9(a), (b), effective January 1, 2017, added subdivision (26b), and deleted former subdivision (34), which read: “Sales of items by a nonprofit civic, charitable, educational, scientific or literary organization when the net proceeds of the sales will be given or contributed to the State of North Carolina or to one or more of its agencies or instrumentalities, or to one or more nonprofit charitable organizations, one of whose purposes is to serve as a conduit through which such net proceeds will flow to the State or to one or more of its agencies or instrumentalities. This exemption does not apply to gross receipts derived from an admission charge to an entertainment activity.” See editor’s notes for applicability.

Session Laws 2016-5, s. 3.11(a), effective January 1, 2017, substituted “as defined in G.S. 105-164.3 ” for “as defined in G.S. 105-164.4 ” in the introductory language of subdivision (52); and rewrote subdivision (57).

Session Laws 2016-5, s. 3.19(b), effective July 1, 2016, added the last sentence in subdivision (32).

Session Laws 2016-5, s. 3.23(a), effective January 1, 2016, added the third sentence in subdivision (11b).

Session Laws 2016-92, s. 2.1(a), effective January 1, 2016, made a stylistic change in subdivision (11b).

Session Laws 2016-92, s. 2.5, effective July 11, 2016, rewrote subdivision (63).

Session Laws 2016-94, s. 38.2(c), as amended by Session Laws 2016-123, s. 11.1, effective July 1, 2016, added subdivision (57a). See editor’s note for applicability.

Session Laws 2016-94, s. 38.5(i), effective January 1, 2017, deleted “for tangible personal property” following “A service contract” in subdivision (61); in subdivision (61a), added the last sentence and sub-subdivisions (61a)a. through l .; rewrote subdivisions (61b) and (62); and added subdivisions (61c), (61d), (66), and (67). See editors’ note for applicability.

Session Laws 2016-94, s. 38.5(p), effective October 1, 2016, added subdivision (68). See editor’s note for applicability.

Session Laws 2017-57, s. 38.8(a), as amended by Session Laws 2017-212, s. 7.2(a), repealed subdivisions (5a) and (57a). For effective date and applicability, see editor’s note.

Session Laws 2017-57, s. 38.8(c), added subdivisions (5e) through (5n). For effective date and applicability, see editor’s note.

Session Laws 2017-57, s. 38.9(b), added subdivision (5o). For effective date and applicability, see editor’s note.

Session Laws 2017-102, s. 15.1, effective July 12, 2017, substituted “section” for “subsection” in subdivision (11b).

Session Laws 2017-139, s. 1, rewrote subdivision (68). For effective date and applicability, see editor’s note.

Session Laws 2017-181, s. 1, added subdivision (69). For effective date and applicability, see editor’s note.

Session Laws 2017-204, s. 2.6, rewrote subdivisions (61), (61a), and (65); added the last two sentences in subdivision (61c); and, in subdivision (62), substituted “purchased or used to fulfill” for “or used to maintain, monitor, inspect, or repair tangible personal property or digital property pursuant to” in the first sentence, inserted the present second sentence, and substituted “property, real property” for “property” in the last sentence. For effective date and applicability, see editor’s note.

Session Laws 2017-204, s. 2.9(a), effective August 11, 2017, added subdivision (1) and sub-subdivisions (12)e. and (12)f.; added “on the invoice or similar billing document given to the purchaser at the time of the sale” at the end of subdivision (43); and rewrote subdivision (57a). For redesignation of subdivision (1), see editor’s note.

Session Laws 2017-204, s. 2.11(b), effective August 11, 2017, added subdivision (62b).

Session Laws 2017-204, s. 2.12(a), rewrote sub-subdivision (61)m. For effective date and applicability, see the editor’s note.

Session Laws 2018-5, s. 38.5(j), effective June 12, 2018, in subdivision (5e), substituted “the persons listed in this subdivision. For purposes of this subdivision, the term ‘accessories’ does not include electricity. The persons are:” for “the following:” in the introductory paragraph; in sub-subdivision (9)c., substituted “for-hire vessel” for “for-hire boat”; in subdivision (13), in the introductory paragraph, added “listed in this subdivision”, and substituted “with them. This subdivision does not apply to pet food or feed for animals. The drugs exempt under this subdivision are as follows:” for “with them:”; and in sub-subdivision (13)b., added the last sentence; in subdivision (15), added the last two sentences; in subdivision (61a)a., substituted the first sentence for one which read: “An item exempt from tax under this Article.”, and added “and fees under sub-subdivision b. of this subdivision” at the end of the last sentence; added sub-subdivisions (61a)p. and q.; and added subdivision (70).

Session Laws 2019-6, ss. 4.9, 5.3, effective March 20, 2019, substituted “G.S. 105-449.106(c)” for “G.S.105-449.105A” in subdivision (11)a; and substituted “Supplemental Nutrition Assistance Program” for “Food Stamp Program” in subdivision (38).

Session Laws 2019-169, ss. 3.3(k), 3.4(c), 3.10, effective July 26, 2019, substituted “Items” for “Tangible personal property, digital property, and services” in subdivision (2b); substituted “food prepared” for “foods prepared” in the second sentence of sub-subdivision (5e)a.; inserted “G.S. 105-449.105A” in sub-subdivision (11)a; substituted “following” for “following items” in the introductory paragraph of subdivision (12); deleted “items” following “packaging” in the introductory paragraph of subdivision (23); deleted “items of” preceding “tangible” twice in subdivision (24); deleted “items of” preceding “tangible” in the first sentence of subdivision (26b); substituted “products” for “items” near the beginning of subdivision (38); inserted “certain” near the beginning and middle of subdivision (43b); substituted “an item used to fulfill either repair, maintenance, and installation services or service contracts” for “property and services used to fulfill either a repair, maintenance, or installation service or a service contract” and made a minor stylistic change in the second sentence of the introductory paragraph of subdivision (61a); substituted “Items” for “Property and services” at the beginning of the second sentence in sub-subdivision (61a)a.; substituted “A service” for “Services” in sub-subdivisions (61a)c. and (61a)e.; in sub-subdivision (61a)f., substituted “tangible personal property” for “items” in the first sentence, and in the second substituted “a household or a commercial” for “household and commercial” near the beginning and “service” for “services” at the end; surbstituted “service” for “services” twice in sub-subdivsion (61a)j.; substituted “wash or vacuum” for “washes and vacuums” in sub-subdivision (61a)k.; rewrote subdivision (61a) l ., which formerly read: “A transmission, distribution, or other network asset contained on utility-owned land, right-of-way, or easement.”; substituted “service, including a service” for “services, including services” in the first sentence of sub-subdivision (61a)n.; substituted “A service” for “Services” at the beginning of sub-subdivision (61a)o.; substituted “Items” for “Tangible personal property, digital property, and services” at the beginning of subdivision (61b); in subdivision (62), in the first sentence, substituted “item, including repair” for “item or repair” at the beginning, deleted “or services” following at the end, and made a minor stylistic change, and inserted “certain” preceding “digital” in the second and third sentences; deleted “items” following “packaging” in the second sentence of the introductory paragraph of subdivision (63); substituted “tangible personal property” for “other item” in sub-subdivision (65)b.; and added subdivision (71).

Session Laws 2019-169, ss. 3.11(a), 3.12(a), added subdivision (5p); and rewrote sub-subdivision (61a)k., which formerly read: “Self-service car wash or vacuum.” For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 3.13(b), added subdivision (13d). For effective date and applicability, see editor’s note.

Session Laws 2019-237, s. 4(a), effective November 1, 2019, substituted “January 1, 2024” for “January 1, 2020” in the last sentence of subdivision (11b).

Session Laws 2019-237, s. 5(a), effective November 1, 2019, substituted “January 1, 2024” for “January 1, 2020” in the introductory language of subdivision (65) and in the second sentence of subdivision (65a).

Session Laws 2019-237, s. 8.1(a), effective November 1, 2019, substituted “vehicle” for “car” in the introductory language of sub-subdivision (61a)k. Session Laws 2019-246, s. 6, made an identical change.

Session Laws 2019-246, s. 6, effective November 8, 2019, substituted “car” for “vehicle” in the introductory language of sub-subdivision (61a)k. Session Laws 2019-237, s. 8.1, made an identical change.

Session Laws 2020-6, s. 2(a), rewrote sub-subdivisions (5o)a. and (5o)b. For effective date and applicability, see editor’s note.

Session Laws 2020-6, s. 3(b), added subdivisions (72) and (73). For effective date and applicability, see editor’s note.

Session Laws 2021-150, s. 25.1, added subdivision (5q). For effective date and applicability, see editor’s note.

Legal Periodicals.

For article, “All the News That’s Fit to Tax: First Amendment Limitations on State and Local Taxation of the Press,” see 21 Wake Forest L. Rev. 59 (1985).

For note on the North Carolina sales and use tax exemption for newspapers, in light of In re Village Publishing Corp., 312 N.C. 211 , 322 S.E.2d 155 (1984), appeal dismissed, — U.S. —, 105 S. Ct. 2693, 86 L. Ed. 2d 710 (1985), see 21 Wake Forest L. Rev. 145 (1985).

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

See legislative survey, 21 Campbell L. Rev. 323 (1999).

For article, “Constitutional Threats in the E-Commerce Jungle: First Amendment and Dormant Commerce Clause Limits on Amazon Laws and Use Tax Reporting Statutes,” see 89 N.C.L. Rev. 2011 (2011).

CASE NOTES

Analysis

I.General Consideration

Editor’s Note. —

Some of the cases cited below were decided under the former law.

Constitutionality. —

Citizens lacked standing to appeal a trial court’s grant of a G.S. 1A-1 , N.C. R. Civ. P. 12(b)(1) motion to dismiss by the State of North Carolina, various state officials, and two companies, in a case challenging G.S. 105-164.3 and G.S. 105-164.13 . The citizens had asserted that the 2006 Current Operations Appropriations Act was violative of the uniformity in taxation provisions of N.C. Const., Art. V, § 2(1) and 2(2) and the law of the land clause of N.C. Const., Art. I, § 19. Munger v. State, 202 N.C. App. 404, 689 S.E.2d 230, 2010 N.C. App. LEXIS 282 (2010).

Subdivision (14) Violates Free Press Clause of United States Constitution. —

Religious literature exemption contained in subdivision (14) of this section violates free press clause of United States Constitution. Finlator v. Powers, 902 F.2d 1158, 1990 U.S. App. LEXIS 7675 (4th Cir. 1990).

And Violates Establishment Clause of United States Constitution. —

Religious literature exemption contained in subdivision (14) of this section contravenes the establishment clause of United States Constitution. Finlator v. Powers, 902 F.2d 1158, 1990 U.S. App. LEXIS 7675 (4th Cir. 1990).

Religious literature exemption contained in subdivision (14) of this section differentiates between Christian sacred text and other publications, both sacred and nonsacred and Christian and non-Christian. This distinction forces State to discriminate on basis of contents of book, text or other published work, which is intolerable under U.S. Const., Amend. I. Finlator v. Powers, 902 F.2d 1158, 1990 U.S. App. LEXIS 7675 (4th Cir. 1990).

Power to exempt from taxation, as well as the power to tax, is an essential attribute of sovereignty. Sale v. Johnson, 258 N.C. 749 , 129 S.E.2d 465, 1963 N.C. LEXIS 465 (1963).

Statutes Strictly Construed. —

Statutes providing exemption from taxation are strictly construed. Sale v. Johnson, 258 N.C. 749 , 129 S.E.2d 465, 1963 N.C. LEXIS 465 (1963).

Provisions in a tax statute granting exemptions from the tax thereby imposed are to be strictly construed in favor of the imposition of the tax and against the claim of exemption. Hatteras Yacht Co. v. High, 265 N.C. 653 , 144 S.E.2d 821, 1965 N.C. LEXIS 1072 (1965).

Exemption Is Never Presumed. —

The general rule is that a grant of exemption from taxation is never presumed. Sale v. Johnson, 258 N.C. 749 , 129 S.E.2d 465, 1963 N.C. LEXIS 465 (1963).

Claimant Has Burden. —

One who claims an exemption or exception from tax coverage has the burden of bringing himself within the exemption or exception. Piedmont Canteen Serv. v. Johnson, 256 N.C. 155 , 123 S.E.2d 582, 1962 N.C. LEXIS 429 (1962).

For meaning of “original or unmanufactured state” in subdivision (3), see Duke Power Co. v. Clayton, 274 N.C. 505 , 164 S.E.2d 289, 1968 N.C. LEXIS 807 (1968).

Sales Tax Is Unconstitutional if Transaction Is Interstate. —

A sales tax is a tax on the freedom of purchase, and, when applied to interstate transactions, is a tax on the privilege of doing interstate commerce, creates a burden on interstate commerce, and runs counter to the Commerce Clause of the federal Constitution. Excel, Inc. v. Clayton, 269 N.C. 127 , 152 S.E.2d 171, 1967 N.C. LEXIS 1033 (1967).

Delivery to Carrier for Transportation Out of State Makes Property Immune from Local Taxation. —

The unconditional commitment of property to a common carrier for transportation in regular course to another state or country is generally held to place it in the stream of interstate or foreign commerce, so as to render it immune from local taxation. Excel, Inc. v. Clayton, 269 N.C. 127 , 152 S.E.2d 171, 1967 N.C. LEXIS 1033 (1967).

But Principle Is Inapplicable to Deliveries to Purchasers in State. —

The principle of law that the unconditional commitment of property to a common carrier for transportation in regular course to another state or country places it in the stream of interstate or foreign commerce, so as to render it immune from local taxation, is not applicable where the material was delivered to the purchasers in North Carolina, the taxing jurisdiction. Excel, Inc. v. Clayton, 269 N.C. 127 , 152 S.E.2d 171, 1967 N.C. LEXIS 1033 (1967).

Despite Intention to Use Goods Out of State. —

The mere intention of the buyer and the seller that the goods sold be used outside of the State does not make the sales transaction any less a local intrastate activity. Where the delivery of the goods sold is in the taxing state and is accepted within the taxing state, a sales tax may lawfully be imposed upon the transaction. Excel, Inc. v. Clayton, 269 N.C. 127 , 152 S.E.2d 171, 1967 N.C. LEXIS 1033 (1967).

Incidental interstate attributes do not transform purely local transactions into interstate transactions and thereby create a burden on interstate commerce and run counter to the Commerce Clause of the federal Constitution. Excel, Inc. v. Clayton, 269 N.C. 127 , 152 S.E.2d 171, 1967 N.C. LEXIS 1033 (1967).

Sales Held Intrastate and Subject to Sales Tax. —

Sale of goods to interstate carriers for use by the carriers at terminals outside this State are intrastate transactions subject to the North Carolina sales tax when the goods are delivered to the carriers at the seller’s plant in this State notwithstanding the carriers take the goods f.o.b. the seller’s plant under bills of lading with themselves as consignees at the respective terminals, without transportation charges, and inspection of the goods is had at, and payment is forwarded from, such foreign terminals. The imposition of such tax does not offend the Commerce Clause of the federal Constitution. Excel, Inc. v. Clayton, 269 N.C. 127 , 152 S.E.2d 171, 1967 N.C. LEXIS 1033 (1967).

Purchases by Housing Authority. —

Neither the Constitution of this State nor the Constitution and laws of the United States prohibit the collection of a sales tax on purchases of tangible personal property made by a housing authority duly created, organized and existing under and by virtue of the Housing Authorities Law (G.S. 157-1 et seq.) enacted in 1935 by the General Assembly of North Carolina. Housing Auth. v. Johnson, 261 N.C. 76 , 134 S.E.2d 121, 1964 N.C. LEXIS 415 (1964).

Local Use Taxes Generally Applicable. —

Under G.S. 105-467 and G.S. 105-68 , exemptions from local use taxes are explicitly limited to and made dependent on the existence of codified exemptions from the State sales and use taxes, and in G.S. 105-164.13 , the legislature has meticulously set forth approximately 50 exemptions and exclusions to the states sales and use taxes, many of which are sub-categorized by industry but nowhere in G.S. 105-164.13 are insurance companies exempted from state sales and use tax; thus, local use taxes are generally applicable, and the North Carolina General Assembly did not intend to make them inapplicable to insurance companies. Proposed Assessments of Additional Sales & Use Tax v. Jefferson-Pilot Ins. Co., 161 N.C. App. 558, 589 S.E.2d 179, 2003 N.C. App. LEXIS 2274 (2003).

Local Sales Tax Not Precluded by Exemption from State Tax. —

The limitation, in G.S. 105-467(1), of local sales tax to sales “subject to” the State sales tax refers not to those transactions for which a state sales tax is actually assessed, but to any transaction described in (former) G.S. 105-164.4(1) without regard to whether the transaction might be exempted or excluded from taxation by the operation of G.S. 105-164.13 . Thus, exemption from state sales tax does not preclude the assessment of a local sales tax. Gregory Poole Equipment Co. v. Coble, 38 N.C. App. 483, 248 S.E.2d 378, 1978 N.C. App. LEXIS 2223 (1978), aff'd, 297 N.C. 19 , 252 S.E.2d 729, 1979 N.C. LEXIS 1111 (1979).

Burden of Proof. —

Where the tax coverage is challenged by virtue of an exemption or exception, the burden is upon the challenger to bring himself within the exemption or exception. Henderson v. Gill, 229 N.C. 313 , 49 S.E.2d 754, 1948 N.C. LEXIS 320 (1948).

II.Farm Products

Flowers grown upon the vendors’ own land are farm products within the meaning of the exemption of such products from the sales tax. Henderson v. Gill, 229 N.C. 313 , 49 S.E.2d 754, 1948 N.C. LEXIS 320 (1948).

Sale by Florist of Flowers Grown on Own Land. —

Plaintiffs operated a florist shop and sold therein flowers grown by themselves on their own land and also flowers purchased from wholesalers. It was held that the sale of flowers grown by them on their own land was not exempt from the sales tax, since even though such flowers are regarded as farm products, such sales were made by plaintiffs in their character and capacity of florists and not as farmers or producers. Henderson v. Gill, 229 N.C. 313 , 49 S.E.2d 754, 1948 N.C. LEXIS 320 (1948).

III.Insecticides

Section does not define “insecticides,” so the term must be given its ordinary meaning. Olin Mathieson Chem. Corp. v. Johnson, 257 N.C. 666 , 127 S.E.2d 262, 1962 N.C. LEXIS 405 (1962).

MH-30 is an agent for destroying weeds and plants, an herbicide. It is no more an insecticide than would be a forest fire which destroyed the balsam firs upon which the woolly aphids feed. Olin Mathieson Chem. Corp. v. Johnson, 257 N.C. 666 , 127 S.E.2d 262, 1962 N.C. LEXIS 405 (1962).

IV.Property Incorporated into Manufactured Product

Purpose. —

The clear intent of subdivision (8) is that a sale of such property to a “manufacturer” is not taxed and neither is its use by the manufacturer as an ingredient or component of another “manufactured” article. In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

“Manufacturing” Defined. —

See In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

Construed Against One Claiming Exemption. —

Subdivision (8), being an exemption from the tax otherwise imposed upon a “use” of tangible personal property, is to be construed strictly against the claim of exemption, insofar as its meaning is in doubt. In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

Inapplicable to Sales Promotional Material. —

The exemption provided in subdivision (8) was not intended by the legislature to apply, and does not apply, to use of material by a manufacturer in the production of an article intended for use by the manufacturer, itself, through its distribution to potential customers as sales promotional material. In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

Furniture manufacturer producing swatch books for use of its sales representatives and its customers has “manufactured” these swatch books. In re Clayton-Marcus Co., 286 N.C. 215 , 210 S.E.2d 199, 1974 N.C. LEXIS 1219 (1974).

V.Sales of Used Articles

Policy behind subdivision (16) of this section is to prevent the same tax from being imposed twice on what are essentially the proceeds of one sale. Gregory Poole Equip. Co. v. Coble, 297 N.C. 19 , 252 S.E.2d 729, 1979 N.C. LEXIS 1111 (1979).

VI.Materials Used for Packaging, Shipment, or Delivery

Poultry Coops. —

Where plaintiffs alleged that they “sell their coops to farmers, poultrymen, and persons, firms, and corporations engaged in the poultry business, and such coops are used for packaging, shipment, and delivery of tangible personal property which is sold either at wholesale or retail, or such coops are delivered with the chickens or turkeys to the customer,” and defendant admitted “that the plaintiffs sell their coops to farmers, poultrymen and persons, firms and corporations engaged in the poultry business, and that such coops are used by such customers in the delivery of live poultry, which is sold by such customers at either wholesale or retail,” such allegations in the complaint and admissions in the answer are not sufficient to exempt plaintiffs’ sales of coops from the sales tax within the purview and intent of subdivision (23) of this section, since there was no allegation in the complaint to the effect that when plaintiffs’ vendees sold poultry the coops constituted a part of the sale of such poultry and were delivered with the poultry to the customer. Sale v. Johnson, 258 N.C. 749 , 129 S.E.2d 465, 1963 N.C. LEXIS 465 (1963).

Limited liability company’s (LLC) Yarn Pak was a container that “enclosed” tangible personal property, and thus, it qualified for the tax exemption under G.S. 105-164.13(23)(b). Adopting the North Carolina Department of Revenue’s position that a container had to “completely” or “fully” enclose property in order to qualify for the exemption would have effectively added language to G.S. 105-164.13(23)(b) not adopted by the legislature; therefore, the LLC’s packaging material was encompassed by the tax exemption under G.S. 105-164.13(23)(b). Parkdale Am., LLC v. Hinton, 200 N.C. App. 275, 684 S.E.2d 458, 2009 N.C. App. LEXIS 1618 (2009).

VII.Newspapers

The North Carolina use tax can be constitutionally assessed against a newspaper which enjoys protection under U.S. Const., Amend. I. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

“Newspaper” Defined. —

A newspaper is a publication appearing at short intervals of time containing news which may be of various types, and intended for the general reader. In re Assessment of Additional N.C. & Orange County Use Taxes, 66 N.C. App. 423, 311 S.E.2d 366, 1984 N.C. App. LEXIS 2876 , modified, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

Publication devoted almost entirely to advertising which does not disseminate news except in very small amounts, does not qualify as a newspaper but is instead an advertising circular. In re Assessment of Additional N.C. & Orange County Use Taxes, 66 N.C. App. 423, 311 S.E.2d 366, 1984 N.C. App. LEXIS 2876 , modified, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

OPINIONS OF ATTORNEY GENERAL

Sand and crushed stone which have been washed and screened remain in their “original or unmanufactured state,” and sale by producer as producer and not retail merchant is exempt from the sales tax. See opinion of Attorney General to Mr. Eric L. Gooch, Department of Revenue, 41 N.C. Op. Att'y Gen. 511 (1971).

§ 105-164.13A. Service charges on food, beverages, or prepared food.

When a service charge is imposed on food, beverages, or prepared food, so much of the service charge that does not exceed twenty percent (20%) of the sales price is considered a tip and is specifically exempted from the tax imposed by this Article if it meets both of the following conditions:

  1. Is separately stated in the price list, menu, or written proposal and also in the invoice or bill.
  2. Is turned over to the personnel directly involved in the service of the food, beverages, or prepared food, in accordance with G.S. 95-25.6 .

History. 1979, c. 801, s. 76; 1979, 2nd Sess., c. 1101; 1999-438, s. 13; 2013-414, s. 11(b).

Effect of Amendments.

Session Laws 2013-414, s. 11(b), effective August 23, 2013, substituted “prepared food” for “meals” throughout the section.

§ 105-164.13B. Food exempt from tax.

  1. State Exemption. —  Food is exempt from the taxes imposed by this Article unless the food is included in one of the subdivisions in this subsection. The following food items are subject to tax:
    1. Repealed by Session Laws 2005-276, s. 33.10, effective October 1, 2005.
    2. Dietary supplements.
    3. Food sold through a vending machine.
    4. Prepared food, other than bakery items sold without eating utensils by an artisan bakery. The term “bakery item” includes bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas. An artisan bakery is a bakery that meets all of the following requirements:
      1. It derives over eighty percent (80%) of its gross receipts from bakery items.
      2. Its annual gross receipts, combined with the gross receipts of all related persons, do not exceed one million eight hundred thousand dollars ($1,800,000). For purposes of this subdivision, the term “related person” means a person described in one of the relationships set forth in section 267(b) or 707(b) of the Code.
    5. Soft drinks.
    6. Repealed by Session Laws 2003-284, s. 45.6B, effective January 1, 2004.
    7. Candy.
  2. Administration of Local Food Tax. —  The Secretary must administer local sales and use taxes imposed on food as if they were imposed under this Article. This applies to local taxes on food imposed under Subchapter VIII of this Chapter and under Chapter 1096 of the 1967 Session Laws.

History. 1998-212, s. 29A.1(b); 2001-347, s. 2.13; 2001-489, s. 3(b); 2003-284, ss. 45.6, 45.6A, 45.6B; 2003-416, s. 22; 2005-276, s. 33.10; 2008-107, s. 28.19(a); 2009-445, s. 42; 2015-6, s. 2.21.

Cross References.

As to applicability of this section to local government sales and use tax for beach nourishment, see Editor’s note under G.S. 105-522 .

Editor’s Note.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

Session Laws 2003-284, s. 45.12, provides that the rewriting and redesignation of the former provisions of this section as subsection (a) by s. 45.6 is effective July 15, 2003, the addition of subsection (b) by s. 45.6A is effective October 1, 2003, and the repeal of subdivision (a)(6) by s. 45.6B is effective January 1, 2004.

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 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 2005-276, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2005’.”

Session Laws 2005-276, s. 33.34, provides in part: “For prepayments of telecommunications and direct-to-home satellite services, the first billing period is considered to start on or after November 1, 2005. For prepayments of satellite digital audio radio services or cable services, the first billing period is considered to start on or after February 1, 2006.”

Session Laws 2005-276, s. 46.5 is a severability clause.

Session Laws 2009-445, s. 42, made a technical correction to the prefatory language of Session Laws 2008-107, s. 28.19(a).

Session Laws 2015-6, 2.13(b), as amended by Session Laws 2016-5, s. 3.12(b), provides in part: “A contractor who paid sales and use tax on an item exempt from sales and use tax pursuant to G.S. 105-164.13 E(c), as enacted by this section, may request a refund from the retailer, and the retailer may, upon issuance of the refund or credit, request a refund for the overpayment of tax under G.S. 105-164.11(a)(1).”

Effect of Amendments.

Session Laws 2003-284, ss. 45.6, 45.6A, and 45.6B, rewrote and redesignated the former provisions of the section as subsection (a); repealed subdivision (a)(6); and added subsection (b). See Editor’s note for effective dates.

Session Laws 2003-416, s. 22, effective August 14, 2003, inserted “G.S.” in subdivision (1)a.

Session Laws 2005-276, s. 33.10, effective October 1, 2005, repealed subdivision (a)(1), which read: “Alcoholic beverages, as defined in G.S. 105 113.68.”; and added subdivision (a)(7).

Session Laws 2008-107, s. 28.19(a), as amended by Session Laws 2009-445, s. 42, effective January 1, 2009, and applicable to sales made on or after that date, rewrote subdivision (a)(4).

Session Laws 2015-6, s. 2.21, effective April 9, 2015, in sub-subdivision (a)(4)b. deleted “as defined in G.S. 105-163.010 ” following “related persons” in the first sentence and added the second sentence.

§§ 105-164.13C, 105-164.13D. [Repealed]

Repealed by Session Laws 2013-316, s. 3.4(a), effective July 1, 2014, and applicable to purchases made on or after July 1, 2014.

History. G.S. 105-164.13 C; 2001-424, s. 34.16(a); 2001-476, s. 18(b); 2003-284, s. 45.7; 2005-276, s. 33.11; 2007-323, s. 31.14(b); repealed by 2013-316, s. 3.4(a), effective July 1, 2014. G.S. 105-164.13 D; 2008-107, s. 28.12(b); 2011-330, s. 19; repealed by 2013-316, s. 3.4(a), effective July 1, 2014.

Editor’s Note.

Former G.S. 105-164.13 C pertained to sales and use tax holiday. Former G.S. 105-164.13 D pertained to sales and use tax holiday for Energy Star qualified products.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

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.”

§ 105-164.13E. Exemption for farmers.

  1. Exemption. —  A qualifying farmer is a person who has an annual income from farming operations for the preceding taxable year of ten thousand dollars ($10,000) or more or who has an average annual income from farming operations for the three preceding taxable years of ten thousand dollars ($10,000) or more. For purposes of this section, the term “income from farming operations” means sales plus any other amounts treated as gross income under the Code from farming operations. A qualifying farmer includes a dairy operator, a poultry farmer, an egg producer, and a livestock farmer, a farmer of crops, a farmer of an aquatic species, as defined in G.S. 106-758 , and a person who boards horses. A qualifying farmer may apply to the Secretary for an exemption certificate number under G.S. 105-164.28 A. The exemption certificate expires when a person fails to meet the income threshold for three consecutive taxable years or ceases to engage in farming operations, whichever comes first.Except as otherwise provided in this section, the items exempt under this section must be purchased by a qualifying farmer or conditional farmer and used by the qualifying or conditional farmer primarily in farming operations. For purposes of this section, an item is used by a farmer for farming operations if it is used for the planting, cultivating, harvesting, or curing of farm crops, in the production of dairy products, eggs, or animals, or by a person who boards horses. The items that may be exempt from sales and use tax under this section are:
    1. Fuel, piped natural gas, and electricity that are measured by a separate meter or another separate device and used for a purpose other than preparing food, heating dwellings, and other household purposes.
    2. Commercial fertilizer, lime, land plaster, plastic mulch, plant bed covers, potting soil, baler twine, and seeds.
    3. Farm machinery, attachment and repair parts for farm machinery, and lubricants applied to farm machinery. The term “machinery” includes implements that have moving parts or are operated or drawn by an animal. The term does not include implements operated wholly by hand or motor vehicles required to be registered under Chapter 20 of the General Statutes.
    4. A container used in the planting, cultivating, harvesting, or curing of farm crops or in the production of dairy products, eggs, or animals or used in packaging and transporting the farmer’s product for sale.
    5. A grain, feed, or soybean storage facility and parts and accessories attached to the facility.
    6. Any of the following substances when purchased for use on animals or plants, as appropriate, held or produced for commercial purposes:
      1. Remedies, vaccines, medications, litter materials, and feeds for animals.
      2. Rodenticides, insecticides, herbicides, fungicides, and pesticides.
      3. Defoliants for use on cotton or other crops.
      4. Plant growth inhibitors, regulators, or stimulators, including systemic and contact or other sucker control agents for tobacco and other crops.
      5. Semen.
    7. Any of the following animals:
      1. Fowl.
      2. Livestock.
    8. Any of the following items concerning the housing, raising, or feeding of animals:
      1. A commercially manufactured facility to be used for commercial purposes for housing, raising, or feeding animals or for housing equipment necessary for these commercial activities. The exemption also applies to commercially manufactured equipment, and parts and accessories for the equipment, used in the facility.
      2. Building materials, supplies, fixtures, and equipment that become a part of and are used in the construction, repair, or improvement of an enclosure or a structure specifically designed, constructed, and used for housing, raising, or feeding animals or for housing equipment necessary for one of these commercial activities. The exemption also applies to commercially manufactured equipment, and parts and accessories for the equipment, used in the enclosure or a structure.
    9. A bulk tobacco barn or rack, parts and accessories attached to the tobacco barn or rack, and any similar apparatus, part, or accessory used to cure or dry tobacco or another crop.
    10. Repair, maintenance, and installation services.
  2. Conditional Exemption. —  A person who does not meet the definition of a qualifying farmer in subsection (a) of this section may apply to the Department for a conditional exemption certificate under G.S. 105-164.28 A. A person with a conditional exemption certificate is allowed to purchase items exempt from sales and use tax to the same extent as a qualifying farmer under subsection (a) of this section. To receive a conditional exemption certificate under this subsection, the person must certify that the person intends to engage in farming operations, as that term is described in subsection (a) of this section, and that the person will timely file State and federal income tax returns that reflect income and expenses incurred from farming operations during the taxable years that the conditional exemption certificate applies.A conditional exemption certificate issued under this subsection is valid for the taxable year in which the certificate is issued and the following two taxable years, provided the person to whom the certificate is issued is engaged in farming and provides copies of applicable State and federal income tax returns to the Department within 90 days following the due date of an income tax return for each taxable year covered by the conditional exemption certificate, including an extension of the due date granted by the Secretary under G.S. 105-263 . A conditional exemption certificate issued under this subsection may not be extended or renewed beyond the original three-year period; provided that a person may request a one-year extension of their conditional exemption certificate if the person satisfies all of the following conditions:
    1. The person holds a conditional exemption certificate that is scheduled to expire within 30 days of an extension request.
    2. The person suffers a weather-related disaster that prevents the person from becoming eligible for a qualifying exemption certificate.
    3. The person provides the Department all of the following:
      1. Documents showing that, but for the disaster, the person would have earned ten thousand dollars ($10,000) or more in gross sales for the year in which the disaster occurred.
      2. Documentation of revenues and expenses relating to the damaged crop.
      3. An affidavit from a county extension director or FSA county committee that the disaster occurred in the area of the county in which the person farms. The Department may not issue a conditional exemption certificate to a person who has had a conditional exemption certificate issued under this subsection during the prior 15 taxable years.

        A person who purchases items with a conditional exemption certificate must maintain documentation of the items purchased and copies of State and federal income tax returns that reflect activities from farming operations for the period of time covered by the conditional exemption certificate for three years following the expiration of the conditional exemption certificate. The Secretary may require a person who has a conditional exemption certificate to provide any other information requested by the Secretary to verify the person met the conditions of this subsection. A person who fails to provide the information requested by the Secretary in a timely manner or who fails to meet the requirements of this subsection becomes liable for any taxes for which an exemption under this subsection was claimed. The taxes become due and payable at the expiration of the conditional exemption certificate, and interest accrues from the date of the original purchase. Additionally, where the person does not timely provide the information requested by the Secretary, the misuse of exemption certificate penalty in G.S. 105-236(a)(5a) applies to each seller identified by the Department from which the person made a purchase.

  3. Contract with a Farmer. —  A qualifying item listed in subdivisions (5), (8), and (9) of subsection (a) of this section purchased to fulfill a contract with a person who holds a qualifying farmer exemption certificate or a conditional farmer exemption certificate issued under G.S. 105-164.28 A is exempt from sales and use tax to the same extent as if purchased directly by the person who holds the exemption certificate. A contractor that purchases one of the items allowed an exemption under this section must provide an exemption certificate to the retailer that includes the name of the qualifying farmer or conditional farmer exemption certificate holder and the qualifying farmer or conditional farmer exemption certificate number issued to that holder. (c1) Services for Farmer. — A qualifying item listed in subdivision (6) of subsection (a) of this section purchased to fulfill a service for a person who holds a qualifying farmer exemption certificate or a conditional farmer exemption certificate issued under G.S. 105-164.28 A is exempt from sales and use tax to the same extent as if purchased directly by the person who holds the exemption certificate. A person that purchases one of the items allowed an exemption under this subsection must provide an exemption certificate to the retailer that includes the name of the qualifying farmer or conditional farmer and the exemption number issued to the qualifying farmer or conditional farmer by the Department pursuant to G.S. 105-164.28A. A person that purchases an item exempt from tax pursuant to this subsection must maintain records to substantiate that an item is used to provide a service for a person who holds a qualifying farmer exemption certificate or a conditional farmer exemption certificate.
  4. Definition. —  For purposes of this section, the term “taxable year” has the same meaning as defined in G.S. 105-153.3 .

History. 2013-316, s. 3.3(a); 2013-363, s. 11.4; 2014-3, s. 3.1(a); 2015-6, s. 2.13(a); 2016-5, s. 3.12(a); 2016-94, s. 38.5(j); 2017-108, s. 20(a); 2018-5, s. 38.5(k); 2019-6, s. 5.4; 2019-169, s. 3.3(l), (m); 2020-6, s. 1(a); 2021-180, s. 42.13C(a).

Editor’s Note.

Session Laws 2013-316, s. 3.3(c), makes this section effective July 1, 2014, and applicable to sales made on or after that date.

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 2014-3, s. 3.1(d), provides: “A person who has an agricultural exemption certificate number issued prior to July 1, 2014, that meets the requirements of G.S. 105-164.13 E for a qualifying farmer should apply for a new agricultural exemption certificate number before July 1, 2014, for use for qualifying purchases made on or after October 1, 2014. A person that meets the requirements of G.S. 105-164.13 E for a qualifying farmer and who has an agricultural exemption certificate number issued prior to July 1, 2014, may continue to use that agricultural exemption certificate number for qualifying purchases made prior to October 1, 2014.”

Session Laws 2014-3, s. 3.1(e), provides: “A person who has an agricultural exemption certificate number issued before July 1, 2014, that does not meet the requirements of G.S. 105-164.13 E for a qualifying farmer must give notice to a seller that the person no longer qualifies for an exemption for purchases made on or after July 1, 2014, and the seller must collect any tax due on the sale. A seller that relies on a copy of an agricultural certificate of exemption and meets the requirements of G.S. 105-164.28 is not liable for any tax due on the sale.”

Session Laws 2014-3, s. 3.1(f), made the amendment to this section by Session Laws 2014-3, s. 3.1(a), applicable to purchases made on or after July 1, 2014.

Session Laws 2015-6, 2.13(b), as amended by Session Laws 2016-5, s. 3.12(b), provides in part: “A contractor who paid sales and use tax on an item exempt from sales and use tax pursuant to G.S. 105-164.13 E(c), as enacted by this section, may request a refund from the retailer, and the retailer may, upon issuance of the refund or credit, request a refund for the overpayment of tax under G.S. 105-164.11(a)(1).”

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.”

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2017-108, s. 21, is a severability clause.

Session Laws 2018-5, s. 38.5(aa), provides, in part: “Subsection (k) of this section is effective retroactively to July 1, 2014. A person who paid sales and use tax for a return period ending prior to the date this section becomes law on an item exempt from sales and use tax pursuant to G.S. 105-164.13 E, as amended by subsection (k) of this section, 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 subsection (k) of this section. A request for a refund must be made on or before October 1, 2018. Notwithstanding G.S. 105-241.6 , a request for a refund received after this date is barred and the provisions of G.S. 105-164.11 do not apply.”

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 2020-6, s. 1(e), made the rewriting of subdivision (a)(7) by Session Laws 2020-6, s. 1(a), effective July 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2021-180, s. 42.13C(c), made the amendments to subdivision (a)(7) of this section by Session Laws 2021-180, s. 42.13C(a), effective retroactively to July 1, 2020, and applicable to purchases made on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2013-363, s. 11.4, effective July 1, 2013, substituted “exemption” for “refund” in the last sentence of subdivision (8)b.

Session Laws 2014-3, s. 3.1(a), effective July 1, 2014, rewrote the section. See Editor’s note for applicability.

Session Laws 2015-6, s. 2.13(a), effective July 1, 2014, in the first paragraph of subsection (a), in the first sentence, substituted “annual income from farming operations” for “annual income” twice and deleted “from farming operations” following “or more” twice, inserted the present second sentence, and added “whichever comes first” at the end of the last sentence; substituted “Fuel, piped natural gas, and electricity that are measured” for “Fuel and electricity that is measured” in subdivision (a)(1); in the first sentence in the second paragraph of subsection (b), inserted “is engaged in farming and” following “certificate is issued,” substituted “following the due date of an income tax return for” for “following the end of,” and added “including an extension of the due date granted by the Secretary under G.S. 105-263 ” at the end; and added subsections (c) and (d).

Session Laws 2016-5, s. 3.12(a), effective May 11, 2016, in the last sentence of subsection (c), substituted “qualifying farmer or conditional farmer exemption” for “agricultural exemption” twice.

Session Laws 2016-94, s. 38.5(j), effective January 1, 2017, added subdivision (a)(10). See editor’s note for applicability.

Session Laws 2017-108, s. 20(a), effective for taxes imposed for taxable years beginning on or after July 1, 2017, added “provided that a person may request a one-year extension of their conditional exemption certificate if the person satisfies all of the following conditions:” at the end of the second paragraph of subsection (b); added subdivisions (b)(1) through (b)(3); and made a stylistic change.

Session Laws 2018-5, s. 38.5(k), in subsection (a), in the first paragraph, substituted “and a livestock farmer, a farmer of crops, a farmer of an aquatic species, as defined in G.S. 106-758 , and a person who boards horses” for “a livestock farmer, a farmer of crops, and a farmer of an aquatic species, as defined in G.S. 106-758 ” in the third sentence, and in the second paragraph, substituted “Except as otherwise provided in this section the items exempt under this section must be purchased by a qualifying farmer and used” for “The following tangible personal property, digital property, and services are exempt from sales and use tax if purchased by a qualifying farmer and for use” in the first sentence, and substituted “or animals. The following tangible personal property and services that may be exempt from sales and use tax under this section are as follows:” for “or animals:” at the end; and added subsection (c1). For effective date and applicability, see editor’s note.

Session Laws 2019-6, s. 5.4, effective March 20, 2019, in subsection (a), in the second paragraph, in the first sentence, substituted “farmer or conditional farmer and used by the qualifying or conditional farmer primarily in” for “farmer and used by the farmer in” near the beginning, inserted “or by a person who boards horses” at the end, and made a minor stylistic change; and substituted “qualifying farmer or conditional farmer and the exemption number issued to the qualifying farmer or conditional farmer” for “purchaser and an exemption number issued to the purchaser” in the second sentence in subsection (c1).

Session Laws 2019-169, s. 3.3( l ), (m), effective July 26, 2019, substituted “items” for “following tangible personal property and services” and “are” for “are as follows” in the last sentence of the second paragraph of subsection (a); and substituted “purposes” for “purposes. This exemption does not apply to any equipment or devices used to administer, release, apply, or otherwise dispense these substances” in the introductory paragraph of subdivision (a)(6); and inserted “dollars” in sub-subdivision (b)(3)a.

Session Laws 2020-6, s. 1(a) rewrote subdivision (a)(7). For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 42.13C(a), in subdivision (a)(7), substituted “Fowl” for “Baby chicks and poults”. For effective date and applicability, see editor's note.

§ 105-164.14. Certain refunds authorized.

  1. Interstate Carriers. —  An interstate carrier is allowed a refund, in accordance with this section, of part of the sales and use taxes paid by it on the purchase in this State of railway cars and locomotives, and fuel, lubricants, repair parts, accessories, service contracts, and repair, maintenance, and installation services for a motor vehicle, railroad car, locomotive, or airplane the carrier operates. An “interstate carrier” is a person who is engaged in transporting persons or property in interstate commerce for compensation. The Secretary shall prescribe the periods of time, whether monthly, quarterly, semiannually, or otherwise, with respect to which refunds may be claimed, and shall prescribe the time within which, following these periods, an application for refund may be made.An applicant for refund shall furnish the following information and any proof of the information required by the Secretary:
    1. A list identifying the railway cars, locomotives, fuel, lubricants, repair parts, accessories, service contracts, and repair, maintenance, and installation services purchased by the applicant inside or outside this State during the refund period.
    2. The purchase price of the taxable tangible personal property and services listed in subdivision (1) of this subsection. For purposes of this subdivision, the term “taxable” is based on the imposition of tax on the tangible personal property and services in the State.
    3. The sales and use taxes paid in this State on the listed items.
    4. The number of miles the applicant’s motor vehicles, railroad cars, locomotives, and airplanes were operated both inside and outside this State during the refund period. Airplane miles are not in this State if the airplane does not depart or land in this State.
    5. Any other information required by the Secretary.For each applicant, the Secretary shall compute the amount to be refunded as follows. First, the Secretary shall determine the mileage ratio. The numerator of the mileage ratio is the number of miles the applicant operated all motor vehicles, railroad cars, locomotives, and airplanes in this State during the refund period. The denominator of the mileage ratio is the number of miles the applicant operated all motor vehicles, railroad cars, locomotives, and airplanes both inside and outside this State during the refund period. Second, the Secretary shall determine the applicant’s proportional liability for the refund period by multiplying this mileage ratio by the purchase price of the tangible personal property and services identified in subdivision (1) of this subsection and then multiplying the resulting product by the tax rate that would have applied to the items if they had all been purchased in this State. Third, the Secretary shall refund to each applicant the excess of the amount of sales and use taxes the applicant paid in this State during the refund period on these items over the applicant’s proportional liability for the refund period.

      (a1) Repealed by Session Laws 2010-166, s. 1.17, effective July 1, 2010.

      (a2) Utility Companies. — A utility company is allowed a refund, in accordance with this section, of part of the sales and use taxes paid by it on the purchase in this State of railway cars and locomotives and accessories for a railway car or locomotive the utility company operates. The Secretary shall prescribe the periods of time, whether monthly, quarterly, semiannually, or otherwise, with respect to which refunds may be claimed and shall prescribe the time within which, following these periods, an application for refund may be made.An applicant for refund shall furnish the following information and any proof of the information required by the Secretary:

      (1) A list identifying the railway cars, locomotives, and accessories purchased by the applicant inside or outside this State during the refund period.

      (2) The purchase price of the items listed in subdivision (1) of this subsection.

      (3) The sales and use taxes paid in this State on the listed items.

      (4) The number of miles the applicant’s railway cars and locomotives were operated both inside and outside this State during the refund period.

      (5) Any other information required by the Secretary.For each applicant, the Secretary shall compute the amount to be refunded as follows. First, the Secretary shall determine the ratio of the number of miles the applicant operated its railway cars and locomotives in this State during the refund period to the number of miles it operated them both inside and outside this State during the refund period. Second, the Secretary shall determine the applicant’s proportional liability for the refund period by multiplying this mileage ratio by the purchase price of the items identified in subdivision (1) of this subsection and then multiplying the resulting product by the tax rate that would have applied to the items if they had all been purchased in this State. Third, the Secretary shall refund to each applicant the excess of the amount of sales and use taxes the applicant paid in this State during the refund period on these items over the applicant’s proportional liability for the refund period.

  2. Nonprofit Entities and Hospital Drugs. —  A nonprofit entity is allowed a semiannual refund of sales and use taxes paid by it under this Article on direct purchases of items for use in carrying on the work of the nonprofit entity. Sales and use tax liability indirectly incurred by a nonprofit entity through reimbursement to an authorized person of the entity for the purchase of tangible personal property and services for use in carrying on the work of the nonprofit entity is considered a direct purchase by the entity. Sales and use tax liability indirectly incurred by a nonprofit entity on building materials, supplies, fixtures, and equipment that become a part of or annexed to any building or structure that is owned or leased by the nonprofit entity and is being erected, altered, or repaired for use by the nonprofit entity for carrying on its nonprofit activities is considered a sales or use tax liability incurred on direct purchases by the nonprofit entity. The refund allowed under this subsection does not apply to purchases of electricity, telecommunications service, ancillary service, piped natural gas, video programming, or a prepaid meal plan. A request for a refund must be in writing and must include any information and documentation required by the Secretary. A request for a refund for the first six months of a calendar year is due the following October 15; a request for a refund for the second six months of a calendar year is due the following April 15. The aggregate annual refund amount allowed an entity under this subsection for the State’s fiscal year may not exceed thirty-one million seven hundred thousand dollars ($31,700,000).The refunds allowed under this subsection do not apply to an entity that is owned and controlled by the United States or to an entity that is owned or controlled by the State and is not listed in this subsection. A hospital that is not listed in this subsection is allowed a semiannual refund of sales and use taxes paid by it on over-the-counter drugs purchased for use in carrying out its work. The following nonprofit entities are allowed a refund under this subsection:
    1. Hospitals not operated for profit, including hospitals and medical accommodations operated by an authority or other public hospital described in Article 2 of Chapter 131E of the General Statutes.
    2. An organization that is exempt from income tax under section 501(c)(3) of the Code, other than an organization that is properly classified in any of the following major group areas of the National Taxonomy of Exempt Entities:
      1. Community Improvement and Capacity Building.
      2. Public and Societal Benefit.
      3. Mutual and Membership Benefit. (2a) Volunteer fire departments and volunteer emergency medical services squads that are one or more of the following:

        a. Exempt from income tax under the Code.

        b. Financially accountable to a city as defined in G.S. 160A-1 , a county, or a group of cities and counties.

        (2b) An organization that is a single member LLC that is disregarded for income tax purposes and satisfies all of the following conditions:

        a. The owner of the LLC is an organization that is exempt from income tax under section 501(c)(3) of the Code.

        b. The LLC is a nonprofit entity that would be eligible for an exemption under 501(c)(3) of the Code if it were not disregarded for income tax purposes.

        c. The LLC is not an organization that would be properly classified in any of the major group areas of the National Taxonomy of Exempt Entities listed in subdivision (2) of this subsection.

    3. Repealed by Session Laws 2008-107, s. 28.22(a), effective July 1, 2008, and applicable to purchases made on or after that date.
    4. Qualified retirement facilities whose property is excluded from property tax under G.S. 105-278.6 A.
    5. A university affiliated nonprofit organization that procures, designs, constructs, or provides facilities to, or for use by, a constituent institution of The University of North Carolina. For purposes of this subdivision, a nonprofit organization includes an entity exempt from taxation as a disregarded entity of the nonprofit organization.
  3. Certain Governmental Entities. —  A governmental entity listed in this subsection is allowed an annual refund of sales and use taxes paid by it under this Article on direct purchases of items. Sales and use tax liability indirectly incurred by a governmental entity on building materials, supplies, fixtures, and equipment that become a part of or annexed to any building or structure that is owned or leased by the governmental entity and is being erected, altered, or repaired for use by the governmental entity is considered a sales or use tax liability incurred on direct purchases by the governmental entity for the purpose of this subsection. The refund allowed under this subsection does not apply to purchases of electricity, telecommunications service, ancillary service, piped natural gas, video programming, or a prepaid meal plan. A request for a refund must be in writing and must include any information and documentation required by the Secretary. A request for a refund is due within six months after the end of the governmental entity’s fiscal year.This subsection applies only to the following governmental entities:
    1. A county.
    2. A city as defined in G.S. 160A-1 . (2a) A consolidated city-county as defined in G.S. 160B-2 .

      (2b), (2c) Repealed by Session Laws 2005-276, s. 7.51(a), effective July 1, 2005, and applicable to sales made on or after that date.

    3. A metropolitan sewerage district or a metropolitan water district in this State.
    4. A water and sewer authority created under Chapter 162A of the General Statutes.
    5. A lake authority created by a board of county commissioners pursuant to an act of the General Assembly.
    6. A sanitary district.
    7. A regional solid waste management authority created pursuant to G.S. 153A-421 .
    8. An area mental health, developmental disabilities, and substance abuse authority, other than a single-county area authority, established pursuant to Article 4 of Chapter 122C of the General Statutes.
    9. A district health department, or a public health authority created pursuant to Part 1A of Article 2 of Chapter 130A of the General Statutes.
    10. A regional council of governments created pursuant to G.S. 160A-470 .
    11. A regional planning and economic development commission or a regional economic development commission created pursuant to Chapter 158 of the General Statutes.
    12. A regional planning commission created pursuant to G.S. 153A-391 .
    13. A regional sports authority created pursuant to G.S. 160A-479 .
    14. A public transportation authority created pursuant to Article 25 of Chapter 160A of the General Statutes.

      (14a) A facility authority created pursuant to Part 4 of Article 20 of Chapter 160A of the General Statutes.

    15. A regional public transportation authority created pursuant to Article 26 of Chapter 160A of the General Statutes, or a regional transportation authority created pursuant to Article 27 of Chapter 160A of the General Statutes.
    16. A local airport authority that was created pursuant to a local act of the General Assembly.
    17. A joint agency created by interlocal agreement pursuant to G.S. 160A-462 to (i) provide fire protection, emergency services, or police protection or (ii) operate a public broadcasting television station.
    18. Repealed by Session Laws 2001-474, s. 7, effective November 29, 2001.
    19. Repealed by Session Laws 2001-474, s. 7, effective November 29, 2001.
    20. A constituent institution of The University of North Carolina, but only with respect to sales and use tax paid by it for tangible personal property or services that are eligible for refund under this subsection acquired by it through the expenditure of contract and grant funds.
    21. The University of North Carolina Health Care System.
    22. A regional natural gas district created pursuant to Article 28 of Chapter 160A of the General Statutes.
    23. A special district created under Article 43 of this Chapter.
    24. A public library created pursuant to an act of the General Assembly or established pursuant to G.S. 153A-270 .
    25. A soil and water conservation district organized under Chapter 139 of the General Statutes.
    26. A district confinement facility created pursuant to G.S. 153A-219 , including a local act modifying G.S. 153A-219 .
  4. Late Applications. —  Refunds applied for more than three years after the due date are barred. (d1) Alcoholic Beverages. — The refunds authorized by this section do not apply to purchases of alcoholic beverages, as defined in G.S. 18B-101 .

    (d2) A city subject to the provisions of G.S. 160A-340.5 is not allowed a refund of sales and use taxes paid by it under this Article for purchases related to the provision of communications service as defined in Article 16A of Chapter 160A of the General Statutes.

  5. State Agencies. —  The State is allowed quarterly refunds of local sales and use taxes paid indirectly by the State agency on building materials, supplies, fixtures, and equipment that become a part of or annexed to a building or structure that is owned or leased by the State agency and is being erected, altered, or repaired for use by the State agency. This subsection does not apply to a State agency that is ineligible for a sales and use tax exemption number under G.S. 105-164.29 A(a).A person who pays local sales and use taxes on building materials or other tangible personal property for a State building project shall give the State agency for whose project the property was purchased a signed statement containing all of the following information:
    1. The date the property was purchased.
    2. The type of property purchased.
    3. The project for which the property was used.
    4. If the property was purchased in this State, the county in which it was purchased.
    5. If the property was not purchased in this State, the county in which the property was used.
    6. The amount of sales and use taxes paid.If the property was purchased in this State, the person shall attach a copy of the sales receipt to the statement. A State agency to whom a statement is submitted shall verify the accuracy of the statement.Within 15 days after the end of each calendar quarter, every State agency shall file with the Secretary a written application for a refund of taxes to which this subsection applies paid by the agency during the quarter. The application shall contain all information required by the Secretary. The Secretary shall credit the local sales and use tax refunds directly to the General Fund.
  6. through (h) Repealed by Session Laws 2010-166, s. 1.17, effective July 1, 2010. (i) Repealed by Session Laws 1999-360, s. 5, for taxes paid on or after January 1, 2008.

    (j) through (o) Repealed by Session Laws 2010-166, s. 1.17, effective July 1, 2010.

    (p) Not an Overpayment.— Taxes for which a refund is allowed under this section are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .

History. 1957, c. 1340, s. 5; 1961, c. 826, s. 2; 1963, cc. 169, 1134; 1965, c. 1006; 1967, c. 1110, s. 6; 1969, c. 1298, s. 1; 1971, cc. 89, 286; 1973, c. 476, s. 193; 1977, c. 895, s. 1; 1979, c. 47; c. 801, ss. 77, 79-82; 1983, c. 594, s. 1; c. 891, s. 13; 1983 (Reg. Sess., 1984), c. 1097, s. 7; 1985, cc. 431, 523; 1985 (Reg. Sess., 1986), c. 863, s. 5; 1987, c. 557, ss. 8, 9; c. 850, s. 16; 1987 (Reg. Sess., 1988), c. 1044, s. 5; 1989, c. 168, s. 5; c. 251; c. 780, s. 1.1; 1989 (Reg. Sess., 1990), c. 936, s. 4; 1991, c. 356, s. 1; c. 689, s. 190.1(b); 1991 (Reg. Sess., 1992), c. 814, s. 1; c. 917, s. 1; c. 1030, s. 25; 1995, c. 17, s. 8; c. 21, s. 1; c. 458, s. 7; c. 461, s. 13; c. 472, s. 1; 1995 (Reg. Sess., 1996), c. 646, s. 6; 1996, 2nd Ex. Sess., c. 18, s. 15.7(a); 1997-340, s. 1; 1997-393, s. 2; 1997-423, s. 1; 1997-426, s. 5; 1997-502, s. 3; 1998-55, ss. 16, 17; 1998-98, s. 15; 1998-212, ss. 29A.4(a), 29A.14(i), 29A.18(b); 1999-360, ss. 4, 5(a), (b), 9; 1999-438, s. 14; 2000-56, s. 9; 2000-140, s. 92.A(c); 2001-414, s. 1; 2001-474, s. 7; 2003-416, ss. 18(b)-(e), 23; 2003-431, ss. 2, 3; 2003-435, 2nd Ex. Sess., s. 4.1; 2004-110, s. 5.1; 2004-124, s. 32B.1; 2004-170, s. 21(a); 2004-204, 1st Ex. Sess., s. 3; 2005-276, ss. 7.27(a), 7.51(a), 33.12; 2005-429, s. 2.12; 2005-435, ss. 32(a), 33(a)-(c), 61, 61.1; 2006-33, s. 6; 2006-66, ss. 24.6(a), (b), (c), 24.10(b), 24.13(b), 24A.1(a); 2006-162, ss. 9, 27; 2006-168, s. 3.1; 2006-252, ss. 2.2, 2.3; 2007-323, ss. 31.10(a), 31.20(b), 31.23(d); 2007-345, s. 14.6(a); 2007-491, s. 44(1)a; 2008-107, ss. 28.22(a), 28.23(a), (b); 2008-118, s. 3.10(a); 2008-154, s. 1; 2009-233, s. 1; 2009-445, ss. 13, 14(a); 2009-527, s. 2(d); 2009-550, s. 4.1; 2010-31, s. 31.5(c), (d); 2010-91, s. 4; 2010-95, s. 4(a); 2010-166, s. 1.17; 2011-84, s. 1(b); 2011-330, s. 26(a); 2012-79, s. 2.11; 2013-316, s. 3.4(b); 2013-414, ss. 12, 42(a), 54(a); 2014-3, s. 8.2(a); 2014-20, s. 1; 2015-235, s. 1; 2016-5, s. 3.22(b); 2017-204, ss. 2.7(a), 2.9(b); 2018-5, s. 38.5(l); 2019-169, s. 3.3(n); 2020-58, s. 3.1(a).

Local Modification.

City of Raeford: 1995, c. 16, s. 1.

Cross References.

As to hospital authorities, see G.S. 131E-15 et seq.

Editor’s Note.

Session Laws 1999-360, s. 31 provides that s. 5 of the act, which added subsection (i) effective May 1, 1999, and amended subdivision (i)(1) effective January 1, 2004, is repealed for taxes paid on or after January 1, 2008.

Session Laws 2000-56, which amended G.S. 105-164.14(i)(2)b., in s. 10(h), as amended by Session Laws 2000-140, s. 92.A(c), and Session Laws 2001-414, s. 1, amended Session Laws 2000-56, s. 10(h), which provided: “Section 9 of this act becomes effective May 1, 1999, and applies to taxes paid on or after that date. Section 9 is repealed for taxes paid on or after January 1, 2008.”

Session Laws 2003-435, 2nd Ex. Sess., s. 4.2, provides: “It is the intent of the General Assembly that the provisions of this part [Part 4 of Session Laws 2003-435, 2nd Ex. Sess.] not be expanded. If a court of competent jurisdiction holds any provision of this part invalid, the section containing that provision is repealed. The repeal of a section of this part under this section does not affect other provisions of this part that may be given affect without the invalid provision.”

Subdivision (j)(3)d. was added by Session Laws 2004-124, s. 32B.1, and included a sunset provision with a repeal date of July 1, 2009. Subdivision (j)(3)d. was subsequently amended by Session Laws 2004-204, 1st Ex. Sess., s. 3, but the amendments made by that act had no sunset provision. Subsequently, Session Laws 2005-435, s. 33(c), deleted the sunset provision for subdivision (j)(3)d.

Session Laws 2004-124, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2004’.”

Session Laws 2004-124, s. 33.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2004-2005 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2004-2005 fiscal year.”

Session Laws 2004-124, s. 33.5, contains a severability clause.

Session Laws 2005-276, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2005’.”

Session Laws 2005-276, s. 7.27(c), provides: “In addition to the report required under G.S. 105-164.14(c), as amended by this section, the Secretary of Revenue shall make a report to the Department of Public Instruction and the Fiscal Research Division of the General Assembly within 30 days after this act becomes law of the amount of refunds, identified by taxpayer, claimed under subdivisions (2b) and (2c) of G.S. 105-164.14(c) during the 2002-2003, 2003-2004, and 2004-2005 fiscal years.”

Session Laws 2005-276, s. 33.34, provides in part: “For prepayments of telecommunications and direct-to-home satellite services, the first billing period is considered to start on or after November 1, 2005. For prepayments of satellite digital audio radio services or cable services, the first billing period is considered to start on or after February 1, 2006.”

Session Laws 2005-276, s. 46.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2005-2007 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2005-2007 fiscal biennium.”

Session Laws 2005-276, s. 46.5 is a severability clause.

Subsection (k) as added by Session Laws 2005-435, s. 61.1 was recodified as subsection ( l ) at the direction of the Revisor of Statutes.

Session Laws 2005-435, s. 62, as amended by Session Laws 2006-66, s. 24.6(c), provides that Part III of the act, which adds new subsections (a1) and (k) [recodified as ( l )] to G.S. 105-164.14 , becomes effective January 1, 2005, and applies to purchases made on or after that date. Part III of Session Laws 2005-435 does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by Part III 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 2006-66, s. 24.6(c), deleted the sunset provision for G.S. 105-164.14 for purchases made on or after January 1, 2007.

Session Laws 2007-323, ss. 31.20(b) and 31.23(d), each added subsections designated as subsection (n). The subsection added by s. 31.23(d) has been redesignated as subsection (o) at the direction of the Revisor of Statutes.

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.

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 2008-154, which added subdivision (b)(5) of this section, in s. 2, provides, in part: “Notwithstanding G.S. 105-164.14(b), a request for a refund of sales and use tax paid for the period January 1, 2004, through December 31, 2007, is timely filed if it is submitted to the Secretary of Revenue by October 15, 2008.”

Session Laws 2009-445, s. 14(a), states in the introductory language that “G.S. 105-164.14(j)(2)n. reads as rewritten.” The amendment has been given effect in subdivision (j)(3)n. at the direction of the Revisor of Statutes.

Session Laws 2009-550, s. 4.1, amended subdivision (b)(1) contingent on Senate Bill 509, 2009 Regular Session becoming law. Senate Bill 509, 2009 Regular Session was enacted as Session Laws 2009-445.

Subdivision (c)(23), as enacted by Session Laws 2010-95, s. 4(a), was redesignated as subdivision (c)(24) at the direction of the Revisor of Statutes.

Session Laws 2010-95, s. 4(a), which added subdivision (c)(24), was applicable to purchases made on or after July 1, 2008.

Session Laws 2010-153, s. 1, as amended by Session Laws 2011-345, s. 1, provides: “A joint agency created by an interlocal agreement pursuant to G.S. 160A-462 to operate a cable system that provides video programming services is allowed a refund of sales and use tax paid by it on purchases made on or after July 1, 2007, and before June 30, 2011, to the same extent allowed to a city under G.S. 105-164.14 (c). Notwithstanding G.S. 105-164.14 , the joint agency must make a request for a refund in writing before January 1, 2011, for sales and use tax paid on or after July 1, 2007, and before June 30, 2010.”

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.”

Session Laws 2011-84, s. 6, provides: “Any city that is designated as a public utility under Chapter 62 of the General Statutes when this act becomes law shall not be subject to the provisions of this act with respect to any of its operations that are authorized by that Chapter.”

Session Laws 2011-84, s. 7 is a severability clause.

Session Laws 2012-74, s. 3, as amended by Session Laws 2013-360, s. 6.16, provides: “(a) For calendar year 2010, an interstate passenger air carrier that is eligible for a refund of sales and use taxes paid on fuel in excess of two million five hundred thousand dollars ($2,500,000) under G.S. 105-164.14 (a1) and G.S. 105-164.14 A(a)(1) is subject to the provisions of this section, notwithstanding any provisions of G.S. 105-164.14, G.S. 105-164.14A, or Section 4 of S.L. 2010-166 to the contrary. Notwithstanding the fact that the first six months of 2010 are subject to G.S. 105-164.14(a1) and the last six months of 2010 are subject to G.S. 105-164.14A(a)(1), a taxpayer shall submit one request for a refund for the entire calendar year.

“(b) An interstate passenger air carrier is allowed a refund of the sales and use tax paid by it on fuel in excess of one million two hundred fifty thousand dollars ($1,250,000) for the period January 1, 2011, through June 30, 2011. The State portion of the refund is payable in two installments. The first installment, payable in fiscal year 2012-2013, may not exceed three million one hundred fifty thousand dollars ($3,150,000). The remainder of the refund is payable in fiscal year 2013-2014. The amount of sales and use tax paid does not include a refund allowed to the interstate passenger air carrier under G.S. 105-164.14(a). A request for a refund must be in writing and must include any information and documentation required by the Secretary. The request for a refund is due before October 1, 2012. A refund applied for after the due date is barred.”

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2013-2015 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2013-2015 fiscal biennium.”

Session Laws 2013-360, s. 38.5 is a severability clause.

Session Laws 2013-414, s. 42(b), made the amendment to subdivision (c)(24) by Session Laws 2013-414, s. 42(a), applicable to purchases occurring on or after January 1, 2013.

Session Laws 2013-414, s. 54(b), made the amendment to subdivision (b)(2a) by Session Laws 2013-414, s. 54(a), applicable to purchases occurring on or after July 1, 2013.

Session Laws 2015-235, s. 2, provides: “The Revenue Laws Study Committee is directed to study the application of the motor fuels tax exemption to entities that are comprised of multiple local government units. The study may include an examination of how the exemption applies to joint agencies created by interlocal agreements and regional authorities created by agreement of multiple counties.”

Session Laws 2017-204, s. 2.7(b), provides: “This section becomes effective retroactively to March 1, 2016.”

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Session Laws 2020-58, s. 3.1(b), made the substitution of “purchases of items” for “purchases of tangible personal property and services” in the first sentence of subsections (b) and (c) by Session Laws 2020-58, s. 3.1(a), effective July 1, 2020, and applicable to purchases made on or after that date.

Effect of Amendments.

Session Laws 1999-360, s. 5(b), effective January 1, 2004, and applicable to taxes paid on or after that date, deleted “and on computer systems hardware and software it capitalizes for tax purposes under the Code” from the end of the first sentence of subdivision (i)(1). For repeal of this amendment, see Editor’s note.

Session Laws 2000-140, s. 92.A(c), effective July 21, 2000, amended Session Laws 2000-56, s. 10(h) to provide that the amendment to this section by Session Laws 2000-140, s. 9 would be effective May 1, 1999, and would be applicable to taxes paid on or after that date. Session Laws 2001-414, s. 1, effective September 14, 2001, further amended Session Laws 2001-56, s. 10(h) to provide that s. 9 of the 2000 act is repealed for taxes paid on or after January 1, 2008.

Session Laws 2003-416, ss. 18(b) through 18(e) and 23, effective August 14, 2003, in subsection (b), deleted “except under G.S. 105-164.4(a) and G.S. 105-164.4(a) (4c)” following “under this Article,” inserted “and services, other than electricity and telecommunications service,” and made minor punctuation changes; in the first paragraph of subsection (c), deleted “except under G.S. 105-164.4(a)(4a) and G.S. 105-164.4(a)(4c)” following “under this Article,” inserted “and services, other than electricity and telecommunications service,” and made minor punctuation changes; in subdivision (c)(20), inserted “or services that are eligible for refund under this subsection”; in subdivision (c)(21), substituted “Health Care System” for “Hospitals at Chapel Hill”; and in the first sentence of subsection (e), inserted “services and of.”

Session Laws 2003-431, s. 2, effective for taxes paid on or after July 1, 2003, in subsection (c), in the first sentence, deleted “except under G.S. 105-164.4(a)(4a) and G.S. 105-164.4(a)(4c)” following “under this Article,” and added “and services, other than electricity and telecommunications service”; and inserted subdivision (c)(2c).

Session Laws 2003-431, s. 3, effective July 1, 2004, and applicable to sales made on or after that date, in subsection (e), deleted “by a State agency on direct purchases of tangible personal property and local sales and use taxes paid” following “use taxes paid” in the first sentence, and deleted the last sentence which read “This subsection does not apply to purchases . . . ”.

Session Laws 2003-435, 2nd Ex. Sess., s. 4.1, effective January 1, 2004, and applicable to sales made on or after that date, added subsection (j).

Session Laws 2004-110, s. 5.1, effective July 1, 2004, and applicable to sales made on or after that date, in subdivision (j)(1), inserted “qualified” in the first sentence and added the last two sentences in the first paragraph.

Session Laws 2004-124, s. 32B.1, rewrote sub-subdivision (j)(2)b. and subdivision (j)(3). See editor’s note for effective date and applicability.

Session Laws 2004-170, s. 21.(a), effective July 1, 2004, deleted “services and of” at the end of the first paragraph of subsection (e).

Session Laws 2004-204, s. 3, effective January 1, 2005, and applicable to sales made on or after that date, in subsection (j)(2), added the last sentence; and in subsection (j)(3), substituted “includes” for “does not include”, and rewrote the last sentence.

Session Laws 2005-276, ss. 7.27(a), 7.51(a), effective July 1, 2005, and s. 33.12, effective January 1, 2006, in subsection (a), in the first sentence, added “the purchase in this State of railway cars and locomotives, and” and deleted “purchased in this State” following “accessories” and in subdivision (a)(1), inserted “railway cars, locomotives,”; in subsection (c), in the introductory paragraph, added the last sentence; and repealed subdivisions (c)(2b) and (c)(2c).

Session Laws 2005-429, s. 2.12, effective January 1, 2007, added subsection (k).

Session Laws 2005-435, s. 32.(a), effective September 27, 2005, rewrote subsection (f).

Session Laws 2005-435, ss. 33.(a) and 33.(b), effective August 1, 2005, and applicable to sales made on or after that date, added subdivision (j)(3)a., and redesignated former subdivision (j)(3)a. as present subdivision (j)(3)b. and designated remaining subdivisions accordingly; and added subdivision (j)(5).

Session Laws 2005-435, ss. 61 and 61.1, effective January 1, 2005, added subsections (a1) and (k) because a subsection (k) had already been added by Session Laws 2005-429, s. 2.12, the subsection added by this act was redesignated as ( l ) at the direction of the Revisor of Statutes. See Editor’s notes, Session Laws 2006-435, s. 62, for applicability.

Session Laws 2006-33, s. 6, effective January 1, 2007, substituted “electricity, telecommunications service, and ancillary” for “electricity and telecommunications” in subsections (b) and (c).

Session Laws 2006-66, s. 24.6(a) and (b), effective July 1, 2006, in subsection (a1), added the last sentence; and in subsection ( l ), added “Aviation Fuel for” preceding “Motorsports Events” and “professional” preceding “motorsports racing” and added the last sentence.

Session Laws 2006-66, s. 24.10(b), effective July 1, 2007, and applicable to purchases made on or after that date, added new subsection (m).

Session Laws 2006-66, s. 24.13(b), effective July 1, 2006, and applicable to purchases made on or after that date, added new subsection (a2).

Session Laws 2006-66, s. 24A.1(a), effective July 1, 2006, and applicable to purchases made on or after that date, added new subsection (d1).

Session Laws 2006-162, s. 9, effective July 24, 2006, substituted “subsections (a1), (g), (h), (i), (j), and (l)” for “subsections (g), (h), (i), and (j)” in the middle of subdivision (k)(1).

Session Laws 2006-162, s. 27, effective July 24, 2006, deleted the former last sentence in the first paragraph of subsection (c), which read: “The Secretary shall make an annual report ot the Department of Public Instruction and the Fiscal Research Division of the General Assembly by March 1 of the amount of refunds, identified by taxpayer, claimed under subdivisions (2b) and (2c) of this subsection over the preceding year.”

Session Laws 2006-168, s. 3.1, effective January 1, 2005, and applicable to sales made on or after that date, substituted “For the purpose of this subsection,” for “In the case of a computer manufacturing facility,” at the beginning of the last sentence in subdivision (j)(2)(b); effective July 1, 2006, and applicable to purchases made on or after that date, in subdivision (j)(2), substituted “all” for “both” in the introductory paragraph and added subdivision (j)(2)(c); added subdivision (j)(3)(f); and substituted “January 1, 2013” for “January 1, 2010” at the end of subdivision (j)(5).

Session Laws 2006-252, ss. 2.2 and 2.3, effective January 1, 2007, in subsection (h), inserted “or Development” in the catchline, inserted “or a development tier one area, as defined in G.S. 143B-437.08 ” in the first sentence of subdivision (1), added “or if it is engaged primarily in one of the businesses listed in G.S. 105-129.83(a) in a development tier one area, as defined in G.S. 143B-437.08 ” at the end of subdivision (2), and inserted “or G.S. 105-129.83(a)” at the end of the first sentence, and “or a development tier one area, as defined in G.S. 143B-437.08” in the second sentence, of subdivision (3); and in subdivision (j)(2)b, substituted “located in a development tier one area as defined in G.S. 143B-437.08” for “located in an enterprise tier one, two, or three area as defined in G.S. 105-129.3.”

Session Laws 2007-323, s. 31.10(a), effective July 1, 2007, and applicable to purchases made on or after July 1, 2007, in sub-subdivision (j)(3)b., inserted “of” following “assembling” and added “or of aircraft engines, blisks, fuselage sections, flight decks, flight deck systems or components, wings, fuselage fairings, fins, moving leading and trailing wing edges, wing boxes, nose sections, tailplanes, passenger doors, nacelles, thrust reversers, landing gear, braking systems, or any combination thereof” at the end.

Session Laws 2007-323, s. 31.20(b), effective July 1, 2007, and applicable to purchases made on or after July 1, 2007, added the subsection designated herein as subsection (o).

Session Laws 2007-323, s. 31.23(d), effective January 1, 2007, and applicable to sales made on or after January 1, 2007, added subsection (n).

Session Laws 2007-345, s. 14.6(a), effective July 1, 2007, and applicable to purchases made on or after July 1, 2007, rewrote subsection (n) as added by Session Laws 2007-323, s. 31.20(b).

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 subdivisions (i)(3) and (j)(4). For applicability, see Editor’s note.

Session Laws 2008-107, s. 28.22(a), effective July 1, 2008, and applicable to purchases made on or after that date, rewrote subdivision (b)(2); and deleted subdivision (b)(3), which read: “Churches, orphanages, and other charitable or religious institutions and organizations not operated for profit.”

Session Laws 2008-107, ss. 28.23(a) and (b), effective July 16, 2008, substituted “January 1, 2011” for “January 1, 2009” in the last sentence of subsections (a1) and ( l ).

Session Laws 2008-118, s. 3.10(a), effective July 1, 2008, added sub-subdivisions (j)(2)d. and (j)(3)n.

Session Laws 2008-154, s. 1, effective January 1, 2004, and applicable to purchases made on or after that date, added subdivision (b)(5). See Editor’s note for additional applicability provisions.

Session Laws 2009-233, s. 1, effective July 1, 2008, and applicable to purchases made on or after that date, added subdivision (b)(2a).

Session Laws 2009-445, s. 13, effective August 7, 2009, rewrote subsection (b).

Session Laws 2009-445, s. 14(a), effective July 1, 2008, and applicable to purchases made on or after that date, substituted “Solar electricity” for “Solar energy” in subdivision (j)(3)n.

Session Laws 2009-527, s. 2(d), effective August 27, 2009, added subdivision (c)(23).

Session Laws 2009-550, s. 4.1, effective August 28, 2009, substituted “or other public hospital described in” for “created under the Hospital Authorities Law” in subdivision (b)(1).

Session Laws 2010-31, s. 31.5(c) and (d), effective June 30, 2010, in subsections (a1) and ( l ), substituted “January 1, 2013” for “January 1, 2011” in the last sentence.

Session Laws 2010-91, s. 4, effective July 1, 2010, and applicable to sales made on or after that date, added subdivisions (j)(3)i. and p.

Session Laws 2010-95, s. 4(a), effective July 1, 2008, and applicable to purchases made on or after that date, added subdivision (c)(24).

Session Laws 2010-166, s. 1.17, effective July 1, 2010, repealed subsections (a1), (f), (g), (h), (j), (k), ( l ), (m), (n), and (o).

Session Laws 2011-84, s. 1(b), effective May 21, 2011, and applicable to sales made on or after that date, added subsection (d2).

Session Laws 2011-330, s. 26(a), effective June 27, 2011, added subsection (p).

Session Laws 2012-79, s. 2.11, effective June 26, 2012, in subsection (a), added the last sentence in subdivision (a)(4), and, in the last paragraph, substituted “mileage ratio. The numerator of the mileage ratio is” for “ratio of”, “all motor vehicles” for “its motor vehicles”, and “refund period. The denominator of the mileage ratio is the number of miles the applicant operated all motor vehicles, railroad cars, locomotives, and airplanes” for “refund period to the number of miles it operated them.”

Session Laws 2013-316, s. 3.4(b), effective July 1, 2014, added the last sentence in the first paragraph of subsection (b). For applicability, see editor’s note.

Session Laws 2013-414, s. 12, effective August 23, 2013, in subsection (b), added the second sentence in the first paragraph; substituted “over-the-counter” for “medicines and” in the second sentence of the second paragraph; and added subdivision (b)(2b).

Session Laws 2013-414, s. 42(a), effective January 1, 2013, added “or established pursuant to G.S. 153A-270 ” at the end of subdivision (c)(24). For applicability, see editor’s note.

Session Laws 2013-414, s. 54(a), effective July 1, 2013, rewrote subdivision (b)(2a). For applicability, see editor’s note.

Session Laws 2014-3, s. 8.2(a), effective July 1, 2014, deleted “other than electricity, telecommunications service, and ancillary service,” following “services” throughout subsections (b) and (c); and inserted the present third sentences in subsection (b) and (c). See Editor’s note for applicability.

Session Laws 2014-20, s. 1, effective July 1, 2015, added subdivisions (c)(25) and (c)(26). See Editor’s note for applicability.

Session Laws 2015-235, s. 1, effective July 1, 2015, inserted “(i) provide fire protection, emergency services, or police protection or (ii)” near the middle of subdivision (c)(17). For applicability, see editor’s note.

Session Laws 2016-5, s. 3.22(b), effective July 1, 2017, added the second sentence in the first paragraph of subsection (e).

Session Laws 2017-204, s. 2.7(a), substituted “accessories, service contracts, and repair, maintenance, and installation services” for “and accessories” in the first sentence of subsection (a) and subdivision (a)(1). For effective date and applicability, see editor’s notes.

Session Laws 2017-204, s. 2.9(b), effective August 11, 2017, substituted “the State’s fiscal year” for “a fiscal year” in the last sentence of the first paragraph in subsection (b).

Session Laws 2018-5, s. 38.5( l ), effective June 12, 2018, in subdivision (a)(2), inserted “taxable” in the first sentence, and added the last sentence.

Session Laws 2019-169, s. 3.3(n), effective July 26, 2019, substituted “tangible personal property and services” for “items” in the first sentence in subdivision (a)(2), and in the fourth sentence in the concluding paragraph of subsection (a); and substituted “tangible personal property” for “items” in the second sentence in subdivision (a)(2).

Session Laws 2020-58, s. 3.1(a), substituted “purchases of items” for “purchases of tangible personal property and services” in the first sentence of subsections (b) and (c). For effective date and applicability, see editor’s note.

Legal Periodicals.

See legislative survey, 21 Campbell L. Rev. 323 (1999).

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).

CASE NOTES

Purpose. —

This provision is designed to fairly apportion sales and use taxes imposed on interstate air carriers, so that the carriers are taxed on the basis of the relative amount of the use of their commercial aircraft in the State. USAIR, Inc. v. Faulkner, 126 N.C. App. 501, 485 S.E.2d 847, 1997 N.C. App. LEXIS 529 (1997).

Source of Property Basis for Classification. —

Court of Appeals was not persuaded that the Legislature intended the source of the property to be the determinative factor in classifying accessories. USAIR, Inc. v. Faulkner, 126 N.C. App. 501, 485 S.E.2d 847, 1997 N.C. App. LEXIS 529 (1997).

Seats and Furnishings Not Accessories. —

Items such as seats, galley, other furnishings, electronic communication devices and other aircraft control devices are not accessories because they are essential to the primary operation of a commercial passenger aircraft; thus, buyer furnished equipment should not be classified as accessories pursuant to subsection (a)c. USAIR, Inc. v. Faulkner, 126 N.C. App. 501, 485 S.E.2d 847, 1997 N.C. App. LEXIS 529 (1997).

Provisions Which Deny Refund to United States Are Void. —

Those (but only those) provisions of the Sales and Use Tax Act and the regulations which operate to deny the United States a tax refund when an appropriate and timely request therefor is made are null and void. United States v. Clayton, 250 F. Supp. 827, 1965 U.S. Dist. LEXIS 7796 (E.D.N.C. 1965); 384 U.S. 156, 86 S. Ct. 1379, 16 L. Ed. 2d 432 (1966).

Housing Authority Not Entitled to Refund. —

A housing authority created pursuant to the provisions of the Housing Authorities Law (G.S. 157-1 et seq.) is a municipal corporation but is not an incorporated city or town, and is not entitled to the refund of sales taxes paid on purchases of tangible personal property pursuant to the provisions of subsection (c) of this section. Housing Auth. v. Johnson, 261 N.C. 76 , 134 S.E.2d 121, 1964 N.C. LEXIS 415 (1964).

A municipal corporation or public agency created, organized and existing under and by virtue of the laws of this State, more particularly the Housing Authorities Law, codified as G.S. 157-1 et seq., is not a charitable organization within the meaning of the refund provisions of subsection (b) of this section. Housing Auth. v. Johnson, 261 N.C. 76 , 134 S.E.2d 121, 1964 N.C. LEXIS 415 (1964).

Residential Care Facility for the Elderly. —

The term “charitable organization” easily accommodated the nature of plaintiffs’ residential care facility for the elderly; plaintiffs were engaged in a humane and philanthropic endeavor to aid and assist the rapidly growing class of elderly citizens of this State, and their activities benefited the larger community which only recently had come to realize the problems associated with an aging population. Southminster, Inc. v. Justus, 119 N.C. App. 669, 459 S.E.2d 793, 1995 N.C. App. LEXIS 614 (1995).

Aircraft Control Devices. —

Items such as seats, galleys, other furnishings, electronic communication devices and other aircraft control devices are not accessories because they are essential and contribute to the primary operation of a commercial passenger aircraft; thus, taxpayer was entitled to refund of taxes paid. USAIR, Inc. v. Faulkner, 126 N.C. App. 501, 485 S.E.2d 847, 1997 N.C. App. LEXIS 529 (1997).

Corporation Was Charitable Organization Entitled to Refund. —

Taxpayer was properly granted summary judgment in the taxpayer’s action to recover a refund of a portion of sales and use taxes it paid because there was no genuine issue of material fact as to whether the taxpayer was a charitable organization when the taxpayer did not operate for a profit, and it used purchases for carrying on the work of its charitable programs; the taxpayer was a charitable organization created and maintained for the purpose of dispensing public good or benevolence, and the taxpayer only sought to recover sales and use taxes it paid with respect to products and services used to preserve a mansion and operate an institute. Lynnwood Found. v. N.C. Dep't of Revenue, 190 N.C. App. 593, 660 S.E.2d 611, 2008 N.C. App. LEXIS 991 (2008).

§ 105-164.14A. Economic incentive refunds.

  1. Refund. —  The following taxpayers are allowed an annual refund of sales and use taxes paid under this Article:
    1. Repealed pursuant to its own terms, effective for purchases made on or after January 1, 2016.
    2. Major recycling facility. —  An owner of a major recycling facility is allowed a refund of the sales and use tax paid by it on building materials, building supplies, fixtures, and equipment that become a part of the real property of the recycling facility. Liability incurred indirectly by the owner for sales and use taxes on these items is considered tax paid by the owner.
    3. Repealed by Session Laws 2016-5, s. 3.14, effective May 11, 2016.
    4. (Repealed for purchases made on or after January 1, 2024) Motorsports team or sanctioning body. —  A professional motorsports racing team, a motorsports sanctioning body, or a related member of such a team or body is allowed a refund of the sales and use tax paid by it in this State on aviation gasoline or jet fuel that is used to travel to or from a motorsports event in this State, to travel to a motorsports event in another state from a location in this State, or to travel to this State from a motorsports event in another state. For purposes of this subdivision, a “motorsports event” includes a motorsports race, a motorsports sponsor event, and motorsports testing. This subdivision is repealed for purchases made on or after January 1, 2024.
    5. (Repealed for purchases made on or after January 1, 2024) Professional motorsports team. —  A professional motorsports racing team or a related member of a team is allowed a refund of fifty percent (50%) of the sales and use tax paid by it in this State on tangible personal property, other than tires or accessories, that comprises any part of a professional motorsports vehicle. For purposes of this subdivision, “motorsports accessories” includes instrumentation, telemetry, consumables, and paint. This subdivision is repealed for purchases made on or after January 1, 2024.
    6. Repealed pursuant to its own terms, effective for purchases made on or after January 1, 2014.
    7. (Repealed for purchases made on or after January 1, 2038) Railroad intermodal facility. —  The owner or lessee of an eligible railroad intermodal facility is allowed a refund of sales and use tax paid by it under this Article on building materials, building supplies, fixtures, and equipment that become a part of the real property of the facility. Liability incurred indirectly by the owner or lessee of the facility for sales and use taxes on these items is considered tax paid by the owner or lessee. This subdivision is repealed for purchases made on or after January 1, 2038.
    8. Transformative projects. —  An owner or lessee of a business that is the recipient of a grant under the Job Development Investment Grant Program on or before June 30, 2019, for a transformative project as defined in G.S. 143B-437.51(9a) is allowed a refund of the sales and use tax paid by it on building materials, building supplies, fixtures, and equipment that become a part of the real property of the facility. Liability incurred indirectly by the owner for sales and use taxes on these items is considered tax paid by the owner.
  2. Administration. —  A request for a refund must be in writing and must include any information and documentation required by the Secretary. A request for a refund is due within six months after the end of the State’s fiscal year. Refunds applied for after the due date are barred.
  3. Report. —  The Department must include in the economic incentives report required by G.S. 105-256 the following information itemized by refund and by taxpayer:
    1. The number of taxpayers claiming a refund allowed in this section.
    2. The total amount of purchases with respect to which refunds were claimed.
    3. The total cost to the General Fund of the refunds claimed.
  4. Not an Overpayment. —  Taxes for which a refund is allowed under this section are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .

History. 2010-166, s. 1.18; 2011-330, ss. 15(c), 20(a), 26(b); 2012-36, s. 11(a); 2013-316, s. 3.5(a); 2015-259, s. 6(d); 2016-5, s. 3.14; 2017-39, s. 7; 2017-57, s. 38.9A(a); 2019-237, s. 5(b).

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.”

The substitution of “racing team, a motorsports sanctioning body, or a related member of such a team or body” for “racing team or a motorsports sanctioning body” in the second sentence of subdivision (a)(4) by Session Laws 2011-330, s. 15(c), was applicable retroactively to purchases made on or after January 1, 2005. The insertion of “or a related member of a team” in subdivision (a)(5) by Session Laws 2011-330, s. 15(c), was applicable retroactively to purchases made on or after July 1, 2007. The substitution of “January 1, 2013” for “January 1, 2011” in subdivisions (a)(1) and (a)(4) by Session Laws 2011-330, s. 20(a), was applicable retroactively to purchases made on or after January 1, 2011.

Session Laws 2012-74, s. 3, as amended by Session Laws 2013-360, s. 6.16, provides: “(a) For calendar year 2010, an interstate passenger air carrier that is eligible for a refund of sales and use taxes paid on fuel in excess of two million five hundred thousand dollars ($2,500,000) under G.S. 105-164.14 (a1) and G.S. 105-164.14 A(a)(1) is subject to the provisions of this section, notwithstanding any provisions of G.S. 105-164.14, G.S. 105-164.14A, or Section 4 of S.L. 2010-166 to the contrary. Notwithstanding the fact that the first six months of 2010 are subject to G.S. 105-164.14(a1) and the last six months of 2010 are subject to G.S. 105-164.14A(a)(1), a taxpayer shall submit one request for a refund for the entire calendar year.

“(b) An interstate passenger air carrier is allowed a refund of the sales and use tax paid by it on fuel in excess of one million two hundred fifty thousand dollars ($1,250,000) for the period January 1, 2011, through June 30, 2011. The State portion of the refund is payable in two installments. The first installment, payable in fiscal year 2012-2013, may not exceed three million one hundred fifty thousand dollars ($3,150,000). The remainder of the refund is payable in fiscal year 2013-2014. The amount of sales and use tax paid does not include a refund allowed to the interstate passenger air carrier under G.S. 105-164.14(a). A request for a refund must be in writing and must include any information and documentation required by the Secretary. The request for a refund is due before October 1, 2012. A refund applied for after the due date is barred.”

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 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2013-2015 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2013-2015 fiscal biennium.”

Session Laws 2013-360, s. 38.5 is a severability clause.

Session Laws 2015-259, s. 4.1(e), provides: “Notwithstanding G.S. 105-164.14 A(a)(1), an interstate passenger air carrier is allowed a refund of the sales and use tax paid by it on fuel in excess of one million two hundred fifty thousand dollars ($1,250,000) for the period beginning July 1, 2015, and ending December 31, 2015.”

Session Laws 2017-57, s. 38.9A(b), made subdivision (a)(8), as added by Session Laws 2017-57, s. 38.9A(a), effective July 1, 2017, and applicable to purchases made on or after that date.

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 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 2011-330, s. 15(c), effective June 27, 2011, and applicable retroactively to purchases made on or after January 1, 2005, substituted “racing team, a motorsports sanctioning body, or a related member of such a team or body” for “racing team or a motorsports sanctioning body” in the second sentence of subdivision (a)(4).

Session Laws 2011-330, s. 15(c), effective June 27, 2011, and applicable retroactively to purchases made on or after July 1, 2007, inserted “or a related member of a team” in subdivision (a)(5).

Session Laws 2011-330, s. 20(a), effective June 27, 2011, and applicable retroactively to purchases made on or after January 1, 2011, in subdivisions (a)(1) and (a)(4), substituted “January 1, 2013” for “January 1, 2011.”

Session Laws 2011-330, s. 26(b), effective June 27, 2011, added subsection (d).

Session Laws 2012-36, s. 11(a), effective June 20, 2012, substituted “January 1, 2014 ” for “January 1, 2013” in the last sentence of subdivisions (a)(1) and (a)(4), and in the introductory paragraph of subdivision (a)(6).

Session Laws 2013-316, s. 3.5(a), effective July 23, 2013, substituted “January 1, 2016” for “January 1, 2014” in subdivisions (a)(1), (a)(4), and (a)(5).

Session Laws 2015-259, s. 6(d), effective September 30, 2015, substituted “January 1, 2020” for “January 1, 2016” in subdivisions (a)(4) and (a)(5).

Session Laws 2016-5, s. 3.14, deleted former subdivision (a)(3), which read: “Business in low-tier area. A taxpayer that is engaged primarily in one of the businesses listed in G.S. 105-129.83 (a) in a development tier one area and that places machinery and equipment in service in that area is allowed a refund of the sales and use tax paid by it on the machinery and equipment. For purposes of this subdivision, ‘machinery and equipment’ includes engines, machinery, equipment, tools, and implements used or designed to be used in one of the businesses listed in G.S. 105-129.83 , capitalized for tax purposes under the Code, and not leased to another party. Liability incurred indirectly by the taxpayer for sales and use taxes on these items is considered tax paid by the taxpayer. The sunset for Article 3J of Chapter 105 of the General Statutes for development tier one areas applies to this subdivision.”

Session Laws 2017-39, s. 7, effective June 21, 2017, inserted “gasoline or jet” in the first sentence of subdivision (a)(4).

Session Laws 2017-57, s. 38.9A(a), added subdivision (a)(8). For effective date and applicability, see editor’s note.

Session Laws 2019-237, s. 5(a), effective November 1, 2019, substituted “January 1, 2024” for “January 1, 2020” in the last sentence of subdivisions (a)(4) and (a)(5).

§ 105-164.14B. [Repealed]

Repealed pursuant to former subsection (f) of this section, effective for sales made on or after January 1, 2014.

History. 2010-166, s. 1.19; 2011-3, ss. 1(a), (b); 2011-330, s. 26(c); 2012-36, s. 11(b).

Editor’s Note.

Former G.S. 105-164.14 B pertained to certain industrial facilities refunds.

Part 4. Reporting and Payment.

§ 105-164.15. [Repealed]

Repealed by Session Laws 2010-95, s. 13, effective July 17, 2010.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 1998-98, s. 50; repealed by 2010-95, s. 13, effective July 17, 2010.

Editor’s Note.

Former G.S. 105-164.15 pertained to the duty of Secretary to provide forms.

§ 105-164.15A. Effective date of tax changes.

  1. General Rate Items.  —  The effective date of a tax change for items taxable under this Article is administered as follows:
    1. For a taxable item that is provided and billed on a monthly or other periodic basis:
      1. A new tax or a tax rate increase applies to the first billing period that is at least 30 days after enactment and that starts on or after the effective date.
      2. A tax repeal or a tax rate decrease applies to bills rendered on or after the effective date.
    2. For a taxable item that is not billed on a monthly or other periodic basis, a tax change applies to amounts received for items provided on or after the effective date, except amounts received for items purchased to fulfill a real property contract for a capital improvement entered into or awarded before the effective date or entered into or awarded pursuant to a bid made before the effective date.
  2. Combined General Rate Items. —  The effective date of a rate change for an item that is taxable under this Article at the combined general rate is administered as follows:
    1. For a taxable item that is not billed on a monthly or other periodic basis, a tax change applies to amounts received for items provided on or after the effective date of a change in the State general rate of tax set in G.S. 105-164.4 . (1a) For a taxable item that is provided and billed on a monthly or other periodic basis:
      1. A tax increase applies to the first billing period that is at least 30 days after enactment and that starts on or after the effective date.
      2. A tax rate decrease applies to bills rendered on or after the effective date.
    2. For an increase in the authorization for local sales and use taxes, the date on which local sales and use taxes authorized by Subchapter VIII of this Chapter for every county become effective in the first county or group of counties to levy the authorized taxes.
    3. For a repeal in the authorization for local sales and use taxes, the effective date of the repeal.

History. 2005-276, s. 33.13; 2006-162, s. 10; 2007-323, s. 31.17(c); 2009-451, s. 27A.3(l); 2011-330, s. 27; 2013-316, s. 3.2(c); 2016-92, s. 2.6; 2017-204, s. 2.4(d); 2018-5, s. 38.5(m); 2019-169, s. 3.3(o).

Editor’s Note.

Session Laws 2005-276, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2005’.”

Session Laws 2005-276, s. 33.34, made this section effective October 1, 2005.

Session Laws 2005-276, s. 33.34, provides in part: “For prepayments of telecommunications and direct-to-home satellite services, the first billing period is considered to start on or after November 1, 2005. For prepayments of satellite digital audio radio services or cable services, the first billing period is considered to start on or after February 1, 2006.”

Session Laws 2005-276, s. 46.5 is a severability clause.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Effect of Amendments.

Session Laws 2006-162, s. 10, effective July 24, 2006, added the second and third sentences in subdivision (1).

Session Laws 2007-323, s. 31.17(c), effective July 1, 2007, added “and items taxed at combined general rate” at the end of the section heading; designated the existing provisions as subsection (a); added “Services” at the beginning of subsection (a); and added subsection (b).

Session Laws 2009-451, s. 27A.3( l ), effective August 7, 2009, in the section heading, substituted “tax changes on” for “rate changes for”; in the introductory language of subsection (a), substituted “tax change” for “rate change”; and rewrote subdivisions (a)(1) and (a)(2).

Session Laws 2011-330, s. 27, effective June 27, 2011, in subdivision (a)(1)a., inserted “that is at least 30 days after enactment and” and deleted the former last two sentences, which read: “For a service billed after it is provided, the first billing period starts on the effective date. For a service billed before it is provided, the first billing period starts on the first day of the month after the effective date.”

Session Laws 2013-316, s. 3.2(c), effective January 1, 2014, rewrote the section heading, which formerly read “Effective date of tax changes on services and items taxed at combined general rate”; in subsection (a), substituted “General Rate Items” for “Services” in the subsection heading, and substituted “tangible personal property, digital property, or services” for “a service” in the introductory language; substituted “a taxable item” for “a service” in subdivisions (a)(1) and (a)(2); and substituted “items” for “services” twice in subdivision (a)(2). For applicability, see editor’s note.

Session Laws 2016-92, s. 2.6, effective July 11, 2016, in subsection (b), substituted “administered as follows” for “the effective date of any of the following” at the end of the introductory language, substituted “For a taxable item that is not billed on a monthly or other periodic basis, a tax change applies to amounts received for items provided on or after the” for “The” at the beginning of subdivision (1), and added subdivision (1a).

Session Laws 2017-204, s. 2.4(d), substituted “purchased to fulfill a real property contract for a capital improvement” for “provided under a lump-sum or unit-price contract” in subdivision (a)(2). For effective date and applicability, see editor’s note.

Session Laws 2018-5, s. 38.5(m), effective June 12, 2018, inserted “General” in the heading for subsection (b).

Session Laws 2019-169, s. 3.3(o), effective July 26, 2019, substituted “items” for “tangible personal property, digital property, or services” in the introductory paragraph of subsection (a).

§ 105-164.16. Returns and payment of taxes.

  1. General. —  Sales and use taxes are payable when a return is due. A return is due quarterly or monthly as specified in this section. A return must be filed with the Secretary on a form prescribed by the Secretary and in the manner required by the Secretary. A return must be signed by the taxpayer or the taxpayer’s agent.A sales tax return must state the taxpayer’s gross sales for the reporting period, the amount and type of sales made in the period that are exempt from tax under G.S. 105-164.13 or are elsewhere excluded from tax, the amount of tax due, and any other information required by the Secretary. A use tax return must state the purchase price of items that were purchased or received during the reporting period and are subject to tax under G.S. 105-164.6 , the amount of tax due, and any other information required by the Secretary. Returns that do not contain the required information will not be accepted. When an unacceptable return is submitted, the Secretary will require a corrected return to be filed.
  2. Quarterly. —  A taxpayer who is consistently liable for less than one hundred dollars ($100.00) a month in State and local sales and use taxes must file a return and pay the taxes due on a quarterly basis. A quarterly return covers a calendar quarter and is due by the last day of the month following the end of the quarter.

    (b1) Monthly. — A taxpayer who is consistently liable for at least one hundred dollars ($100.00) but less than twenty thousand dollars ($20,000) a month in State and local sales and use taxes must file a return and pay the taxes due on a monthly basis. A monthly return is due by the 20th day of the month following the calendar month covered by the return.

    (b2) Prepayment. — A taxpayer who is consistently liable for at least twenty thousand dollars ($20,000) a month in State and local sales and use taxes must make a monthly prepayment of the next month’s tax liability. The prepayment is due on the date a monthly return is due. The prepayment must equal at least sixty-five percent (65%) of any of the following:

    1. The amount of tax due for the current month.
    2. The amount of tax due for the same month in the preceding year.
    3. The average monthly amount of tax due in the preceding calendar year.

      (b3) Category. — The Secretary must monitor the amount of State and local sales and use taxes paid by a taxpayer or estimate the amount of taxes to be paid by a new taxpayer and must direct each taxpayer to pay tax and file returns as required by this section. In determining the amount of taxes due from a taxpayer, the Secretary must consider the total amount due from all places of business owned or operated by the same person as the amount due from that person. A taxpayer must file a return and pay tax in accordance with the Secretary’s direction.

  3. Repealed by Session Laws 2001-427, s. 6(a), effective January 1, 2002, and applicable to taxes levied on or after that date.
  4. Use Tax on Purchases. —  Use tax payable by an individual who purchases an item, other than a boat or aircraft, for a nonbusiness purpose is due on an annual basis. For an individual who is not required to file an individual income tax return under Part 2 of Article 4 of this Chapter, the annual reporting period ends on the last day of the calendar year and a use tax return is due by the following April 15. For an individual who is required to file an individual income tax return, the annual reporting period ends on the last day of the individual’s income tax year, and the use tax must be paid on the income tax return as provided in G.S. 105-269.14 .
  5. Simultaneous State and Local Changes. —  When State and local sales and use tax rates change on the same date because one increases and the other decreases but the combined rate does not change, sales and use taxes payable on the following periodic payments are reportable in accordance with the changed State and local rates:
    1. Lease or rental payments billed after the effective date of the changes.
    2. Installment sale payments received after the effective date of the changes by a taxpayer who reports the installment sale on a cash basis.

History. 1957, c. 1340, s. 5; 1967, c. 1110, s. 6; 1973, c. 476, s. 193; 1979, c. 801, s. 83; 1983 (Reg. Sess., 1984), c. 1097, s. 14; 1985, c. 656, s. 26; 1985 (Reg. Sess., 1986), c. 1007; 1987, c. 557, s. 6; 1989 (Reg. Sess., 1990), c. 945, s. 1; 1991, c. 690, s. 4; 1993, c. 450, s. 7; 1997-77, s. 1; 1998-121, s. 1; 1999-341, s. 1; 2000-120, s. 11; 2001-347, s. 2.14; 2001-414, s. 18; 2001-427, s. 6(a); 2001-430, s. 7; 2002-184, ss. 10, 11; 2003-284, ss. 44.1, 45.8; 2003-416, s. 26; 2005-276, s. 33.24; 2006-162, s. 5(b); 2006-33, s. 9; 2007-527, ss. 11, 12; 2008-134, s. 11; 2009-451, s. 27A.3(b), (c), (m); 2010-31, s. 31.3(a)-(d); 2010-95, s. 42; 2011-330, s. 21; 2019-169, s. 3.3(p); 2020-58, s. 3.2.

Editor’s Note.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

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 2005-276, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2005’.”

Session Laws 2005-276, s. 33.34, provides in part: “For prepayments of telecommunications and direct-to-home satellite services, the first billing period is considered to start on or after November 1, 2005. For prepayments of satellite digital audio radio services or cable services, the first billing period is considered to start on or after February 1, 2006.”

Session Laws 2005-276, s. 46.5 is a severability clause.

Session Laws 2009-451, s. 27A.3(b), effective August 7, 2009, repealed Session Laws 2000-120, s. 11, which, as enacted, would have rewritten G.S. 105-164.16(d), effective for taxable years beginning on or after January 1, 2010.

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 2010-31, s. 31.3(e), provides: “When the Secretary of Revenue conducts a review of a taxpayer’s sales and use tax payment schedule requirements under G.S. 105-164.16(b3), the Secretary must identify the taxpayers who are no longer required to make a monthly prepayment of the next month’s sales and use tax liability because of the reduction of the sales tax payment threshold under this section and must notify those taxpayers of the change in the taxpayer’s payment requirement.”

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 2010-95, s. 42, repealed Session Laws 2009-451, s. 27A.3(c), which had repealed the October 10, 2010 effective date for s. 11 (now repealed) of Session Laws 2000-120.

Effect of Amendments.

Session Laws 2000-120, s. 11, as amended by Session Laws 2003-284, s. 44.1, and by Session Laws 2005-276, s. 33.24, effective for taxable years beginning on or after January 1, 2010, rewrote subsection (d).

Session Laws 2003-284, s. 45.8, as amended by Session Laws 2003-416, s. 26, effective October 1, 2003, substituted “20th day of the month” for “15th day of the month” in subsection (b1).

Session Laws 2006-33, s. 9, effective October 1, 2007, substituted “when a return is due” for “quarterly, monthly, or semimonthly as specified in this section” in the first sentence of subsection (a); deleted “but less than ten thousand dollars ($10,000)” following “($100.00)” in the first sentence of subsection (b1); rewrote subsection (b2); in (b3), substituted “as required by this section” for “in accordance with the appropriate schedule” at the end of the first sentence, and “direction” for “direction until notified in writing to file and pay under a different schedule” in the last sentence.

Session Laws 2006-162, s. 5(b), effective July 24, 2006, in the second sentence of the second paragraph in (a), substituted “property or services that were purchased” for “property that was purchased” and substituted “are subject” for “is subject.”

Session Laws 2007-527, ss. 11 and 12, effective August 31, 2007, in subsection (b1), substituted “at least one hundred” for “more than one hundred”; and in the first sentence of subsection (d), inserted “excluding purchases of boats and aircraft.”

Session Laws 2008-134, s. 11, effective July 28, 2008, added subsection (e).

Session Laws 2009-451, s. 27A.3(m), effective August 7, 2009, in subsection (a), in the second paragraph, inserted “digital property” in the second sentence; in subsection (d), substituted “property other than a boat or an aircraft, digital property, or a service” for “property, excluding purchases of boats and aircraft” in the first sentence; and, in the introductory language of subsection (e), deleted “general” following “combined” and “the gross receipts from” following “payable on.”.

Session Laws 2010-31, s. 31.3(a), effective October 1, 2010, in subsections (b1) and (b2), substituted “fifteen thousand dollars ($15,000)” for “ten thousand dollars ($10,000).”

Session Laws 2010-31, s. 31.3(c), effective October 1, 2011, in subsections (b1) and (b2), substituted “twenty thousand dollars ($20,000)” for “fifteen thousand dollars ($15,000).”

Session Laws 2011-330, s. 21, effective June 27, 2011, in the introductory paragraph of subsection (d), substituted “purchases the items listed in this subsection” for “purchases tangible personal property other than a boat or an aircraft, digital property, or a service” in the second sentence, and added the last sentence; and added subdivisions (d)(1) through (d)(3).

Session Laws 2019-169, s. 3.3(p), effective July 26, 2019, substituted “items” for “tangible personal property, digital property, or services” in the second sentence of the second paragraph of subsection (a); in subsection (d), in the introductory paragraph, substituted “an item, other than a boat or aircraft” for “the items listed in this subsection” in the first sentence, and deleted “The items are” from the end; and deleted subdivisions (d)(1) through (d)(3).

Session Laws 2020-58, s. 3.2, effective June 30, 2020, in subsection (d), deleted “Out-of-State” preceding “Purchases” in the heading, and deleted “outside the State” preceding “for a nonbusiness” in the first sentence.

§ 105-164.16A. Reporting option for prepaid meal plans.

This section provides a retailer that offers a prepaid meal plan subject to the tax imposed by G.S. 105-164.4 with an option concerning the method by which the sales tax will be remitted to the Secretary and a return filed under G.S. 105-164.16 . When the retailer enters into an agreement with a food service contractor by which the food service contractor agrees to provide food or prepared food under a prepaid meal plan, and the food service contractor with whom the retailer contracts is also a retailer under this Article, the retailer may include in the agreement that the food service contractor is liable for reporting and remitting the sales tax due on the gross receipts derived from the prepaid meal plan on behalf of the retailer. The agreement must provide that the tax applies to the allocated sales price of the prepaid meal plan paid by or on behalf of the person entitled to the food or prepaid food under the plan and not the amount charged by the food service contractor to the retailer under the agreement for the food and prepared food for the person.

A retailer who elects this option must report to the food service contractor with whom it has an agreement the gross receipts a person pays to the retailer for a prepaid meal plan. The retailer must report the gross receipts on an accrual basis of accounting, as required under G.S. 105-164.20 . The retailer must send the food service contractor the tax due on the gross receipts derived from a prepaid meal plan. Tax payments received by a food service contractor from a retailer are held in trust by the food service contractor for remittance to the Secretary. A food service contractor that receives a tax payment from a retailer must remit the amount received to the Secretary. A food service contractor is not liable for tax due but not received from a retailer. A retailer that does not send the food service contractor the tax due on the gross receipts derived from a prepaid meal plan is liable for the amount of tax the retailer fails to send to the food service contractor.

History. 2014-3, s. 4.1(f); 2015-6, s. 2.14(a).

Editor’s Note.

Session Laws 2014-4.1(f) made this section effective May 29, 2014, and applicable to gross receipts derived from a prepaid meal plan sold or billed on or after July 1, 2014.

Effect of Amendments.

Session Laws 2015-6, s. 2.14(a), effective April 9, 2015, in the first paragraph, substituted “retailer that offers a prepaid meal plan subject to the tax imposed by G.S. 105-164 ” for “taxpayer that offers to sell a prepaid meal plan” in the first sentence and substituted “reporting and remitting the sales tax due” for “collecting and remitting the sales tax due” near the end of the second sentence; and in the second paragraph inserted the present second sentence and added the last four sentences.

§§ 105-164.17, 105-164.18. [Repealed]

Repealed by Session Laws 1993, c. 450, ss. 8, 9.

Cross References.

For present similar provisions, see G.S. 105-241 .

§ 105-164.19. Extension of time for making returns and payment.

The Secretary for good cause may extend the time for filing any return under the provisions of this Article and may grant additional time within which to file the return and pay the tax due pursuant to G.S. 105-263(b).

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 1977, c. 1114, s. 10; 1985, c. 656, s. 30; 2007-491, s. 44(1)a; 2013-414, s. 1(f); 2018-5, s. 38.5(n).

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 last sentence. For applicability, see Editor’s note.

Session Laws 2013-414, s. 1(f), effective August 23, 2013, in the first sentence, substituted “filing any return” for “making any return,” “file the return” for “make such return,” and “the return” for “such return,” and deleted “such” preceding “additional” and following “filing any”; and, in the second sentence, substituted “is extended, interest accrues” for “be extended, interest,” and deleted “shall be added and paid” following “date of payment.”

Session Laws 2018-5, s. 38.5(n), effective June 12, 2018, substituted “and pay the tax due pursuant to G.S. 105-263(b)” for “as he may deem proper, but the time for filing any return shall not be extended for more than 30 days after the regular due date of the return. If the time for filing a return is extended, interest accrues at the rate established pursuant to G.S. 105-241.21 from the time the return was due to be filed to the date of payment.”

§ 105-164.20. Cash or accrual basis of reporting.

  1. Basis Selected. —  Except as provided in subsection (b) of this section, a retailer may report sales on either the cash or accrual basis of accounting upon making application to the Secretary for permission to use the basis selected. Permission granted by the Secretary to report on a selected basis continues in effect until revoked by the Secretary or the taxpayer receives permission from the Secretary to change the basis selected.
  2. Accrual Basis. —  For purposes of reporting and remitting sales tax under this Article, a retailer listed in this subsection must report the gross receipts it derives from the taxable transaction listed in this subsection on an accrual basis of accounting. The following retailers must report gross receipts as provided in this subsection:
    1. A retailer who sells electricity, piped natural gas, or telecommunications service. A sale of electricity, piped natural gas, or telecommunications service is considered to accrue when the retailer bills its customer for the sale.
    2. A retailer who derives gross receipts from a prepaid meal plan, notwithstanding that the retailer may report tax on the cash basis for other sales at retail and notwithstanding that the revenue has not been recognized for accounting purposes.
    3. A retailer who sells or derives gross receipts from a service contract, as provided in G.S. 105-164.4 I(d).

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 1983 (Reg. Sess., 1984), c. 1097, s. 15; 1998-22, s. 7; 2001-430, s. 8; 2015-6, s. 2.14(b).

Effect of Amendments.

Session Laws 2015-6, s. 2.14(b), effective April 9, 2015, rewrote the section.

§ 105-164.21. [Repealed]

Repealed by Session Laws 1987, c. 622, s. 10.

§ 105-164.21A. [Repealed]

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. 1983 (Reg. Sess., 1984), c. 1097, s. 12; 1989 (Reg. Sess., 1990), c. 945, s. 2; repealed by 2013-316, s. 4.1(a), effective July 1, 2014.

Editor’s Note.

Former G.S. 105-164.21 A pertained to deduction for municipalities that sell electric power.

§ 105-164.21B. [Repealed]

Repealed by Session Laws 2006-151, s. 9, effective January 1, 2007.

Part 5. Records Required to Be Kept.

§ 105-164.22. Record-keeping requirements, inspection authority, and effect of failure to keep records.

  1. Record Keeping Generally. —  Retailers, wholesale merchants, facilitators, real property contractors, and consumers must keep records that establish their tax liability under this Article. The Secretary or a person designated by the Secretary may inspect these records at any reasonable time during the day.
  2. Retailers. —  A retailer’s records must include records of the retailer’s gross income, gross sales, net taxable sales, all items purchased for resale, and any reports or records related to transactions with a facilitator with whom it has a contract as provided in this Article. Failure of a retailer to keep records that establish a sale is exempt under this Article subjects the retailer to liability for tax on the sale.
  3. Wholesale Merchants. —  A wholesale merchant’s records must include a bill of sale for each customer that contains the name and address of the purchaser, the date of the purchase, the item purchased, and the sales price of the item. A wholesale merchant must also keep records that establish a sale is exempt from tax and any reports or records related to transactions with a facilitator with whom it has a contract as provided in this Article. Failure of a wholesale merchant to keep records that establish a sale is exempt from tax under this Article subjects the wholesale merchant to liability for tax at the rate that applies to the retail sale of the item.
  4. Facilitators. —  A facilitator’s records must include records of the facilitator’s gross income, gross sales, net taxable sales, all items purchased for resale, any reports or records related to transactions with a retailer with whom it has a contract as provided in this Article, and any other records that establish its tax liability. Failure of a facilitator to keep records that establish a sale is exempt from tax under this Article subjects the facilitator to liability for tax on the sale.
  5. Real Property Contractors. —  A real property contractor’s records must include substantiation that a transaction is a real property contract or a mixed transaction contract pursuant to G.S. 105-164.4 H(a1). Failure of a real property contractor to keep records that establish a real property contract under this Article subjects the real property contractor to liability for tax on the sale.
  6. Consumers. —  A consumer’s records must include an invoice or other statement of the purchase price of an item the consumer purchased from inside or outside the State and any sales and use tax paid thereon. Failure of the consumer to keep these records subjects the consumer to liability for tax on the purchase price of the item, as determined by the Secretary.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 1998-98, s. 51; 2009-451, s. 27A.3(n); 2016-5, s. 3.15; 2018-5, s. 38.5(t); 2019-246, s. 4(l).

Editor’s Note.

Session Laws 1998-98, s. 51, effective August 14, 1998, redesignated Division V as Part 5.

Session Laws 2019-246, s. 4(q), made the rewriting of this section by Session Laws 2019-246, s. 4( l ), effective February 1, 2020, and applicable to sales occurring on or after that date.

Session Laws 2019-246, s. 4(n), provides: “There is no obligation to collect the sales and use tax required by this section retroactively.”

Session Laws 2019-246, s. 4(o), is a severability clause.

Effect of Amendments.

Session Laws 2009-451, s. 27A.3(n), effective August 7, 2009, rewrote the section.

Session Laws 2016-5, s. 3.15, effective May 11, 2016, deleted “for a period of three years” following “consumers must keep” in the first sentence of the first paragraph.

Session Laws 2018-5, s. 38.5(t), effective June 12, 2018, inserted “inside or” in the first sentence of the last paragraph.

Session Laws 2019-246, s. 4( l ), rewrote the section. For effective date and applicability, see editor’s note.

§§ 105-164.23 through 105-164.25. [Repealed]

Repealed by Session Laws 2009-451, s. 27A.3(o), effective August 7, 2009.

§ 105-164.26. Presumption that sales are taxable.

For the purpose of the proper administration of this Article and to prevent evasion of the retail sales tax, the following presumptions apply:

  1. That all gross receipts of wholesale merchants and retailers are subject to the retail sales tax until the contrary is established by proper records as required in this Article.
  2. That tangible personal property sold by a person for delivery in this State is sold for storage, use, or other consumption in this State.
  3. That tangible personal property delivered outside this State and brought to this State by the purchaser is for storage, use, or consumption in this State.
  4. That certain digital property sold for delivery or access in this State is sold for storage, use, or consumption in this State.
  5. That a service purchased for receipt in this State is purchased for storage, use, or consumption in this State.

History. 1957, c. 1340, s. 5; 1998-98, s. 108; 2009-451, s. 27A.3(p); 2019-169, s. 3.3(q).

Effect of Amendments.

Session Laws 2009-451, s. 27A.3(p), effective August 7, 2009, rewrote the section.

Session Laws 2019-169, s. 3.3(q), effective July 26, 2019, inserted “certain” near the beginning of subdivision (4).

CASE NOTES

Relationship With Other Laws. —

Online travel companies were not retailers (and therefore not subject to tax) under the plain language of G.S. 105-164.4(a)(3), and G.S. 105-164.26 ’s presumption that sales were taxable did nothing to change the court’s conclusion. Pitt County v. Hotels.Com, L.P., 553 F.3d 308, 2009 U.S. App. LEXIS 552 (4th Cir. 2009).

Burden of showing exemptions or exceptions from a taxing statute is upon the one asserting the exemption or exclusion. Telerent Leasing Corp. v. High, 8 N.C. App. 179, 174 S.E.2d 11, 1970 N.C. App. LEXIS 1513 (1970).

School Picture Sales as Retail Sales. —

Evidence supported Secretary’s finding and conclusions that “commission” picture sales were retail sales, where taxpayer’s letter stated that the price of packages available for order included sales tax, and where although proof envelope described the picture sales as a school project on which the school retained a commission, it did not say that the school was selling the pictures. In re Assessment of Additional Sales & Use Tax Against Strawbridge Studios, Inc., 94 N.C. App. 300, 380 S.E.2d 142, 1989 N.C. App. LEXIS 475 (1989).

Department’s Statements Not Evidence That Sales Were Wholesale Sales. —

Statements in Department of Revenue’s internal correspondence and correspondence with taxpayer’s attorney stating that “contract sales” were or appeared to be sales for resale did not constitute evidence that the “contract sales” were wholesale sales, where in each case the correspondence made it clear that in order to be taxable as wholesale sales, the statutory and regulatory requirements had to be met, and the characterizations were not judicial admissions that the requirements for wholesale taxation had been met. In re Assessment of Additional Sales & Use Tax Against Strawbridge Studios, Inc., 94 N.C. App. 300, 380 S.E.2d 142, 1989 N.C. App. LEXIS 475 (1989).

§ 105-164.27. [Repealed]

Repealed by Session Laws 1961, c. 826, s. 2.

§ 105-164.27A. Direct pay permit.

  1. General. —  A general direct pay permit authorizes its holder to purchase certain items without paying tax to the seller and authorizes the seller to not collect any tax on a sale to the permit holder. A general direct pay permit may not be used for purposes identified in subsections (a1), (a2), (a3), or (b) of this section. A person who purchases an item under a direct pay permit issued under this subsection is liable for use tax due on the purchase. The tax is payable when the property is placed in use or the service is received. A direct pay permit issued under this subsection does not apply to taxes imposed under G.S. 105-164.4 on sales of electricity, piped natural gas, video programming, spirituous liquor, or the gross receipts derived from rentals of accommodations.A person who purchases an item for storage, use, or consumption in this State whose tax status cannot be determined at the time of the purchase because of one of the reasons listed below may apply to the Secretary for a general direct pay permit:
    1. The place of business where the item will be stored, used, or consumed in the State is not known at the time of the purchase and a different tax consequence applies depending on where the item is used in the State.
    2. The manner in which the item will be stored, used, or consumed in the State is not known at the time of the purchase and one or more of the potential uses is taxable but others are not taxable in the State. (a1) Direct Mail. — A person who purchases direct mail may apply to the Secretary for a direct pay permit for the purchase of direct mail. A direct pay permit issued for direct mail does not apply to any purchase other than the purchase of direct mail. A person who purchases direct mail under a direct pay permit must file a return and pay the tax due monthly or quarterly to the Secretary.

      (a2) Qualified Jet Engine. — A person who purchases a qualified jet engine may apply to the Secretary for a direct pay permit for the purchase of a qualified jet engine. A direct pay permit issued for a qualified jet engine does not apply to any purchase other than the purchase of a qualified jet engine. The maximum use tax on a qualified jet engine is two thousand five hundred dollars ($2,500). A person who purchases a qualified jet engine under a direct pay permit must file a return and pay the tax due monthly to the Secretary.

      (a3) Boat and Aircraft. — A direct pay permit issued under this subsection authorizes its holder to purchase tangible personal property, certain digital property, or repair, maintenance, and installation services for a boat, an aircraft, or a qualified jet engine without paying tax to the seller and authorizes the seller to not collect any tax on the purchased items from the permit holder. A person who purchases the tangible personal property, certain digital property, or repair, maintenance, and installation services under a direct pay permit must file a return and pay the tax due to the Secretary in accordance with G.S. 105-164.16 . A permit holder is allowed a use tax exemption on one or more of the following: (i) the installation charges that are a part of the sales price of tangible personal property or certain digital property purchased by the permit holder for a boat, an aircraft, or a qualified jet engine, provided the installation charges are separately stated and identified as such on the invoice or other documentation given to the permit holder at the time of the sale and (ii) the sales price of or gross receipts derived from repair, maintenance, and installation services provided for a boat or an aircraft.In lieu of purchasing under a direct pay permit pursuant to this subsection, a purchaser may elect to have the seller collect and remit the tax due on behalf of the purchaser. Where the purchaser elects for the seller to collect and remit the tax, an invoice given to the purchaser bearing the proper amount of tax on a retail transaction extinguishes the purchaser’s liability for the tax on the transaction. Where a seller cannot or does not separately state installation charges that are a part of the sales price of tangible personal property or certain digital property for a boat, an aircraft, or a qualified jet engine on the invoice or other documentation given to the purchaser at the time of the sale, tax is due on the total purchase price.The amount of the use tax exemption is the amount of the installation charges and the sales price of or gross receipts derived from the repair, maintenance, and installation services that exceed twenty-five thousand dollars ($25,000).

  2. Telecommunications Service. —  A direct pay permit for telecommunications service authorizes its holder to purchase telecommunications service and ancillary service without paying tax to the seller and authorizes the seller to not collect any tax on a sale to the permit holder. A person who purchases these services under a direct pay permit must file a return and pay the tax due monthly or quarterly to the Secretary. A direct pay permit issued under this subsection does not apply to any tax other than the tax on telecommunications service and ancillary service.A call center that purchases telecommunications service that originates outside this State and terminates in this State may apply to the Secretary for a direct pay permit for telecommunications service and ancillary service. A call center is a business that is primarily engaged in providing support services to customers by telephone to support products or services of the business. A business is primarily engaged in providing support services by telephone if at least sixty percent (60%) of its calls are incoming.
  3. Application. —  An application for a direct pay permit must be made on a form provided by the Secretary and contain the information required by the Secretary. The Secretary may grant the application if the Secretary finds that the applicant complies with the sales and use tax laws and that the applicant’s compliance burden will be greatly reduced by use of the permit.
  4. Revocation. —  A direct pay permit is valid until the holder returns it to the Secretary or the Secretary revokes it. The Secretary may revoke a direct pay permit if the holder of the permit does not file a sales and use tax return on time, does not pay sales and use tax on time, or otherwise fails to comply with the sales and use tax laws.

History. 2000-120, s. 1; 2001-414, s. 20; 2001-430, s. 9; 2002-72, s. 18; 2003-284, s. 45.9; 2003-416, s. 16(b); 2006-33, s. 7; 2009-451, s. 27A.3(q); 2012-79, s. 2.12; 2013-414, s. 13; 2015-259, s. 4.2(e); 2016-94, s. 38.5(m); 2017-204, s. 2.11(a); 2018-5, s. 38.5(o); 2019-6, s. 5.5; 2019-169, s. 3.3(r).

Editor’s Note.

Session Laws 2001-430, s. 9, amended this section in the coded bill drafting format provided by G.S. 120-20.1 . The amendment omitted some words that had been in subsection (b) in striking through that subsection. The subsection is set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

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

Effect of Amendments.

Session Laws 2003-284, s. 45.9, effective July 15, 2003, inserted the second paragraph of subsection (a).

Session Laws 2003-416, s. 16.(b), effective August 14, 2003, deleted “interstate” following “that purchases” in the first sentence of the last paragraph in subsection (b).

Session Laws 2006-33, s. 7, effective January 1, 2007, in subsection (b), in the first paragraph added “and ancillary service” in the first and last sentences, substituted “these services” for “telecommunications service” in the second sentence; and, in the second paragraph, inserted “service and ancillary” following “telecommunications” in the first sentence.

Session Laws 2009-451, s. 27A.3(q), effective August 7, 2009, rewrote subsection (a), and added subsection (a1).

Session Laws 2012-79, s. 2.12, effective June 26, 2012, in the second paragraph of subsection (a), inserted “for storage, use, or consumption in this State”; in subdivisions (a)(1) and (a)(2), substituted “stored, used, or consumed” for “used”; and in the first paragraph of subsection (b), inserted “or quarterly” in the second sentence.

Session Laws 2013-414, s. 13, effective August 23, 2013, substituted “on sales of electricity or the gross receipts derived from the rentals of accommodations” for “on electricity” in the last sentence of the first paragraph of subsection (a); and added the last sentence in subsection (a1).

Session Laws 2015-259, s. 4.2(e), added subsection (a2). For effective date and applicability, see Editor’s note.

Session Laws 2016-94, s. 38.5(m), effective July 1, 2016, in subsection (a), in the first paragraph, substituted “certain tangible” for “any tangible” in the first sentence and added the present second sentence; and added subsection (a3). See editor’s note for applicability.

Session Laws 2017-204, s. 2.11(a), effective August 11, 2017, in subsection (a3), substituted “in accordance with G.S. 105-164.14 ” for “by the end of the month following the month in which the property or services are purchased” in the second sentence of the first paragraph, and added the present second paragraph.

Session Laws 2018-5, s. 38.5(o), effective June 12, 2018, in subsection (a), in the first paragraph, substituted “electricity, piped natural gas, video programming, spirituous liquor” for “electricity” in the last sentence; and in subdivisions (a)(1) and (a)(2), added “in the State” throughout.

Session Laws 2019-6, s. 5.5, effective March 20, 2019, substituted “G.S. 105-164.16” for “G.S.105-164.14” in the second sentence of the first paragraph of subsection (a3).

Session Laws 2019-169, s. 3.3(r), effective July 26, 2019, substituted “items” for “tangible personal property, digital property, or service” in the first sentence of the first paragraph of subsection (a); and, in subsection (a3), in the first sentence of the first paragraph, inserted “certain” and substituted “purchased items” for “item or services”, substituted “tangible personal property, certain digital property, or repair, maintenance, and installation services” for “property or services” in the second sentence, and in the third sentence, inserted “certain” in item (i), and substituted “boat or an aircraft” for “boat, an aircraft, or a qualified jet engine” in item (ii), and made a minor stylistic change in the last paragraph.

§ 105-164.28. Certificate of exemption.

  1. Relief From Liability. —  Except as provided in subsection (b) of this section, a seller is not liable for the tax otherwise applicable if the Secretary determines that a purchaser improperly claimed an exemption, or if the seller within 90 days of the sale meets the following requirements:
    1. For a sale made in person, the seller obtains a certificate of exemption or a blanket certificate of exemption from a purchaser with which the seller has a recurring business relationship. If the purchaser provides a paper certificate, the certificate must be signed by the purchaser and state the purchaser’s name, address, certificate of registration number, reason for exemption, and type of business. For purposes of this subdivision, a certificate received by fax is a paper certificate. If the purchaser does not provide a paper certificate, the seller must obtain and maintain the same information required had a certificate been provided by the purchaser.
    2. Repealed by Session Laws 2013-414, s. 43(a), effective August 23, 2013.
    3. For a sale made over the Internet or by other remote means, the seller obtains the purchaser’s name, address, certificate of registration number, reason for exemption, and type of business and maintains this information in a retrievable format in its records. If a certificate of exemption is provided electronically for a remote sale, the requirements of subdivision (1) of this subsection apply except the electronic certificate is not required to be signed by the purchaser.
    4. In the case of drop shipment sales, a third-party vendor obtains a certificate of exemption provided by its customer or any other acceptable information evidencing qualification for a resale exemption, regardless of whether the customer is registered to collect and remit sales and use tax in the State.
  2. Substantiation Request. —  If the Secretary determines that a certificate of exemption or the required data elements obtained by the seller are incomplete, the Secretary may request substantiation from the seller. A seller is not required to verify that a certificate of registration number provided by a purchaser is correct. If a seller does one of the following within 120 days after a request for substantiation by the Secretary, the seller is not liable for the tax otherwise applicable:
    1. Obtains a fully completed certificate of exemption from the purchaser provided in good faith. The certificate is provided in good faith if it claims an exemption that meets all of the following conditions:
      1. It was statutorily available in this State on the date of the transaction.
      2. It could be applicable to the item being purchased.
      3. It is reasonable for the purchaser’s type of business.
    2. Obtains other information to establish the transaction was not subject to tax.
  3. Fraud. —  The relief from liability under this section does not apply to a seller who does any of the following:
    1. Fraudulently fails to collect tax.
    2. Solicits purchasers to participate in the unlawful claim of an exemption.
    3. Accepts an exemption certificate when the purchaser claims an entity-based exemption when the subject of the transaction sought to be covered by the exemption certificate is received by the purchaser at a location operated by the seller, and the claimed exemption is not available in this State.
    4. Had knowledge or had reason to know at the time information was provided relating to the exemption claimed that the information was materially false.
    5. Knowingly participated in activity intended to purposefully evade tax properly due on the transaction.
  4. Purchaser’s Liability. —  A purchaser who does not resell an item purchased under a certificate of exemption is liable for any tax subsequently determined to be due on the sale.
  5. Renewal of Information. —  The Secretary may not require a seller to renew a blanket certificate of exemption or to update exemption certificate information or data elements when there is a recurring business relationship between the buyer and seller. For purposes of this section, a recurring business relationship exists when a period of no more than 12 months elapse between sales transactions.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 1991 (Reg. Sess., 1992), c. 914, s. 1; 2000-120, s. 6; 2005-276, s. 33.15; 2009-451, s. 27A.3(r); 2011-330, s. 28; 2013-414, s. 43(a).

Editor’s Note.

Session Laws 2014-3, s. 3.1(d), provides: “A person who has an agricultural exemption certificate number issued prior to July 1, 2014, that meets the requirements of G.S. 105-164.13 E for a qualifying farmer should apply for a new agricultural exemption certificate number before July 1, 2014, for use for qualifying purchases made on or after October 1, 2014. A person that meets the requirements of G.S. 105-164.13 E for a qualifying farmer and who has an agricultural exemption certificate number issued prior to July 1, 2014, may continue to use that agricultural exemption certificate number for qualifying purchases made prior to October 1, 2014.”

Session Laws 2014-3, s. 3.1(e), provides: “A person who has an agricultural exemption certificate number issued before July 1, 2014, that does not meet the requirements of G.S. 105-164.13 E for a qualifying farmer must give notice to a seller that the person no longer qualifies for an exemption for purchases made on or after July 1, 2014, and the seller must collect any tax due on the sale. A seller that relies on a copy of an agricultural certificate of exemption and meets the requirements of G.S. 105-164.28 is not liable for any tax due on the sale.”

Effect of Amendments.

Session Laws 2005-276, s. 33.15, effective October 1, 2005, rewrote the section.

Session Laws 2009-451, s. 27A.3(r), effective August 7, 2009, in subsection (a), in the introductory language, deleted “of tangible personal property” following “a purchaser,” and, in subdivision (a)(2), substituted “item sold is type of item” for “tangible personal property sold is type of property”; and in subsection (b), substituted “an item” for “property”.

Session Laws 2011-330, s. 28, effective June 27, 2011, in the section catchline, the introductory paragraph of subsection (a), and in subsection (b), substituted “exemption” for “resale.”

Session Laws 2013-414, s. 43(a), effective August 23, 2013, rewrote the section.

CASE NOTES

Taxpayer Not Denied Due Process and Equal Protection. —

Burden of proof and requirement of a Form E-590, which creates a conclusive presumption of retail sales, did not deny taxpayer due process and equal protection, as no part of the tax law required the taxpayer to obtain a Form E-590 from schools, since the taxpayer could present other written evidence to establish that the schools were registered to pay the retail tax and that pictures were purchased for resale. In re Assessment of Additional Sales & Use Tax Against Strawbridge Studios, Inc., 94 N.C. App. 300, 380 S.E.2d 142, 1989 N.C. App. LEXIS 475 (1989).

Lessor Has Burden to Show That Leasing Transactions Constituted Sale for Resale. —

A lessor of television sets who had not procured resale certificates from any of its customers had the burden to show that its leasing transactions constituted a sale for resale, entitling the lessor to an exemption from the sales tax. Telerent Leasing Corp. v. High, 8 N.C. App. 179, 174 S.E.2d 11, 1970 N.C. App. LEXIS 1513 (1970).

§ 105-164.28A. Other exemption certificates.

  1. Authorization. —  The Secretary may require a person who purchases an item that is exempt from tax to obtain an exemption certificate from the Department to receive the exemption. The Department must issue a use-based exemption number to a person who qualifies for the exemption. A person who no longer qualifies for a use-based exemption number must notify the Secretary within 30 days to cancel the number.An exemption certificate issued by the purchaser authorizes a retailer to sell an item to the holder of the certificate and not collect tax on the sale. A person who no longer qualifies for an exemption certificate must give notice to each seller that may rely on the exemption certificate on or before the next purchase. A person who purchases an item under an exemption certificate is liable for any tax due on the purchase if the Department determines that the person is not eligible for the exemption certificate or if the person purchased items that do not qualify for an exemption under the exemption certificate. The liability is relieved when the seller obtains the purchaser’s name, address, type of business, reason for exemption, and exemption number in lieu of obtaining an exemption certificate.
  2. Scope. —  This section does not apply to a direct pay permit or a certificate of exemption. G.S. 105-164.27 A addresses a direct pay permit, and G.S. 105-164.28 addresses a certificate of exemption.
  3. Administration. —  This section shall be administered in accordance with G.S. 105-164.28 . Additionally, the provisions of this section may also apply to a conditional exemption certificate issued to a person in accordance with G.S. 105-164.13 E.

History. 2002-184, s. 12; 2009-451, s. 27A.3(s); 2013-414, s. 43(b); 2014-3, s. 3.1(b); 2019-6, s. 5.6.

Editor’s Note.

Session Laws 2014-3, s. 3.1(d), provides: “A person who has an agricultural exemption certificate number issued prior to July 1, 2014, that meets the requirements of G.S. 105-164.13 E for a qualifying farmer should apply for a new agricultural exemption certificate number before July 1, 2014, for use for qualifying purchases made on or after October 1, 2014. A person that meets the requirements of G.S. 105-164.13 E for a qualifying farmer and who has an agricultural exemption certificate number issued prior to July 1, 2014, may continue to use that agricultural exemption certificate number for qualifying purchases made prior to October 1, 2014.”

Session Laws 2014-3, s. 3.1(e), provides: “A person who has an agricultural exemption certificate number issued before July 1, 2014, that does not meet the requirements of G.S. 105-164.13 E for a qualifying farmer must give notice to a seller that the person no longer qualifies for an exemption for purchases made on or after July 1, 2014, and the seller must collect any tax due on the sale. A seller that relies on a copy of an agricultural certificate of exemption and meets the requirements of G.S. 105-164.28 is not liable for any tax due on the sale.”

Session Laws 2014-3, s. 3.1(f), made the amendment to this section by Session Laws 2014-3, s. 3.1(b), applicable to purchases made on or after July 1, 2014.

Effect of Amendments.

Session Laws 2009-451, s. 27A.3(s), effective August 7, 2009, in subsection (a), substituted “an item” for “tangible personal property” three times, and “item” for “property” twice.

Session Laws 2013-414, s. 43(b), effective August 23, 2013, in subsection (a), deleted “or the item was not sued as intended” at the end of the third sentence, and added the fourth sentence; substituted “exemption” for “resale” twice in subsection (b); and added subsection (c).

Session Laws 2014-3, s. 3.1(b), effective July 1, 2014, rewrote subsection (a); and added the last sentence in subsection (c). See Editor’s note for applicability.

Session Laws 2019-6, s. 5.6, effective March 20, 2019, in subsection (a), in the first paragraph, in the first sentence, deleted “or is subject to a preferential rate of tax depending on the status of the purchaser or the intended use of the item” following “exempt from tax” near the middle, and substituted “exemption” for “exemption or preferential rate” at the end, in the second sentence, deleted “preferential rate or” preceding “use-based” near the middle, and substituted “exemption” for “exemption or preferential rate” at the end, and in the last sentence, deleted “preferential rate or” preceding “use-based”, and in the second paragraph, in the first sentence, deleted “either collect tax at a preferential rate or” following “certificate and” near the middle, and substituted “sale” for “sale, as appropriate” at the end.

§ 105-164.29. Application for certificate of registration by wholesale merchants, retailers, and facilitators.

  1. Requirement and Application. —  Before a person may engage in business as a retailer or a wholesale merchant or when a facilitator is liable for tax under this Article, the person must obtain a certificate of registration. To obtain a certificate of registration, a person must register with the Department. A person who has more than one business is required to obtain only one certificate of registration for each legal entity to cover all operations of each business throughout the State. An application for registration must be signed as follows:
    1. By the owner, if the owner is an individual.
    2. By a manager, member, or company official, if the owner is a limited liability company.

      (2a) By a manager, member, or partner, if the owner is a partnership.

    3. By an executive officer or some other person specifically authorized by the corporation to sign the application, if the owner is a corporation. If the application is signed by a person authorized to do so by the corporation, written evidence of the person’s authority must be attached to the application.
  2. Issuance. —  A certificate of registration is not assignable and is valid only for the person in whose name it is issued. A copy of the certificate of registration must be displayed at each place of business.
  3. Term. —  A certificate of registration is valid unless it is revoked for failure to comply with the provisions of this Article or becomes void. A certificate issued to a person who makes taxable sales or a person liable for tax under this Article becomes void if, for a period of 18 months, the person files no returns or files returns showing no sales. A certificate of registration issued to a seller that contracts with a certified service provider pursuant to G.S. 105-164.42 I and that is a model one seller as defined in the Streamlined Agreement does not become void if the certified service provider files returns for the seller showing no sales for a period for which a certificate could become void under this subsection.
  4. Revocation. —  The failure of a wholesale merchant or retailer to comply with this Article or G.S. 14-401.18 or the failure of a facilitator to comply with this Article is grounds for revocation of the person’s certificate of registration. Before the Secretary revokes a person’s certificate of registration, the Secretary must notify the person that the Secretary proposes to revoke the certificate of registration and that the proposed revocation will become final unless the person objects to the proposed revocation and files a request for a Departmental review within the time set in G.S. 105-241.11 for requesting a Departmental review of a proposed assessment. The notice must be sent in accordance with the methods authorized in G.S. 105-241.20 . The procedures in Article 9 of this Chapter for review of a proposed assessment apply to the review of a proposed revocation.
  5. Definition. —  For purposes of this section, the term “person” means a wholesale merchant, a retailer, or a facilitator.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 1979, 2nd Sess., c. 1084; 1991, c. 690, s. 5; 1993, c. 354, s. 17; c. 539, s. 705; 1994, Ex. Sess., c. 24, s. 14(c); 1999-333, s. 8; 2000-140, s. 67(b); 2007-491, s. 19; 2009-451, s. 27A.3(t); 2014-3, s. 14.9(b); 2015-6, s. 2.15; 2017-39, 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. 19, effective January 1, 2008, rewrote subsection (d). For applicability, see Editor’s note.

Session Laws 2009-451, s. 27A.3(t), effective August 7, 2009, in subsection (a), added “Requirement and” to the subsection heading, and added the present first sentence.

Session Laws 2014-3, s. 14.9(b), effective May 29, 2014, substituted “merchants, retailers, and facilitators” for “merchants and retailers” in the section heading; in the introductory language of subsection (a), in the first sentence, inserted “or when a facilitator is liable for tax under G.S. 105-164.4 F”, and in the third sentence, substituted “person” for “wholesale merchant or retailer” and inserted “for each legal identity”; in the second sentence of subsection (c), inserted “or a facilitator liable for tax under G.S. 105-164.4 F” and “for facilitator”; rewrote first two sentences in subsection (d); added subsection (e); and made a minor stylistic change.

Session Laws 2015-6, s. 2.15, effective April 9, 2015, substituted “company official, if the owner is a limited” for “partner, if the owner is an association, a partnership, or a limited” in subdivision (a)(2); and added subdivision (a)(2a).

Session Laws 2017-39, s. 8, effective June 21, 2017, substituted “this Article,” for “G.S. 105-164.4F” in the first sentence of subsection (a); and, in subsection (c), substituted “person” for “retailer” or “facilitator” and variations throughout, substituted “this Article” for “G.S. 105-164.4F” in the second sentence, and added the third sentence.

§ 105-164.29A. State government exemption process.

  1. Application. —  To be eligible for the exemption provided in G.S. 105-164.13(52), a State agency must obtain from the Department a sales tax exemption number. The application for exemption must be in the form required by the Secretary, be signed by the State agency’s head, and contain any information required by the Secretary. The Secretary must assign a sales tax exemption number to a State agency that submits a proper application. This section does not apply to any of the following State agencies:
    1. An occupational licensing board, as defined in G.S. 93B-1 .
    2. An entity listed in G.S. 105-164.14(c).
  2. Liability. —  A State agency that does not use the items purchased with its exemption number must pay the tax that should have been paid on the items purchased, plus interest calculated from the date the tax would otherwise have been paid.

History. 2003-431, s. 4; 2004-170, s. 22; 2016-5, s. 3.22(a).

Effect of Amendments.

Session Laws 2004-170, s. 22, effective August 2, 2004, substituted “105-164.13(52)” for “105-164.13(51)” in subsection (a).

Session Laws 2016-5, s. 3.22(a), effective July 1, 2017, added the last sentence in the introductory language of subsection (a); and added subdivisions (a)(1) and (a)(2).

§ 105-164.29B. Information to counties and cities.

The Secretary must give information on refunds of tax made under this Article to a designated county or city official within 30 days after the official makes a written request to the Secretary for the information. For a request made by a county official, the Secretary must give the official a list of each claimant that received a refund in the past 12 months of at least one thousand dollars ($1,000) of tax paid to the county. For a request made by a city official, the Secretary must give the official a list of each claimant that received a refund in the past 12 months of at least one thousand dollars ($1,000) of tax paid to all the counties in which the city is located. The list must include the name and address of each of these claimants and the amount of the refund received from each county covered by the request.

A claimant that has received a refund under this Article of tax paid to a county must give information on the refund to a designated official of the county or a city located in the county. The claimant must give the information to the county or city official within 30 days after the official makes a written request to the claimant for the information. For a request by a county or city official, the claimant must give the official a copy of the request for the refund and any supporting documentation requested by the official to verify the request. If a claimant determines that a refund it has received under this Article is incorrect, the claimant must file an amended request for a refund.

For purposes of this section, a designated county official is the chair of the board of county commissioners or a county official designated in a resolution adopted by the Board, and a designated city official is the mayor of the city or a city official designated in a resolution adopted by the city’s governing board. Information given to a county or city official under this section is not a public record and may not be disclosed except as provided in G.S. 153A-148.1 or G.S. 160A-208.1 .

History. 2010-166, s. 1.20.

Part 6. Examination of Records.

§ 105-164.30. Secretary or agent may examine books, etc.

For the purpose of enforcing the collection of the tax levied by this Article, the Secretary or his duly authorized agent is authorized to examine at all reasonable hours during the day the books, papers, records, documents or other data of all retailers or wholesale merchants bearing upon the correctness of any return or for the purpose of filing a return where none has been made as required by this Article, and may require the attendance of any person and take his testimony with respect to any such matter, with power to administer oaths to such person or persons. If any person summoned as a witness fails to obey any summons to appear before the Secretary or his authorized agent, or refuses to testify or answer any material question or to produce any book, record, paper, or other data when required to do so, the Secretary or his authorized agent shall report the failure or refusal to the Attorney General or the district solicitor, who shall thereupon institute proceedings in the superior court of the county where the witness resides to compel obedience to any summons of the Secretary or his authorized agent. Officers who serve summonses or subpoenas, and witnesses attending, shall receive like compensation as officers and witnesses in the superior courts, to be paid from the proper appropriation for the administration of this Article.

In the event any retailer or wholesale merchant fails or refuses to permit the Secretary or his authorized agent to examine his books, papers, accounts, records, documents or other data, the Secretary may require the retailer or wholesale merchant to show cause before the superior court of the county in which said taxpayer resides or has its principal place of business as to why the books, records, papers, documents, or data should not be examined and the superior court shall have jurisdiction to enter an order requiring the production of all necessary books, records, papers, documents, or data and to punish for contempt any person who violates the order.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 1998-98, s. 52; 2013-414, s. 1(g); 2016-5, s. 3.16.

Editor’s Note.

Session Laws 1998-98, s. 52, effective August 14, 1998, redesignated Division VI as Part 6.

Effect of Amendments.

Session Laws 2013-414, s. 1(g), effective August 23, 2013, in the first paragraph, in the first sentence, substituted “is authorized to” for “is hereby specifically authorized to” and “filing a return” for “making a return”; in the second sentence, substituted “witness fails” for “witness shall fail,” “refuses to” for “shall refuse to,” “the Secretary or his authorized agent shall report the failure or refusal to” for “such failure or refusal shall be reported to”; and in the second paragraph, substituted “fails or refuses to permit the Secretary or his authorized agent to examine his” for “shall fail or refuse to permit examination of his,” other data, the Secretary may require the retailer” for “other data by the Secretary or his authorized agents as aforesaid, the Secretary shall have the power to proceed by citing said retailer,” and “any person who violates the order” for “of such order any person violating the same,” and made minor stylistic changes.

Session Laws 2016-5, s. 3.16, effective May 11, 2016, substituted “books, records, papers, documents, or data” for “books, records, papers, or documents” twice in the second paragraph.

§ 105-164.31. [Repealed]

Repealed by Session Laws 2009-451, s. 27A.3(o), effective August 7, 2009.

§ 105-164.32. Incorrect returns; estimate.

If a retailer, a wholesale merchant, a facilitator, or a consumer fails to file a return and pay the tax due under this Article or files a grossly incorrect or false or fraudulent return, the Secretary must estimate the tax due and assess the retailer, the wholesale merchant, the facilitator, or the consumer based on the estimate.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193; 2001-414, s. 21; 2009-451, s. 27A.3(u); 2018-5, s. 38.5(p).

Effect of Amendments.

Session Laws 2009-451, s. 27A.3(u), effective August 7, 2009, rewrote the section.

Session Laws 2018-5, s. 38.5(p), effective June 12, 2018, substituted “merchant, a facilitator” for “merchant”, and substituted “the wholesale merchant, the facilitator, or the consumer” for “wholesale merchant, or consumer”.

Part 7. Failure to Make Returns; Overpayments.

§§ 105-164.33, 105-164.34. [Repealed]

Repealed by Session Laws 1963, c. 1169, s. 3.

§ 105-164.35. [Repealed]

Repealed by Session Laws 2013-414, s. 14, effective August 23, 2013.

History. 1957, c. 1340, s. 5; 1959, c. 1259, s. 9; 1973, c. 476, s. 193; repealed by 2013-414, s. 14, effective August 23, 2013.

Editor’s Note.

Former G.S. 105-164.35 pertained to excessive payments and recomputing tax.

§ 105-164.36. [Repealed]

Repealed by Session Laws 1959, c. 1259, s. 9.

§ 105-164.37. Bankruptcy, receivership, etc.

If any taxpayer subject to the provisions of this Article goes into bankruptcy, receivership or turns over his stock of merchandise by voluntary transfer to creditors, the tax liability under this Article shall constitute a prior lien upon such stock of merchandise and shall become subject to levy under execution and it shall be the duty of the transferee in any such case to retain the amount of the tax due from the first sales of such stock of merchandise and pay the same to the Secretary.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193.

§ 105-164.38. Tax is a lien.

  1. The tax imposed by this Article is a lien upon all personal property of any person who is required by this Article to obtain a certificate of registration to engage in business and who stops engaging in the business by transferring the business, transferring the stock of goods of the business, or going out of business. A person who stops engaging in business must file the return required by this Article within 30 days after transferring the business, transferring the stock of goods of the business, or going out of business.
  2. Any person to whom the business or the stock of goods was transferred must withhold from the consideration paid for the business or stock of goods an amount sufficient to cover the taxes due until the person selling the business or stock of goods produces a statement from the Secretary showing that the taxes have been paid or that no taxes are due. If the person who buys a business or stock of goods fails to withhold an amount sufficient to cover the taxes and the taxes remain unpaid after the 30-day period allowed, the buyer is personally liable for the unpaid taxes to the extent of the greater of the following:
    1. The consideration paid by the buyer for the business or the stock of goods.
    2. The fair market value of the business or the stock of goods.
  3. Assessment. —  The period of limitations for assessing liability against the buyer of a business or the stock of goods of a business and for enforcing the lien against the property expires one year after the end of the period of limitations for assessment against the person who sold the business or the stock of goods. Except as otherwise provided in this section, the assessment procedures in Article 9 of this Chapter apply to a person who buys a business or the stock of goods of a business to the same extent as if the person had incurred the original tax liability.

History. 1957, c. 1340, s. 5; 1963, c. 1169, s. 3; 1973, c. 476, s. 193; 1991, c. 690, s. 6; 1991 (Reg. Sess., 1992), c. 949, s. 2; 2000-140, s. 67(c); 2007-491, s. 20.

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. 20, effective January 1, 2008, in subsection (c), added “Assessment —” to the beginning, and rewrote the second sentence. For applicability, see Editor’s note.

§ 105-164.39. Attachment.

In the event any retailer or wholesale merchant is delinquent in the payment of the tax herein provided for, the Secretary may give notice of the amount of such delinquency by registered mail to all persons having in their possession or under their control any credits or other personal property belonging to such retailer or wholesale merchant or owing any debts to such taxpayer at the time of the receipt by them of such notice and thereafter any person so notified shall neither transfer nor make any other disposition of such credits, other personal property or debts until the Secretary shall have consented to a transfer or disposition or until 30 days shall have elapsed from and after the receipt of such notice. All persons so notified must within five days after receipt of such notice advise the Secretary of any and all such credits, other personal property or debts in their possession, under their control or owing by them as the case may be. The remedy provided by this section shall be cumulative and optional and in addition to all other remedies now provided by law for the collection of taxes due the State.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193.

§ 105-164.40. Jeopardy assessment.

If the Secretary is of the opinion that the collection of any tax or any amount of tax required to be collected and paid to the State under this Article will be jeopardized by delay, he shall make an assessment of the tax or amount of tax required to be collected and shall mail or issue a notice of such assessment to the taxpayer together with a demand for immediate payment of the tax or of the deficiency in tax declared to be in jeopardy including interest and penalties. In the case of a tax for a current period, the Secretary may declare the taxable period of the taxpayer immediately terminated and shall cause notice of such finding and declaration to be mailed or issued to the taxpayer together with a demand for immediate payment of the tax based on the period declared terminated and such tax shall be immediately due and payable, whether or not the time otherwise allowed by law for filing a return and paying the tax has expired. Assessments provided for in this section shall be immediately due and payable and proceedings for the collection shall commence at once and if any such tax, penalty or interest is not paid upon demand of the Secretary, he shall forthwith cause a levy to be made on the property of the taxpayer or, in his discretion the Secretary may require the taxpayer to file such indemnity bond as in his judgment may be sufficient to protect the interest of the State.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193.

§ 105-164.41. [Repealed]

Repealed by Session Laws 2011-330, s. 38, effective June 27, 2011.

History. 1957, c. 1340, s. 5; 1963, c. 1169, s. 3; 1967, c. 1110, s. 6; 1973, c. 476, s. 193; 1985, c. 656, s. 29; 1993, c. 257, s. 7; repealed by 2011-330, s. 38, effective June 27, 2011.

Editor’s Note.

Former G.S. 105-164.41 pertained to excess tax payments and refunds.

§ 105-164.42. [Repealed]

Repealed by Session Laws 1959, c. 1259, s. 9.

Part 7A. Uniform Sales and Use Tax Administration Act.

§ 105-164.42A. Short title.

This Part is the “Uniform Sales and Use Tax Administration Act” and may be cited by that name.

History. 2001-347, s. 1.3; 2005-276, s. 33.31.

Editor’s Note.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, deleted the contingent expiration date by amending Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.42B. Definitions.

The following definitions apply in this Part:

  1. Agreement. — Streamlined Agreement, as defined in G.S. 105-164.3 .
  2. Certified automated system. — Software certified jointly by the states that are signatories to the Agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state, and maintain a record of the transaction.
  3. Certified service provider. — An agent certified jointly by the states that are signatories to the Agreement to perform all of the seller’s sales tax functions.
  4. Member state. — A state that has entered into the Agreement.
  5. Person. — Defined in G.S. 105-228.90 .
  6. Sales tax. — The tax levied in G.S. 105-164.4 .
  7. Seller. — A person making sales, leases, or rentals of personal property or services.
  8. State. — The term “this State” means the State of North Carolina. Otherwise, the term “state” means any state of the United States and the District of Columbia.
  9. Use tax. — The tax levied in G.S. 105-164.6 .

History. 2001-347, s. 1.3; 2005-276, ss. 33.16, 33.31.

Editor’s Note.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

Effect of Amendments.

Session Laws 2005-276, s. 33.16, effective October 1, 2005, rewrote subdivision (1).

§ 105-164.42C. Authority to enter Agreement.

The Secretary is authorized to enter into the Agreement with one or more states to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance for all sellers and for all types of commerce. The Secretary may act jointly with other member states to establish standards for certification of a certified service provider and a certified automated system and to establish performance standards for multistate sellers.

The Secretary is authorized to represent this State before the other member states. The Secretary may take any other actions reasonably required to implement this Part, including the joint procurement with other member states of goods and services in furtherance of the Agreement.

History. 2001-347, s. 1.3; 2005-276, s. 33.31.

Editor’s Note.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.42D. Relationship to North Carolina law.

No provision of the Agreement authorized by this Part invalidates or amends any provision of the law of this State. Adoption of the Agreement by this State does not amend or modify any law of this State. Implementation of a condition of the Agreement in this State must be made pursuant to an act of the General Assembly.

History. 2001-347, s. 1.3; 2005-276, s. 33.31.

Editor’s Note.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.42E. Agreement requirements.

The Secretary may not enter into the Agreement unless the Agreement requires each state to abide by the following requirements:

  1. Uniform state rate. —  The Agreement must set restrictions to achieve more uniform state rates through the following:
    1. Limiting the number of state rates.
    2. Limiting maximums on the amount of state tax that is due on a transaction.
    3. Limiting thresholds on the application of a state tax.
  2. Uniform standards. —  The Agreement must establish uniform standards for all of the following:
    1. The sourcing of transactions to taxing jurisdictions.
    2. The administration of exempt sales.
    3. The allowances a seller can take for bad debts.
    4. Sales and use tax returns and remittances.
  3. Uniform definitions. —  The Agreement must require states to develop and adopt uniform definitions of sales and use tax terms. The definitions must enable a state to preserve its ability to make policy choices not inconsistent with the uniform definitions.
  4. Central registration. —  The Agreement must provide a central, electronic registration system that allows a seller to register to collect and remit sales and use taxes for all signatory states.
  5. No nexus attribution. —  The Agreement must provide that registration with the central registration system and the collection of sales and use taxes in the signatory states will not be used as a factor in determining whether the seller has nexus with a state for any tax.
  6. Local sales and use taxes. —  The Agreement must provide for reduction of the burdens of complying with local sales and use taxes through one or more of the following:
    1. Restricting variances between the state and local tax bases.
    2. Requiring states to administer any sales and use taxes levied by local jurisdictions within the state so that sellers collecting and remitting these taxes will not have to register or file returns with, remit funds to, or be subject to independent audits from local taxing jurisdictions.
    3. Restricting the frequency of changes in the local sales and use tax rates and setting effective dates for the application of local jurisdictional boundary changes to local sales and use taxes.
    4. Providing notice of changes in local sales and use tax rates and of changes in the boundaries of local taxing jurisdictions.
  7. Monetary allowances. —  The Agreement must outline any monetary allowances that are to be provided by the states to sellers or certified service providers.
  8. State compliance. —  The Agreement must require each state to certify compliance with the terms of the Agreement before becoming a member and to maintain compliance, under the laws of the member state, with all provisions of the Agreement while a member.
  9. Consumer privacy. —  The Agreement must require each state to adopt a uniform policy for certified service providers that protects the privacy of consumers and maintains the confidentiality of tax information.

History. 2001-347, s. 1.3; 2005-276, s. 33.31.

Editor’s Note.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.42F. Cooperating sovereigns.

The Agreement authorized by this Part is an accord among individual cooperating sovereigns in furtherance of their governmental functions. The Agreement provides a mechanism among the member states to establish and maintain a cooperative, simplified system for the application and administration of sales and use taxes under the laws of each member state.

History. 2001-347, s. 1.3; 2005-276, s. 33.31.

Editor’s Note.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.42G. Effect of Agreement.

Entry of this State into the Agreement does not create a cause of action or a defense to an action. No person may challenge any action or inaction by a department, agency, or other instrumentality of this State, or a political subdivision of this State, on the ground that the action or inaction is inconsistent with the Agreement. No law of this State, or its application, may be declared invalid on the ground that the provision or application is inconsistent with the Agreement.

History. 2001-347, s. 1.3; 2005-276, s. 33.31.

Editor’s Note.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.42H. Certification of certified automated system and effect of certification.

  1. Certification. —  The Secretary may certify a software program as a certified automated system if the Secretary determines that the program correctly determines all of the following and that the software can generate reports and returns required by the Secretary:
    1. The applicable combined State and local sales and use tax rate for a sale, based on the sourcing principles in G.S. 105-164.4 B.
    2. Whether or not an item is exempt from tax, based on a uniform product code or another method.
    3. Repealed by Session Laws 2006-33, s. 12, effective June 1, 2006.
    4. The amount of tax to be remitted for each taxpayer for a reporting period.
    5. Any other issue necessary for the application or calculation of sales and use tax due.
  2. Liability. —  A seller may choose to use a certified automated system in performing its sales tax administration functions. A seller that uses a certified automated system is liable for sales and use taxes due on transactions it processes using the certified automated system except for underpayments of tax attributable to errors in the functioning of the system. A person that provides a certified automated system is responsible for the proper functioning of that system and is liable for underpayments of tax attributable to errors in the functioning of the system.

History. 2000-120, s. 2; 2001-347, ss. 1.1, 1.3; 2005-276, s. 33.31; 2006-33, s. 12.

Editor’s Note.

Session Laws 2001-347, s. 1.1, effective August 8, 2001, recodifies G.S. 105-164.43 A(a) as G.S. 104-164.42H(a).

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

Effect of Amendments.

Session Laws 2006-33, s. 12, effective June 1, 2006, repealed former subdivision (a)(3), which read: “Whether or not an exemption certificate offered by a purchaser is a valid certificate, based on the Department’s registry of holders of exemption certificates.”

§ 105-164.42I. Contract with certified service provider and effect of contract.

  1. Certification. —  The Secretary may certify an entity as a certified service provider if the entity meets all of the following requirements:
    1. The entity uses a certified automated system.
    2. The entity has agreed to update its program upon notification by the Secretary.
    3. The entity integrates its certified automated system with the system of a seller for whom the entity collects tax so that the tax due on a sale is determined at the time of the sale.
    4. The entity remits the taxes it collects at the time and in the manner specified by the Secretary.
    5. The entity agrees to file sales and use tax returns on behalf of the sellers for whom it collects tax.
    6. The entity enters into a contract with the Secretary and agrees to comply with all the conditions of the contract.
  2. Contract. —  The Secretary may contract or authorize in writing the Streamlined Sales Tax Governing Board to contract on behalf of the Secretary with a certified service provider for the collection and remittance of sales and use taxes. A certified service provider must file with the Secretary or the Streamlined Sales Tax Governing Board one of the following in the amount set by the Secretary: (i) a bond; (ii) an irrevocable letter of credit; or (iii) evidence of a certificate of deposit. A bond, irrevocable letter of credit, or certificate of deposit must be conditioned upon compliance with the contract, be payable to the State or the Streamlined Sales Tax Governing Board, and be in the form required by the Secretary or the Streamlined Sales Tax Governing Board. The amount a certified service provider charges under the contract is a cost of collecting the tax and is payable from the amount collected.
  3. Liability. —  A seller may contract with a certified service provider to collect and remit sales and use taxes payable to the State on sales made by the seller. A certified service provider with whom a seller contracts is the agent of the seller. As the seller’s agent, the certified service provider, rather than the seller, is liable for sales and use taxes due this State on all sales transactions the certified service provider processes for the seller unless the seller misrepresents the type of items it sells or commits fraud. A seller that misrepresents the type of items it sells or commits fraud is liable for taxes not collected as a result of the misrepresentation or fraud.
  4. Audit and Review. —  In the absence of misrepresentation or fraud, a seller that contracts with a certified service provider is not subject to audit on the transactions processed by the certified service provider. A seller is subject to audit for transactions not processed by the certified service provider. The State may perform a system check of a seller and review a seller’s procedures to determine if the certified service provider’s system is functioning properly and the extent to which the seller’s transactions are being processed by the certified service provider. A certified service provider is subject to audit.

History. 2000-120, s. 2; 2001-347, ss. 1.1, 1.3; 2005-276, s. 33.31; 2013-414, s. 44; 2016-5, s. 3.18; 2019-169, s. 3.3(s).

Editor’s Note.

Session Laws 2001-347, s. 1.1, effective August 8, 2001, recodifies G.S. 105-164.43 A(b) as G.S. 104-164.42I(a) and G.S. 105-164.43 B as G.S. 105-164.42 I(b).

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

Effect of Amendments.

Session Laws 2013-414, s. 44, effective August 23, 2013, in subsection (b), inserted “or authorize in writing the Streamlined Sales Tax Governing Board to contract on behalf of the Secretary” in the first sentence, inserted “or the Streamlined Sales Tax Governing Board” in the second and third sentences, and inserted “or irrevocable letter of credit” in the third sentence.

Session Laws 2016-5, s. 3.18, effective May 11, 2016, rewrote subsection (b).

Session Laws 2019-169, s. 3.3(s), effective July 26, 2019, substituted “items” for “products” in the third and fourth sentences of subsection (c).

§ 105-164.42J. Performance standard for multistate seller.

The Secretary may establish a performance standard for a seller that is engaged in business in this State and at least 10 other states and has developed a proprietary system to determine the amount of sales and use taxes due on transactions. A seller that enters into an agreement with the Secretary that establishes a performance standard for that system is liable for the failure of the system to meet the performance standard.

History. 2001-347, s. 1.3; 2005-276, s. 33.31.

Editor’s Note.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.42K. Registration and effect of registration.

Registration under the Agreement satisfies the registration requirements under this Article. A seller who registers under the Agreement within 12 months after the State becomes a member of the Agreement and who meets the following conditions is not subject to assessment for sales tax for any period before the effective date of the seller’s registration:

  1. The seller was not registered with the State during the 12-month period before the effective date of this State’s participation in the Agreement.
  2. When the seller registered, the seller had not received a letter from the Department notifying the seller of an audit.
  3. The seller continues to be registered under the Agreement and to remit tax to the State for at least 36 months.

History. 2005-276, s. 33.17.

Editor’s Note.

Session Laws 2005-276, s. 33.34, made this section effective October 1, 2005.

§ 105-164.42L. Liability relief for erroneous information or insufficient notice by Department.

  1. Boundary and Rate Databases. —  The Secretary may develop databases that provide information on the boundaries of taxing districts and the tax rates applicable to those taxing districts. The databases may assign the proper tax rate and taxing district to each taxing area within the State. If more than one tax rate applies within a specific taxing area, the Secretary shall assign the lowest combined tax rate imposed within the specific taxing area. If the Secretary cannot determine the appropriate tax rate for a street address, the Secretary shall assign the lowest combined tax rate imposed within the street address’s nine-digit zip code. But, if the Secretary cannot determine the appropriate tax rate for a street address’s nine-digit zip code, the Secretary shall assign the lowest combined tax rate imposed within the street address’s five-digit zip code.A person who relies on the information provided in these databases is not liable for underpayments of tax attributable to erroneous information provided by the Secretary in those databases until 10 business days after the date of notification by the Secretary.
  2. Taxability Matrix. —  The Secretary may develop a taxability matrix that provides information on the taxability of certain items or certain tax administration practices. A person who relies on the information provided in the taxability matrix is not liable for underpayments of tax attributable to erroneous information provided by the Secretary in the taxability matrix until 10 business days after the date of notification by the Secretary.
  3. Rate Changes. —  A retailer is not liable for an underpayment of tax attributable to a rate change when the State fails to provide for at least 30 days between the enactment of the rate change and the effective date of the rate change if the conditions of this subsection are satisfied. However, if the State establishes the retailer fraudulently failed to collect tax at the new rate or solicited customers based on the immediately preceding effective rate, this liability relief does not apply. Both of the following conditions must be satisfied for liability relief:
    1. The retailer collected tax at the immediately preceding rate.
    2. The retailer’s failure to collect at the newly effective rate does not extend beyond 30 days after the date of enactment of the new rate or the effective date applicable under G.S. 105-164.15 A.

History. 2005-276, s. 33.18; 2007-244, s. 5; 2013-414, s. 15; 2016-5, s. 3.17(a); 2019-169, s. 3.5(b).

Effect of Amendments.

Session Laws 2007-244, s. 5, effective October 1, 2007, substituted “A person who” for “A seller that” at the beginning of the second sentence.

Session Laws 2013-414, s. 15, effective August 23, 2013, rewrote the section heading, which formerly read “Databases on taxing jurisdictions”; redesignated the formerly undesignated provisions of this section as present subsection (a); and added subsections (b) and (c).

Session Laws 2016-5, s. 3.17(a), effective May 11, 2016, added “until 10 business days after the date of notification by the Secretary” at the end of subsection (a); and, in subsection (b), added “or certain tax administration practices” at the end of the first sentence, and added “until 10 business days after the date of notification by the Secretary” at the end of the last sentence.

Session Laws 2019-169, s. 3.5(b), effective July 26, 2019, inserted the subsection headings in subsections (a), (b), and (c); and, in subsection (a), substituted “districts” for “jurisdictions” twice in the first sentence, and added the last four sentences.

Part 8. Administration and Enforcement.

§ 105-164.43. [Repealed]

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.”

§ 105-164.43A.

Recodified as G.S. 105-164.42 H(a) and G.S. 105-164.42 I(a) by Session Laws 2001-347, s. 1.1, effective August 8, 2001. See note.

Editor’s Note.

Session Laws 2001-347, s. 1.1, effective August 8, 2001, recodifies G.S. 105-164.43 A(a) as G.S. 105-164.42 H(a) and recodifies G.S. 105-164.43 AB(b) as G.S. 105-164.42 I(a).

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.43B.

Recodified as G.S. 105-164.42 I(b) by Session Laws 2001-347, s. 1.1, effective August 8, 2001. See note.

Editor’s Note.

Session Laws 2001-347, s. 1.1, effective August 8, 2001, recodifies G.S. 105-164.43 B as G.S. 105-164.42 I(b). For contingent expiration date, see note regarding Session Laws 2001-347, s. 3.1.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.43C. [Repealed]

Repealed by Session Laws 2001-347, s. 1.2, effective August 8, 2001. See note.

Editor’s Note.

Sessions Laws 2001-347, s. 1.2, repealed this section effective August 8, 2001. For contingent expiration date of this repeal, see note regarding Session Laws 2001-347, s. 3.1.

Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13, provided for a January 1, 2006, contingent expiration date. However, Session Laws 2005-276, s. 33.31, amended Session Laws 2001-347, s. 3.1, as amended by Session Laws 2003-416, s. 13 to read: “Part 1 of this act [which enacted Part 7A of Article 5 of Chapter 105] is effective when it becomes law [August 8, 2001].”

§ 105-164.43D. Applicable due date when due date falls on a weekend, holiday, or when the Federal Reserve Bank is closed.

  1. Weekends and Holidays. —  When the last day for doing an act required or permitted by this Article or Subchapter VIII of this Chapter falls on a Saturday, Sunday, or holiday, the act is considered to be done within the prescribed time limit if it is done on the next business day.
  2. Federal Reserve Bank Closure. —  If the Federal Reserve Bank is closed on a due date that prohibits a person from making a payment by ACH debit or credit as required by this Article or Subchapter VIII of this Chapter, the payment is timely if made on the next day the Federal Reserve Bank is open.

History. 2014-3, s. 14.10.

Editor’s Note.

Session Laws 2014-3, s. 17.1 made this section effective May 29, 2014.

Session Laws 2014-3, s. 14.10, enacted this section as G.S. 105-164.45 . It has been renumbered as G.S. 105-164.43 D at the direction of the Revisor of Statutes.

§ 105-164.44. Penalty and remedies of Article 9 applicable.

All provisions not inconsistent with this Article in Article 9, entitled “General Administration — Penalties and Remedies” of Subchapter I of Chapter 105 of the General Statutes, including but not limited to, administration, auditing, making returns, promulgation of rules and regulations by the Secretary, additional taxes, assessment procedure, imposition and collection of taxes and the lien thereof, assessments, refunds and penalties are hereby made a part of this Article and shall be applicable thereto.

History. 1957, c. 1340, s. 5; 1973, c. 476, s. 193.

Editor’s Note.

Section 105-116.1, referred to in subsection (c), was repealed by Session Laws 2013-316, s. 4.1(a), effective July 1, 2014.

§ 105-164.44A. [Repealed]

Repealed by Session Laws 1991, c. 45, s. 18.

§ 105-164.44B. [Repealed]

Repealed by Session Laws 2011-145, s. 13.27(a), effective July 1, 2011.

History. 1983 (Reg. Sess., 1984), c. 1116, s. 88; 1987, c. 738, s. 150; 1989, c. 752, s. 159; 1993, c. 321, ss. 290(a), 290(b); 1993 (Reg. Sess., 1994), c. 591, s. 9, c. 769, s. 27.1(a), (b); repealed by 2011-145, s. 13.27(a), effective July 1, 2011.

Editor’s Note.

Former G.S. 105-164.44 B pertained to the transfer to Wildlife Resources Fund of taxes on hunting and fishing supplies and equipment.

§ 105-164.44C. [Repealed]

Repealed by Session Laws 2001-424, s. 34.15(a)(1), as amended by Session Laws 2002-126, s. 30A.1, effective July 1, 2002.

§ 105-164.44D. [Repealed]

Repealed by Session Laws 2015-241, s. 2.2(b), effective July 1, 2015.

History. 1991, c. 689, s. 322; repealed by 2015-241, s. 2.2(b), effective July 1, 2015.

Editor’s Note.

Former G.S. 105-164.4 D pertained to reimbursement for sales tax exemption for purchases by the Department of Transportation.

§ 105-164.44E. (Repealed effective July 1, 2030) Transfer to the Dry-Cleaning Solvent Cleanup Fund.

  1. Transfer. —  At the end of each quarter, the Secretary must transfer to the Dry-Cleaning Solvent Cleanup Fund established under G.S. 143-215.104 C an amount equal to fifteen percent (15%) of the net State sales and use taxes collected under G.S. 105-164.4(a)(4) during the previous fiscal year, as determined by the Secretary based on available data.
  2. Sunset. —  This section is repealed effective July 1, 2030.

History. 2000-19, s. 1.1; 2009-483, ss. 6, 8; 2019-237, s. 6(b).

Editor’s Note.

Session Laws 2009-483, s. 6, amended Session Laws 2000-19, s. 23, making the enactment of this section effective April 1, 2003, and deleting the June 30, 2010, expiration date for this section. Now see subsection (b) of this section for sunset provision.

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, 2009-483, s. 8, effective August 26, 2009, inserted the subsection (a) designation and subsection heading; and added subsection (b).

Session Laws 2019-237, s. 6(b), effective November 1, 2019, substituted “July 1, 2030” for “July 1, 2020” in subsection (b).

§ 105-164.44F. Distribution of part of telecommunications taxes to cities.

  1. Amount. —  The Secretary must distribute part of the taxes imposed by G.S. 105-164.4(a)(4c) on telecommunications service and ancillary service. The Secretary must make the distribution within 75 days after the end of each calendar quarter. The amount the Secretary must distribute is the following percentages of the net proceeds of the taxes collected during the quarter:
    1. Eighteen and seventy one hundredths percent (18.70%) minus two million six hundred twenty thousand nine hundred forty-eight dollars ($2,620,948), must be distributed to cities in accordance with this section. The deduction is one-fourth of the annual amount by which the distribution to cities of the gross receipts franchise tax on telephone companies, imposed by former G.S. 105-20, was required to be reduced beginning in fiscal year 1995-96 as a result of the “freeze deduction.”
    2. Seven and seven tenths percent (7.7%) must be distributed to counties and cities as provided in G.S. 105-164.44 I.
  2. Share of Cities Incorporated on or After January 1, 2001. —  The share of a city incorporated on or after January 1, 2001, is its per capita share of the amount to be distributed to all cities incorporated on or after this date. This amount is the proportion of the total to be distributed under this section that is the same as the proportion of the population of cities incorporated on or after January 1, 2001, compared to the population of all cities. In making the distribution under this subsection, the Secretary must use the most recent annual population estimates certified to the Secretary by the State Budget Officer.
  3. Share of Cities Incorporated Before January 1, 2001. —  The share of a city incorporated before January 1, 2001, is its proportionate share of the amount to be distributed to all cities incorporated before this date. A city’s proportionate share for a quarter is based on the amount of telephone gross receipts franchise taxes attributed to the city under G.S. 105-116.1 for the same quarter that was the last quarter in which taxes were imposed on telephone companies under repealed G.S. 105-120 . The amount to be distributed to all cities incorporated before January 1, 2001, is the amount determined under subsection (a) of this section, minus the amount distributed under subsection (b) of this section.The following changes apply when a city incorporated before January 1, 2001, alters its corporate structure. When a change described in subdivision (2) or (3) occurs, the resulting cities are considered to be cities incorporated before January 1, 2001, and the distribution method set out in this subsection rather than the method set out in subsection (b) of this section applies:
    1. If a city dissolves and is no longer incorporated, the proportional shares of the remaining cities incorporated before January 1, 2001, must be recalculated to adjust for the dissolution of that city.
    2. If two or more cities merge or otherwise consolidate, their proportional shares are combined.
    3. If a city divides into two or more cities, the proportional share of the city that divides is allocated among the new cities on a per capita basis.
  4. Share of Cities Served by a Telephone Membership Corporation. —  The share of a city served by a telephone membership corporation, as described in Chapter 117 of the General Statutes, is computed as if the city was incorporated on or after January 1, 2001, under subsection (b) of this section. If a city is served by a telephone membership corporation and another provider, then its per capita share under this subsection applies only to the population of the area served by the telephone membership corporation.
  5. Ineligible Cities. —  An ineligible city is disregarded for all purposes under this section. A city incorporated on or after January 1, 2000, is not eligible for a distribution under this section unless it meets both of the following requirements:
    1. It is eligible to receive funds under G.S. 136-41.2 .
    2. A majority of the mileage of its streets is open to the public.
  6. Nature. —  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.

History. 2001-424, s. 34.25(b); 2001-430, s. 10; 2001-487, s. 67(d); 2002-120, s. 4; 2004-203, s. 5(g); 2005-276, s. 33.19; 2005-435, s. 34(c); 2006-33, s. 8; 2006-66, ss. 24.1(d), (e), (f), (g); 2006-151, s. 7; 2007-145, s. 9(a); 2007-323, ss. 31.2(a), (b); 2009-451, s. 27A.2(c).

Editor’s Note.

Session Laws 2001-424, s. 34.25(b) amends subsection (a) of this section, as enacted by House Bill 571, contingent on House Bill 571 becoming law on or before January 1, 2002. House Bill 571 is Session Laws 2001-430, effective January 1, 2002.

Session Laws 2006-66, s. 24.1(d), which had amended subsection (a) by substituting “(18.70%)” for “(18.03%)” and making related changes, was contingent on House Bill 2047, 2005 General Assembly (2006-151) not becoming law. Session Laws 2006-151 did become law, so session laws 2006-66, s. 24.1(d) did not take effect.

Session Laws 2006-66, s. 24.1(e), which had amended subsection (a) by substituting “(19.42%)” for “(18.70%)” and made related changes, was contingent on House Bill 2047, 2005 General Assembly (2006-151) not becoming law. Since Session Laws 2006-151 did become law, S.L. 2006-66, s. 24.1(e) was not given effect. Session Laws 2006-66, s. 24.1(e), was repealed by Session Laws 2007-323, s. 31.2(a), effective July 31, 2007.

Session Laws 2006-66, s. 24.1(g), as amended by Session Laws 2007-145, s. 9(a), effective August 1, 2007, and applicable to taxes collected on or after that date, had substituted “Nineteen and forty-two one-hundredths percent (19.42%)” for “Eighteen and seventy one hundredths percent (18.70%)” in subdivision (a)(1); and had substituted “Eight percent (8%)” for “Seven and seven tenths percent (7.7%)” in subdivision (a)(2). Session Laws 2006-66, s. 24.1(g), was repealed by Session Laws 2007-323, s. 31.2(a), (b), effective July 31, 2007, and the amendments to this section have therefore not been given effect.

Session Laws 2006-151, s. 20, is a severability clause.

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 [repealed] for the calendar quarter that begins April 1, 2014.”

Effect of Amendments.

Session Laws 2004-203, s. 5(g), effective August 17, 2004, substituted “State Budget Officer” for “State Planning Officer” in subsection (b).

Session Laws 2005-276, s. 33.19, effective October 1, 2005, substituted “eighteen and three one-hundredths percent (18.03%)” for “eighteen and twenty-six hundredths percent (18.26%)” in subsection (a).

Session Laws 2005-435, s. 34.(c), effective January 1, 2006, made a minor stylistic change in subdivision (e)(2).

Session Laws 2006-33, s. 8, effective January 1, 2007, inserted “service and ancillary” preceding “service” in the first sentence of subsection (a).

Session Laws 2006-66, s. 24.1(f), as amended by Session Laws 2007-323, s. 31.2(b), effective January 1, 2007, and applicable to taxes collected on or after that date, substituted “eighteen and seventy one-hundredths percent (18.70%)” for “eighteen and three one hundredths percent (18.03%)” in the first sentence of subdivision (a)(1); and in subdivision (a)(2), substituted “seven-tenths” for “twenty three one hundredths” and “(7.7%)” for “(7.23%).”

Session Laws 2006-151, s. 7, effective January 1, 2007, and applicable to the distribution made within 75 days after March 31, 2007, for the quarter starting January 1, 2007, in the introductory paragraph of subsection (a), deleted “to the cities” following “The secretary must distribute” near the beginning, substituted “the following percentages” for “eighteen and three one-hundredths percent (18.03%)”, and made minor punctuation changes; in subdivision (a)(1), added “Eighteen and three one-hundredths percent (18.03%),” to the beginning of the first sentence, substituted “($2,620,948), must be distributed to cities in accordance with this section.” for “($2,620,948).” at the end of the first sentence, substituted “ The” for “This” at the beginning of the second sentence, and deleted the third sentence; added subdivision (a)(2).

Session Laws 2009-451, s. 27A.2(c), effective October 1, 2009, and applicable to distributions for months beginning on or after October 1, 2009, and expiring July 1, 2011, substituted “Sixteen and thirty-six hundredths percent (16.36%)” for “Eighteen and seventy one hundredths percent (18.70%)” in the first sentence of subdivision (a)(1), and “Six and seventy-four hundredths percent (6.74%)” for “Seven and seven tenths percent (7.7%)” at the beginning of subdivision (a)(2).

§ 105-164.44G. [Repealed]

Repealed by Session Laws 2013-316, s. 3.1(b), effective January 1, 2014, and applicable to sales made on or after that date.

History. 2003-400, s. 16; 2009-445, s. 15(a); repealed by 2013-316, s. 3.1(b), effective January 1, 2014.

Editor’s Note.

Former G.S. 105-164.44 G pertained to distribution of part of tax on modular homes.

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.”

§ 105-164.44H. Transfer to State Public School Fund.

Each fiscal year, the Secretary of Revenue shall transfer at the end of each quarter from the State sales and use tax net collections received by the Department of Revenue under Article 5 of Chapter 105 of the General Statutes to the State Treasurer for the State Public School Fund, one-fourth of the amount transferred the preceding fiscal year plus or minus the percentage of that amount by which the total collection of State sales and use taxes increased or decreased during the preceding fiscal year.

History. 2005-276, s. 7.51(b).

Editor’s Note.

Session Laws 2005-276, s. 7.51(c), as amended by Session Laws 2005-345, s. 7, and as amended by Session Laws 2006-66, s. 7.20(b), provides: “Notwithstanding the provisions of G.S. 105-164.44 H, for the 2006-2007 fiscal year, the amount transferred to the State Public School Fund each quarter shall equal one-fourth of the amount refunded under G.S. 105-164.14(c)(2b) and (2c) during the 2005-2006 fiscal year for State sales and use taxes only plus or minus the percentage of that amount by which the total collection of State sales and use tax increased or decreased during the preceding fiscal year. The remainder of this section becomes effective July 1, 2005, and applies to sales made on or after that date.”

Session Laws 2005-276, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2005’.”

Session Laws 2005-276, s. 46.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2005-2007 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2005-2007 fiscal biennium.”

Session Laws 2005-276, s. 46.5 is a severability clause.

§ 105-164.44I. Distribution of part of sales tax on video programming service and telecommunications service to counties and cities.

  1. Distribution. —  The Secretary must distribute to the counties and cities part of the taxes imposed by G.S. 105-164.4(a)(4c) on telecommunications service and G.S. 105-164.4(a)(6) on video programming service. The Secretary must make the distribution within 75 days after the end of each calendar quarter. The amount the Secretary must distribute is the sum of the revenue listed in this subsection. From this amount, the Secretary must first make the distribution required by subsection (b) of this section and then distribute the remainder in accordance with subsections (c) and (d) of this section. The revenue to be distributed under this section consists of the following:
    1. The amount specified in G.S. 105-164.44 F(a)(2).
    2. Twenty three and six tenths percent (23.6%) of the net proceeds of the taxes collected during the quarter on video programming, other than on direct-to-home satellite service.
    3. Thirty-seven and one tenths percent (37.1%) of the net proceeds of the taxes collected during the quarter on direct-to-home satellite service.
  2. Supplemental PEG Channel Support. — G.S. 105-164.44 J sets out the requirements for receipt by a county or city of supplemental PEG channel support funds distributed under this subsection. The Secretary must include the applicable amount of supplemental PEG channel support in each quarterly distribution to a county or city. The amount to include is one-fourth of the share of each qualifying PEG channel certified by the city or county under G.S. 105-164.44 J. The share of each certified PEG channel is the sum of four million dollars ($4,000,000) and the amount of any funds returned to the Secretary in the prior fiscal year under G.S. 105-164.44J(d) divided by the number of PEG channels certified under G.S. 105-164.44J. A county or city may not receive PEG channel support under this subsection for more than three qualifying PEG channels.For purposes of this subsection, the term “qualifying PEG channel” has the same meaning as in G.S. 105-164.44J.
  3. 2006-2007 Fiscal Year Distribution. —  The share of a county or city is its proportionate share of the amount to be distributed to all counties and cities under this subsection. The proportionate share of a county or city is the base amount for the county or city compared to the base amount for all other counties and cities. The base amount of a county or city that did not impose a cable franchise tax under G.S. 153A-154 or G.S. 160A-214 before July 1, 2006, is two dollars ($2.00) times the most recent annual population estimate for that county or city. The base amount of a county or city that imposed a cable franchise tax under either G.S. 153A-154 or G.S. 160A-214 before July 1, 2006, is the amount of cable franchise tax and subscriber fee revenue the county or city certifies to the Secretary that it imposed during the first six months of the 2006-2007 fiscal year. A county or city must make this certification by March 15, 2007. The certification must specify the amount of revenue that is derived from the cable franchise tax and the amount that is derived from the subscriber fee. (c1) Revised Certification. — If a county or city determines that the amount of cable franchise tax it imposed during the first six months of the 2006-2007 fiscal year differs from the amount certified to the Secretary under subsection (c) of this section, the county or city may submit a new certification to the Secretary revising the amount. For distributions for quarters beginning on or after October 1, 2007, the Secretary must determine the proportionate share of a county or city based upon certifications submitted on or before October 1, 2007. For distributions for quarters beginning on or after April 1, 2008, the Secretary must determine the proportionate share of a county or city based upon certifications submitted on or before April 1, 2008. Certifications submitted after April 1, 2008, may not be used to adjust a county’s or city’s base amount under subsection (c) of this section.
  4. Subsequent Distributions. —  For subsequent fiscal years, the Secretary must multiply the amount of a county’s or city’s share under this section for the preceding fiscal year by the percentage change in its population for that fiscal year and add the result to the county’s or city’s share for the preceding fiscal year to obtain the county’s or city’s adjusted amount. Each county’s or city’s proportionate share for that year is its adjusted amount compared to the sum of the adjusted amounts for all counties and cities.
  5. Use of Proceeds. —  A county or city that imposed subscriber fees during the first six months of the 2006-2007 fiscal year must use a portion of the funds distributed to it each fiscal year under subsections (c) and (d) of this section for the operation and support of PEG channels. The amount of funds that must be used for PEG channel operation and support in fiscal year 2006-2007 is two times the amount of subscriber fee revenue the county or city certified to the Secretary that it imposed during the first six months of the 2006-2007 fiscal year. The amount of funds that must be used for PEG channel operation and support in subsequent fiscal years is the same proportionate amount of the funds that were distributed under subsections (c) and (d) of this section and used for this purpose in fiscal year 2006-2007.A county or city that used part of its franchise tax revenue in fiscal year 2005-2006 for the operation and support of PEG channels or a publicly owned and operated television station must use the funds distributed to it under subsections (c) and (d) of this section to continue the same level of support for the PEG channels and public stations. The remainder of the distribution may be used for any public purpose.
  6. Late Information. —  A county or city that does not submit information that the Secretary needs to make a distribution by the date the information is due is excluded from the distribution. If the county or city later submits the required information, the Secretary must include the county or city in the distribution for the quarter that begins after the date the information is received.
  7. Population Determination. —  In making population determinations under this section, the Secretary must use the most recent annual population estimates certified to the Secretary by the State Budget Officer. For purposes of the distributions made under this section, the population of a county is the population of its unincorporated areas plus the population of an ineligible city in the county, as determined under this section.
  8. City Changes. —  The following changes apply when a city alters its corporate structure or incorporates:
    1. If a city dissolves and is no longer incorporated, the proportional shares of the remaining counties and cities must be recalculated to adjust for the dissolution of that city.
    2. If two or more cities merge or otherwise consolidate, their proportional shares are combined.
    3. If a city divides into two or more cities, the proportional share of the city that divides is allocated among the new cities on a per capita basis.
    4. If a city incorporates after January 1, 2007, and the incorporation is not addressed by subdivisions (2) or (3) of this subsection, the share of the county in which the new city is located is allocated between the county and the new city on a per capita basis.
  9. Ineligible Cities. —  An ineligible city is disregarded for all purposes under this section. A city incorporated on or after January 1, 2000, is not eligible for a distribution under this section unless it meets both of the following requirements:
    1. It is eligible to receive funds under G.S. 136-41.2 .
    2. A majority of the mileage of its streets is open to the public.
  10. Nature. —  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.

History. 2006-151, s. 8; 2006-66, ss. 24.1(h), (i); 2007-145, s. 9(a); 2007-323, ss. 31.2(a), (b); 2007-527, s. 28; 2008-148, ss. 1, 2; 2009-451, s. 27A.2(d); 2010-158, s. 11(b); 2013-414, s. 45.

Editor’s Note.

Session Laws 2006-151, s. 22, makes this section effective January 1, 2007, and applicable to the distribution made within 75 days after March 31, 2007, for the quarter starting January 1, 2007.

G.S. 160A-214 , referred to in subsection (c), was repealed by Session Laws 2006-151, s. 13, effective January 1, 2007.

G.S. 153A-154 , referred to in subsection (c), was repealed by Session Laws 2006-151, s. 11, effective January 1, 2007.

Session Laws 2006-66, s. 24.1(i), as amended by Session Laws 2007-145, s. 9(a), effective August 1, 2007, and applicable to taxes collected on or after that date, had substituted “Twenty-five percent (25%)” for “Twenty three and six tenths percent (23.6%)” in subdivision (a)(2); and in subdivision (a)(3), had substituted “five tenths” for “one tenths” and “(37.5%)” for “(37.1%).” Session Laws 2006-66, s. 24.1(g), was repealed by Session Laws 2007-323, s. 31.2(a), (b), effective July 31, 2007, and the amendments to this section have therefore not been given effect.

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 2006-151, s. 16, provides: “To make the distribution required under G.S. 105-164.44 I(b), as enacted by this act, for the 2006-2007 fiscal year, a county or city must certify to the Secretary of Revenue by March 15, 2007, the number of qualifying PEG channels it operates.”

Session Laws 2006-151, s. 20, is a severability clause.

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 [repealed] for the calendar quarter that begins April 1, 2014.”

Effect of Amendments.

Session Laws 2006-66, s. 24.1(h), as amended by Session Laws 2007-323, s. 31.2(b), effective January 1, 2007, and applicable to taxes collected on or after that date, substituted “Twenty-three and six tenths percent (23.6%)” for “Twenty-two and sixty-one one-hundredths percent (22.61%)” in subdivision (a)(2); in subdivision (a)(3), added “and one-tenths” preceding “percent” and substituted “(37.1%)” for “(37%).”

Session Laws 2007-527, s. 28, effective August 31, 2007, added subsection (c1).

Session Laws 2008-148, ss. 1 and 2, effective August 2, 2008, rewrote subsections (b) and (e).

Session Laws 2009-451, s. 27A.2(d), effective October 1, 2009, and applicable to distributions for months beginning on or after October 1, 2009, and expiring July 1, 2011, substituted “Twenty and sixty-five hundredths percent (20.65%)” for “Twenty three and six tenths percent (23.6%)” in subdivision (a)(2), and “Thirty-two and forty-six hundredths percent (32.46%)” for “Thirty-seven and one tenths percent (37.1%)” in subdivision (a)(3).

Session Laws 2010-158, s. 11(b), effective July 1, 2011, and applicable to distributions made on or after July 1, 2011, for quarters starting on or after April 1, 2011, in the first paragraph of subsection (b), rewrote the third sentence, which formerly read: “The amount to include is one-fourth of twenty-five thousand dollars ($25,000) for each qualifying PEG channel certified by the county or city under G.S. 105-164.44 J,” and in the last paragraph, deleted the first three sentences, which pertained to the amount of money distributed for qualifying PEG channels.

Session Laws 2013-414, s. 45, effective August 23, 2013, in the fourth sentence of the introductory language of subsection (a), substituted “From this amount, the Secretary must first make the distribution required by subsection (b) of this section and then distribute” for “The Secretary must distribute two million dollars ($2,000,000) of this amount in accordance with subsection (b) of this section and.”

CASE NOTES

Tax Does Not Violate Supremacy Clause. —

Session Laws 2006-151, s. 8, does not violate the supremacy clause of U.S. Const., Art. VI because: (1) 47 U.S.C. § 548(b), 17 U.S.C. § 122, and 47 U.S.C. § 341(a) do not mandate equal tax treatment by states of satellite and cable operators; and (2) 47 U.S.C. § 152 expressly permits state taxation of satellite operators, and authorizes the transfer by states of collected funds to local governments. Directv, Inc. v. Tolson, 498 F. Supp. 2d 784, 2007 U.S. Dist. LEXIS 55774 (E.D.N.C. 2007), aff'd, 513 F.3d 119, 2008 U.S. App. LEXIS 450 (4th Cir. 2008).

Tax Does Not Violate Commerce Clause. —

In requiring satellite operators and cable operators to pay the same amount in sales taxes, Session Laws 2006-151, s. 8, does not violate the commerce clause of U.S. Const., Art. I, because the dormant commerce clause does not forbid cable operators from receiving rights-of-way without making additional payments. Directv, Inc. v. Tolson, 498 F. Supp. 2d 784, 2007 U.S. Dist. LEXIS 55774 (E.D.N.C. 2007), aff'd, 513 F.3d 119, 2008 U.S. App. LEXIS 450 (4th Cir. 2008).

Satellite Operators Lacked Standing to Challenge Tax. —

Although satellite operators argued that enforcement of Session Laws 2006-151, s. 8, would subsidize cable operators’ cost of doing business, the alleged subsidy did not exist because obtaining rights-of-way was never a cost of a cable operator’s business in North Carolina. Directv, Inc. v. Tolson, 498 F. Supp. 2d 784, 2007 U.S. Dist. LEXIS 55774 (E.D.N.C. 2007), aff'd, 513 F.3d 119, 2008 U.S. App. LEXIS 450 (4th Cir. 2008).

Federal Court Review of Constitutional Challenges Precluded on Grounds of Comity. —

Satellite operators that sought: (1) a declaratory judgment that Session Laws 2006-151, s. 8, violated the commerce and supremacy clauses of U.S. Const., Arts. I and VI; and (2) an injunction prohibiting enforcement of Session Laws 2006-151, s. 8, could not pursue their claims because the Tax Injunction Act, 28 U.S.C. § 1341, prohibited the court from enjoining or altering tax collection and principles of comity precluded the court from requiring local governments to levy franchise fees on cable operators. Directv, Inc. v. Tolson, 498 F. Supp. 2d 784, 2007 U.S. Dist. LEXIS 55774 (E.D.N.C. 2007), aff'd, 513 F.3d 119, 2008 U.S. App. LEXIS 450 (4th Cir. 2008).

§ 105-164.44J. Supplemental PEG channel support.

  1. Definitions. —  The following definitions apply in this section:
    1. Existing agreement. — Defined in G.S. 66-350 .
    2. PEG channel. — Defined in G.S. 66-350 .
    3. PEG channel operator. — An entity that does one or more of the following:
      1. Produces programming for delivery on a PEG channel.
      2. Provides facilities for the production of programming or playback of programming for delivery on a PEG channel.
    4. Qualifying PEG channel. — A PEG channel that operates for at least 90 days during a fiscal year and that meets all of the following programming requirements:
      1. It delivers at least eight hours of scheduled programming a day.
      2. It delivers at least six hours and 45 minutes of scheduled, non-character-generated programming a day.
      3. Its programming content does not repeat more than fifteen percent (15%) of the programming content on any other PEG channel provided to the same county or city.
    5. Supplemental PEG channel support funds. — The amount distributed to a county or city under G.S. 105-164.44 I(b).
  2. Certification. —  A county or city must certify to the Secretary by July 15 of each year all of the qualifying PEG channels provided for its use during the preceding fiscal year by a cable service provider under either G.S. 66-357 or an existing agreement. A county or city may not certify more than three qualifying PEG channels. The certification must include all of the following:
    1. An identification of each channel as a public, an education, or a government channel.
    2. The name and signature of the PEG channel operator for each channel. If a qualifying PEG channel has more than one PEG channel operator, the county or city must include the name of each operator of the PEG channel. A PEG channel operator may be included on the certification of only one county or city for each type of PEG channel that it operates.
    3. Any other information required by the Secretary.
  3. Use of Funds. —  A county or city must use the supplemental PEG channel support funds distributed to it for the operation and support of each of the qualifying PEG channels it certifies by allocating the amount it receives equally among each of the qualifying PEG channels. A county or city must distribute the supplemental PEG channel support funds to the PEG channel operator of the qualifying PEG channel within 30 days of its receipt of the supplemental PEG channel support funds from the Department, or as specified in an interlocal agreement. If a qualifying PEG channel has more than one PEG channel operator, the county or city must distribute the amount allocated for that PEG channel equally to each PEG channel operator, or as specified in an interlocal agreement.
  4. Errors in Certification. —  If a county or city determines that it certified a PEG channel in error, the county or city must submit a revised certification to the Secretary, and the county or city must return all supplemental PEG channel support funds distributed to it as a result of the error. The Secretary must add the funds returned to the total amount of supplemental PEG channel support funds to be allocated in the following fiscal year.

History. 2008-148, s. 3; 2010-158, s. 11(c).

Editor’s Note.

Session Laws 2008-148, s. 6, made this section effective August 2, 2008.

Session Laws 2008-148, s. 4, provides: “Notwithstanding G.S. 105-164.44 J(b), as enacted by this act, certifications of qualifying PEG channels for use in distributing fiscal year 2008-2009 supplemental PEG channel support funds may be submitted to the Secretary on or before September 15, 2008. The distribution of supplemental PEG channel support funds made within 75 days after June 30, 2008, must be based on the qualifying PEG channel certification in effect for the prior distribution.”

Effect of Amendments.

Session Laws 2010-158, s. 11(c), effective July 1, 2010, added the second sentence in the introductory paragraph of subsection (b).

§ 105-164.44K. Distribution of part of tax on electricity to cities.

  1. Distribution. —  The Secretary must distribute to cities forty-four percent (44%) of the net proceeds of the tax collected under G.S. 105-164.4 on electricity, less the cost to the Department of administering the distribution. Each city’s share of the amount to be distributed is its franchise tax share calculated under subsection (b) of this section plus its ad valorem share calculated under subsection (c) of this section. If the net proceeds of the tax allocated under this section are not sufficient to distribute the franchise tax share of each city under subsection (b) of this section, the proceeds shall be distributed to each city on a pro rata basis. The Secretary must make the distribution within 75 days after the end of each quarter.
  2. Franchise Tax Share. —  The quarterly franchise tax share of a city is the total amount of electricity gross receipts franchise tax distributed to the city under repealed G.S. 105-116.1 or repealed provisions of G.S. 159B-27 for the same related quarter that was the last quarter in which taxes were imposed on electric power companies under repealed G.S. 105-116 or repealed provisions of G.S. 159B-27 . The quarterly franchise tax share of a city includes adjustments made for the hold-harmless amounts under repealed G.S. 105-116 . If the franchise tax share of a city, including the hold-harmless adjustments, is less than zero, then the amount is zero. The determination made by the Department with respect to a city’s franchise tax share is final and is not subject to administrative or judicial review.The franchise tax share of a city that has dissolved, merged with another city, or divided into two or more cities since it received a distribution under repealed G.S. 105-116.1 or repealed provisions of G.S. 159B-27 is adjusted as follows:
    1. If a city dissolves and is no longer incorporated, the franchise tax share of the city is added to the amount distributed under subsection (c) of this section.
    2. If two or more cities merge or otherwise consolidate, their franchise tax shares are combined.
    3. If a city divides into two or more cities, the franchise tax share of the city that divides is allocated among the new cities in proportion to the total amount of ad valorem taxes levied by each on property having a tax situs in the city.
  3. Ad Valorem Share. —  The ad valorem share of a city is its proportionate share of the amount that remains for distribution after determining each city’s franchise tax share under subsection (b) of this section. The prohibitions in G.S. 105-472(d) on the receipt of funds by a city apply to the distribution under this subsection.A city’s proportionate share is the amount of ad valorem taxes it levies on property having a tax situs in the city compared to the ad valorem taxes levied by all cities on property having a tax situs in the cities. The ad valorem method set out in G.S. 105-472(b)(2) applies in determining the share of a city under this subsection based on ad valorem taxes, except that the amount of ad valorem taxes levied by a city does not include ad valorem taxes levied on behalf of a taxing district and collected by the city.
  4. Nature. —  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. The Governor may not reduce or withhold the distribution.

History. 2013-316, s. 4.3(a); 2013-363, s. 11.2.

Editor’s Note.

Session Laws 2013-316, s. 4.3(b), makes this section effective for quarters beginning on or after July 1, 2014.

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 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. 105-164.44 K 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. 105-164.44 K(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. 105-164.44 K.

“(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. 105-164.44 L 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. 105-164.44 L(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. 105-164.44 L.”

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 [repealed] for the calendar quarter that begins April 1, 2014.”

Effect of Amendments.

Session Laws 2013-363, s. 11.2, effective July 1, 2014, inserted “or repealed provisions of G.S. 159B-27 ” throughout subsection (b).

§ 105-164.44L. Distribution of part of tax on piped natural gas to cities.

  1. Distribution. —  The Secretary must distribute to cities twenty percent (20%) of the net proceeds of the tax collected under G.S. 105-164.4 on piped natural gas, less the cost to the Department of administering the distribution. Each city’s share of the amount to be distributed is its excise tax share calculated under subsection (b) of this section plus its ad valorem share calculated under subsection (c) of this section. A gas city will also receive an amount calculated under subsection (b1) of this section as part of its excise tax share. If the net proceeds of the tax allocated under this section are not sufficient to distribute the excise tax share of each city under subsection (b) of this section and the gas city share under subsection (b1) of this section, the proceeds shall be distributed to each city on a pro rata basis. The Secretary must make the distribution within 75 days after the end of each quarter.
  2. Excise Tax Share. —  The quarterly excise tax share of a city is the amount of piped natural gas excise tax distributed to the city under repealed G.S. 105-187.44 for the same related quarter that was the last quarter in which taxes were imposed on piped natural gas under repealed Article 5E of this Chapter. The determination made by the Department with respect to a city’s excise tax share is final and is not subject to administrative or judicial review.The excise tax share of a city that has dissolved, merged with another city, or divided into two or more cities since it received a distribution under repealed G.S. 105-187.44 is adjusted as follows:
    1. If a city dissolves and is no longer incorporated, the excise tax share of the city is added to the amount distributed under subsection (c) of this section.
    2. If two or more cities merge or otherwise consolidate, their excise tax shares are combined.
    3. If a city divides into two or more cities, the excise tax share of the city that divides is allocated among the new cities in proportion to the total amount of ad valorem taxes levied by each on property having a tax situs in the city.

      (b1) Gas Cities. — In addition to the excise tax share calculated under subsection (b) of this section, a gas city shall receive as part of its excise tax share a distribution calculated under this subsection. The Secretary must determine the amount the gas city would have received under repealed G.S. 105-187.44 for the last year in which taxes were imposed under repealed Article 5E of this Chapter if piped natural gas consumed by the city or delivered by the city to a customer had not been exempt from tax under repealed G.S. 105-187.41(c)(1) and G.S. 105-187.41(c)(2), excluding any amount received under subsection (b) of this section, and divide that amount by four to calculate the quarterly distribution amount for a gas city under this subsection. A gas city must report the information required by the Secretary to make the distribution under this section in the form, manner, and time required by the Secretary. The determination made by the Department with respect to a gas city’s share under this subsection is final and is not subject to administrative or judicial review. For purposes of this section, the term “gas city” is a city in this State that operated a piped natural gas distribution system as of July 1, 1998. These cities are Bessemer City, Greenville, Kings Mountain, Lexington, Monroe, Rocky Mount, Shelby, and Wilson.

  3. Ad Valorem Share. —  The ad valorem share of a city is its proportionate share of the amount that remains for distribution after determining each city’s excise tax share under subsection (b) of this section. Only cities that receive an excise tax share under subsection (b) of this section for any quarter of the year are eligible to receive an ad valorem share. The prohibitions in G.S. 105-472(d) on the receipt of funds by a city apply to the distribution under this subsection.A city’s proportionate share is the amount of ad valorem taxes it levies on property having a tax situs in the city compared to the ad valorem taxes levied by all cities on property having a tax situs in the cities. The ad valorem method set out in G.S. 105-472(b)(2) applies in determining the share of a city under this section based on ad valorem taxes, except that the amount of ad valorem taxes levied by a city does not include ad valorem taxes levied on behalf of a taxing district and collected by the city.
  4. Nature. —  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. The Governor may not reduce or withhold the distribution.

History. 2013-316, s. 4.3(a); 2014-3, s. 14.13(e); 2014-39, ss. 1(b)-(d).

Editor’s Note.

Session Laws 2013-316, s. 4.3(b), makes this section effective for quarters beginning on or after July 1, 2014.

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.”

Section 105-187.44, referred to throughout this section, was repealed by Session Laws 2013-316, s. 4.1(d), effective July 1, 2014.

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. 105-164.44 K 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. 105-164.44 K(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. 105-164.44 K.

“(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. 105-164.44 L 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. 105-164.44 L(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. 105-164.44 L.”

Session Laws 2014-39, s. 1(e), provides: “Subsection (a) of this section becomes effective July 1, 2014, and expires July 1, 2015, and applies to the gross receipts of piped natural gas or electricity billed on or after July 1, 2014, and before July 1, 2015. Subsection (b) of this section is effective for quarters beginning on or after July 1, 2014. Subsection (c) and subsection (d) of this section are effective for quarters beginning on or after July 1, 2015. The remainder of this section is effective when it becomes law.

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 [repealed] for the calendar quarter that begins April 1, 2014.”

Effect of Amendments.

Session Laws 2014-3, s. 14.13(e), effective May 29, 2014, inserted the present second sentence in subsection (c).

Session Laws 2014-39, s. 1(b), effective for quarters beginning on or after July 1, 2014, rewrote the first paragraph of subsection (b).

Session Laws 2014-39, s. 1(c), (d), effective for quarters beginning on or after July 1, 2015, in subsection (a), added the present third sentence, and added “and the gas city share under subsection (b1) of this section” at the end of the fourth sentence; and added subsection (b1).

§ 105-164.44M. Transfer to Division of Aviation.

The net proceeds of the tax collected on aviation gasoline and jet fuel under G.S. 105-164.4 must be transferred within 75 days after the end of each fiscal year to the Highway Fund. This amount is annually appropriated from the Highway Fund to the Division of Aviation of the Department of Transportation for prioritized capital improvements to general aviation airports for time-sensitive aviation capital improvement projects for economic development purposes.

History. 2015-259, s. 4.1(d); 2017-57, s. 34.21(a).

Effect of Amendments.

Session Laws 2017-57, s. 34.21(a), effective January 1, 2018, substituted “general aviation airports” for “public airports” and made a stylistic change.

Local Option Sales and Use Taxes.

§§ 105-164.45 through 105-164.58. [Repealed]

Repealed by Session Laws 1971, c. 77, s. 1.

Cross References.

As to local government sales and use taxes, see G.S. 105-463 through 105-474.

§§ 105-165 through 105-176. [Repealed]

Repealed by Session Laws 1957, c. 1340, s. 5.

§§ 105-177, 105-178. [Repealed]

Repealed by Session Laws 1951, c. 643, s. 5.

§ 105-179. [Repealed]

Repealed by Session Laws 1957, c. 1340, s. 5.

§ 105-180. [Repealed]

Repealed by Session Laws 1951, c. 643, s. 5.

§ 105-181. [Repealed]

Repealed by Session Laws 1957, c. 1340, s. 5.

§ 105-182. [Repealed]

Repealed by Session Laws 1955, c. 1350, s. 19.

§§ 105-183 through 105-187. [Repealed]

Repealed by Session Laws 1957, c. 1340, s. 5.

Article 5A. North Carolina Highway Use Tax.

§ 105-187.1. Definitions.

  1. The following definitions and the definitions in G.S. 105-164.3 apply to this Article:
    1. Commissioner. — The Commissioner of Motor Vehicles.
    2. Division. — The Division of Motor Vehicles, Department of Transportation. (2a) Limited possession commitment. — Long-term lease or rental, short-term lease or rental, and vehicle subscriptions.
    3. Long-term lease or rental. — A lease or rental made under a written agreement to lease or rent one or more vehicles to the same person for a period of at least 365 continuous days and that is not a vehicle subscription.

      (3a) Park model RV. — A vehicle that meets all of the following conditions:

      1. Is designed and marketed as temporary living quarters for recreational, camping, travel, or seasonal use.
      2. Is certified by the manufacturer as complying with ANSI A119.5.
      3. Is built on a single chassis mounted on wheels with a gross trailer area not exceeding 400 square feet in the setup mode.
    4. Recreational vehicle. — Defined in G.S. 20-4.01 . The term also includes a park model RV.
    5. Rescue squad. — An organization that provides rescue services, emergency medical services, or both.
    6. Retailer. — A retailer as defined in G.S. 105-164.3 who is engaged in the business of selling, leasing, renting, or offering vehicle subscriptions for motor vehicles.
    7. Short-term lease or rental. — A lease or rental of a motor vehicle or motor vehicles, including a vehicle sharing service, that is not a long-term lease or rental or a vehicle subscription.
    8. Vehicle sharing service. — A service for which a person pays a membership fee for the right to use a motor vehicle or motor vehicles upon payment of an additional time-based or mileage-based fee.
    9. Vehicle subscription. — A written agreement that grants a person the right to use and exchange motor vehicles owned, directly or indirectly, by the person offering the agreement upon payment of a subscription fee, but it does not include a vehicle sharing service. The subscription fee must provide a person exclusive use of an agreed-upon number of motor vehicles at any given time during the full term of the subscription.
  2. This section does not apply to Chapter 20 of the General Statutes, including the licensing requirements, restrictions, limitations, and prohibitions on unfair methods of competition contained in Article 12 of that Chapter.

History. 1989, c. 692, s. 4.1; 1991, c. 79, s. 4; 2000-173, s. 10(a); 2001-424, s. 34.24(e); 2001-497, s. 2(b); 2002-72, s. 19(a); 2016-5, s. 3.19(a); 2019-69, s. 1.

Editor’s Note.

Session Laws 2003-383, s. 4, provides: “The General Assembly reaffirms its intent that the proceeds of the issuance of any bonds pursuant to the Highway Bond Act of 1996, Chapter 590 of the 1995 Session Laws, shall be used only for the purposes stated in that act, and for no other purpose.”

The section as amended by Session Laws 2016-5, s. 3.19(a), added the definition of “Park model RV” and designated it as subdivision (4), redesignating former subdivisions (4) through (7) as subdivisions (5) through (8), respectively. The definition of “Park model RV” has been redesignated as subdivision (3a), and the subsequent definitions have retained their former designations, at the direction of the Revisor of Statutes.

Subdivision (a)(2a) was added by Session Laws 2019-69, s. 1, as subdivision (a)(3c), and was redesignated at the direction of the Revisor of Statutes to maintain alphabetical order.

Session Laws 2019-69, s. 6, made the amendment to this section by Session Laws 2019-69, s. 1, effective October 1, 2019, and applicable to vehicle subscription agreements entered into on or after that date.

Effect of Amendments.

Session Laws 2016-5, s. 3.19(a), effective May 11, 2016, added the definition of “Park model RV”; and added the last sentence in subdivision (4).

Session Laws 2019-69, s. 1, designated the previously existing provisions as subsection (a); substituted “one or more vehicles” for “property” and “days and that is not a vehicle subscription” for “days” in subdivision (a)(3); and added subdivisions (a)(3c), (a)(6) through (a)(9), and subsection (b). For effective date and applicability, see editor’s note.

§ 105-187.2. Highway use tax imposed.

A tax is imposed on the privilege of using the highways of this State. This tax is in addition to all other taxes and fees imposed.

History. 1989, c. 692, s. 4.1.

§ 105-187.3. Rate of tax.

  1. Tax Base. —  The tax imposed by this Article is applied to the sum of the retail value of a motor vehicle for which a certificate of title is issued and any fee regulated by G.S. 20-101.1 . The tax does not apply to the sales price of a service contract, provided the charge is separately stated on the bill of sale or other similar document given to the purchaser at the time of the sale. (a1) Tax Rate. — The tax rate is three percent (3%). The maximum tax is two thousand dollars ($2,000) for each certificate of title issued for a Class A or Class B motor vehicle that is a commercial motor vehicle, as defined in G.S. 20-4.01 , and for each certificate of title issued for a recreational vehicle. The tax is payable as provided in G.S. 105-187.4 .
  2. Retail Value. —  The retail value of a motor vehicle for which a certificate of title is issued because of a sale of the motor vehicle by a retailer is the sales price of the motor vehicle, including all accessories attached to the vehicle when it is delivered to the purchaser, less the amount of any allowance given by the retailer for a motor vehicle taken in trade as a full or partial payment for the purchased motor vehicle.The retail value of a motor vehicle for which a certificate of title is issued because of a sale of the motor vehicle by a seller who is not a retailer is the market value of the vehicle, less the amount of any allowance given by the seller for a motor vehicle taken in trade as a full or partial payment for the purchased motor vehicle. A transaction in which two parties exchange motor vehicles is considered a sale regardless of whether either party gives additional consideration as part of the transaction.The retail value of a motor vehicle for which a certificate of title is issued because of a reason other than the sale of the motor vehicle is the market value of the vehicle. The market value of a vehicle is presumed to be the value of the vehicle set in a schedule of values adopted by the Commissioner.The retail value of a vehicle for which a certificate of title is issued because of a transfer by a State agency that assists the United States Department of Defense with purchasing, transferring, or titling a vehicle to another State agency, a unit of local government, a volunteer fire department, or a volunteer rescue squad is the sales price paid by the State agency, unit of local government, volunteer fire department, or volunteer rescue squad.
  3. Schedules. —  In adopting a schedule of values for motor vehicles, the Commissioner shall adopt a schedule whose values do not exceed the wholesale values of motor vehicles as published in a recognized automotive reference manual.

History. 1989, c. 692, ss. 4.1, 4.2; c. 770, s. 74.13; 1993, c. 467, s. 3; 1995, c. 349, s. 1; c. 390, s. 30; 2001-424, s. 34.24(a); 2001-497, s. 2(a); 2009-550, s. 2(e); 2010-95, s. 5; 2013-360, s. 34.29(a); 2013-363, s. 8.1; 2014-3, s. 6.1(g); 2014-39, s. 3; 2015-241, s. 29.34A(a); 2015-259, s. 5(d); 2015-268, s. 10.1(d).

Editor’s Note.

Session Laws 2014-3, s. 6.1(g), and Session Laws 2014-39, s. 3, both amended subsection (a) of this section in the coded bill drafting format provided by G.S. 120-20.1 . However, the amendment by Session Laws 2014-3, s. 6.1(g) did not account for the changes made by Session Laws 2014-39, s. 3, and the section has been set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2015-241, s. 29.34A(c), as amended by Session Laws 2015-268, s. 10.1(d), provides: “This section becomes effective January 1, 2016, and applies to sales made on or after that date, or, for purposes of G.S. 105-187.5 , a lease or rental agreement entered into on or after that date.”

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 2016-94, s. 38.5(a), provides: “A retailer is not liable for an undercollection of sales or use tax as a result of the changes made under Section 32.18 of S.L. 2015-241 and under Part V of S.L. 2015-259 if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax. This applies only to the period beginning March 1, 2016, and ending December 31, 2016.”

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Effect of Amendments.

Session Laws 2009-550, s. 2(e), effective August 28, 2009, added subsection (b1).

Session Laws 2010-95, s. 5, effective July 17, 2010, subdivided former subsection (b) into three paragraphs; and redesignated former subsection (b1) as the present fourth paragraph of subsection (b) by deleting the subsection (b1) designation and the subsection head, which read: “Retail Value of Transferred Department of Defense Vehicles.”

Session Laws 2013-360, s. 34.29(a), as amended by Session Laws 2013-363, s. 8.1, effective July 1, 2014, rewrote subsection (a).

Session Laws 2014-3, s. 6.1(g), effective October 1, 2014, rewrote former subsection (a) as present subsections (a) and (a1). See Editor’s note for applicability.

Session Laws 2015-241, s. 29.34A(a), effective January 1, 2016, rewrote subsection (a1). For applicability, see editor’s note.

Session Laws 2015-259, s. 5(d), in subsection (a), added “provided the charge is separately stated on the bill of sale or other similar document given to the purchaser at the time of the sale” at the end of the last sentence, and deleted the former last sentence, which read: “The sales price of a service contract is subject to the sales tax imposed under Article 5 of this Chapter.” For effective date and applicability, see editor’s note.

§ 105-187.4. Payment of tax.

  1. Method. —  The tax imposed by this Article must be paid to the Commissioner when applying for a certificate of title for a motor vehicle. The Commissioner may not issue a certificate of title for a vehicle until the tax imposed by this Article has been paid. The tax may be paid in cash or by check.
  2. Sale by Retailer. —  When a certificate of title for a motor vehicle is issued because of a sale of the motor vehicle by a retailer, the applicant for the certificate of title must attach a copy of the bill of sale for the motor vehicle to the application. A retailer who sells a motor vehicle may collect from the purchaser of the vehicle the tax payable upon the issuance of a certificate of title for the vehicle, apply for a certificate of title on behalf of the purchaser, and remit the tax due on behalf of the purchaser. If a check submitted by a retailer in payment of taxes collected under this section is not honored by the financial institution upon which it is drawn because the retailer’s account did not have sufficient funds to pay the check or the retailer did not have an account at the institution, the Division may suspend or revoke the license issued to the retailer under Article 12 of Chapter 20 of the General Statutes.

History. 1989, c. 692, s. 4.1; 1991, c. 193, s. 1.

§ 105-187.5. Alternate tax for a limited possession commitment.

  1. Election. —  A retailer may elect not to pay the tax imposed by this Article at the rate set in G.S. 105-187.3 when applying for a certificate of title for a motor vehicle purchased by the retailer for a limited possession commitment. A retailer who makes this election shall pay a tax on the gross receipts of the limited possession commitment of the vehicle. The portion of a limited possession commitment billing or payment that represents any amount applicable to the sales price of a service contract as defined in G.S. 105-164.3 should not be included in the gross receipts subject to the tax imposed by this Article. The charge must be separately stated on documentation given to the purchaser at the time the limited possession commitment goes into effect, or on the monthly billing statement or other documentation given to the purchaser. When a limited possession commitment is sold to another retailer, the seller of the limited possession commitment should provide to the purchaser of the limited possession commitment the documentation showing that the service contract and applicable sales taxes were separately stated at the time the limited possession commitment went into effect and the new retailer must retain the information to support an allocation for tax computed on the gross receipts subject to highway use tax. Like the tax imposed by G.S. 105-187.3 , this alternate tax is a tax on the privilege of using the highways of this State. The tax is imposed on a retailer, but is to be added to the limited possession commitment of a motor vehicle and thereby be paid by the person who enters into a limited possession commitment with a retailer.
  2. Rate. —

    The applicable tax rates on the gross receipts from a limited possession commitment are as listed in this subsection. Gross receipts does not include the amount of any allowance given for a motor vehicle taken in trade as a partial payment on the limited possession commitment. The maximum tax in G.S. 105-187.3(a1) on certain motor vehicles applies to a continuous limited possession commitment of such a motor vehicle to the same person. The applicable tax rates are as follows:

    Click to view

  3. Method. —  A retailer who elects to pay tax on the gross receipts of the limited possession commitment of a motor vehicle shall make this election when applying for a certificate of title for the vehicle. To make the election, the retailer shall complete a form provided by the Division giving information needed to collect the alternate tax based on gross receipts. Once made, an election is irrevocable.
  4. Administration. —  The Division shall notify the Secretary of Revenue of a retailer who makes the election under this section. A retailer who makes this election shall report and remit to the Secretary the tax on the gross receipts of the limited possession commitment of the motor vehicle. The Secretary shall administer the tax imposed by this section on gross receipts in the same manner as the tax levied under G.S. 105-164.4(a)(2). The administrative provisions and powers of the Secretary that apply to the tax levied under G.S. 105-164.4(a)(2) apply to the tax imposed by this section. In addition, the Division may request the Secretary to audit a retailer who elects to pay tax on gross receipts under this section. When the Secretary conducts an audit at the request of the Division, the Division shall reimburse the Secretary for the cost of the audit, as determined by the Secretary. In conducting an audit of a retailer under this section, the Secretary may audit any sales of motor vehicles made by the retailer.

Type of Limited Possession Commitment Tax Rate Short-term lease or rental 8% Vehicle subscription 5% Long-term lease or rental 3%

History. 1989, c. 692, s. 4.1; 1991, c. 79, s. 5; c. 193, s. 3; 1995, c. 410, s. 1; 2000-173, s. 10(b); 2001-424, s. 34.24(b); 2001-497, s. 2(c); 2014-3, s. 6.1(h); 2015-259, s. 5(e); 2016-92, s. 2.7; 2016-94, s. 38.5(k); 2019-69, s. 2.

Editor’s Note.

Session Laws 2016-94, s. 38.5(a), provides: “A retailer is not liable for an undercollection of sales or use tax as a result of the changes made under Section 32.18 of S.L. 2015-241 and under Part V of S.L. 2015-259 if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax. This applies only to the period beginning March 1, 2016, and ending December 31, 2016.”

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.”

Session Laws 2016-94, s. 38.5(q) made the amendments to this section by Session Laws 2016-94, s. 38.5(k), applicable to sales made on or after January 1, 2017.

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2019-69, s. 6, made the amendment to this section by Session Laws 2019-69, s. 2, effective October 1, 2019, and applicable to vehicle subscription agreements entered into on or after that date.

Effect of Amendments.

Session Laws 2014-3, s. 6.1(h), effective October 1, 2014, inserted the third and fourth sentences in subsection (a). See Editor’s note for applicability.

Session Laws 2015-259, s. 5(e), rewrote subsection (a). For effective date and applicability, see Editor’s note.

Session Laws 2016-92, s. 2.7, effective July 11, 2016, substituted “G.S. 105-187.3(a1)” for “G.S. 105-187.3(a)” in the last sentence of subsection (b).

Session Laws 2016-94, s. 38.5(k), effective January 1, 2017, in subsection (a), substituted “charge must” for “charge should” in the fourth sentence, deleted the former fifth sentence, which read: “Where a retailer fails to separately state any portion of a lease or rental billing or payment that represents an amount applicable to the sale price of a service contract, the amount is deemed to be part of the gross receipts of a lease or rental of a vehicle,” and added the present fifth sentence; and substituted “G.S. 105-187.3(a1)” for “G.S. 105-187.3(a)” in the last sentence of subsection (b). See editor’s note for applicability.

Session Laws 2019-69, s. 2, rewrote the section heading, which formerly read “Alternate tax for those who rent or lease motor vehicles”; substituted “limited possession commitment” for “lease or rental” throughout the section;substituted “enters into a limited possession commitment with a retailer” for “leases or rents the vehicle” in the last sentence of subsection (a); and, in subsection (b), rewrote the first sentence and added the last sentence. For effective date and applicablity, see editor’s note.

§ 105-187.6. Exemptions from highway use tax.

  1. Full Exemptions. —  The tax imposed by this Article does not apply when a certificate of title is issued as the result of a transfer of a motor vehicle:
    1. To (i) the insurer of the motor vehicle under G.S. 20-109.1 because the vehicle is a salvage vehicle or (ii) a used motor vehicle dealer under G.S. 20-109.1 because the vehicle is a salvage vehicle that was abandoned.
    2. To either a manufacturer, as defined in G.S. 20-286 , or a motor vehicle retailer for the purpose of resale.
    3. To the same owner to reflect a change or correction in the owner’s name. (3a) To one or more of the same co-owners to reflect the removal of one or more other co-owners, when there is no consideration for the transfer.
    4. By will or intestacy.
    5. By a gift between a husband and wife, a parent and child, or a stepparent and a stepchild.
    6. By a distribution of marital or divisible property incident to a marital separation or divorce.
    7. Repealed by Session Laws 2009-445, s. 16, effective August 7, 2009.
    8. To a local board of education for use in the driver education program of a public school when the motor vehicle is transferred:
      1. By a retailer and is to be transferred back to the retailer within 300 days after the transfer to the local board.
      2. By a local board of education.
    9. To a volunteer fire department or volunteer rescue squad that is not part of a unit of local government, has no more than two paid employees, and is exempt from State income tax under G.S. 105-130.11 , when the motor vehicle is one of the following:
      1. A fire truck, a pump truck, a tanker truck, or a ladder truck used to suppress fire.
      2. A four-wheel drive vehicle intended to be mounted with a water tank and hose and used for forest fire fighting.
      3. An emergency services vehicle.
    10. To a State agency from a unit of local government, volunteer fire department, or volunteer rescue squad to enable the State agency to transfer the vehicle to another unit of local government, volunteer fire department, or volunteer rescue squad.
    11. To a revocable trust from an owner who is the sole beneficiary of the trust.
    12. To a charitable organization operating under section 501(c)(3) of the Internal Revenue Code (26 U.S.C. § 501(c)(3)) where the vehicle was donated to the charitable organization solely for purposes of resale by the charitable organization.
  2. Partial Exemptions. —  A maximum tax of forty dollars ($40.00) applies when a certificate of title is issued as the result of a transfer of a motor vehicle:
    1. To a secured party who has a perfected security interest in the motor vehicle.
    2. To a partnership, limited liability company, corporation, trust, or other person where no gain or loss arises on the transfer of the motor vehicle under section 351 or section 721 of the Code, or because the transfer is treated under the Code as being to an entity that is not a separate entity from its owner or whose separate existence is otherwise disregarded, or to a partnership, limited liability company, or corporation by merger, conversion, or consolidation in accordance with applicable law.
  3. Out-of-state Vehicles. —  A maximum tax of two hundred fifty dollars ($250.00) applies when a certificate of title is issued for a motor vehicle that, at the time of applying for a certificate of title, is and has been titled in the name of the owner of the motor vehicle in another state for at least 90 days prior to the date of application for a certificate of title in this State.
  4. Exemption Limitation. —  The full exemptions set out in subsection (a) of this section, except for those set out in subdivisions (1), (2), (9), and (10) of subsection (a) of this section, do not apply to a certificate of title issued for a motor vehicle titled in another state at the time of the transfer. The partial exemptions set out in subsection (b) of this section do not apply to a certificate of title issued for a motor vehicle titled in another state at the time of the transfer.

History. 1989, c. 692, s. 4.1; c. 770, ss. 74.9, 74.10; 1991, c. 193, s. 4; c. 689, s. 323; 1993, c. 467, s. 1; 1995, c. 390, s. 31; 1997-443, s. 11A.118(a); 1998-98, s. 15.1; 1999-369, s. 5.9; 2000-140, s. 68; 2001-387, s. 151; 2001-424, s. 34.24(d); 2001-487, s. 68; 2009-81, s. 2; 2009-445, s. 16; 2010-95, s. 6; 2013-400, s. 6; 2015-241, ss. 29.34(a), 29.34A(b); 2015-268, s. 10.1(d); 2017-69, s. 1; 2018-43, s. 5.

Editor’s Note.

Session Laws 2015-241, s. 29.34A(c), as amended by Session Laws 2015-268, s. 10.1(d), provides: “This section becomes effective January 1, 2016, and applies to sales made on or after that date, or, for purposes of G.S. 105-187.5 , a lease or rental agreement entered into on or after that date.‘

Effect of Amendments.

Session Laws 2009-81, s. 2, effective June 11, 2009, added subdivision (a)(10).

Session Laws 2009-445, s. 16, effective August 7, 2009, deleted subdivision (a)(7), which read: “To a handicapped person from the Department of Health and Human Services after the vehicle has been equipped by the Department for use by the handicapped.”

Session Laws 2010-95, s. 6, effective July 17, 2010, added subdivision (a)(11).

Session Laws 2013-400, s. 6, effective October 1, 2013, in subdivision (a)(1), inserted “(i)” and added “or (ii) a used motor vehicle dealer under G.S. 20-109.1 because the vehicle is a salvage vehicle that was abandoned.”

Session Laws 2015-241, s. 29.34(a), effective September 30, 2015, in subsection (c), inserted “in the name of the owner of the motor vehicle” and added “prior to the date of application for a certificate of title in this State.”

Session Laws 2015-241, s. 29.34A(b), substituted “tax of two hundred fifty dollars ($250.00)” for “tax of one hundred fifty dollars ($150.00).” in subsection (c). For effective date and applicability, see Editor’s note.

Session Laws 2017-69, s. 1, effective June 28, 2017, added subsection (d).

Session Laws 2018-43, s. 5, effective June 22, 2018, added subdivision (a)(12).

§ 105-187.7. Credits.

  1. Tax Paid in Another State. —  A person who, within 90 days before applying for a certificate of title for a motor vehicle on which the tax imposed by this Article is due, has paid a sales tax, an excise tax, or a tax substantially equivalent to the tax imposed by this Article on the vehicle to a taxing jurisdiction outside this State is allowed a credit against the tax due under this Article for the amount of tax paid to the other jurisdiction.
  2. Tax Paid Within One Year. —  A person who applies for a certificate of title for a motor vehicle that is titled in another state but was formerly titled in this State is allowed a credit against the tax due under this Article for the amount of tax paid under this Article by that person on the same vehicle within one year before the application for a certificate of title.

History. 1989, c. 692, s. 4.1; 1995, c. 390, s. 32; c. 512, s. 1.

§ 105-187.8. Refund for return of purchased motor vehicle.

When a purchaser of a motor vehicle returns the motor vehicle to the seller of the motor vehicle within 90 days after the purchase and receives a vehicle replacement for the returned vehicle or a refund of the price paid the seller, whether from the seller or the manufacturer of the vehicle, the purchaser may obtain a refund of the privilege tax paid on the certificate of title issued for the returned motor vehicle.

To obtain a refund, the purchaser must apply to the Division for a refund within 30 days after receiving the replacement vehicle or refund of the purchase price. The application must be made on a form prescribed by the Commission and must be supported by documentation from the seller of the returned vehicle.

History. 1989, c. 692, s. 4.1; 1995, c. 390, s. 33.

§ 105-187.9. Disposition of tax proceeds.

  1. Distribution. —   Taxes collected under this Article at the rate of five percent (5%) and eight percent (8%) shall be credited to the Highway Fund. Taxes collected under this Article at the rate of three percent (3%) shall be credited to the North Carolina Highway Trust Fund.
  2. Repealed by Session Laws 2010-31, s. 28.7(i), and Session Laws 2013-183, s. 4.1, effective July 1, 2013.
  3. Repealed by Session Laws 2013-183, s. 4.1, effective July 1, 2013.

History. 1989, c. 692, s. 4.1; c. 799, s. 33; 1993, c. 321, s. 164(a); 2001-424, s. 34.24(c); 2001-513, s. 15; 2008-107, s. 25.5(a), (c), (e); 2010-31, s. 28.7(f), (h)-(j); 2011-145, ss. 28.33(c), (d); 2011-391, s. 57; 2012-142, s. 24.8(b); 2013-183, s. 4.1; 2017-57, s. 2.2(f); 2019-69, s. 3; 2021-180, s. 42.10.

Editor’s Note.

Session Laws 2013-183, s. 7.1(b), provided: “This act is effective only if the General Assembly appropriates funds in the Current Operations and Capital Improvements Appropriations Act of 2013 to implement this act.” Session Laws 2013-360, s. 34.30, effective July 1, 2013, repealed Session Laws 2013-183, s. 7.1(b).

Session Laws 2017-57, s. 2.2(g), made the amendment to subsection (a) of this section by Session Laws 2017-57, s. 2.2(f), effective June 28, 2017, and applicable to taxes collected on or after that date.

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 2019-69, s. 6, made the amendment to this section by Session Laws 2019-69, s. 3, effective October 1, 2019, and applicable to vehicle subscription agreements entered into on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2008-107, s. 25.5(a), effective July 1, 2008, substituted “forty-five million dollars ($145,000,000)” for “seventy million dollars ($170,000,000)” in subdivision (b)(1).

Session Laws 2008-107, s. 25.5(c), effective July 1, 2009, substituted “one hundred six million dollars ($106,000,000)” for “one hundred forty-five million dollars ($145,000,000)” in subdivision (b)(1).

Session Laws 2008-107, s. 25.5(e), effective July 1, 2010, substituted “seventy-one million dollars ($71,000,000)” for “one hundred six million dollars ($106,000,000)” in subdivision (b)(1).

Session Laws 2010-31, s. 28.7(f), effective July 1, 2011, in the introductory paragraph of subsection (b), substituted “General Fund Transfer” for “Transfer” and made a minor punctuation change; in subdivision (b)(1), substituted “forty million dollars ($40,000,000)” for “seventy-one million dollars ($71,000,000)”; and added subsection (c).

Session Laws 2010-31, s. 28.7(h), effective July 1, 2012, in subdivision (b)(1), substituted “twenty-six million dollars ($26,000,000)” for “forty million dollars ($40,000,000)”; and in subsection (c), substituted “forty-five million dollars ($45,000,000)” for “thirty-one million dollars ($31,000,000).”

Session Laws 2010-31, s. 28.7(i), (j), effective July 1, 2013, deleted subsection (b), relating to “General Land Transfers”; and substituted “fifty-eight million dollars ($58,000,000)” for “forty-five million dollars ($45,000,000)” in the first sentence of subsection (c).

Session Laws 2013-183, s. 4.1, effective July 1, 2013, deleted subsections (b) and (c), which pertained to general fund transfer and mobility fund transfer, respectively.

Session Laws 2017-57, s. 2.2(f), in subsection (a), in the first sentence, substituted “Of the taxes collected” for “Taxes collected” at the beginning, and inserted “, the sum of ten million dollars ($10,000,000) shall be credited annually to the Highway Fund, and the remainder” near the middle. For effective date and applicability, see editor’s note.

Session Laws 2019-69, s. 3, inserted “five percent (5%) and” in subsection (a). For effective date and applicability, see editor’s note.

Session Laws, 2021-180, s. 42.10, effective July 1, 2021, rewrote the first sentence of subsection (a).

CASE NOTES

Transfer From Trust Fund to General Fund. —

Because one of the objects of the North Carolina Highway Trust Fund is to supplement the State’s General Fund, use of the Trust Fund monies for this purpose cannot be viewed as a “raid” of the Trust Fund for purposes not previously sanctioned by the General Assembly; the Trust Fund lacks the indicia of a trust, the language creating the Trust Fund is ambiguous concerning whether the Trust Fund was intended to be a “true” trust fund because G.S. 136-176 merely states that a special account is created within the State treasury, not a trust fund, the Trust Fund is not constitutionally protected, and G.S. 105-187.9 evinces the intention of the General Assembly to use part of the Trust Fund money to supplement the General Fund. Goldston v. State, 199 N.C. App. 618, 683 S.E.2d 237, 2009 N.C. App. LEXIS 1564 (2009), aff'd, 364 N.C. 416 , 700 S.E.2d 223, 2010 N.C. LEXIS 728 (2010).

Statutory transfer of money by the General Assembly from the North Carolina Highway Trust Fund to the State’s General Fund was appropriate; an Executive Order was read to refer to the General Assembly and the Governor in proclamations as the appropriate bodies to make adjustments, and that action was consistent with the text of the Constitution with regard to the manner in which public money was spent; the Current Operations and Capital Improvements Appropriations Act of 2001, the historical practice that led up to the adoption of N.C. Const., Art. III, § 5, and the legislative history of the money involved. Goldston v. State, 199 N.C. App. 618, 683 S.E.2d 237, 2009 N.C. App. LEXIS 1564 (2009), aff'd, 364 N.C. 416 , 700 S.E.2d 223, 2010 N.C. LEXIS 728 (2010).

§ 105-187.10. Penalties and remedies.

  1. Penalties. —  The penalty for bad checks in G.S. 105-236(1) applies to a check offered in payment of the tax imposed by this Article. In addition, if a check offered to the Division in payment of the tax imposed by this Article is returned unpaid and the tax for which the check was offered, plus the penalty imposed under G.S. 105-236(1), is not paid within 30 days after the Commissioner demands its payment, the Commissioner may revoke the registration plate of the vehicle for which a certificate of title was issued when the check was offered.
  2. Unpaid Taxes. —  The remedies for collection of taxes in Article 9 of this Chapter apply to the taxes levied by this Article and collected by the Commissioner. In applying these remedies, the Commissioner has the same authority as the Secretary.
  3. Appeals. —  A taxpayer who disagrees with the presumed value of a motor vehicle must pay the tax based on the presumed value, but may appeal the value to the Commissioner. A taxpayer who appeals the value must provide two estimates of the value of the vehicle to the Commissioner. If the Commissioner finds that the value of the vehicle is less than the presumed value of the vehicle, the Commissioner shall refund any overpayment of tax made by the taxpayer with interest at the rate specified in G.S. 105-241.21 from the date of the overpayment.

History. 1989, c. 692, s. 4.1; c. 770, s. 74.8; 2007-491, ss. 21, 44(1)b.

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, ss. 21, 44(1)b., effective January 1, 2008, in subsection (b), substituted “Article 9 of this Chapter” for “G.S. 20-99” in the first sentence, and added the last sentence; and in subsection (c), substituted “G.S. 105-241.21” for “G.S. 105-241.1” in the last sentence. For applicability, see Editor’s note.

§ 105-187.11. [Repealed]

Repealed by Session Laws 2007-527, s. 30, effective August 31, 2007.

§§ 105-187.12 through 105-187.14.

Reserved for future codification purposes.

Article 5B. Scrap Tire Disposal Tax.

§ 105-187.15. Definitions.

The definitions in G.S. 105-164.3 apply to this Article, except that the term “sale” does not include lease or rental, and the following definitions apply to this Article:

  1. Scrap tire. — A tire that is no longer suitable for its original, intended purpose because of wear, damage, or defect.
  2. Tire. — A continuous solid or pneumatic rubber covering encircling a wheel.

History. 1991, c. 221, s. 1.

Editor’s Note.

Session Laws 2013-360, s. 14.16(f)-(h), provides: “(f) The funds appropriated to the Department of Environment and Natural Resources for the 2013-2015 biennium for the Scrap Tire Disposal Program established under G.S. 130A-309.64 , as enacted by subsection (b) of this section, shall be allocated as follows:

“(1) Up to eighty thousand dollars ($80,000) shall be used by the Department of Environment and Natural Resources to support a position in the same manner as revenue in the Scrap Tire Disposal Account may be used under G.S. 130A-309.63(b)(3) (now repealed), and

“(2) Four hundred twenty thousand dollars ($420,000) shall be used by the Department of Environment and Natural Resources in the same manner as revenue in the Scrap Tire Disposal Account may be used under G.S. 130A-309.63 , as amended by this section.

“(g) Any tax proceeds remaining in the Scrap Tire Disposal Account, repealed under subsection (b) of this section, as of the effective date of this section shall continue to be used for the same purposes and in the same manner as the Scrap Tire Disposal Account, except the funds in the Scrap Tire Disposal Account shall not be used for grants to encourage the use of processed scrap tire materials.

“(h) Money collected pursuant to Article 5B of Chapter 105 of the General Statutes between July 1, 2013, and the date this act becomes law shall be credited to the General Fund. The money shall be used for the purposes provided in this section.”

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2013-2015 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2013-2015 fiscal biennium.”

Session Laws 2013-360, s. 38.5 is a severability clause.

§ 105-187.16. Tax imposed.

  1. Levy.—  A privilege tax is imposed on a tire retailer at a percentage rate of the sales price of each new tire sold at retail by the retailer. A privilege tax is imposed on a tire retailer and on a tire wholesale merchant at a percentage rate of the sales price of each new tire sold by the retailer or wholesale merchant to a wholesale merchant or retailer for placement on a vehicle offered for sale, lease, or rental by the retailer or wholesale merchant. An excise tax is imposed on a new tire purchased for storage, use, or consumption in this State or for placement in this State on a vehicle offered for sale, lease, or rental. This excise tax is a percentage rate of the purchase price of the tire. These taxes are in addition to all other taxes.
  2. Rate.—

    The percentage rate of the taxes imposed by subsection (a) of this section is set by the following table; the rate is based on the bead diameter of the new tire sold or purchased:

    Click to view

Bead Diameter of Tire Percentage Rate Less than 20 inches 2% At least 20 inches 1%.

History. 1991, c. 221, s. 1; 1993, c. 548, s. 1; 1997-209, s. 1; 2001-414, s. 22; 2002-10, s. 1.

Editor’s Note.

Session Laws 1993, c. 548, s. 9, provided that the amendment by c. 548, s. 1 would expire June 30, 1997. Session Laws 1997-209, s. 1, changed the expiration date to June 30, 2002. Session Laws 2002-10, s. 1, repealed the expiration provision for Section 1 of Session Laws 1993, c. 548.

§ 105-187.17. Administration.

The privilege tax this Article imposes on a tire retailer who sells new tires at retail is an additional State sales tax and the excise tax this Article imposes on the storage, use, or consumption of a new tire in this State is an additional State use tax. Except as otherwise provided in this Article, these taxes shall be collected and administered in the same manner as the State sales and use taxes imposed by Article 5 of this Chapter. As under Article 5 of this Chapter, the additional State sales tax paid when a new tire is sold is a credit against the additional State use tax imposed on the storage, use, or consumption of the same tire.

The privilege tax this Article imposes on a tire retailer and on a tire wholesale merchant who sell new tires for placement in this State on a vehicle offered for sale, lease, or rental is a tax on the wholesale sale of the tires. This tax and the excise tax this Article imposes on a new tire purchased for placement in this State on a vehicle offered for sale, lease, or rental shall, to the extent practical, be collected and administered as if they were additional State sales and use taxes. The privilege tax paid when a new tire is sold for placement on a vehicle offered for sale, lease, or rental is a credit against the use tax imposed on the purchase of the same tire for placement in this State on a vehicle offered for sale, lease, or rental.

History. 1991, c. 221, s. 1.

§ 105-187.18. Exemptions.

  1. The taxes imposed by this Article do not apply to:
    1. Bicycle tires and other tires for vehicles propelled by human power.
    2. Recapped tires.
    3. Tires sold for placement on newly manufactured vehicles.
  2. Except for the exemption for sales a state cannot constitutionally tax, the exemptions and refunds allowed in Article 5 of this Chapter do not apply to the taxes imposed by this Article.

History. 1991, c. 221, s. 1; 1991 (Reg. Sess., 1992), c. 867, s. 1; 1993, c. 364, s. 2; 2003-416, s. 19(a); 2010-166, s. 3.4.

Editor’s Note.

Session Laws 1993, c. 364, s. 2, effective July 16, 1993, rewrote Session Laws 1991, c. 867, s. 2 to make the amendment by c. 867, s. 1 to G.S. 105-187.18 effective upon ratification (July 15, 1992) and to make it applicable retroactively to tires sold on or after July 1, 1991.

Effect of Amendments.

Session Laws 2003-416, s. 19.(a), effective August 14, 2003, designated the formerly undesignated paragraphs as subsections (a) and (b); and in subsection (b), added “Except for the exemption for sales a state cannot constitutionally tax” at the beginning of the sentence, and made stylistic and punctuation changes.

Session Laws 2010-166, s. 3.4, effective July 1, 2010, substituted “the exemptions and refunds allowed in Article 5 of this Chapter” for “the exemptions in G.S. 105-164.13 and the refunds allowed in G.S. 105-164.14 ” in subsection (b).

§ 105-187.19. Use of tax proceeds.

  1. The Secretary shall distribute the taxes collected under this Article, less the allowance to the Department of Revenue for administrative expenses, in accordance with this section. The Secretary may retain the cost of collection by the Department, not to exceed four hundred twenty-five thousand dollars ($425,000) a year, as reimbursement to the Department.
  2. Each quarter, the Secretary shall credit thirty percent (30%) of the net tax proceeds to the General Fund. The Secretary shall distribute the remaining seventy percent (70%) of the net tax proceeds among the counties on a per capita basis according to the most recent annual population estimates certified to the Secretary by the State Budget Officer.
  3. A county may use funds distributed to it under this section only as provided in G.S. 130A-309.54 . A county that receives funds under this section and that has an agreement with another unit of local government under which the other unit of local government provides for the disposal of solid waste for the county shall transfer the amount received under this section to the other unit of local government. A unit of local government to which funds are transferred is subject to the same restrictions on use of the funds as the county.

History. 1991, c. 221, s. 1; 1993, c. 485, s. 13; c. 548, ss. 2, 8; 1997-209, ss. 1, 3; 2004-203, s. 5(h); 2007-153, s. 1; 2007-323, s. 24.2; 2009-451, s. 13.3B(a); 2013-360, s. 14.16(a).

Editor’s Note.

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.

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(h), effective August 17, 2004, substituted “State Budget Officer” for “State Planning Officer” in subsection (b).

Session Laws 2007-153, s. 1, effective July 1, 2007, in subsection (b), in the first sentence, substituted “eight percent (8%)” for “five percent (5%)” and substituted “twenty-two percent (22%)” for “twenty-seven percent (27%),” and substituted “seventy percent (70%)” for “sixty eight percent (68%)” in the second sentence.

Session Laws 2007-323, s. 24.2, effective July 1, 2007, substituted “four hundred twenty-five thousand dollars ($425,000)” for “two hundred twenty five thousand dollars ($225,000)” near the end of the second sentence in subsection (a).

Session Laws 2009-451, s. 13.3B(a), effective July 1, 2009, substituted “Fund, seventeen percent (17%) of the net tax proceeds to the Scrap Tire Disposal Account, two and one-half percent (2.5%) of the net tax proceeds to the Inactive Hazardous Sites Cleanup Fund, and two and one-half percent (2.5%) of the net tax proceeds to the Bernard Allen Memorial Emergency Drinking Water Fund” for “Fund and shall credit twenty-two percent (22%) of the net tax proceeds to the Scrap Tire Disposal Account” at the end of the first sentence of subsection (b).

Session Laws 2013-360, s. 14.16(a), effective July 1, 2013, rewrote the first sentence in subsection (b), which formerly read “Each quarter, the Secretary shall credit eight percent (8%) of the next tax proceeds to the Solid Waste Management Trust Fund, seventeen percent (17%) of the net tax proceeds to the Scrap Tire Disposal Account, two and one-half percent (2.5%) of the net tax proceeds to the Inactive Hazardous Sites Cleanup Fund, and two and one-half percent (2.5%) of the net tax proceeds to the Bernard Allen Memorial Emergency Drinking Water Fund.”

Article 5C. White Goods Disposal Tax.

§ 105-187.20. Definitions.

The definitions in G.S. 105-164.3 apply to this Article, except that the term “sale” does not include lease or rental, and the following definition applies to this Article:

  1. Repealed by Session Laws 2005-435, s. 35, effective September 27, 2005.
  2. White goods. — Defined in G.S. 130A-290(a).

History. 1993, c. 471, s. 3; 1998-24, s. 7; 2000-109, s. 9(a); 2005-435, s. 35.

Editor’s Note.

Session Laws 1993, c. 471, s. 11, as amended by Session Laws 1993 (Reg. Sess., 1994), c. 769, s. 15.1(b), and further amended by Session Laws 1998-24, s. 7, made this section effective January 1, 1994 and provided that it would expire July 1, 2001. Session Laws 2000-109, s. 9(a), effective July 13, 2000, deleted the expiration date.

Effect of Amendments.

Session Laws 2005-435, s. 35, effective January 1, 2006, made a minor stylistic change and deleted former subdivision (1), which read: “Chlorofluorocarbon refrigerant.—Defined in G.S. 130A-290(a).”

§ 105-187.21. Tax imposed.

A privilege tax is imposed on a white goods retailer at a flat rate for each new white good that is sold by the retailer. An excise tax is imposed on a new white good purchased for storage, use, or consumption in this State. The rate of the privilege tax and the excise tax is three dollars ($3.00). These taxes are in addition to all other taxes.

History. 1993, c. 471, s. 3; 1998-24, ss. 1, 7; 2000-109, s. 9(a); 2016-5, s. 3.20(a).

Editor’s Note.

Session Laws 1993, c. 471, s. 11, as amended by Session Laws 1993 (Reg. Sess., 1994), c. 769, s. 15.1(b), and further amended by Session Laws 1998-24, s. 7, made this section effective January 1, 1994 and provided that it would expire July 1, 2001. Session Laws 2000-109, s. 9(a), effective July 13, 2000, deleted the expiration date.

Effect of Amendments.

Session Laws 2016-5, s. 3.20(a), effective July 1, 2016, deleted “outside the State” following “good purchased” in the second sentence.

§ 105-187.22. Administration.

The privilege tax this Article imposes on a white goods retailer is an additional State sales tax and the excise tax this Article imposes on the storage, use, or consumption of a new white good in this State is an additional State use tax. Except as otherwise provided in this Article, these taxes shall be collected and administered in the same manner as the State sales and use taxes imposed by Article 5 of this Chapter. As under Article 5 of this Chapter, the additional State sales tax paid when a new white good is sold at retail is a credit against the additional State use tax imposed on the storage, use, or consumption of the same white good.

History. 1993, c. 471, s. 3; 1998-24, s. 7; 2000-109, s. 9(a).

Editor’s Note.

Session Laws 1993, c. 471, s. 11, as amended by Session Laws 1993 (Reg. Sess., 1994), c. 769, s. 15.1(b), and further amended by Session Laws 1998-24, s. 7, made this section effective January 1, 1994 and provided that it would expire July 1, 2001. Session Laws 2000-109, s. 9(a), effective July 13, 2000, deleted the expiration date.

§ 105-187.23. Exemptions and refunds.

  1. Exemptions. —  Except for the exemption for sales a state cannot constitutionally tax, the exemptions allowed in Article 5 of this Chapter do not apply to the taxes imposed by this Article.
  2. Refunds. —  The refunds allowed in Article 5 of this Chapter do not apply to the taxes imposed by this Article. A person who buys at least 50 new white goods of any kind in the same sale or purchase may obtain a refund equal to sixty percent (60%) of the amount of tax imposed by this Article on the white goods when all of the white goods purchased are to be placed in new or remodeled dwelling units that are located in this State and do not contain the kind of white goods purchased. To obtain a refund, a person must file an application for a refund with the Secretary. The application must contain the information required by the Secretary, be signed by the purchaser of the white goods, and be submitted by the date set by the Secretary.

History. 1993, c. 471, s. 3; 1998-24, s. 7; 2000-109, s. 9(a); 2003-416, s. 19(b); 2010-166, s. 3.5.

Editor’s Note.

Session Laws 1993, c. 471, s. 11, as amended by Session Laws 1993 (Reg. Sess., 1994), c. 769, s. 15.1(b), and further amended by Session Laws 1998-24, s. 7, made this section effective January 1, 1994 and provided that it would expire July 1, 2001. Session Laws 2000-109, s. 9(a), effective July 13, 2000, deleted the expiration date.

Effect of Amendments.

Session Laws 2003-416, s. 19.(b), effective August 14, 2003, designated the formerly undesignated paragraphs as subsections (a) and (b); and in subsection (a), substituted “for sales a state cannot constitutionally tax” for “provided in G.S. 105-164.13(17).”

Session Laws 2010-166, s. 3.5, effective July 1, 2010, in subsection (a), substituted “allowed in Article 5 of this Chapter” for “in G.S. 105-164.13 ”; and, in subsection (b), substituted “Article 5 of this Chapter” for “G.S. 105-164.14.”

§ 105-187.24. Use of tax proceeds.

The Secretary shall distribute the taxes collected under this Article, less the Department of Revenue’s allowance for administrative expenses, in accordance with this section. The Secretary may retain the Department’s cost of collection, not to exceed four hundred twenty-five thousand dollars ($425,000) a year, as reimbursement to the Department.

Each quarter, the Secretary shall credit twenty-eight percent (28%) of the net tax proceeds to the General Fund. The Secretary shall distribute the remaining seventy-two percent (72%) of the net tax proceeds among the counties on a per capita basis according to the most recent annual population estimates certified to the Secretary by the State Budget Officer. The Department shall not distribute the tax proceeds to a county when notified not to do so by the Department of Environmental Quality under G.S. 130A-309.87 . If a county is not entitled to a distribution, the proceeds allocated for that county will be credited to the White Goods Management Account.

A county may use funds distributed to it under this section only as provided in G.S. 130A-309.82 . A county that receives funds under this section and that has an interlocal agreement with another unit of local government under which the other unit provides for the disposal of solid waste for the county must transfer the amount received under this section to that other unit. A unit to which funds are transferred is subject to the same restrictions on use of the funds as the county.

History. 1993, c. 471, s. 3; 1993 (Reg. Sess., 1994), c. 769, s. 15.1(b); 1998-24, ss. 2, 7; 2000-109, s. 9(a); 2004-203, s. 5(i); 2007-323, s. 24.1; 2013-360, s. 14.17(a); 2015-241, s. 14.30(u).

Editor’s Note.

Session Laws 1993 (Reg. Sess., 1994), c. 769, s. 15.1(a), effective July 1, 1994, repealed Session Laws 1993, c. 471, s. 10, which would have amended this section effective January 1, 1995.

Session Laws 1993, c. 471, s. 11, as amended by Session Laws 1993 (Reg. Sess., 1994), c. 769, s. 15.1(b), and further amended by Session Laws 1998-24, s. 7, made this section effective January 1, 1994 and provided that it would expire July 1, 2001. Session Laws 2000-109, s. 9(a), effective July 13, 2000, deleted the expiration date.

Effect of Amendments.

Session Laws 2004-203, s. 5(i), effective August 17, 2004, substituted “State Budget Officer” for “State Planning Officer” in the second sentence of the second paragraph.

Session Laws 2007-323, s. 24.1, effective July 1, 2007, substituted “four hundred twenty-five thousand dollars ($425,000)” for “two hundred twenty five thousand dollars ($225,000)” near the end of the first paragraph.

Session Laws 2013-360, s. 14.17(a), effective August 1, 2013, substituted “twenty-eight percent (28%) of the net tax proceeds to the General Fund” for “eight percent (8%) of the net tax proceeds to the Solid Waste Management Trust Fund and shall credit twenty percent (20%) of the net tax proceeds to the White Goods Management Account” in the first sentence of the second paragraph.

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 the third sentence in the second paragraph.

§§ 105-187.25 through 105-187.29.

Reserved for future codification purposes.

Article 5D. Dry-Cleaning Solvent Tax.

(Repealed effective January 1, 2030)

§ 105-187.30. (See note for repeal of Article) Definitions.

The definitions in G.S. 105-164.3 apply to this Article, and the following definitions apply to this Article:

  1. Dry-cleaning facility. — Defined in G.S. 143-215.104 B.
  2. Dry-cleaning solvent. — Defined in G.S. 143-215.104 B.

History. 1997-392, s. 4; 2009-483, s. 5.

Article has a Delayed Repeal Date.

For delayed repeal of this Article, see G.S. 105-187.35 .

Editor’s note.

Session Laws 2009-483, s. 5, amended Session Laws 1997-392, s. 8, deleting the repeal date for Session Laws 1997-392, s. 4, which enacted Article 5D (G.S. 105-187.30 through 105-187.34). Therefore, this section is not repealed effective January 1, 2010. Now see G.S. 105-187.35 for sunset provision.

§ 105-187.31. (See note for repeal of Article) Tax imposed.

A privilege tax is imposed on a dry-cleaning solvent retailer at a flat rate for each gallon of dry-cleaning solvent sold by the retailer to a dry-cleaning facility. An excise tax is imposed on dry-cleaning solvent purchased for storage, use, or consumption by a dry-cleaning facility in this State. The rate of the privilege tax and the excise tax is ten dollars ($10.00) for each gallon of halogenated hydrocarbon-based dry-cleaning solvent and one dollar and thirty-five cents ($1.35) for each gallon of hydrocarbon-based dry-cleaning solvent. These taxes are in addition to all other taxes.

History. 1997-392, s. 4; 2000-19, s. 1.2; 2001-265, s. 1; 2007-530, s. 13; 2009-483, ss. 5, 6; 2017-204, s. 2.9(g).

Article has a Delayed Repeal Date.

For delayed repeal of this Article, see G.S. 105-187.35 .

Editor’s note.

Session Laws 2007-530, s. 14, provides: “If the Environmental Management Commission adopts rules establishing a risk-based approach applicable to the assessment, prioritization, and remediation of dry-cleaning solvent contamination, the original notice of text for which was published at 21 N.C. Reg. 1818 (April 16, 2007); the Rules Review Commission approves these rules, including any changes incorporated as a result of public comments or Rules Review Commission requirements; and the Rules Review Commission receives 10 or more letters of objection to these rules in accordance with G.S. 150B-21.3 (b2), the Environmental Management Commission, notwithstanding the requirements of G.S. 150B-21.1 and G.S. 150B-21.3 , may adopt these rules as temporary rules in accordance with the temporary rule-making procedures set out in Chapter 150B of the General Statutes.”

Session Laws 2009-483, s. 5, amended Session Laws 1997-392, s. 8, deleting the repeal date for Session Laws 1997-392, s. 4, which enacted Article 5D (G.S. 105-187.30 through 105-187.34). Therefore, this section is not repealed effective January 1, 2010. Now see G.S 105-187.35 for sunset provision.

Session Laws 2009-483, s. 6, amended Session Laws 2000-19, s. 23, making the amendment to this section by Session Laws 2000-19 effective October 1, 2001, and deleting the January 1, 2010, expiration date for the amendment.

Effect of Amendments.

Session Laws 2000-19, s. 1.2, as amended by Session Laws 2001-265, s. 1, and as amended by Session Laws 2009-483, s. 6, effective October 1, 2001, in the third sentence, substituted “ten dollars ($10.00)” for “five dollars and eighty-five cents ($5.85)” and “one dollar and thirty-five cents ($1.35)” for “eighty cents (80¢).”

Session Laws 2007-530, s.13, effective August 31, 2007, substituted “gallon of halogenated hydrocarbon-based dry-cleaning solvent and one dollar and thirty-five cents ($1.35) for each gallon of hydrocarbon-based dry-cleaning solvent” for “gallon of dry-cleaning solvent that is chlorine based and one dollar and thirty-five cents ($1.35) for each gallon of dry-cleaning solvent that is hydrocarbon based.”

Session Laws 2017-204, s. 2.9(g), effective August 11, 2017, deleted “outside the State” preceding “for storage” in the second sentence.

Legal Periodicals.

For 1997 legislative survey, see 20 Campbell L. Rev. 443.

§ 105-187.32. (See note for repeal of Article) Administration.

The privilege tax this Article imposes on a dry-cleaning solvent retailer is an additional State sales tax, and the excise tax this Article imposes on the storage, use, or consumption of dry-cleaning solvent by a dry-cleaning facility in this State is an additional State use tax. Except as otherwise provided in this Article these taxes shall be collected and administered in the same manner as the State sales and use taxes imposed by Article 5 of this Chapter. As under Article 5 of this Chapter, the additional State sales tax paid when dry-cleaning solvent is sold at retail is a credit against the additional State use tax imposed on the storage, use, or consumption of the same dry-cleaning solvent.

History. 1997-392, s. 4; 2009-483, s. 5.

Article has a Delayed Repeal Date.

For delayed repeal of this Article, see G.S. 105-187.35 .

Editor’s note.

Session Laws 2009-483, s. 5, amended Session Laws 1997-392, s. 8, deleting the repeal date for Session Laws 1997-392, s. 4, which enacted Article 5D (G.S. 105-187.30 through 105-187.34). Therefore, this section is not repealed effective January 1, 2010. Now see G.S. 105-187.35 for sunset provision.

§ 105-187.33. (See note for repeal of Article) Exemptions and refunds.

Except for the exemption for sales a state cannot constitutionally tax, the exemptions and refunds allowed in Article 5 of this Chapter do not apply to the taxes imposed by this Article.

History. 1997-392, s. 4; 2003-416, s. 19(c); 2009-483, s. 5; 2010-166, s. 3.6.

Article has a Delayed Repeal Date.

For delayed repeal of this Article, see G.S. 105-187.35 .

Editor’s note.

Session Laws 2009-483, s. 5, amended Session Laws 1997-392, s. 8, deleting the repeal date for Session Laws 1997-392, s. 4, which enacted Article 5D (G.S. 105-187.30 through 105-187.34). Therefore, this section is not repealed effective January 1, 2010. Now see G.S. 105-187.35 for sunset provision.

Effect of Amendments.

Session Laws 2003-416, s. 19.(c), effective August 14, 2003, added “Except for the exemption for sales a state cannot constitutionally tax” at the beginning of the section.

Session Laws 2010-166, s. 3.6, effective July 1, 2010, substituted “exemptions and refunds allowed in Article 5 of this Chapter” for “exemptions in G.S. 105-164.13 ” in the first sentence; and deleted the second sentence, which read: “The refunds allowed in G.S. 105-164.14 do not apply to the taxes imposed by this Article.”

§ 105-187.34. (See note for repeal of Article) Use of tax proceeds.

The Secretary must credit the taxes collected under this Article, less the Department of Revenue’s allowance for administrative expenses, to the Dry-Cleaning Solvent Cleanup Fund. The Secretary may retain the Department’s cost of collection, not to exceed one hundred twenty-five thousand dollars ($125,000) a year, as reimbursement to the Department.

History. 1997-392, s. 4; 2009-483, s. 5.

Article has a Delayed Repeal Date.

For delayed repeal of this Article, see G.S. 105-187.35 .

Editor’s note.

Session Laws 2009-483, s. 5, amended Session Laws 1997-392, s. 8, deleting the repeal date for Session Laws 1997-392, s. 4, which enacted Article 5D (G.S. 105-187.30 through 105-187.34). Therefore, this section is not repealed effective January 1, 2010. Now see G.S. 105-187.35 for sunset provision.

§ 105-187.35. Sunset.

This Article is repealed effective January 1, 2030.

History. 2009-483, s. 9; 2019-237, s. 6(c).

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. 6(c), effective November 1, 2019, substituted “January 1, 2030” for “January 1, 2020.”

§§ 105-187.36 through 105-187.39.

Reserved for future codification purposes.

Article 5E. Piped Natural Gas Tax. [Repealed]

§§ 105-187.40 through 105-187.46. [Repealed]

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

History. S. 105-187.40; 1998-22, s. 1; repealed by 2013-316, s. 4.1(d), effective July 1, 2014. s. 105-187.41; 1998-22, s. 1; 2007-397, s. 11(a)-(e); repealed by 2013-316, s. 4.1(d), effective July 1, 2014. s. 105-187.42; 1998-22, s. 1; repealed by 2013-316, s. 4.1(d), effective July 1, 2014. s. 105-187.43; 1998-22, s. 1; 1999-33, s. 32(a); 2001-427, s. 6(f); 2006-33, s. 13; 2012-79, s. 2.13; repealed by 2013-316, s. 4.1(d), effective July 1, 2014. s. 105-187.44; 1998-22, s. 1; 1998-217, s. 32(b); 1999-337, s. 32(b); 2002-120, s. 3; repealed by 2013-316, s. 4.1(d), effective July 1, 2014. s. 105-187.45; 1998-22, s. 1; repealed by 2013-316, s. 4.1(d), effective July 1, 2014. s. 105-187.46; 1998-22, s. 1; repealed by 2013-316, s. 4.1(d), effective July 1, 2014.

Editor’s Note.

Former G.S. 105-187.40 pertained to definitions. Former G.S. 105-187.41 pertained to tax imposed on piped natural gas. Former G.S. 105-187.42 pertained to liability for the tax. Former G.S. 105-187.43 pertained to payment of the tax. Former G.S. 105-187.44 pertained to distribution of part of tax proceeds to cities. Former G.S. 105-187.45 pertained to information exchange and information returns. Former G.S. 105-187.46 pertained to records and audits.

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 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 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. 105-164.44 K 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. 105-164.44 K(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. 105-164.44 K.

“(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. 105-164.44 L 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. 105-164.44 L(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. 105-164.44 L.”

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 .”

§§ 105-187.47 through 105-187.49.

Reserved for future codification purposes.

Article 5F. Certain Machinery and Equipment. [Repealed]

§§ 105-187.50 through 105-187.53. [Repealed]

Repealed by Session Laws 2017-57 s. 38.8(a), effective July 1, 2018, and applicable to sales made on or after that date.

History. S. 105-187.50; 2001-347, s. 2.17; 2007-323, s. 31.22(a); 2009-451, s. 27A.3(v); 2010-91, s. 5; repealed by 2017-57, s. 38.8(a), effective July 1, 2018. s. 105-187.51; 2001-347, s. 2.17; 2005-435, s. 56(a); 2010-147, s. 2.3; 2016-94, s. 38.2(d); repealed by 2017-57, s. 38.8(a), effective July 1, 2018. s. 105-187.51A; 2005-276, s. 33.21; 2007-397, s. 12(a)-(d); repealed by 2007-397, s. 12(d), effective July 1, 2010 and 2017-57, s. 38.8(a), effective July 1, 2018. s. 105-187.51B; 2005-276, s. 33.21; 2006-66, s. 24.9(a); 2006-196, s. 12; 2007-323, s. 31.7(a); 2007-527, s. 13(a); 2008-107, s. 28.21(a); 2011-302, s. 1; 2013-414, s. 46; 2016-94, s. 38.2(a), (b); 2016-123, ss. 11.1, 11.3(a); repealed by 2017-57, s. 38.8(a), effective July 1, 2018. s. 105-187.51C; 2007-323, s. 31.22(b); 2009-445, s. 17; 2010-91, ss. 6, 7; 2011-330, ss. 22, 24; repealed by 2017-57, s. 38.8(a), effective July 1, 2018. s. 105-187.51D; 2011-302, s. 2; 2016-94, s. 38.2(e); repealed by 2017-57, s. 38.8(a), effective July 1, 2018. s. 105-187.52; 2001-347, s. 2.17; 2005-276, s. 33.22; 2006-162, s. 11; 2007-527, s. 14; 2011-330, s. 25(b); 2013-414, s. 16; 2015-6, s. 2.23(b); 2017-57, s. 38.8(a); 2018-5, s. 38.5(r); repealed by 2017-57, s. 38.8(a), effective July 1, 2018. s. 105-187.53; 2006-19, s. 2; repealed by 2017-57, s. 38.8(a), effective July 1, 2018.

Editor’s Note.

Former G.S. 105-187.50 contained definitions. Former G.S. 105-187.51 pertained to tax imposed on mill machinery. Former G.S. 105-187.51A pertained to tax imposed on manufacturing fuel. Former G.S. 105-187.51B pertained to tax imposed on machinery, equipment, and other tangible personal property purchased by certain companies. Former G.S. 105-187.51C pertained to tax imposed on datacenter machinery and equipment. Former G.S. 105-187.51D pertained to tax imposed on machinery at large manufacturing and distribution facility. Former G.S. 105-187.52 pertained to administration. Former G.S. 105-187.53 pertained to commercial logging items.

§§ 105-187.54 through 105-187.59.

Reserved for future codification purposes.

Article 5G. Solid Waste Disposal Tax.

§ 105-187.60. Definitions.

The definitions set out in G.S. 105-164.3 and G.S. 130A-290 apply to this Article.

History. 2007-550, s. 14(a).

Cross References.

As to solid waste management, generally, see G.S. 130A-290 et seq.

As to use of proceeds from solid waste disposal tax, see G.S. 130A-295.9 .

§ 105-187.61. Tax imposed.

  1. Tax Rate. —  An excise tax is imposed on the disposal of municipal solid waste and construction and demolition debris in any landfill permitted pursuant to Article 9 of Chapter 130A of the General Statutes at a rate of two dollars ($2.00) per ton of waste. An excise tax is imposed on the transfer of municipal solid waste and construction and demolition debris to a transfer station permitted pursuant to Article 9 of Chapter 130A of the General Statutes for disposal outside the State at a rate of two dollars ($2.00) per ton of waste.
  2. Tax Liability. —  The excise tax imposed by this section is due on municipal solid waste and construction and demolition debris received from third parties and on municipal solid waste and construction and demolition debris disposed of by the owner or operator. The tax is payable by the owner or operator of each landfill and transfer station permitted under Article 9 of Chapter 130A of the General Statutes.

History. 2007-550, s. 14(a).

§ 105-187.62. Administration.

  1. Collection. —  The owner or operator of each landfill and transfer station permitted pursuant to Article 9 of Chapter 130A of the General Statutes must maintain scales designed to determine waste tonnage that are approved by the Department of Agriculture and Consumer Services. Each owner or operator must record waste tonnage disposed of in a landfill or transferred to a station for disposal outside the State and must maintain other records as required by the Secretary of Revenue. An owner or operator may add the amount of the solid waste disposal tax due to the charges made to a third party for disposal of municipal solid waste or construction and demolition debris.
  2. Payment. —  The tax imposed by this Article is payable when a return is due. A return and payment are due on a quarterly basis. A quarterly return covers a calendar quarter and is due by the last day of the month following the end of the quarter.
  3. Bad Debt Deduction. —  In the event that an owner or operator pays the tax on tonnage received from a customer and the account of that customer is found to be worthless and charged off for income tax purposes, the owner or operator may recover the tax paid on the tonnage it received but for which it was never compensated. The tax shall be recovered by reducing the overall tonnage on which the owner or operator pays tax in a calendar quarter by the tonnage for which it was never compensated from the worthless account. A local government that has paid tax on an account that is subsequently found to be worthless shall recover the tax paid in the same manner, if it meets all the conditions for recovery that would apply if the local government were subject to income tax. If the owner or operator subsequently collects on an account that has been declared worthless, any tax recovered must be repaid in the next calendar quarter.

History. 2007-550, s. 14(a); 2008-207, s. 1.

Effect of Amendments.

Session Laws 2008-207, s. 1, effective August 9, 2008, designated the previously existing provisions as subsection (a); in subsection (a), inserted “Collection. —” at the beginning, substituted “must” for “shall” in the first sentence and near the beginning of the second sentence, substituted “disposed of in a landfill or transferred to a station for disposal outside the State and must” for “at the time the waste is received and” in the second sentence, deleted the last sentence, which read: “The tax imposed by this Article is payable and a return is due to be filed in the same manner as required under G.S. 105-164.16 for sales and use tax”; and added subsections (b) and (c).

§ 105-187.63. Use of tax proceeds.

From the taxes received pursuant to this Article, the Secretary may retain the costs of collection, not to exceed two hundred twenty-five thousand dollars ($225,000) a year, as reimbursement to the Department. The Secretary must credit or distribute taxes received pursuant to this Article, less the cost of collection, on a quarterly basis as follows:

  1. Fifty percent (50%) to the Inactive Hazardous Sites Cleanup Fund established by G.S. 130A-310.11 .
  2. Thirty-seven and one-half percent (37.5%) to cities and counties in the State on a per capita basis, using the most recent annual estimate of population certified by the State Budget Officer. One-half of this amount must be distributed to cities, and one-half of this amount must be distributed to counties. For purposes of this distribution, the population of a county does not include the population of a city located in the county.A city or county is excluded from the distribution under this subdivision if it does not provide solid waste management programs and services and is not responsible by contract for payment for these programs and services. The Department of Environmental Quality must provide the Secretary with a list of the cities and counties that are excluded under this subdivision. The list must be provided by May 15 of each year and applies to distributions made in the fiscal year that begins on July 1 of that year.Funds distributed under this subdivision must be used by a city or county solely for solid waste management programs and services.
  3. Twelve and one-half percent (12.5%) to the General Fund.

History. 2007-543, s. 2; 2007-550, s. 14(a); 2008-207, s. 2; 2009-484, s. 4; 2013-360, s. 14.18(a); 2015-241, s. 14.30(u).

Editor’s Note.

Session Laws 2008-207, s. 3, provides: “Notwithstanding G.S. 105-187.63(2) , as amended by this act, the Department of Environment and Natural Resources must provide a list to the Secretary of Revenue of the cities and counties that are excluded from the distribution under that subdivision by September 15, 2008. The list applies to distributions made in fiscal year 2008-2009.”

Session Laws 2013-360, s. 14.18(f), provides: “Money collected pursuant to Article 5G of Chapter 105 of the General Statutes between July 1, 2013, and the date this act becomes law [July 26, 2013] shall be credited to the General Fund. The money shall be used for the purposes provided in this section.”

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2013-2015 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2013-2015 fiscal biennium.”

Session Laws 2013-360, s. 38.5 is a severability clause.

Session Laws 2017-57, s. 13.3, provides: “Notwithstanding G.S. 130A-310.11(b), one million dollars ($1,000,000) of the funds credited to the Inactive Hazardous Sites Cleanup Fund under G.S. 105-187.63 for the assessment and remediation of pre-1983 landfills shall instead be allocated to the City of Havelock for the repurposing of the Phoenix Recycling site.”

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. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2017-2019 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2017-2019 fiscal biennium.”

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

Session Laws 2018-5, s. 13.2, as amended by Session Laws 2018-97, s. 4.2, and as amended by Session Laws 2021-180, s. 12.9, provides: “Notwithstanding G.S. 130A-310.11(b), up to two million dollars ($2,000,000) of the funds credited to the Inactive Hazardous Sites Cleanup Fund under G.S. 105-187.63 for the assessment and remediation of pre-1983 landfills shall instead be used by the Department of Environmental Quality’s Division of Waste Management to provide a matching grant to Charlotte Motor Speedway, LLC, (CMS) for the purpose of remediation activities at the Charlotte Motor Speedway in Cabarrus County. The Division shall provide one dollar ($1.00) for every one non-State dollar ($1.00) provided in kind or otherwise, up to a maximum of two million dollars ($2,000,000) for the matching grant described in this section. CMS may allocate all or a portion of the grant provided by this section to an entity that controls CMS or an entity controlled by CMS. Entities receiving such an allocation shall be considered a subgrantee as defined in G.S. 143C-6-23 .

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2007-543, s. 2, effective July 1, 2008, rewrote subdivision (2), which formerly read: “Thirty-seven and one-half percent (37.5%) to units of local government that provide solid waste management services directly to residents within the political boundaries of the unit of local government as determined by the Department of Environment and Natural Resources, distributed on a per capita basis as described in G.S. 105-472(b)(1). Funds distributed under this subdivision shall be used by a unit of local government solely for solid waste management programs and services. As used in this subdivision, ‘unit of local government‘ includes a regional solid waste management authority established under Article 22 of Chapter 153A of the General Statutes.”

Session Laws 2008-207, s. 2, effective August 9, 2008, in the second sentence of the introductory paragraph, substituted “Secretary must credit” for “Secretary shall credit,” and inserted “on a quarterly basis”; and rewrote subdivision (2).

Session Laws 2009-484, s. 4, effective August 26, 2009, in subdivision (2), deleted “unless it is served by a regional solid waste management authority established under Article 22 of Chapter 153A of the General Statutes” at the end of the first sentence of the second paragraph, and deleted the last sentence in the third paragraph, which read: “A city or county that receives funds under this subdivision and is served by a regional solid waste management authority must forward the amount it receives to that authority.”

Session Laws 2013-360, s. 14.18(a), effective July 1, 2013, substituted “General Fund” for “Solid Waste Management Trust Fund established by G.S. 130A-309.12 ” in subdivision (3).

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 the second sentence in the second paragraph of subdivision (2).

§§ 105-187.64 through 105-187.69.

Reserved for future codification purposes.

Article 5H. 911 Service Charge for Prepaid Wireless Telecommunications Service.

§ 105-187.70. Department to comply with Part 10 of Article 15 of Chapter 143B of the General Statutes.

The Department of Revenue shall comply with the provisions of Part 10 of Article 15 of Chapter 143B of the General Statutes to receive and transfer to the 911 Fund the 911 service charge for prepaid wireless telecommunications service collected on retail transactions occurring in this State.

History. 2011-122, s. 6; 2012-79, s. 1.6; 2015-241, s. 7A.3.

Editor’s Note.

Session Laws 2011-122, s. 9, made this Article effective July 1, 2013, and applicable to all retail transactions occurring in this State, as that term is defined in this act, on or after that date.

Session Laws 2015-241, s. 7A.3, provides in part: “The Revisor of Statutes may conform names and titles changed by this section and may correct statutory references as required by this section throughout the General Statutes. In making the changes authorized by this section, the Revisor may also adjust subject and verb agreement and the placement of conjunctions.” Pursuant to this authority, “Part 10 of Article 15 of Chapter 143B” was substituted for “Article 3 of Chapter 62A” in the section heading and in the text of the section 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. 33.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2015-2017 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2015-2017 fiscal biennium.”

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

Effect of Amendments.

Session Laws 2012-79, s. 1.6, effective June 26, 2012, substituted “Article 3” for “Article 4” in the section catchline.

Session Laws 2015-241, s. 7A.3, effective September 18, 2015, substituted “Part 10 of Article 15 of Chapter 143B” for “Article 3 of Chapter 62A” in the section heading and in the text.

§§ 105-187.71 through 105-187.75.

Reserved for future codification purposes.

Article 5I. Severance Tax.

§ 105-187.76. Definitions.

The following definitions apply in this Article:

  1. Casinghead gas. — Gas or vapor indigenous to an oil stratum and produced from the stratum with oil.
  2. Commission. — The Oil and Gas Commission.
  3. Condensate. — Liquid hydrocarbon that is or can be recovered from gas by a separator or other means.
  4. Energy mineral. — All forms of natural gas, oil, and related condensates.
  5. First purchaser. — A person who purchases an energy mineral from a producer.
  6. Gas. — All natural gas, including casinghead gas, and all other hydrocarbons not defined as condensates.
  7. Gross price. — The total price paid by the first purchaser of the energy mineral at the wellhead.
  8. Marginal gas well. — A well incapable of producing more than 100 MCF per day, as determined by the Commission using the current wellhead deliverability rate methodology utilized by the Commission, during the calendar month for which the severance tax report is filed.
  9. MCF. — One thousand cubic feet of natural gas.
  10. Oil. — Crude petroleum oil, and other hydrocarbons, regardless of gravity, which are produced at the well in liquid form by ordinary production methods and which are not the result of condensation of gas after it leaves the reservoir.
  11. Owner. — An owner of a landowner’s royalty interest, of an overriding royalty, of profits and working interests, or any combination thereof in energy minerals. The term does not include an owner of federal, State, or local governmental royalty interest.
  12. Person. — Defined in G.S. 105-228.90 .
  13. Producer. — A person who takes an energy mineral from the soil or water in this State.
  14. Return. — Any report or statement required to be filed under this Article to determine the tax due.
  15. Royalty interest. — An interest in mineral rights in a producing leasehold in the State. A royalty interest does not include the interest of a person having only the management and operation of a well.
  16. Secretary. — The Secretary of Revenue.
  17. Severance. — The extraction or other removal of an energy mineral from the soil or water of this State.
  18. Severed. — The point at which the energy mineral has been separated from the soil or water of this State.
  19. Standard barrel of oil. — A barrel of oil containing 42 gallons.
  20. Taxpayer. — Any person required to pay the severance tax levied by this Article.

History. 2014-4, s. 17(a); 2020-58, s. 2.8(a).

Editor’s Note.

Session Laws 2014-4, s. 19, made this Article effective July 1, 2015, and applicable to energy minerals severed on or after that date.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.71 . It has been renumbered as this section at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2020-58, s. 2.8(a), effective June 30, 2020, substituted “Oil and Gas Commission” for “Mining and Energy Commission” in subdivision (2).

§ 105-187.77. Tax on severance of energy minerals.

  1. Purpose. —  An excise tax is levied on the privilege of engaging in the severance of energy minerals from the soil or water of this State. The tax is imposed on the producer of the energy mineral. The purpose of the tax is to provide revenue to administer and enforce the provisions of this Article, to administer the State’s natural gas and oil reclamation regulatory program, to meet the environmental and resource management needs of this State, and to reclaim land affected by exploration for, drilling for, and production of natural gas and oil. The severance tax is imposed upon all energy minerals severed when sold.
  2. Calculation of Tax. —  The amount of the severance tax is calculated as follows:
    1. Condensates. —  The applicable percentage rate of the gross price paid.
    2. Gas. —  The applicable percentage rate of the market value as determined in G.S. 105-187.78 .
    3. Oil. —  The applicable percentage rate of the gross price paid.
  3. (Effective until January 1, 2021) Oil and Condensates Rate. —  The percentage rate for condensates and oil is three and one-half percent (3.5%).

    (c) (Effective January 1, 2021) Oil and Condensates Rate. — The percentage rate for condensates and oil is five percent (5%).

  4. (Effective until January 1, 2021) Marginal Gas Rate. —  The producer of a proposed or existing gas well may apply to the Commission for a determination that the well qualifies as a marginal gas well. The producer may elect to have the gas taxed at the marginal gas rate or the gas rate. For severance of gas from a marginal gas well the percentage rate is six-tenths of one percent (0.6%).

    (d) (Effective January 1, 2021) Marginal Gas Rate. — The producer of a proposed or existing gas well may apply to the Commission for a determination that the well qualifies as a marginal gas well. The producer may elect to have the gas taxed at the marginal gas rate or the gas rate. For severance of gas from a marginal gas well the percentage rate is eight-tenths of one percent (0.8%).

  5. (Effective until January 1, 2021) Gas Rate. —

    The percentage rate for gas is set in the table below. The tax rate is applied to the delivered to market value of the gas sold.

    Click to view

    (e) (Effective January 1, 2021 until January 1, 2023) Gas Rate. —

    The percentage rate for gas is set in the table below. The tax rate is applied to the delivered to market value of the gas sold.

    Click to view

    (e) (Effective January 1, 2023) Gas Rate. —

    The percentage rate for gas is set in the table below. The tax rate is applied to the delivered to market value of the gas sold.

    Click to view

Over Up to Rate -0- $3.00 per MCF 0.9% $3.01 per MCF $4.00 1.9% $4.01 N/A 2.9%

Over Up to Rate -0- $3.00 per MCF 0.9% $3.01 per MCF $4.00 1.9% $4.01 $5.00 2.9% $5.01 $6.00 3.9% $6.01 $7.00 4.9% $7.01 N/A 5%

Over Up to Rate -0- $3.00 per MCF 0.9% $3.01 per MCF $4.00 1.9% $4.01 $5.00 2.9% $5.01 $6.00 3.9% $6.01 $7.00 4.9% $7.01 $8.00 5.9% $8.01 $9.00 6.9% $9.01 $10.00 7.9% $10.01 N/A 9%

History. 2014-4, s. 17(a), (d)-(f); 2016-5, s. 4.4(b); 2020-58, s. 2.8(b).

Subsections (c) and (d) Set Out Twice.

The first versions of subsections (c) and (d) set out above are effective until January 1, 2021. The second versions of subsections (c) and (d) set out above are effective January 1, 2021.

Subsection (e) Set Out Three Times.

The first version of subsection (e) set out above is effective until January 1, 2021. The second version of subsection (e) set above is effective January 1, 2021 until January 1, 2023. The third version of subsection (e) set out above is effective January 1, 2023.

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.72. It has been renumbered as this section at the direction of the Revisor of Statutes.

Session Laws 2014-4, s. 19, made the amendment to subsections (c), (d), and (e) by Session Laws 2014-4, s. 17(d), applicable to energy minerals severed on or after January 1, 2019, made the amendment to subsections (c), (d), and (e) by Session Laws 2014-4, s. 17(e), applicable to energy minerals severed on or after January 1, 2021, and made the amendment to subsection (e) by Session Laws 2014-4, s. 17(f), applicable to energy minerals severed on or after January 1, 2023.

Effect of Amendments.

Session Laws 2014-4, s. 17(d), effective January 1, 2019, in subsection (c), substituted “three and one-half percent (3.5%)” for “two percent (2%)”; in subsection (d), substituted “six-tenths of one percent (0.6%)” for “four-tenths of one percent (0.4%)”; and rewrote subsection (e). See Editor’s note for applicability.

Session Laws 2014-4, s. 17(e), effective January 1, 2021, in subsection (c), substituted “five percent (5%)” for “three and one-half percent (3.5%)”; in subsection (d), substituted “eight-tenths of one percent (0.8%)” for “six-tenths of one percent (0.6%)”; and, in subsection (e), in the table, substituted “$5.00” for “N/A” in the third entry and added the last three entries. See Editor’s note for applicability.

Session Laws 2014-4, s. 17(f), effective January 1, 2023, in the table in subsection (e), in the sixth entry, substituted “$8.00” for “N/A” and “5.9%” for “5%” and added the last three entries. See Editor’s note for applicability.

Session Laws 2016-5, s. 4.4(b), effective May 11, 2016, added the second sentence in subsection (a).

Session Laws 2020-58, s. 2.8(b), effective June 30, 2020, deleted “Mining and Energy” preceding “Commission” in the first sentence of subsection (d).

§ 105-187.78. Delivered to Market Value.

  1. Delivered to Market Value of Natural Gas. —  The delivered to market value of natural gas is the total actual gross price as adjusted in this section. The delivered to market value of gas is determined by subtracting the producer’s actual costs to deliver the gas to the market from the producer’s total gross cash receipts from the sale of the natural gas. A producer receiving a cost reimbursement from the gas purchaser shall include the reimbursement in the gross cash receipts and is entitled to deduct the actual costs of delivering the gas to market incurred.
  2. Records. —  In order to be eligible to subtract the actual costs to deliver the gas to the market from the producer’s gross receipts for purposes of calculating the delivered-to-market value of natural gas, the producer shall provide any information required by the Secretary. Every producer subtracting the costs to deliver the gas to the market as permitted under this subsection shall maintain and make available for inspection by the Secretary any records the Secretary considers necessary to determine and verify the amount of the costs to deliver the gas to the market the producer is eligible to subtract. The burden of proving eligibility for subtracting the costs to deliver the gas to the market and the amount of the costs to deliver the gas to the market to be subtracted shall rest upon the producer, and no subtraction of costs to deliver the gas to the market shall be allowed to a producer that fails to maintain adequate records or to make them available for inspection.
  3. Costs to Deliver the Gas to the Market and Facilities Used to Deliver the Gas to the Market. —  A “facility used to deliver the gas to market” includes flow lines or gathering systems from the separator to the purchaser’s transmission line, compressor stations, dehydration units, line heaters after the separator, and treating facilities. “Costs to deliver the gas to the market” are the actual and reasonable costs incurred by the producer to get the gas from the mouth of the well to the first purchaser, except costs incurred in normal lease separation of the oil or condensate from the gas, and costs associated with insurance premiums on a facility used to deliver the gas to market. Costs to deliver the gas to the market include only the following:
    1. Costs for compressing the gas sold.
    2. Costs for dehydrating the gas sold.
    3. Costs for sweetening and treating the gas sold.
    4. Costs for delivering the gas to the purchaser.
    5. Reasonable charges for depreciation of the facility used to deliver the gas to market being used, provided that, if the facility is rented, the actual rental fee is added.
    6. Costs of direct or allocated labor associated with the facility used to deliver the gas to market.
    7. Costs of materials, supplies, maintenance, repairs, and fuel associated with the facility used to deliver the gas to market.
    8. Property taxes paid on the facility used to deliver the gas to market.
    9. Charges for fees paid by the producer to any provider of dehydration, treating, compression, and delivery services.

History. 2014-4, s. 17(a).

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.73. It has been renumbered as this section at the direction of the Revisor of Statutes.

§ 105-187.79. On-site use exemption from the tax.

On-site use is exempt from the tax imposed under this Article. On-site use is the severance of energy minerals from land or water in this State owned legally or beneficially by the producer, which energy minerals are used on the land from which they are taken by the producer as part of the improvement of or use in the producer’s homestead and which have a yearly cumulative delivered to market value of not greater than one thousand two hundred dollars ($1,200). When severed energy minerals so used exceed a cumulative delivered to market value of one thousand two hundred dollars ($1,200) during any year, the further severance of energy minerals shall be subject to the tax imposed by this Article.

History. 2014-4, s. 17(a).

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.74. It has been renumbered as this section at the direction of the Revisor of Statutes.

§ 105-187.80. Returns and payment of tax.

  1. General. —  Severance taxes are payable when a return is due. A return is due quarterly or monthly as specified in this section. A return must be filed by the producer of the energy mineral with the Secretary on a form prescribed by the Secretary and in the manner required by the Secretary. A return must be signed by the taxpayer or the taxpayer’s agent.
  2. Payment. —  A producer of energy minerals shall pay the tax for all owners of the energy minerals. The producer shall withhold from any payment due owners the proportionate tax due for remittance to the Secretary.
  3. Quarterly. —  A taxpayer who is consistently liable for less than one thousand dollars ($1,000) a month in severance taxes must file a return and pay the taxes due on a quarterly basis. A quarterly return covers a calendar quarter and is due by the 25th day of the second month following the end of the quarter.
  4. Monthly. —  A taxpayer who is consistently liable for at least one thousand dollars ($1,000) a month in severance taxes must file a return and pay the taxes due on a monthly basis. A monthly return is due by the 25th day of the second month following the calendar month covered by the return.
  5. Category. —  The Secretary must monitor the amount of severance taxes paid by a taxpayer or estimate the amount of taxes to be paid by a new taxpayer and must direct each taxpayer to pay tax and file returns as required by this section. In determining the amount of taxes due from a taxpayer, the Secretary must consider the total amount due from all places of business owned or operated by the same person as the amount due from that person. A taxpayer must file a return and pay tax in accordance with the Secretary’s direction.
  6. Information on Return. —  The amount of tax due and any other information required by the Secretary must be included on the return. Returns that do not contain the required information will not be accepted. When an unacceptable return is submitted, the Secretary will require a corrected return to be filed. The return must contain the following information concerning energy minerals produced during the month being reported:
    1. The gross amount of energy minerals produced that are subject to the tax imposed by this Article.
    2. The leases from which the energy minerals were produced.
    3. The names and addresses of the first purchasers of the energy minerals.
  7. Additional Information. —  To claim an exemption for on-site use, the producer or taxpayer of a proposed or existing gas well shall apply to the Secretary for determination of eligibility. The Secretary may require an applicant to provide any information required to administer this provision. The Secretary shall make the determination within 15 calendar days of the receipt of all information required by the Secretary from the producer or taxpayer, and the producer or taxpayer shall attach the determination of eligibility to its severance tax form next due, as applicable. The taxpayer shall provide any information required by the Secretary. Every taxpayer claiming the exemption shall maintain and make available for inspection by the Secretary of Revenue any records the Secretary considers necessary to determine and verify the claim to which the taxpayer is entitled. The burden of proving eligibility shall rest upon the taxpayer, and no exemption shall be allowed to a taxpayer who fails to maintain adequate records or to make them available for inspection. The portion of the severance tax that is required to be deducted from the royalty owner or other interest shall be calculated in the same manner as the portion of the severance tax borne by the producer.
  8. Commission Determination. —  To claim the marginal gas rate, the producer or taxpayer of a proposed or existing gas well shall provide to the Secretary proof that the Commission has determined the well qualifies as a marginal gas well.

History. 2014-4, s. 17(a); 2020-58, s. 2.8(c).

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.75. It has been renumbered as this section at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2020-58, s. 2.8(c), effective June 30, 2020, deleted “Mining and Energy” preceding “Commission” in subsection (h).

§ 105-187.81. Bond or letter of credit required.

A producer must file with the Secretary a bond or an irrevocable letter of credit after obtaining a permit under G.S. 113-395 . A bond or an irrevocable letter of credit must be conditioned upon compliance with the requirements of this Article, be payable to the State, and be in the form required by the Secretary. The amount of the bond or irrevocable letter of credit is two times the applicant’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 producers and increase the amount of a required bond when the amount of the bond furnished no longer covers the anticipated tax liability of the producer and decrease the amount when the Secretary determines that a smaller bond amount will adequately protect the State from loss. When notified to do so by the Secretary, a person who is required to file a bond or an irrevocable letter of credit must file the bond or irrevocable letter of credit in the amount required by the Secretary within 30 days after receiving the notice from the Secretary.

History. 2014-4, s. 17(a); 2016-5, s. 4.4(c).

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.76 . It has been renumbered as this section at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2016-5, s. 4.4(c), effective May 11, 2016, substituted “after obtaining a permit under G.S. 113-395 ” for “if the producer fails to file a return required under this Article” at the end of the first sentence; added the proviso at the end of the third sentence; and added the present next-to-last sentence.

§ 105-187.82. [Repealed]

Repealed by Session Laws 2016-5, s. 4.4(a), effective May 11, 2016.

History. 2014-4, s. 17(a); repealed by 2016-5, s. 4.4(a), effective May 11, 2016.

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.77 . It has been renumbered as this section at the direction of the Revisor of Statutes.

Former G.S. 105-187.82 pertained to liability of producer for tax.

§ 105-187.83. Royalty owner’s records.

The owner of a royalty interest shall keep and provide to the Secretary, upon request, both of the following:

  1. A record of all money received as royalty from each producing leasehold in the State.
  2. A copy of all settlement sheets furnished by a purchaser or operator or other statement showing the amount of energy minerals for which a royalty was received and the amount of severance tax deducted.

History. 2014-4, s. 17(a).

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.78 . It has been renumbered as this section at the direction of the Revisor of Statutes.

§ 105-187.84. Permits suspended for failure to report.

If an entity fails to file any report or return or to pay any tax or fee required by this Article for 90 days after it is due, the Secretary shall inform the Secretary of Environmental Quality of this failure. The Secretary of Environmental Quality shall suspend permits for oil and gas exploration using horizontal drilling and hydraulic fracturing under G.S. 113-395 of any entity that fails to file a return under this Article. The Secretary of Environmental Quality shall immediately notify by mail an entity of a suspension under this section.

History. 2014-4, s. 17(a); 2015-241, s. 14.30(v).

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.79 . It has been renumbered as this section 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.

Effect of Amendments.

Session Laws 2015-241, s. 14.30(v), effective July 1, 2015, substituted “Secretary of Environmental Quality” for “Secretary of Environment and Natural Resources” throughout the section.

§ 105-187.85. No local taxation.

A city or county may not impose a franchise, privilege, license, income, or excise tax on the severing, production, treating, processing, ownership, sale, storage, purchase, marketing, or transportation on any energy minerals produced in the State, or upon the business of severing, producing, treating, processing, owning, selling, buying, storing, marketing, or transporting such energy minerals, or upon the ownership, operation, or maintenance of plants, facilities, machinery, pipelines, and gathering lines related to the severing, production, treating, processing, ownership, storage, sale, purchase, marketing, or transportation of energy minerals. This section does not preclude the taxation of the property in accordance with Article 11 of this Chapter.

History. 2014-4, s. 17(a).

Editor’s Note.

Session Laws 2014-4, s. 17(a), enacted this section as G.S. 105-187.80 . It has been renumbered as this section at the direction of the Revisor of Statutes.

§§ 105-187.86 through 105-187.90.

Reserved for future codification purposes.

Article 6. Gift Taxes. [Repealed]

§§ 105-188 through 105-197.1. [Repealed]

Repealed by Session Laws 2008-107, s. 28.18(a), effective January 1, 2009.

Editor’s Note.

Session Laws 2008-107, s. 28.18(e), provides: “This section does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute repealed by this act before the effective date of its repeal; nor does it affect the right to any refund or credit of a tax that accrued under the repealed statute before the effective date of its repeal.”

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Article 7. Schedule H. Intangible Personal Property. [Repealed]

§ 105-198. [Repealed]

Repealed by Session Laws 1995, c. 41, s. 1(b).

§§ 105-199, 105-200. [Repealed]

Repealed by Session Laws 1985, c. 656, s. 32.

§§ 105-201 through 105-204. [Repealed]

Repealed by Session Laws 1995, c. 41, s. 1(b).

§ 105-205. [Repealed]

Repealed by Session Laws 1985, c. 656, s. 32.

§§ 105-206, 105-207. [Repealed]

Repealed by Session Laws 1995, c. 41, s. 1(b).

§ 105-208. [Repealed]

Repealed by Session Laws 1959, c. 1259, s. 9.

§ 105-209. [Repealed]

Repealed by Session Laws 1995, c. 41, s. 1(b).

§ 105-210. [Repealed]

Repealed by Session Laws 1979, c. 179, s. 4.

§§ 105-211 through 105-213. [Repealed]

Repealed by Session Laws 1995, c. 41, s. 1(b).

§ 105-213.1.

Recodified as G.S. 105-275.2 by Session Laws 1995.

§§ 105-214 through 105-217. [Repealed]

Repealed by Session Laws 1995, c. 41, s. 1(b).

Article 8. Schedule I. Compensating Use Tax. [Repealed]

§§ 105-218 through 105-228. [Repealed]

Repealed by Session Laws 1957, c. 1340, s. 5.

Cross References.

For present statutes relating to use tax, see G.S. 105-164.1 et seq.

Article 8A. Gross Earnings Taxes on Freight Line Companies in Lieu of Ad Valorem Taxes.

§ 105-228.1. Defining taxes levied and assessed in this Article.

The purpose of this Article is to levy a fair and equal tax under authority of Section 2(2) of Article V of the North Carolina Constitution and to provide a practical means for ascertaining and collecting it. The taxes levied and assessed in this Article are on gross earnings, as defined in the Article, and are in lieu of ad valorem taxes upon the properties of persons taxed in this Article.

History. 1954, c. 400, s. 8; 1998-98, ss. 64, 109.

Legal Periodicals.

For comment on this Article, see 21 N.C.L. Rev. 364 (1943).

§ 105-228.2. Tax upon freight car line companies.

  1. For purposes of taxation under this section the property of freight line companies as defined is declared to constitute a special class of property. In lieu of all ad valorem taxes by either or both the State government and the respective local taxing jurisdictions, a tax upon gross earnings in the State as elsewhere defined shall be imposed.
  2. Any person or persons, joint-stock association or corporation, wherever organized or incorporated, engaged in the business of operating cars or engaged in the business of furnishing or leasing cars not otherwise listed for taxation in this State, for the transportation of freight (whether such cars be owned by such company or any other person or company), over any railway or lines, in whole or in part, within this State, such line or lines not being owned, leased or operated by such company, whether such cars be termed box, flat, coal, ore, tank, stock, gondola, furniture, or refrigerator car or by some other name, shall be deemed a freight line company.
  3. For the purposes of taxation under this section all cars used exclusively within the State, or used partially within and without the State, and a proportionate part of the intangible values of the business as a going concern, are hereby declared to have situs in this State.
  4. Every freight line company, as hereinbefore defined, shall pay annually a sum in the nature of a tax at three per centum (3%) upon the total gross earnings received from all sources by such freight line companies within the State, which shall be in lieu of all ad valorem taxes in this State of any freight company so paying the same.
  5. The term “gross earnings received from all sources by such freight line companies within the State” as used in this Article is hereby declared and shall be construed to mean all earnings from the operation of freight cars within the State for all car movements or business beginning and ending within the State and a proportion, based upon the proportion of car mileage within the State to the total car mileage, or earnings on all interstate car movements or business passing through, or into or out of the State.
  6. Every railroad company using or leasing the cars of any freight line company shall, upon making payment to such freight line company for the use or lease, after June 30, 1943, of such cars withhold so much thereof as is designated in this section. On or before March first of each year such railroad company shall make and file with the Secretary of Revenue a statement showing the amount of such payment for the next preceding 12-month period ending December 31, and of the amounts so withheld by it, and shall remit to the Secretary of Revenue the amounts so withheld. If any railroad company shall fail to make such report or fail to remit the amount of tax herein levied, or shall fail to withhold the part of such payment hereby required to be withheld, such railroad company shall become liable for the amount of the tax herein levied and shall not be entitled to deduct from its gross earnings for purposes of taxation the amounts so paid by it to freight line companies.It is not the purpose of this subsection to impose an unreasonable burden of accounting on railroad companies operating in this State, and the Secretary of Revenue is hereby authorized, upon the application of any railroad company, to approve any method of accounting which he finds to be reasonably adequate for determining the amount of mileage earnings by any car line company whose equipment is operated within the State by or on the lines of such railroad company. Further, if in the opinion of the Secretary of Revenue the tax imposed by this section can be satisfactorily collected direct from the freight line companies, he is hereby authorized to fix rules and regulations for such direct collection, with the authority to return at any time to the method of collection at source above provided in this subsection.
  7. Every car line company shall file such additional reports annually, and in such form and as of such date as the Secretary of Revenue may deem necessary to determine the equitable amount of tax levied under this section.
  8. Upon the filing of such reports it shall be the duty of the Secretary of Revenue to inspect and verify the same and assess the amount of taxes due from freight line companies therein named. Any freight line company against which a tax is assessed under the provisions of this Article may at any time within 15 days after the last day for the filing of reports by railroad companies, appear before the Secretary of Revenue at a hearing to be granted by the Secretary and offer evidence and argument on any matter bearing upon the validity or correctness of the tax assessed against it, and the Secretary shall review his assessment of such tax and shall make his order confirming or modifying the same as he shall deem just and equitable, and if any overpayment is found to have been made it shall be refunded by the Secretary. Provided, however that such payment if in the amount of three dollars ($3.00) or more shall be refunded to the taxpayer within 60 days of the discovery thereof; if the amount of overpayment is less than three dollars ($3.00) then such overpayment shall be refunded only upon receipt by the Secretary of Revenue of a written demand for such refund from the taxpayer. Provided further, that no overpayment shall be refunded irrespective of whether upon discovery or receipt of written demand if such discovery is not made or such demand is not received within three years from the filing date of the return or within six months of the payment of the tax alleged to be an overpayment, whichever date is the later.
  9. The provisions of Article 9 of this Chapter apply to this Article.
  10. The provisions of this Article shall apply to all freight line gross earnings accruing from and after June 30, 1943.

History. 1943, c. 400, s. 8; 1957, c. 1340, s. 14; 1973, c. 476, s. 193; 1998-212, s. 29A.14(j).

Article 8B. Taxes Upon Insurance Companies And Prepaid Health Plans.

§ 105-228.3. Definitions.

The following definitions apply in this Article:

  1. Article 65 corporation. — A corporation subject to Article 65 of Chapter 58 of the General Statutes, regulating hospital, medical, and dental service corporations.
  2. Capitation payment. — Amounts paid by the Department of Health and Human Services to prepaid health plans under capitated contracts for the delivery of Medicaid and NC Health Choice services in accordance with Article 4 of Chapter 108D of the General Statutes.
  3. Captive insurance company. — Defined in G.S. 58-10-340 .
  4. Foreign captive insurance company. — A captive insurance company as defined in G.S. 58-10-340(9), except that such company is not formed or licensed under the laws of this State but is formed and licensed under the laws of any jurisdiction within the United States other than this State.
  5. Insurer. — An insurer as defined in G.S. 58-1-5 or a group of employers who have pooled their liabilities pursuant to G.S. 97-93 of the Workers’ Compensation Act.
  6. Prepaid health plan. — As defined in G.S. 108D-1 .
  7. Self-insurer. — An employer that carries its own risk pursuant to G.S. 97-93 of the Workers’ Compensation Act.

History. 1945, c. 752, s. 2; 1985 (Reg. Sess., 1986), c. 928, s. 12; 1995, c. 360, s. 1(b); 2013-116, s. 6(a); 2018-5, s. 38.2(e); 2020-88, s. 16(b).

Editor’s Note.

Session Laws 1998-98, s. 65 deleted “Schedule I-B” from the article heading.

Session Laws 2013-116, s. 8, provides: “Nothing in this act shall be construed to obligate the General Assembly to appropriate funds to implement the provisions of this act. This act becomes effective July 1, 2013, if funds are appropriated for the 2013-2015 fiscal biennium to provide the Department with regulatory staff and resources to license and regulate captive insurance companies. If no funds are appropriated, then this act shall not become effective until July 1 of a year in which the General Assembly appropriates funds to implement it.” Funds were appropriated for the 2013-2015 fiscal biennium.

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 2020-88, s. 16(a), rewrote the Article 8B heading, which formerly read: “Taxes Upon Insurance Companies.” See note for effective date and applicability.

Session Laws 2020-88, s. 16(f), made the rewriting of the Article 8B heading effective 30 days after it becomes law and applicable to capitation payments received by prepaid health plans on or after that date. Session Laws 2020-88 became law on July 2, 2020, making the effective date of this amendment August 1, 2020.

Session Laws 2020-88, s. 16(f), made the rewriting of this section by Session Laws 2020-88, s. 16(b), effective 30 days after it becomes law and applicable to capitation payments received by prepaid health plans on or after that date. Session Laws 2020-88 became law on July 2, 2020, making the effective date of this amendment August 1, 2020.

Effect of Amendments.

Session Laws 2013-116, s. 6(a), effective July 1, 2013, added subdivision (1a).

Session Laws 2018-5, s. 38.2(e), effective June 12, 2018, added subdivision (1b).

Session Laws 2020-88, s. 16(b), rewrote the section. For effective date and applicability, see editor’s note.

§ 105-228.4.

Recodified as G.S. 58-6-7 by Session Laws 1995, c. 360, s. 1(c).

Editor’s Note.

Session Laws 1995, c. 193, s. 65, amended this section effective June 7, 1995, by substituting “license” for “registration” in the catchline; in subsection (a), substituting “license” for “certificate of registration” in the first sentence, and in the second and third sentences substituting “license” for “certificate”. The amendments have been implemented in G.S. 58-6-7 .

§ 105-228.4A. Tax on captive insurance companies.

  1. Tax Levied. —  A tax is levied in this section on a captive insurance company doing business in this State. In the case of a branch captive insurance company, the tax levied in this section applies only to the branch business of the company. Two or more captive insurance companies under common ownership and control are taxed under this section as a single captive insurance company. The tax levied in this section does not apply to a foreign captive insurance company.
  2. Other Taxes. —  A captive insurance company that is subject to the tax levied by this section and a foreign captive insurance company are not subject to any of the following:
    1. Franchise taxes imposed by Article 3 of this Chapter.
    2. Income taxes imposed by Article 4 of this Chapter, subject to the provisions of G.S. 105-130.5 A.
    3. Local privilege taxes or local taxes computed on the basis of gross premiums.
    4. The insurance regulatory charge imposed by G.S. 58-6-25 .
  3. Administration. —  The definitions in G.S. 58-10-340 apply in this section. A company subject to this section must file with the Secretary a full and accurate report of the premiums contracted for or collected on policies or contracts of insurance written by the company during the preceding calendar year. In the case of a multiyear policy or contract, the premiums must be prorated among the years covered by the policy or contract. The report is due on or before March 15. The taxes imposed by this section are due to the Secretary with the report.
  4. Tax on Assumed Reinsurance Premiums. —

    The tax to be applied to assumed reinsurance premiums is computed at the percentages provided in the table below. The tax does not apply to premiums for risks or portions of risks that are subject to taxation on a direct basis under subsection (e) of this section. The tax is not payable in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of one insurer by another insurer if the two insurers are under common control and the Commissioner of Insurance verifies both of the following: (i) the transaction between the insurers is part of a plan to discontinue the operations of one of the insurers, and (ii) the intent of the insurers is to renew or maintain business with the captive insurance company.

    Premiums Collected Rate of Tax

    Up to $20,000,000 .225%

    $20,000,000 to $40,000,000 .150%

    $40,000,000 to $60,000,000 .050%

    $60,000,000 and over .025%

  5. Tax on Direct Premiums. —

    The tax to be applied to direct premiums is computed at the percentages provided in the table below. In determining the amount of premiums subject to tax under this subsection, the taxpayer may deduct the amounts paid to policyholders as return premiums. Return premiums include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders.

    Premiums Collected Rate of Tax

    Up to $20,000,000 0.4%

    $20,000,000 and more 0.3%

  6. Total Tax Liability. —  The aggregate amount of tax payable under this section by a protected cell captive insurance company with more than 10 cells may not be less than ten thousand dollars ($10,000) and may not exceed the lesser of (i) one hundred thousand dollars ($100,000) plus five thousand dollars ($5,000) multiplied by the number of cells over 10 and (ii) two hundred thousand dollars ($200,000). The aggregate amount of tax payable under this section for any other captive insurance company may not be less than five thousand dollars ($5,000) and may not exceed one hundred thousand dollars ($100,000).If a captive insurance company is a special purpose financial captive and if the special purpose financial captive is under common ownership and control with one or more other captive insurance companies, the following provisions apply to the consolidated group of companies that are taxed as a single captive insurance company pursuant to subsection (a) of this section:
    1. The amount of premium tax payable under this section is allocated to each member of the consolidated group in the same proportion that the premium allocable to the member bears to the total premium of all members.
    2. The aggregate amount of tax payable under this section by the consolidated group is equal to the greater of the following:
      1. The sum of the premium tax allocated to the members.
      2. Five thousand dollars ($5,000).
    3. If the total premium tax allocated to all members of a consolidated group that are special purpose financial captives exceeds one hundred thousand dollars ($100,000), then the total premium tax allocated to those members is one hundred thousand dollars ($100,000).
    4. If the total premium tax allocated to all members of the consolidated group that are not special purpose financial captives exceeds one hundred thousand dollars ($100,000), then the total premium tax allocated to those members is one hundred thousand dollars ($100,000).

History. 2013-116, s. 6(b); 2014-3, s. 14.11; 2018-5, s. 38.2(f).

Editor’s Note.

Session Laws 2013-116, s. 8, provides: “Nothing in this act shall be construed to obligate the General Assembly to appropriate funds to implement the provisions of this act. This act becomes effective July 1, 2013, if funds are appropriated for the 2013-2015 fiscal biennium to provide the Department with regulatory staff and resources to license and regulate captive insurance companies. If no funds are appropriated, then this act shall not become effective until July 1 of a year in which the General Assembly appropriates funds to implement it.” Funds were appropriated for the 2013-2015 fiscal biennium.

Effect of Amendments.

Session Laws 2014-3, s. 14.11, effective May 29, 2014, substituted “March 15” for “March 1” in the next-to-last sentence of subsection (c).

Session Laws 2018-5, s. 38.2(f), effective June 12, 2018, in subsection (a), added the last sentence; and in subdivision (b)(2), added “subject to the provisions of G.S. 105-130.5 A”.

§ 105-228.5. Taxes measured by gross premiums. [Effective for taxable years beginning before January 1, 2022]

  1. Tax Levied. —  A tax is levied in this section on insurers, Article 65 corporations, health maintenance organizations, prepaid health plans, and self-insurers. An insurer, health maintenance organization, prepaid health plan, or Article 65 corporation that is subject to the tax levied by this section is not subject to franchise or income taxes imposed by Articles 3 and 4, respectively, of this Chapter.
  2. Tax Base. —
    1. Insurers. —  The tax imposed by this section on an insurer or a health maintenance organization shall be measured by gross premiums from business done in this State during the preceding calendar year.
    2. Repealed by Session Laws 2006-196, effective for taxable years beginning on or after January 1, 2008.
    3. Article 65 Corporations. —  The tax imposed by this section on an Article 65 corporation shall be measured by gross collections from membership dues, exclusive of receipts from cost plus plans, received by the corporation during the preceding calendar year.
    4. Self-insurers. —  The tax imposed by this section on a self-insurer shall be measured by the gross premiums that would be charged against the same or most similar industry or business, taken from the manual insurance rate then in force in this State, applied to the self-insurer’s payroll for the previous calendar year as determined under Article 36 of Chapter 58 of the General Statutes modified by the self-insurer’s approved experience modifier.
    5. Prepaid health plans. —  The tax imposed by this section on a prepaid health plan shall be measured by gross capitation payments received by the prepaid health plan from the Department of Health and Human Services for services provided to enrollees in the State Medicaid program or NC Health Choice program in the preceding calendar year.

      (b1) Calculation of Tax Base. — In determining the amount of gross premiums from business in this State, all gross premiums received in this State, credited to policies written or procured in this State, or derived from business written in this State shall be deemed to be for contracts covering persons, property, or risks resident or located in this State unless one of the following applies:

      (1) The premiums are properly reported and properly allocated as being received from business done in some other nation, territory, state, or states.

      (2) The premiums are from policies written in federal areas for persons in military service who pay premiums by assignment of service pay.

      Gross premiums from business done in this State in the case of life insurance contracts, including supplemental contracts providing for disability benefits, accidental death benefits, or other special benefits that are not annuities, means all premiums collected in the calendar year, other than for contracts of reinsurance, for policies the premiums on which are paid by or credited to persons, firms, or corporations resident in this State, or in the case of group policies, for contracts of insurance covering persons resident within this State. The only deductions allowed shall be for premiums refunded on policies rescinded for fraud or other breach of contract and premiums that were paid in advance on life insurance contracts and subsequently refunded to the insured, premium payer, beneficiary or estate. Gross premiums shall be deemed to have been collected for the amounts as provided in the policy contracts for the time in force during the year, whether satisfied by cash payment, notes, loans, automatic premium loans, applied dividend, or by any other means except waiver of premiums by companies under a contract for waiver of premium in case of disability.

      Gross premiums from business done in this State in the case of prepaid health plans means all capitation payments received by a prepaid health plan from the Department of Health and Human Services for the delivery of services to enrollees in the State Medicaid program or NC Health Choice program in the calendar year. Capitation payments refunded by a prepaid health plan to the State are the only allowable deductions.

      Gross premiums from business done in this State for all other health care plans and contracts of insurance, including contracts of insurance required to be carried by the Workers’ Compensation Act, means all premiums written during the calendar year, or the equivalent thereof in the case of self-insurers under the Workers’ Compensation Act, for contracts covering property or risks in this State, other than for contracts of reinsurance, whether the premiums are designated as premiums, deposits, premium deposits, policy fees, membership fees, or assessments. Gross premiums shall be deemed to have been written for the amounts as provided in the policy contracts, new and renewal, becoming effective during the year irrespective of the time or method of making payment or settlement for the premiums, and with no deduction for dividends whether returned in cash or allowed in payment or reduction of premiums or for additional insurance, and without any other deduction except for return of premiums, deposits, fees, or assessments for adjustment of policy rates or for cancellation or surrender of policies.

  3. Exclusions. —  Every insurer, in computing the premium tax, shall exclude all of the following from the gross amount of premiums, and the gross amount of excluded premiums is exempt from the tax imposed by this section:
    1. All premiums received on or after July 1, 1973, from policies or contracts issued in connection with the funding of a pension, annuity, or profit-sharing plan qualified or exempt under section 401, 403, 404, 408, 457 or 501 of the Code as defined in G.S. 105-228.90 .
    2. Premiums or considerations received from annuities, as defined in G.S. 58-7-15 .
    3. Funds or considerations received in connection with funding agreements, as defined in G.S. 58-7-16 .
    4. The following premiums, to the extent federal law prohibits their taxation under this Article:
      1. Federal Employees Health Benefits Plan premiums.
      2. Medicare premiums.
      3. Medicaid or NC Health Choice premiums, other than capitation payments, paid by or on behalf of a Medicaid or NC Health Choice beneficiary.
  4. (See Editor’s note) Tax Rates; Disposition. —
    1. Workers’ Compensation. —  The tax rate to be applied to gross premiums, or the equivalent thereof in the case of self-insurers, on contracts applicable to liabilities under the Workers’ Compensation Act is two and five-tenths percent (2.5%). The net proceeds shall be credited to the General Fund.
    2. Other Insurance Contracts. —  The tax rate to be applied to gross premiums on all other taxable contracts issued by insurers or health maintenance organizations and to be applied to gross premiums and gross collections from membership dues, exclusive of receipts from cost plus plans, received by Article 65 corporations is one and nine-tenths percent (1.9%). The net proceeds shall be credited to the General Fund. (2a) Prepaid Health Plans. — The tax rate to be applied to gross premiums from capitation payments received by prepaid health plans is one and nine-tenths percent (1.9%). The net proceeds shall be credited to the General Fund.
    3. Additional Rate on Property Coverage Contracts. —  An additional tax at the rate of seventy-four hundredths percent (0.74%) applies to gross premiums on insurance contracts for property coverage. The tax is imposed on ten percent (10%) of the gross premiums from insurance contracts for automobile physical damage coverage and on one hundred percent (100%) of the gross premiums from all other contracts for property coverage. Twenty percent (20%) of the net proceeds of this additional tax must be credited to the Volunteer Fire Department Fund established in Article 87 of Chapter 58 of the General Statutes. Twenty percent (20%) of the net proceeds must be credited to the Department of Insurance for disbursement pursuant to G.S. 58-84-25 . Up to twenty percent (20%), as determined in accordance with G.S. 58-87-10(f), must be credited to the Workers’ Compensation Fund. The remaining net proceeds must be credited to the General Fund. The additional tax imposed on property coverage contracts under this subdivision is a special purpose assessment based on gross premiums and not a gross premiums tax.The following definitions apply in this subdivision:
      1. Automobile physical damage. — The following lines of business identified by the NAIC: private passenger automobile physical damage and commercial automobile physical damage.
      2. Property coverage. — The following lines of business identified by the NAIC: fire, farm owners multiple peril, homeowners multiple peril, nonliability portion of commercial multiple peril, ocean marine, inland marine, earthquake, private passenger automobile physical damage, commercial automobile physical damage, aircraft, and boiler and machinery. The term also includes insurance contracts for wind damage.
      3. NAIC. — National Association of Insurance Commissioners.
    4. Repealed by Session Laws 2006-196, effective for taxable years beginning on or after January 1, 2008.
    5. Repealed by Session Laws 2003-284, s. 43.1, effective for taxable years beginning on or after January 1, 2004.
    6. Repealed by Session Laws 2005-276, s. 38.4(a), effective for taxable years beginning on or after January 1, 2007.
  5. Report and Payment. —  Each taxpayer doing business in this State shall, within the first 15 days of March, file with the Secretary of Revenue a full and accurate report of the total gross premiums as defined in this section, the payroll and other information required by the Secretary in the case of a self-insurer, or the total gross collections from membership dues exclusive of receipts from cost plus plans collected in this State during the preceding calendar year. The taxes imposed by this section shall be remitted to the Secretary with the report.
  6. Installment Payments Required. —  Taxpayers that are subject to the tax imposed by this section and have a premium tax liability of ten thousand dollars ($10,000) or more for business done in North Carolina during the immediately preceding year shall remit three equal quarterly installments with each installment equal to at least thirty-three and one-third percent (33 1/3%) of the premium tax liability incurred in the immediately preceding taxable year. The quarterly installment payments shall be made on or before April 15, June 15, and October 15 of each taxable year. The taxpayer shall remit the balance by the following March 15 in the same manner provided in this section for annual returns.The Secretary may permit an insurance company or prepaid health plan to pay less than the required estimated payment when the insurer or prepaid health plan reasonably believes that the total estimated payments made for the current year will exceed the total anticipated tax liability for the year.An underpayment or an overpayment of an installment payment required by this subsection accrues interest in accordance with G.S. 105-241.21 . An overpayment of tax shall be credited to the taxpayer and applied against the taxes imposed upon the taxpayer under this Article.
  7. Exemptions. —  This section does not apply to any of the following:
    1. A farmers’ mutual assessment fire insurance company.
    2. A fraternal order or society that does not operate for a profit and does not issue policies on any person except members.
    3. A captive insurance company taxed under G.S. 105-228.4 A.
    4. A foreign captive insurance company that is licensed in and taxed on its gross premiums in a jurisdiction within the United States other than this State.

History. 1945, c. 752, s. 2; 1947, c. 501, s. 8; 1951, c. 643, s. 8; 1955, c. 1313, s. 5; 1957, c. 1340, s. 12; 1959, c. 1211; 1961, c. 783; 1963, c. 1096; 1969, c. 1221; 1973, cc. 142, 1019; 1975, c. 143; c. 559, s. 8; 1979, c. 714, s. 2; 1983, c. 713, s. 81; 1985, c. 119, s. 3; c. 719, ss. 1, 2; 1985 (Reg. Sess., 1986), c. 1031, ss. 1-5; 1987, c. 709, s. 2; c. 814, s. 2; 1989 (Reg. Sess., 1990), c. 814, s. 27; 1991, c. 689, s. 297; 1993 (Reg. Sess., 1994), c. 600, s. 4; 1995, c. 360, s. 1(d); 1995 (Reg. Sess., 1996), c. 747, s. 2; 1998-98, s. 17; 2001-424, s. 34.22(a), (d), (e); 2001-487, s. 69(a); 2001-489, s. 2(a)-(d), (f), (g); 2003-284, s. 43.1; 2005-276, s. 38.4(a); 2005-435, s. 57(a); 2006-196, ss. 1-5; 2007-250, s. 1; 2007-491, s. 23; 2013-116, s. 6(c); 2013-360, s. 20.2(a); 2014-64, s. 3(b); 2016-5, s. 1.4; 2017-204, s. 1.11(a); 2018-5, s. 38.2(g); 2020-88, s. 16(c).

Section Set Out Twice.

The section above is in effect for taxable years beginning before January 1, 2022. For this section as in effect for taxable years beginning on or after January 1, 2012, see the following section, also numbered G.S. 105-228.5 .

Editor’s Note.

Session Laws 1995 (Reg. Sess., 1996), c. 747, s. 16, provides: “This act does not obligate the General Assembly to appropriate funds.”

Session Laws 2013-116, s. 8, provides: “Nothing in this act shall be construed to obligate the General Assembly to appropriate funds to implement the provisions of this act. This act becomes effective July 1, 2013, if funds are appropriated for the 2013-2015 fiscal biennium to provide the Department with regulatory staff and resources to license and regulate captive insurance companies. If no funds are appropriated, then this act shall not become effective until July 1 of a year in which the General Assembly appropriates funds to implement it.” Funds were appropriated for the 2013-2015 fiscal biennium.

Session Laws 2014-64, s. 3(c), provides: “Using a portion of the additional funds made available to the General Fund through the amendment to G.S. 105-228.5 made by Section 3(b) of this act, the sum of one million four hundred thousand dollars ($1,400,000) is appropriated for fiscal year 2014-2015, recurring from the General Fund to the North Carolina Firefighters’ and Rescue Squad Workers’ Pension Fund established under G.S. 58-86-1 .”

Session Laws 2017-204, s. 1.11(b), (c), provides: “(b) A taxpayer that elected to take a business energy and tax credit against the gross premiums tax for a taxable year beginning before January 1, 2017, may take an installment or carryforward of the credit against the additional tax imposed under G.S. 105-228.5(d)(3) for taxable years beginning before January 1, 2017. A taxpayer may not take an installment or carryforward of the credit against the additional tax imposed under G.S. 105-228.5(d)(3) for taxable years beginning on or after January 1, 2017. A taxpayer 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 benefit enacted by this subsection. A request for a refund must be made on or before January 1, 2018. A request for a refund received after this date is barred.

“(c) The gross premiums tax is a tax imposed on the gross premiums of insurers, Article 65 corporations, health maintenance organizations, and self-insurers. Entities subject to the gross premiums tax are not subject to franchise or income taxes. In S.L. 2009-548, the General Assembly broadened the taxes against which the business and energy tax credits could be taken from income and franchise taxes to income, franchise, and gross premiums taxes.

“The gross premiums tax rate is set in G.S. 105-228.5 (d)(1) and (2). Separate and apart from the gross premiums taxes, G.S. 105-228.5 (d)(3) imposes an additional tax that is calculated using a person’s gross premiums but is not considered part of the gross premiums tax imposition. The Department of Revenue has historically administered the gross premium tax and the additional tax imposed under G.S. 105-228.5 as two separate and distinct taxes. Satisfied with this administration, the General Assembly did not address the separate treatment of the two taxes in S.L. 2009-548.

“The intent of this section is two-fold, as follows:

“(1) To clarify the accuracy of the Department’s interpretation of the current and continuing state of the law by expressly codifying the long-standing interpretation that the additional tax imposed by G.S. 105-228.5(d)(3) is a separate and distinct tax that is based upon gross premiums but is not a gross premiums tax.

“(2) To avoid costly potential litigation with taxpayers that have failed to properly take an installment or carryforward of a business and energy tax credit against only the gross premiums tax by permitting the taxpayers to take installments and carryforwards of that tax credit for taxable years beginning before January 1, 2017, against the additional tax that is imposed under G.S. 105-228.5(d)(3).”

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

Session Laws 2018-49, s. 8(a)-(c), provides: “(a) It is the intent of the General Assembly to enact legislation, no later than March 15, 2019, that will ensure that the premium tax levied under G.S. 105-228.5 applies to capitation payments received by Prepaid Health Plans, as defined in G.S. 58-93-2, in the same manner in which the tax is applied to the gross premiums from business done in this State for all other health care plans and contracts of insurance provided by insurers or health maintenance organizations subject to the tax.

“(b) Until March 15, 2019, or such earlier date as the legislation described in subsection (a) of this section is enacted, the Department of Health and Human Services shall plan for the implementation of Medicaid transformation with the assumption that such legislation will be enacted. If the General Assembly has not ratified the legislation described in subsection (a) of this section by March 15, 2019, then the Department of Health and Human Services shall plan for the implementation of Medicaid transformation with the assumption that such legislation will be not enacted, and the Department shall correct all actions taken in reliance on the previous assumption, including the reissuance of the requests for proposals for capitated PHP contracts, if necessary.

“(c) By October 1, 2018, the Department of Health and Human Services, in consultation with the Department of Revenue, shall submit a report to the Joint Legislative Oversight Committee on Medicaid and NC Health Choice containing proposed legislative changes necessary to accomplish the intent set forth in subsection (a) of this section. The report shall include the following:

“(1) Assurances that the proposed legislative changes do not violate federal Medicaid laws or regulations.

“(2) An estimate of the amount of increase in revenue that is anticipated as a result of the proposed legislative changes, and any proposed uses for the increase in revenue.”

Session Laws 2020-88, s. 16(f), made the amendment of this section by Session Laws 2020-88, s. 16(c), effective 30 days after it becomes law and applicable to capitation payments received by prepaid health plans on or after that date. Session Laws 2020-88 became law on July 2, 2020, making the effective date of this amendment August 1, 2020.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2003-284, s. 43.1, effective for taxable years beginning on or after January 1, 2004, in subdivision (d)(2), inserted “and to be applied to gross premiums and gross collections from membership dues, exclusive of receipts from cost plus plans, received by Article 65 corporations”; repealed subdivision (d)(5); and in subdivision (d)(6), inserted “including directly operated health maintenance organizations authorized under G.S. 58-67-95 .”

Session Laws 2005-276, s. 38.4(a), effective for taxable years beginning on or after January 1, 2007, repealed subdivision (d)(6).

Session Laws 2005-435, s. 57.(a), effective January 1, 2007, inserted “or health maintenance organizations” following “issued by insurers” in subdivision (d)(2).

Session Laws 2006-196, s. 1, effective for taxable years beginning on or after January 1, 2006, rewrote paragraph (d)(3) which read: “Additional Statewide Fire and Lightning Rate. — An additional tax shall be applied to gross premiums on contracts of insurance applicable to fire and lightning coverage, except in the case of marine and automobile policies, at the rate of one and thirty-three hundredths percent (1.33%). Twenty-five percent (25%) of the net proceeds of this additional tax shall be deposited in the Volunteer Fire Department Fund established in Article 87 of Chapter 58 of the General Statutes. The remaining net proceeds shall be credited to the General Fund.”; ss. 2 - 5, effective for taxable years beginning on or after January 1, 2008, deleted former paragraph (b)(2) which read: “Additional Local Fire and Lightning Rate. - The additional tax imposed by subdivision (d)(4) of this section shall be measured by gross premiums from business done in fire districts in this State during the preceding calendar year. For the purpose of this section, the term ‘fire district’ has the meaning provided in G.S. 58-84-5 ”; in subsection (d), rewrote paragraph (d)(3); deleted paragraph (d)(4) which read: “Additional Local Fire and Lightning Rate. — An additional tax shall be applied to gross premiums on contracts of insurance applicable to fire and lightning coverage within fire districts at the rate of one-half of one percent ( 1/ 2 of 1%). The net proceeds shall be credited to the Department of Insurance for disbursement pursuant to G.S. 58-84-25 ”; deleted the second paragraph of subsection (e) which read: “In the case of an insurer liable for the additional local fire and lightning tax, the report shall include the information required under G.S. 58-84.1”; and deleted “not including the additional local fire and lightning tax,” following “liability” in the middle of the first sentence of subsection (f).

Session Laws 2007-250, s. 1, effective for taxable years beginning on or after January 1, 2008, in subdivision (d)(3), in the introductory paragraph, substituted “seventy-four hundredths percent (0.74%)” for “eighty-five hundredths percent (.85%)” in the first sentence, and “Thirty percent (30%)” for “Twenty percent (20%)” in the third sentence; and added the last sentence in subdivision (d)(3)b.

Session Laws 2007-491, s. 23, effective January 1, 2008, in subsection (f), deleted “of Revenue” following “The Secretary” in the second paragraph, and rewrote the third paragraph. For applicability, see Editor’s note.

Session Laws 2013-116, s. 7, effective July 1, 2013, added the last sentence in subsection (g).

Session Laws 2013-360, s. 20.2(a), effective July 1, 2013, in the introductory language of subdivision (d)(3), substituted “Twenty-five percent (25%)” for “Thirty percent (30%)” in the third sentence, substituted “Twenty percent (20%)” for “Twenty-five percent (25%)” in the fourth sentence, and added the next-to-last sentence.

Session Laws 2014-64, s. 3(b), effective July 1, 2014, substituted “twenty percent (20%)” for “twenty-five percent (25%)” in the third sentence of subdivision (d)(3).

Session Laws 2016-5, s. 1.4, effective May 11, 2016, substituted “Article 36 of Chapter 58” for “Article 2 of Chapter 97” near the end of subdivision (b)(4).

Session Laws 2017-204, s. 1.11(a), effective August 11, 2017, added the last sentence in subdivision (d)(3).

Session Laws 2018-5, s. 38.2(g), effective June 12, 2018, rewrote subsection (g).

Session Laws 2020-88, s. 16(c), added “prepaid health plans” and “prepaid health plan” in subsection (a); added subdivision (b)(5); added the second paragraph of subdivision (b1)(2); deleted “Medicaid or” preceding “Medicare” in sub-subdivision (c)(4)b., added sub-subdivision (c)(4)c.; added subdivision (d)(2a); and, in subsection (f), substituted “taxpayer shall” for “company shall” in the last sentence of the first paragraph, added “or prepaid health plan” twice in the second paragraph, and substituted “taxpayer” for “company” twice in the last paragraph. For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 42.8(a), effective for taxable years beginning on or after January 1, 2022, in subsection (b1), added the second undesignated paragraph.

Legal Periodicals.

For discussion of the 1947 amendment which added to the section, see 25 N.C.L. Rev. 471 (1947).

For comment, “Jumping in the Deep End? An Analysis of the North Carolina Health Insurance Risk Pool,” see 31 Campbell L. Rev. 379 (2009).

CASE NOTES

Constitutionality. —

See Great Am. Ins. Co. v. High, 264 N.C. 752 , 142 S.E.2d 681, 1965 N.C. LEXIS 1274 (1965); Great Am. Ins. Co. v. Johnson, 257 N.C. 367 , 126 S.E.2d 92, 1962 N.C. LEXIS 367 (1962).

The license tax imposed by a former statute upon the gross receipts of insurance companies on business written within the borders of our State was held not in contravention of U.S. Const., Amend. XIV, as to due process and equal protection of the law, nor a burden upon interstate commerce, being restricted to intrastate commerce, and not extending beyond the boundaries of the State. Pittsburg Life & Trust Co. v. Young, 172 N.C. 470 , 90 S.E. 568, 1916 N.C. LEXIS 322 (1916).

Legislative History of Section. —

See Great Am. Ins. Co. v. Johnson, 257 N.C. 367 , 126 S.E.2d 92, 1962 N.C. LEXIS 367 (1962).

Nature of Tax. —

A tax imposed by a former statute upon the gross earnings of foreign life insurance companies doing business within this State, derived within this State, was a license or occupation tax. Pittsburg Life & Trust Co. v. Young, 172 N.C. 470 , 90 S.E. 568, 1916 N.C. LEXIS 322 (1916).

A tax on the gross receipts of an insurance company is a privilege tax. Wilmington Underwriters Ins. Co. v. Stedman, 130 N.C. 221 , 41 S.E. 279, 1902 N.C. LEXIS 49 (1902).

Gross Receipts from Business Done in State. —

The former tax on gross receipts applied to all receipts from business done in the State, whether the money was paid here or forwarded to the main office. Pittsburg Life & Trust Co. v. Young, 172 N.C. 470 , 90 S.E. 568, 1916 N.C. LEXIS 322 (1916).

Validity of Section Tested by G.S. 105-267 . —

The validity of provisions of this section can be tested only by the exclusive procedure set out in G.S. 105-267 [repealed]. Great Am. Ins. Co. v. Gold, 254 N.C. 168 , 118 S.E.2d 792, 1961 N.C. LEXIS 417 (1961).

Insurance Companies Liable for Local Use Taxes. —

Recent amendments to G.S. 105-228.10 make it clear that insurance companies are currently responsible for local use taxes, and the changes were made to clarify the law that existed prior to the amendments; thus, a trial court properly found an insurance company liable for such taxes and rejected its claim that it had an exemption from such taxes under G.S. 105-228.5 . Proposed Assessments of Additional Sales & Use Tax v. Jefferson-Pilot Ins. Co., 161 N.C. App. 558, 589 S.E.2d 179, 2003 N.C. App. LEXIS 2274 (2003).

§ 105-228.5. Taxes measured by gross premiums. [Effective for taxable years beginning on or after January 1, 2022]

  1. Tax Levied. —  A tax is levied in this section on insurers, Article 65 corporations, health maintenance organizations, prepaid health plans, and self-insurers. An insurer, health maintenance organization, prepaid health plan, or Article 65 corporation that is subject to the tax levied by this section is not subject to franchise or income taxes imposed by Articles 3 and 4, respectively, of this Chapter.
  2. Tax Base.    —
    1. Insurers. —  The tax imposed by this section on an insurer or a health maintenance organization shall be measured by gross premiums from business done in this State during the preceding calendar year.
    2. Repealed by Session Laws 2006-196, effective for taxable years beginning on or after January 1, 2008.
    3. Article 65 Corporations. —  The tax imposed by this section on an Article 65 corporation shall be measured by gross collections from membership dues, exclusive of receipts from cost plus plans, received by the corporation during the preceding calendar year.
    4. Self-insurers. —  The tax imposed by this section on a self-insurer shall be measured by the gross premiums that would be charged against the same or most similar industry or business, taken from the manual insurance rate then in force in this State, applied to the self-insurer’s payroll for the previous calendar year as determined under Article 36 of Chapter 58 of the General Statutes modified by the self-insurer’s approved experience modifier.
    5. Prepaid health plans. —  The tax imposed by this section on a prepaid health plan shall be measured by gross capitation payments received by the prepaid health plan from the Department of Health and Human Services for services provided to enrollees in the State Medicaid program or NC Health Choice program in the preceding calendar year. (b1) Calculation of Tax Base. — In determining the amount of gross premiums from business in this State, all gross premiums received in this State, credited to policies written or procured in this State, or derived from business written in this State shall be deemed to be for contracts covering persons, property, or risks resident or located in this State unless one of the following applies:

      (1) The premiums are properly reported and properly allocated as being received from business done in some other nation, territory, state, or states.

      (2) The premiums are from policies written in federal areas for persons in military service who pay premiums by assignment of service pay.

      Gross premiums from business done in this State in the case of life insurance contracts, including supplemental contracts providing for disability benefits, accidental death benefits, or other special benefits that are not annuities, means all premiums collected in the calendar year, other than for contracts of reinsurance, for policies the premiums on which are paid by or credited to persons, firms, or corporations resident in this State, or in the case of group policies, for contracts of insurance covering persons resident within this State. The only deductions allowed shall be for premiums refunded on policies rescinded for fraud or other breach of contract and premiums that were paid in advance on life insurance contracts and subsequently refunded to the insured, premium payer, beneficiary or estate. Gross premiums shall be deemed to have been collected for the amounts as provided in the policy contracts for the time in force during the year, whether satisfied by cash payment, notes, loans, automatic premium loans, applied dividend, or by any other means except waiver of premiums by companies under a contract for waiver of premium in case of disability.

      Gross premiums from business done in this State in the case of an insurer of bail bonds means the amounts received by an insurer from a surety bondsman during the calendar year for bail bonds written on behalf of the insurer. An insurer is subject to the definitions of gross premiums under this section for gross premiums from transacting any other line of insurance business. For purposes of this paragraph, the terms “bail bonds,” “insurer,” and “surety bondsman” have the same meaning as defined in G.S. 58-71-1 .

      Gross premiums from business done in this State for all other health care plans and contracts of insurance, including contracts of insurance required to be carried by the Workers’ Compensation Act, means all premiums written during the calendar year, or the equivalent thereof in the case of self-insurers under the Workers’ Compensation Act, for contracts covering property or risks in this State, other than for contracts of reinsurance, whether the premiums are designated as premiums, deposits, premium deposits, policy fees, membership fees, or assessments. Gross premiums shall be deemed to have been written for the amounts as provided in the policy contracts, new and renewal, becoming effective during the year irrespective of the time or method of making payment or settlement for the premiums, and with no deduction for dividends whether returned in cash or allowed in payment or reduction of premiums or for additional insurance, and without any other deduction except for return of premiums, deposits, fees, or assessments for adjustment of policy rates or for cancellation or surrender of policies.

  3. Exclusions. —  Every insurer, in computing the premium tax, shall exclude all of the following from the gross amount of premiums, and the gross amount of excluded premiums is exempt from the tax imposed by this section:
    1. All premiums received on or after July 1, 1973, from policies or contracts issued in connection with the funding of a pension, annuity, or profit-sharing plan qualified or exempt under section 401, 403, 404, 408, 457 or 501 of the Code as defined in G.S. 105-228.90 .
    2. Premiums or considerations received from annuities, as defined in G.S. 58-7-15 .
    3. Funds or considerations received in connection with funding agreements, as defined in G.S. 58-7-16 .
    4. The following premiums, to the extent federal law prohibits their taxation under this Article:
      1. Federal Employees Health Benefits Plan premiums.
      2. Medicare premiums.
      3. Medicaid or NC Health Choice premiums, other than capitation payments, paid by or on behalf of a Medicaid or NC Health Choice beneficiary.
  4. (See Editor’s note) Tax Rates; Disposition.    —
    1. Workers’ Compensation. —  The tax rate to be applied to gross premiums, or the equivalent thereof in the case of self-insurers, on contracts applicable to liabilities under the Workers’ Compensation Act is two and five-tenths percent (2.5%). The net proceeds shall be credited to the General Fund.
    2. Other Insurance Contracts. —  The tax rate to be applied to gross premiums on all other taxable contracts issued by insurers or health maintenance organizations and to be applied to gross premiums and gross collections from membership dues, exclusive of receipts from cost plus plans, received by Article 65 corporations is one and nine-tenths percent (1.9%). The net proceeds shall be credited to the General Fund. (2a) Prepaid Health Plans. — The tax rate to be applied to gross premiums from capitation payments received by prepaid health plans is one and nine-tenths percent (1.9%). The net proceeds shall be credited to the General Fund.
    3. Additional Rate on Property Coverage Contracts. —  An additional tax at the rate of seventy-four hundredths percent (0.74%) applies to gross premiums on insurance contracts for property coverage. The tax is imposed on ten percent (10%) of the gross premiums from insurance contracts for automobile physical damage coverage and on one hundred percent (100%) of the gross premiums from all other contracts for property coverage. Twenty percent (20%) of the net proceeds of this additional tax must be credited to the Volunteer Fire Department Fund established in Article 87 of Chapter 58 of the General Statutes. Twenty percent (20%) of the net proceeds must be credited to the Department of Insurance for disbursement pursuant to G.S. 58-84-25 . Up to twenty percent (20%), as determined in accordance with G.S. 58-87-10(f), must be credited to the Workers’ Compensation Fund. The remaining net proceeds must be credited to the General Fund. The additional tax imposed on property coverage contracts under this subdivision is a special purpose assessment based on gross premiums and not a gross premiums tax.The following definitions apply in this subdivision:
      1. Automobile physical damage. — The following lines of business identified by the NAIC: private passenger automobile physical damage and commercial automobile physical damage.
      2. Property coverage. — The following lines of business identified by the NAIC: fire, farm owners multiple peril, homeowners multiple peril, nonliability portion of commercial multiple peril, ocean marine, inland marine, earthquake, private passenger automobile physical damage, commercial automobile physical damage, aircraft, and boiler and machinery. The term also includes insurance contracts for wind damage.
      3. NAIC. — National Association of Insurance Commissioners.
    4. Repealed by Session Laws 2006-196, effective for taxable years beginning on or after January 1, 2008.
    5. Repealed by Session Laws 2003-284, s. 43.1, effective for taxable years beginning on or after January 1, 2004.
    6. Repealed by Session Laws 2005-276, s. 38.4(a), effective for taxable years beginning on or after January 1, 2007.
  5. Report and Payment. —  Each taxpayer doing business in this State shall, within the first 15 days of March, file with the Secretary of Revenue a full and accurate report of the total gross premiums as defined in this section, the payroll and other information required by the Secretary in the case of a self-insurer, or the total gross collections from membership dues exclusive of receipts from cost plus plans collected in this State during the preceding calendar year. The taxes imposed by this section shall be remitted to the Secretary with the report.
  6. Installment Payments Required. —  Taxpayers that are subject to the tax imposed by this section and have a premium tax liability of ten thousand dollars ($10,000) or more for business done in North Carolina during the immediately preceding year shall remit three equal quarterly installments with each installment equal to at least thirty-three and one-third percent (33 1/3%) of the premium tax liability incurred in the immediately preceding taxable year. The quarterly installment payments shall be made on or before April 15, June 15, and October 15 of each taxable year. The taxpayer shall remit the balance by the following March 15 in the same manner provided in this section for annual returns.The Secretary may permit an insurance company or prepaid health plan to pay less than the required estimated payment when the insurer or prepaid health plan reasonably believes that the total estimated payments made for the current year will exceed the total anticipated tax liability for the year.An underpayment or an overpayment of an installment payment required by this subsection accrues interest in accordance with G.S. 105-241.21 . An overpayment of tax shall be credited to the taxpayer and applied against the taxes imposed upon the taxpayer under this Article.
  7. Exemptions. —  This section does not apply to any of the following:
    1. A farmers’ mutual assessment fire insurance company.
    2. A fraternal order or society that does not operate for a profit and does not issue policies on any person except members.
    3. A captive insurance company taxed under G.S. 105-228.4 A.
    4. A foreign captive insurance company that is licensed in and taxed on its gross premiums in a jurisdiction within the United States other than this State.

History. 1945, c. 752, s. 2; 1947, c. 501, s. 8; 1951, c. 643, s. 8; 1955, c. 1313, s. 5; 1957, c. 1340, s. 12; 1959, c. 1211; 1961, c. 783; 1963, c. 1096; 1969, c. 1221; 1973, cc. 142, 1019; 1975, c. 143; c. 559, s. 8; 1979, c. 714, s. 2; 1983, c. 713, s. 81; 1985, c. 119, s. 3; c. 719, ss. 1, 2; 1985 (Reg. Sess., 1986), c. 1031, ss. 1-5; 1987, c. 709, s. 2; c. 814, s. 2; 1989 (Reg. Sess., 1990), c. 814, s. 27; 1991, c. 689, s. 297; 1993 (Reg. Sess., 1994), c. 600, s. 4; 1995, c. 360, s. 1(d); 1995 (Reg. Sess., 1996), c. 747, s. 2; 1998-98, s. 17; 2001-424, s. 34.22(a), (d), (e); 2001-487, s. 69(a); 2001-489, s. 2(a)-(d), (f), (g); 2003-284, s. 43.1; 2005-276, s. 38.4(a); 2005-435, s. 57(a); 2006-196, ss. 1-5; 2007-250, s. 1; 2007-491, s. 23; 2013-116, s. 6(c); 2013-360, s. 20.2(a); 2014-64, s. 3(b); 2016-5, s. 1.4; 2017-204, s. 1.11(a); 2018-5, s. 38.2(g); 2020-88, s. 16(c); 2021-180, s. 42.8(a).

Section Set Out Twice.

The section above is in effect for taxable years beginning on or after January 1, 2022. For this section as in effect for taxable years on or before January 1, 2012, see the preceding section, also numbered G.S. 105-228.5 .

The section above is in effect for taxable years beginning on or after January 1, 2022. For this section as in effect for taxable years on or before January 1, 2022, see the main volume.

Editor’s Note.

Session Laws 1995 (Reg. Sess., 1996), c. 747, s. 16, provides: “This act does not obligate the General Assembly to appropriate funds.”

Session Laws 2013-116, s. 8, provides: “Nothing in this act shall be construed to obligate the General Assembly to appropriate funds to implement the provisions of this act. This act becomes effective July 1, 2013, if funds are appropriated for the 2013-2015 fiscal biennium to provide the Department with regulatory staff and resources to license and regulate captive insurance companies. If no funds are appropriated, then this act shall not become effective until July 1 of a year in which the General Assembly appropriates funds to implement it.” Funds were appropriated for the 2013-2015 fiscal biennium.

Session Laws 2014-64, s. 3(c), provides: “Using a portion of the additional funds made available to the General Fund through the amendment to G.S. 105-228.5 made by Section 3(b) of this act, the sum of one million four hundred thousand dollars ($1,400,000) is appropriated for fiscal year 2014-2015, recurring from the General Fund to the North Carolina Firefighters’ and Rescue Squad Workers’ Pension Fund established under G.S. 58-86-1 .”

Session Laws 2017-204, s. 1.11(b), (c), provides: “(b) A taxpayer that elected to take a business energy and tax credit against the gross premiums tax for a taxable year beginning before January 1, 2017, may take an installment or carryforward of the credit against the additional tax imposed under G.S. 105-228.5(d)(3) for taxable years beginning before January 1, 2017. A taxpayer may not take an installment or carryforward of the credit against the additional tax imposed under G.S. 105-228.5(d)(3) for taxable years beginning on or after January 1, 2017. A taxpayer 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 benefit enacted by this subsection. A request for a refund must be made on or before January 1, 2018. A request for a refund received after this date is barred.

“(c) The gross premiums tax is a tax imposed on the gross premiums of insurers, Article 65 corporations, health maintenance organizations, and self-insurers. Entities subject to the gross premiums tax are not subject to franchise or income taxes. In S.L. 2009-548, the General Assembly broadened the taxes against which the business and energy tax credits could be taken from income and franchise taxes to income, franchise, and gross premiums taxes.

“The gross premiums tax rate is set in G.S. 105-228.5 (d)(1) and (2). Separate and apart from the gross premiums taxes, G.S. 105-228.5 (d)(3) imposes an additional tax that is calculated using a person’s gross premiums but is not considered part of the gross premiums tax imposition. The Department of Revenue has historically administered the gross premium tax and the additional tax imposed under G.S. 105-228.5 as two separate and distinct taxes. Satisfied with this administration, the General Assembly did not address the separate treatment of the two taxes in S.L. 2009-548.

“The intent of this section is two-fold, as follows:

“(1) To clarify the accuracy of the Department’s interpretation of the current and continuing state of the law by expressly codifying the long-standing interpretation that the additional tax imposed by G.S. 105-228.5(d)(3) is a separate and distinct tax that is based upon gross premiums but is not a gross premiums tax.

“(2) To avoid costly potential litigation with taxpayers that have failed to properly take an installment or carryforward of a business and energy tax credit against only the gross premiums tax by permitting the taxpayers to take installments and carryforwards of that tax credit for taxable years beginning before January 1, 2017, against the additional tax that is imposed under G.S. 105-228.5(d)(3).”

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

Session Laws 2018-49, s. 8(a)-(c), provides: “(a) It is the intent of the General Assembly to enact legislation, no later than March 15, 2019, that will ensure that the premium tax levied under G.S. 105-228.5 applies to capitation payments received by Prepaid Health Plans, as defined in G.S. 58-93-2, in the same manner in which the tax is applied to the gross premiums from business done in this State for all other health care plans and contracts of insurance provided by insurers or health maintenance organizations subject to the tax.

“(b) Until March 15, 2019, or such earlier date as the legislation described in subsection (a) of this section is enacted, the Department of Health and Human Services shall plan for the implementation of Medicaid transformation with the assumption that such legislation will be enacted. If the General Assembly has not ratified the legislation described in subsection (a) of this section by March 15, 2019, then the Department of Health and Human Services shall plan for the implementation of Medicaid transformation with the assumption that such legislation will be not enacted, and the Department shall correct all actions taken in reliance on the previous assumption, including the reissuance of the requests for proposals for capitated PHP contracts, if necessary.

“(c) By October 1, 2018, the Department of Health and Human Services, in consultation with the Department of Revenue, shall submit a report to the Joint Legislative Oversight Committee on Medicaid and NC Health Choice containing proposed legislative changes necessary to accomplish the intent set forth in subsection (a) of this section. The report shall include the following:

“(1) Assurances that the proposed legislative changes do not violate federal Medicaid laws or regulations.

“(2) An estimate of the amount of increase in revenue that is anticipated as a result of the proposed legislative changes, and any proposed uses for the increase in revenue.”

Session Laws 2020-88, s. 16(f), made the amendment of this section by Session Laws 2020-88, s. 16(c), effective 30 days after it becomes law and applicable to capitation payments received by prepaid health plans on or after that date. Session Laws 2020-88 became law on July 2, 2020, making the effective date of this amendment August 1, 2020.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2003-284, s. 43.1, effective for taxable years beginning on or after January 1, 2004, in subdivision (d)(2), inserted “and to be applied to gross premiums and gross collections from membership dues, exclusive of receipts from cost plus plans, received by Article 65 corporations”; repealed subdivision (d)(5); and in subdivision (d)(6), inserted “including directly operated health maintenance organizations authorized under G.S. 58-67-95 .”

Session Laws 2005-276, s. 38.4(a), effective for taxable years beginning on or after January 1, 2007, repealed subdivision (d)(6).

Session Laws 2005-435, s. 57.(a), effective January 1, 2007, inserted “or health maintenance organizations” following “issued by insurers” in subdivision (d)(2).

Session Laws 2006-196, s. 1, effective for taxable years beginning on or after January 1, 2006, rewrote paragraph (d)(3) which read: “Additional Statewide Fire and Lightning Rate. — An additional tax shall be applied to gross premiums on contracts of insurance applicable to fire and lightning coverage, except in the case of marine and automobile policies, at the rate of one and thirty-three hundredths percent (1.33%). Twenty-five percent (25%) of the net proceeds of this additional tax shall be deposited in the Volunteer Fire Department Fund established in Article 87 of Chapter 58 of the General Statutes. The remaining net proceeds shall be credited to the General Fund.”; ss. 2 - 5, effective for taxable years beginning on or after January 1, 2008, deleted former paragraph (b)(2) which read: “Additional Local Fire and Lightning Rate. - The additional tax imposed by subdivision (d)(4) of this section shall be measured by gross premiums from business done in fire districts in this State during the preceding calendar year. For the purpose of this section, the term ‘fire district’ has the meaning provided in G.S. 58-84-5 ”; in subsection (d), rewrote paragraph (d)(3); deleted paragraph (d)(4) which read: “Additional Local Fire and Lightning Rate. — An additional tax shall be applied to gross premiums on contracts of insurance applicable to fire and lightning coverage within fire districts at the rate of one-half of one percent ( 1/ 2 of 1%). The net proceeds shall be credited to the Department of Insurance for disbursement pursuant to G.S. 58-84-25 ”; deleted the second paragraph of subsection (e) which read: “In the case of an insurer liable for the additional local fire and lightning tax, the report shall include the information required under G.S. 58-84.1”; and deleted “not including the additional local fire and lightning tax,” following “liability” in the middle of the first sentence of subsection (f).

Session Laws 2007-250, s. 1, effective for taxable years beginning on or after January 1, 2008, in subdivision (d)(3), in the introductory paragraph, substituted “seventy-four hundredths percent (0.74%)” for “eighty-five hundredths percent (.85%)” in the first sentence, and “Thirty percent (30%)” for “Twenty percent (20%)” in the third sentence; and added the last sentence in subdivision (d)(3)b.

Session Laws 2007-491, s. 23, effective January 1, 2008, in subsection (f), deleted “of Revenue” following “The Secretary” in the second paragraph, and rewrote the third paragraph. For applicability, see Editor’s note.

Session Laws 2013-116, s. 7, effective July 1, 2013, added the last sentence in subsection (g).

Session Laws 2013-360, s. 20.2(a), effective July 1, 2013, in the introductory language of subdivision (d)(3), substituted “Twenty-five percent (25%)” for “Thirty percent (30%)” in the third sentence, substituted “Twenty percent (20%)” for “Twenty-five percent (25%)” in the fourth sentence, and added the next-to-last sentence.

Session Laws 2014-64, s. 3(b), effective July 1, 2014, substituted “twenty percent (20%)” for “twenty-five percent (25%)” in the third sentence of subdivision (d)(3).

Session Laws 2016-5, s. 1.4, effective May 11, 2016, substituted “Article 36 of Chapter 58” for “Article 2 of Chapter 97” near the end of subdivision (b)(4).

Session Laws 2017-204, s. 1.11(a), effective August 11, 2017, added the last sentence in subdivision (d)(3).

Session Laws 2018-5, s. 38.2(g), effective June 12, 2018, rewrote subsection (g).

Session Laws 2020-88, s. 16(c), added “prepaid health plans” and “prepaid health plan” in subsection (a); added subdivision (b)(5); added the second paragraph of subdivision (b1)(2); deleted “Medicaid or” preceding “Medicare” in sub-subdivision (c)(4)b., added sub-subdivision (c)(4)c.; added subdivision (d)(2a); and, in subsection (f), substituted “taxpayer shall” for “company shall” in the last sentence of the first paragraph, added “or prepaid health plan” twice in the second paragraph, and substituted “taxpayer” for “company” twice in the last paragraph. For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 42.8(a), effective for taxable years beginning on or after January 1, 2022, in subsection (b1), added the second undesignated paragraph.

Legal Periodicals.

For discussion of the 1947 amendment which added to the section, see 25 N.C.L. Rev. 471 (1947).

For comment, “Jumping in the Deep End? An Analysis of the North Carolina Health Insurance Risk Pool,” see 31 Campbell L. Rev. 379 (2009).

CASE NOTES

Constitutionality. —

See Great Am. Ins. Co. v. High, 264 N.C. 752 , 142 S.E.2d 681, 1965 N.C. LEXIS 1274 (1965); Great Am. Ins. Co. v. Johnson, 257 N.C. 367 , 126 S.E.2d 92, 1962 N.C. LEXIS 367 (1962).

The license tax imposed by a former statute upon the gross receipts of insurance companies on business written within the borders of our State was held not in contravention of U.S. Const., Amend. XIV, as to due process and equal protection of the law, nor a burden upon interstate commerce, being restricted to intrastate commerce, and not extending beyond the boundaries of the State. Pittsburg Life & Trust Co. v. Young, 172 N.C. 470 , 90 S.E. 568, 1916 N.C. LEXIS 322 (1916).

Legislative History of Section. —

See Great Am. Ins. Co. v. Johnson, 257 N.C. 367 , 126 S.E.2d 92, 1962 N.C. LEXIS 367 (1962).

Nature of Tax. —

A tax imposed by a former statute upon the gross earnings of foreign life insurance companies doing business within this State, derived within this State, was a license or occupation tax. Pittsburg Life & Trust Co. v. Young, 172 N.C. 470 , 90 S.E. 568, 1916 N.C. LEXIS 322 (1916).

A tax on the gross receipts of an insurance company is a privilege tax. Wilmington Underwriters Ins. Co. v. Stedman, 130 N.C. 221 , 41 S.E. 279, 1902 N.C. LEXIS 49 (1902).

Gross Receipts from Business Done in State. —

The former tax on gross receipts applied to all receipts from business done in the State, whether the money was paid here or forwarded to the main office. Pittsburg Life & Trust Co. v. Young, 172 N.C. 470 , 90 S.E. 568, 1916 N.C. LEXIS 322 (1916).

Validity of Section Tested by G.S. 105-267 . —

The validity of provisions of this section can be tested only by the exclusive procedure set out in G.S. 105-267 [repealed]. Great Am. Ins. Co. v. Gold, 254 N.C. 168 , 118 S.E.2d 792, 1961 N.C. LEXIS 417 (1961).

Insurance Companies Liable for Local Use Taxes. —

Recent amendments to G.S. 105-228.10 make it clear that insurance companies are currently responsible for local use taxes, and the changes were made to clarify the law that existed prior to the amendments; thus, a trial court properly found an insurance company liable for such taxes and rejected its claim that it had an exemption from such taxes under G.S. 105-228.5 . Proposed Assessments of Additional Sales & Use Tax v. Jefferson-Pilot Ins. Co., 161 N.C. App. 558, 589 S.E.2d 179, 2003 N.C. App. LEXIS 2274 (2003).

§ 105-228.5A. Credit against gross premium tax for assessments paid to the Insurance Guaranty Association and the Life and Health Insurance Guaranty Association.

  1. The following definitions apply in this section:
    1. Assessment. — An assessment as described in G.S. 58-48-35 or an assessment as described in G.S. 58-62-41 .
    2. Association. — The North Carolina Insurance Guaranty Association created under G.S. 58-48-25 or the North Carolina Life and Health Insurance Guaranty Association created under G.S. 58-62-26 .
    3. Repealed by Session Laws 1995, c. 360, s. 1(e).
    4. Member insurer. — A member insurer as defined in G.S. 58-48-20 or a member insurer as defined in G.S. 58-62-16 .
  2. A member insurer who pays an assessment is allowed as a credit against the tax imposed under G.S. 105-228.5 an amount equal to twenty percent (20%) of the amount of the assessment in each of the five taxable years following the year in which the assessment was paid. In the event a member insurer ceases doing business, all assessments for which it has not taken a credit under this section may be credited against its premium tax liability for the year in which it ceases doing business. The amount of the credit allowed by this section may not exceed the member insurer’s premium tax liability for the taxable year.
  3. Any sums that are acquired by refund, under either G.S. 58-48-35 or G.S. 58-62-41 , from the Association by member insurers, and that have previously been offset against premium taxes as provided in subsection (b) of this section, shall be paid by the member insurers to this State in the manner required by the Secretary of Revenue. The Association shall notify the Secretary that the refunds have been made.

History. 1991, c. 689, s. 298; 1991 (Reg. Sess., 1992), c. 1007, s. 8; 1995, c. 360, s. 1(e).

§ 105-228.5B. Distribution of part of tax proceeds to High Risk Pool.

By November 1 of each year, the State Treasurer must transfer from the General Fund to the North Carolina Health Insurance Risk Pool Fund established in G.S. 58-50-225 an amount equal to thirty percent (30%) of the growth in revenue from the tax applied to gross premiums under G.S. 105-228.5(d)(2). The growth in revenue from this tax is the difference between the amount of revenue collected during the preceding fiscal year on premiums taxed under that subdivision less $475,545,413, which is the amount of revenue collected during fiscal year 2006-2007 on premiums taxed under that subdivision. The Treasurer must draw the amount required under this section from revenue collected on premiums taxed under that subdivision.

History. 2007-532, s. 4(a), (b); 2008-118, s. 3.2(d), (e); 2009-445, s. 10.

Effect of Amendments.

Session Laws 2007-532, s. 4(b), effective June 30, 2010, inserted “thirty percent (30%) of” preceding “the growth in revenue from the tax applied to gross premiums under G.S. 105-228.5(d)(2)” in the first sentence.

Session Laws 2008-118, s. 3.2(d), effective July 1, 2008, deleted “Special” following “Risk Pool” in the first sentence.

Session Laws 2008-118, s. 3.2(e), effective June 30, 2010, and applicable to the transfer at the end of fiscal year 2009-2010, substituted “Distribution of part of tax proceeds” for “Proceeds credited” in the section heading, and inserted “thirty percent (30%) of” in the first sentence.

Session Laws 2009-445, s. 10, effective August 7, 2009, substituted “By November 1 of each year” for “Within 75 days after the end of each fiscal year” at the beginning.

§ 105-228.6. Taxes in case of withdrawal from State.

Any insurance company which for any cause withdraws from this State or ceases to register and transact new business in this State shall be liable for the taxes specified in G.S. 105-228.5 with respect to gross premiums collected in the calendar year in which such withdrawal may occur. In case any company which was formerly licensed or registered in this State and which subsequently ceased to do business therein, may apply to reenter this State, application for reentry or renewal of registration shall be denied unless and until said company shall have paid all taxes, together with any penalties and interest, due as to premiums collected in the year of withdrawal and also taxes as specified in G.S. 105-228.5 for gross premiums collected in the calendar year next preceding the year in which such application for renewal of registration is made.

History. 1945, c. 752, s. 2; 1985 (Reg. Sess., 1986), c. 1031, s. 5.1; 1987, c. 814, s. 4; 1989, c. 346, s. 1.

§ 105-228.7. [Repealed]

Repealed by Session Laws 1987, c. 629, s. 21.

§ 105-228.8. Retaliatory premium taxes.

  1. When the laws of any other state impose, or would impose, any premium taxes, upon North Carolina companies doing business in the other state that are, on an aggregate basis, in excess of the premium taxes directly imposed upon similar companies by the statutes of this State, the Secretary of Revenue shall impose the same premium taxes, on an aggregate basis, upon the companies chartered in the other state doing business or seeking to do business in North Carolina. Any company subject to the retaliatory tax imposed by this section shall report and pay the tax with the annual premium tax return required by G.S. 105-228.5 . The retaliatory tax imposed by this section shall be included in the quarterly prepayment rules for premium taxes.
  2. For purposes of this section, the following definitions shall be applied:
    1. “State” includes the District of Columbia and other states, territories, and possessions of the United States, the provinces of Canada, and other nations.
    2. “Companies” includes all entities subject to tax under G.S. 105-228.5 .
  3. For purposes of this section, any premium taxes that are, or would be, imposed upon North Carolina companies by any city, county, or other political subdivision or agency of another state shall be deemed to be imposed directly by that state.
  4. In computing the premium taxes that another state imposes, or would impose, upon a North Carolina company doing business in the state, it shall be assumed that North Carolina companies pay the highest rates of premium tax that are generally imposed by the other state on similar companies chartered outside of the state.
  5. This section shall not apply to special purpose obligations or assessments based on premiums imposed in connection with particular kinds of insurance, to the special purpose regulatory charge imposed under G.S. 58-6-25 , or to dedicated special purpose taxes based on premiums.
  6. If the laws of another state retaliate against North Carolina companies on other than an aggregate basis, the Secretary of Revenue shall retaliate against companies chartered in that state on the same basis.

History. 1945, c. 752, s. 2; 1987, c. 814, s. 1; 1989 (Reg. Sess., 1990), c. 1069, s. 21; 1991, c. 689, s. 291; 1995, c. 360, s. 1(f); 2011-330, s. 10.

Effect of Amendments.

Session Laws 2011-330, s. 10, effective June 27, 2011, deleted the last sentence of subsection (e), which read: “For purposes of this section, seventy-five percent (75%) of the one and thirty-three hundredths percent (1.33%) tax on amounts collected on contracts of insurance applicable to fire and lightning coverage shall not be a special purpose obligation or assessment or a dedicated special purpose tax within the meaning of this subsection.”

§ 105-228.9. Commissioner of Insurance to administer portions of Article.

The following taxes relating to insurance are collected by the Commissioner of Insurance:

  1. Surplus lines tax, G.S. 58-21-85 .
  2. Tax on risk retention groups not chartered in this State, G.S. 58-22-20(3).
  3. Tax on person procuring insurance directly with an unlicensed insurer, G.S. 58-28-5(b).

    The Commissioner of Insurance has the same authority and responsibility in administering those taxes as the Secretary of Revenue has in administering this Article.

History. 1945, c. 752, s. 2; 1955, c. 1350, s. 22; 1973, c. 476, s. 193; 1987, c. 804, s. 9; 1995, c. 360, s. 1(a); 1995 (Reg. Sess., 1996), c. 747, s. 1.

Editor’s Note.

Session Laws 1995 (Reg. Sess., 1996), c. 747, s. 16, provides: “This act does not obligate the General Assembly to appropriate funds.”

§ 105-228.10. No additional local taxes.

No city or county may levy on a person subject to the tax levied in this Article a privilege tax or a tax computed on the basis of gross premiums.

History. 1945, c. 752, s. 2; 1998-98, s. 18.

CASE NOTES

Insurance Companies Liable for Local Use Taxes. —

Recent amendments to G.S. 105-228.10 make it clear that insurance companies are currently responsible for local use taxes, and the changes were made to clarify the law that existed prior to the amendments; thus, a trial court properly found an insurance company liable for such taxes and rejected its claim that it had an exemption from such taxes under G.S. 105-228.5 . Proposed Assessments of Additional Sales & Use Tax v. Jefferson-Pilot Ins. Co., 161 N.C. App. 558, 589 S.E.2d 179, 2003 N.C. App. LEXIS 2274 (2003).

Article 8C. Schedule I-C. Excise Tax on Banks. [Repealed]

§§ 105-228.11 through 105-228.20. [Repealed]

Repealed by Session Laws 1973, c. 1053, s. 1.

§ 105-228.21.

Omitted.

Article 8D. Taxation of Savings and Loan Associations. [Repealed]

§§ 105-228.22 through 105-228.24. [Repealed]

Repealed by Session Laws 1998-98, s. 1(a), effective August 14, 1998.

Cross References.

For provisions as to savings and loan associations, see Chapter 54B.

Editor’s Note.

Session Laws 1998-98, s. 66, deleted “Schedule I-D” from the article heading.

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.”

§ 105-228.24A. [Transferred]

Recodified as G.S. 105-130.43 (now repealed) by Session Laws 1998-98, s. 1(d), effective for taxable years beginning on or after January 1, 1998.

§§ 105-228.25 through 105-228.27. [Repealed]

Repealed by Session Laws 1983, c. 26, s. 1.

Article 8E. Excise Tax on Conveyances.

§ 105-228.28. Scope.

This Article applies to every person conveying an interest in real estate located in North Carolina other than a governmental unit or an instrumentality of a governmental unit.

History. 1967, c. 986, s. 1; 1999-28, s. 1.

Local Modification.

Pasquotank, Perquimans, and Washington: 1989, c. 393, s. 1.

Editor’s Note.

Session Laws 2013-360, s. 14.4(c), provides: “Money collected pursuant to Article 8E of Chapter 105 of the General Statutes between July 1, 2013, and the date this act becomes law shall be credited to the General Fund. The money shall be used for the purposes provided in G.S. 113-44.15 and G.S. 113-253(c)(8b)-(8d), as enacted by this act.”

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2013-2015 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2013-2015 fiscal biennium.”

Session Laws 2013-360, s. 38.5 is a severability clause.

Legal Periodicals.

For article, “Transferring North Carolina Real Estate, Part I: How the Present System Functions,” see 49 N.C.L. Rev. 413 (1971).

CASE NOTES

Relationship to Other Laws. —

Counties’ action seeking the payment of real estate transfer taxes from two federally chartered private corporations responsible for establishing secondary market facilities for residential mortgages was dismissed where 12 U.S.C.S. §§ 1452(e) and 1723a(c)(2) plainly exempted them from all taxation, and the specific carve-out for real estate taxes did not apply to the North Carolina Transfer Tax, G.S. 105-228.28 et seq. Rowan County v. Fannie Mae, 2013 U.S. Dist. LEXIS 131622 (M.D.N.C. Sept. 16, 2013).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. Austin C. Williams, 41 N.C. Op. Att'y Gen. 714 (1972).

§ 105-228.29. Exemptions.

This Article does not apply to any of the following transfers of an interest in real property:

  1. By operation of law.
  2. By lease for a term of years.
  3. By or pursuant to the provisions of a will.
  4. By intestacy.
  5. By gift.
  6. If no consideration in property or money is due or paid by the transferee to the transferor.
  7. By merger, conversion, or consolidation.
  8. By an instrument securing indebtedness.

History. 1967, c. 986, s. 1; 1999-28, s. 1; 1999-369, s. 5.10(a)-(c).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. W.G. Massey, 41 N.C. Op. Att'y Gen. 480 (1971).

See opinion of Attorney General to Patsy Thomas, Caldwell County Register of Deeds, 41 N.C. Op. Att'y Gen. 204 (1971).

See opinion of Attorney General to Mr. Mark Stuart, Guilford County Register of Deeds, 41 N.C. Op. Att'y Gen. 237 (1971).

Sale of real property by the trustee of a deed of trust to the creditor of the deed of trust for the amount owed by the debtor is a sale for consideration and is subject to tax. See opinion of Attorney General to Mrs. Julia E. Manning, 41 N.C. Op. Att'y Gen. 837 (1972).

See opinion of Attorney General to Mr. Austin C. Williams, 41 N.C. Op. Att'y Gen. 714 (1972).

Conveyance by an individual to his wholly-owned corporation for “business convenience” and “without consideration” is not subject to the excise stamp tax on conveyances. See opinion of Attorney General to Mrs. Lois C. LeRay, 43 N.C. Op. Att'y Gen. 79 (1973).

Conveyance of interest in lease for term of years is not subject to real estate excise stamp tax on conveyances. See opinion of Attorney General to Mr. Lucius M. Cheshire, County Attorney, Orange County, 43 N.C. Op. Att'y Gen. 364 (1974).

§ 105-228.30. Imposition of excise tax; distribution of proceeds.

  1. An excise tax is levied on each instrument by which any interest in real property is conveyed to another person. The tax rate is one dollar ($1.00) on each five hundred dollars ($500.00) or fractional part thereof of the consideration or value of the interest conveyed. The transferor must pay the tax to the register of deeds of the county in which the real estate is located before recording the instrument of conveyance. If the instrument transfers a parcel of real estate lying in two or more counties, however, the tax must be paid to the register of deeds of the county in which the greater part of the real estate with respect to value lies.The excise tax on instruments imposed by this Article applies to timber deeds and contracts for the sale of standing timber to the same extent as if these deeds and contracts conveyed an interest in real property.
  2. The register of deeds of each county must remit the proceeds of the tax levied by this section to the county finance officer. The finance officer of each county must credit one-half of the proceeds to the county’s general fund and remit the remaining one-half of the proceeds, less taxes refunded and the county’s allowance for administrative expenses, to the Department of Revenue on a monthly basis. A county may retain two percent (2%) of the amount of tax proceeds allocated for remittance to the Department of Revenue as compensation for the county’s cost in collecting and remitting the State’s share of the tax. The Department of Revenue shall credit the funds remitted to the Department of Revenue under this subsection to the General Fund.

History. 1967, c. 986, s. 1; 1991, c. 689, s. 338; 1991 (Reg. Sess., 1992), c. 1019, s. 1; 1993 (Reg. Sess., 1994), c. 772, s. 2; 1995, c. 456, s. 3; 1999-28, s. 1; 2000-16, s. 1; 2001-427, s. 14(a); 2011-330, s. 30(b); 2013-360, s. 14.4(a).

Editor’s Note.

Session Laws 2013-360, s. 14.4(c), provides: “Money collected pursuant to Article 8E of Chapter 105 of the General Statutes between July 1, 2013, and the date this act becomes law shall be credited to the General Fund. The money shall be used for the purposes provided in G.S. 113-44.15 and G.S. 113-253(c)(8b)-(8d), as enacted by this act.”

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2013-2015 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2013-2015 fiscal biennium.”

Session Laws 2013-360, s. 38.5 is a severability clause.

Effect of Amendments.

Session Laws 2001-427, s. 14.(a), effective July 1, 2003, and applicable to amounts collected on or after that date, substituted “monthly” for “quarterly” in the second sentence of subsection (b).

Session Laws 2011-330, s. 30(b), effective June 27, 2011, inserted “taxes refunded and” in the second sentence of subsection (b).

Session Laws 2013-360, s. 14.4(a), effective July 1, 2013, rewrote the last sentence of subsection (b), which formerly read “Of the funds remitted to it pursuant to this section, the Department of Revenue must credit seventy-five percent (75%) to the Parks and Recreation Trust Fund established under G.S. 113-44.15 and twenty five percent (25%) to the Natural Heritage Trust Fund established under G.S. 113-77.7.”

CASE NOTES

Standing to Sue. —

Timber companies that paid excise tax on timber in behalf of landowners who sold timber were not taxpayers under G.S. 105-228.30 , and the trial court properly dismissed the companies’ lawsuit against the State of North Carolina seeking reimbursement of the tax because the companies did not have standing to sue. Am. Woodland Indus. v. Tolson, 155 N.C. App. 624, 574 S.E.2d 55, 2002 N.C. App. LEXIS 1584 (2002).

Consideration Represented. —

Trustee failed to prove that a transfer of an undivided interest in real estate less than two years before the debtors’ petition was filed constituted a fraudulent transfer where: (1) in an unverified answer, the transferees stated that the county tax value of the entire property was $80,000; (2) $ 20 in tax stamps was paid for recording the deed, which represented consideration of $10,000; (3) the debtors denied that $10,000 was paid in connection with the deed and alleged in unverified responses that the debtor was paid $50,000; and (4) the tax values did not have a high probative value and the trustee did not show whether $10,000 was reasonably equivalent to the value of the debtor’s undivided, one-half interest in the property. Lanik v. Young, 2018 Bankr. LEXIS 94 (Bankr. M.D.N.C. Jan. 17, 2018).

OPINIONS OF ATTORNEY GENERAL

An instrument conveying ownership of leasehold improvements, owned by a lessee, from the lessee to a purchaser is not subject to the excise stamp tax on conveyances. See opinion of Attorney General to Mr. Thomas Russell Odom, Durham County Attorney, 55 N.C. Op. Att'y Gen. 109 (1986).

§ 105-228.31. [Repealed]

Repealed by Session Laws 1999-28, s. 1, effective July 1, 2000.

§ 105-228.32. Instrument must be marked to reflect tax paid.

A person who presents an instrument for registration must report to the Register of Deeds the amount of tax due. It is the duty of the person presenting the instrument for registration to report the correct amount of tax due. Before the instrument may be recorded, the Register of Deeds must collect the tax due and mark the instrument to indicate that the tax has been paid and the amount of the tax paid.

History. 1967, c. 986, s. 1; 1969, c. 599, s. 1; 1973, c. 476, s. 193; 1999-28, s. 1; 2009-454, s. 2.

Effect of Amendments.

Session Laws 2009-454, s. 2, effective January 1, 2010, added the present second sentence.

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mrs. Lois C. LeRay, Register of Deeds, New Hanover County, 40 N.C. Op. Att'y Gen. 876 (1970).

§ 105-228.33. Taxes recoverable by action.

A county may recover unpaid taxes under this Article in an action in the name of the county brought in the superior court of the county. The action may be filed if the taxes remain unpaid more than 30 days after the register of deeds has demanded payment. In such actions, costs of court shall include a fee to the county of twenty-five dollars ($25.00) for expense of collection.

History. 1967, c. 986, s. 1; 1999-28, s. 1.

§ 105-228.34. [Repealed]

Repealed by Session Laws 1999-28, s. 1, effective July 1, 2000.

§ 105-228.35. Administrative provisions.

Except as otherwise provided in this Article, the provisions of Article 9 of this Chapter apply to this Article.

History. 1967, c. 986, s. 1; 1999-28, s. 1; 2000-170, s. 1.

§ 105-228.36. [Repealed]

Repealed by Session Laws 1999-28, s. 1, effective July 1, 2000.

§ 105-228.37. Refund of overpayment of tax.

  1. Refund Request. —  A taxpayer who pays more tax than is due under this Article may request a refund of the overpayment by filing a written request for a refund with the board of county commissioners of the county where the tax was paid. The request must be filed within six months after the date the tax was paid and must explain why the taxpayer believes a refund is due.
  2. Hearing by County. —  A board of county commissioners must conduct a hearing on a request for refund. Within 60 days after a timely request for a refund has been filed and at least 10 days before the date set for the hearing, the board must notify the taxpayer in writing of the time and place at which the hearing will be conducted. The date set for the hearing must be within 90 days after the timely request for a hearing was filed or at a later date mutually agreed upon by the taxpayer and the board. The board must make a decision on the requested refund within 90 days after conducting a hearing under this subsection.
  3. Process if Refund Granted. —  If the board of commissioners decides that a refund is due, it must refund the overpayment, together with any applicable interest, to the taxpayer and inform the Department of the refund. The Department may assess the taxpayer for the amount of the refund in accordance with G.S. 105-241.9 if the Department disagrees with the board’s decision.
  4. Process if Refund Denied. —  If the board of commissioners finds that no refund is due, the written decision of the board must inform the taxpayer that the taxpayer may request a departmental review of the denial of the refund in accordance with the procedures set out in G.S. 105-241.11 .
  5. Recording Correct Deed. —  Before a tax is refunded, the taxpayer must record a new instrument reflecting the correct amount of tax due. If no tax is due because an instrument was recorded in the wrong county, then the taxpayer must record a document stating that no tax was owed because the instrument being corrected was recorded in the wrong county. The taxpayer must include in the document the names of the grantors and grantees and the deed book and page number of the instrument being corrected.When a taxpayer records a corrected instrument, the taxpayer must inform the register of deeds that the instrument being recorded is a correcting instrument. The taxpayer must give the register of deeds a copy of the decision granting the refund that shows the correct amount of tax due. The correcting instrument must include the deed book and page number of the instrument being corrected. The register of deeds must notify the county finance officer and the Secretary when the correcting instrument has been recorded.
  6. Interest. —  An overpayment of tax bears interest at the rate established in G.S. 105-241.21 from the date that interest begins to accrue. Interest begins to accrue on an overpayment 30 days after the request for a refund is filed by the taxpayer with the board of county commissioners.

History. 2000-170, s. 2; 2007-491, s. 24; 2011-330, s. 30(a).

Local Modification.

Mecklenburg: 2009-110.

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. 24, effective January 1, 2008, rewrote the first and last sentences of subsection (b); rewrote subsections (c) and (d); and substituted “G.S. 105-241.21” for “G.S. 105-241.1(i)” in subsection (f). For applicability, see Editor’s note.

Session Laws 2011-330, s. 30(a), effective June 27, 2011, rewrote subsections (b) through (d).

§§ 105-228.38 through 105-228.89.

Reserved for future codification purposes.

Article 9. General Administration; Penalties and Remedies.

§ 105-228.90. Scope and definitions.

  1. Scope. —  This Article applies to all of the following:
    1. Subchapters I, V, and VIII of this Chapter.
    2. The annual report filing requirements of G.S. 55-16-22 .
    3. The primary forest product assessment levied under Article 81 of Chapter 106 of the General Statutes.
    4. The inspection taxes levied under Article 3 of Chapter 119 of the General Statutes.
    5. Chapter 105A of the General Statutes.
  2. Definitions. —  The following definitions apply in this Article:
    1. CARES Act. — The Coronavirus Aid, Relief, and Economic Security Act, P.L. 116-136, March 27, 2020, 134 Stat. 359. (3) Charter school. — A nonprofit corporation that has a charter under G.S. 115C-218.5 to operate a charter school.

      (5) City. — A city as defined by G.S. 160A-1(2) . The term also includes an urban service district defined by the governing board of a consolidated city-county, as defined by G.S. 160B-2(1) .

      (7) Code. — The Internal Revenue Code as enacted as of April 1, 2021, including any provisions enacted as of that date that become effective either before or after that date.

      (9) County. — Any one of the counties listed in G.S. 153A-10 . The term also includes a consolidated city-county as defined by G.S. 160B-2(1) .

      (11) Department. — The Department of Revenue.

      (13) Electronic Funds Transfer. — A transfer of funds initiated by using an electronic terminal, a telephone, a computer, or magnetic tape to instruct or authorize a financial institution or its agent to credit or debit an account.

      (15) Federal determination. — A change or correction arising from an audit by the Commissioner of Internal Revenue or an agreement of the U.S. competent authority, and the change or correction has become final. A federal determination is final when the determination is not subject to administrative or judicial review. Additionally, audit findings made by the Internal Revenue Service are deemed final in the following circumstances:

      1. The taxpayer has received audit findings from the Internal Revenue Service for the tax period and the taxpayer does not timely file an administrative appeal with the Internal Revenue Service.
      2. The taxpayer consented to any of the audit findings for the tax period through a form or other written agreement with the Internal Revenue Service.

        (17) Income tax return preparer. — Any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax imposed by Article 4 of this Chapter or any claim for refund of tax imposed by Article 4 of this Chapter. For purposes of this definition, the completion of a substantial portion of a return or claim for refund is treated as the preparation of the return or claim for refund. The term does not include a person merely because the person (i) furnishes typing, reproducing, or other mechanical assistance, (ii) prepares a return or claim for refund of the employer, or an officer or employee of the employer, by whom the person is regularly and continuously employed, (iii) prepares as a fiduciary a return or claim for refund for any person, or (iv) represents a taxpayer in a hearing regarding a proposed assessment.

        (19) NAICS. — The North American Industry Classification System adopted by the United States Office of Management and Budget as of December 31, 2007.

        (21) Pass-through entity. — An entity or business, including a limited partnership, a general partnership, a joint venture, a Subchapter S Corporation, or a limited liability company, all of which is treated as owned by individuals or other entities under the federal tax laws, in which the owners report their share of the income, losses, and credits from the entity or business on their income tax returns filed with this State. For the purpose of this section, an owner of a pass-through entity is an individual or entity who is treated as an owner under the federal tax laws.

        (23) Person. — An individual, a fiduciary, a firm, an association, a partnership, a limited liability company, a corporation, a unit of government, or another group acting as a unit. The term includes an officer or employee of a corporation, a member, a manager, or an employee of a limited liability company, and a member or employee of a partnership who, as officer, employee, member, or manager, is under a duty to perform an act in meeting the requirements of Subchapter I, V, or VIII of this Chapter, of G.S. 55-16-22 , of Article 81 of Chapter 106 of the General Statutes, or of Article 3 of Chapter 119 of the General Statutes.

        (25) Secretary. — The Secretary of Revenue.

        (27) Tax. — A tax levied under Subchapter I, V, or VIII of this Chapter, the primary forest product assessment levied under Article 81 of Chapter 106 of the General Statutes, or an inspection tax levied under Article 3 of Chapter 119 of the General Statutes. Unless the context clearly requires otherwise, the term “tax” includes penalties and interest as well as the principal amount.

        (29) Taxpayer. — A person subject to the tax or reporting requirements of Subchapter I, V, or VIII of this Chapter, of Article 81 of Chapter 106 of the General Statutes, or of Article 3 of Chapter 119 of the General Statutes.

        (31) Taxpayer Identification Number (TIN). — An identification number issued by the Social Security Administration or the Internal Revenue Service, excluding a Taxpayer Identification Number for Pending U.S. Adoptions (ATIN) and Preparer Taxpayer Identification Number (PTIN).

        (33) Truncated Taxpayer Identification Number (TTIN). — This term has the same meaning as defined in Treasury Regulation section 301.6109-4.

History. 1991 (Reg. Sess., 1992), c. 930, s. 13; 1993, c. 12, s. 1; c. 354, s. 18; c. 450, s. 1; 1993 (Reg. Sess., 1994), c. 662, s. 1; c. 745, s. 13; 1995, c. 17, s. 9; c. 461, s. 14; 1995 (Reg. Sess., 1996), c. 664, s. 1; 1997-55, s. 1; 1997-475, s. 6.9; 1998-171, s. 1; 1999-415, s. 1; 2000-72, s. 1; 2000-126, s. 1; 2000-140, s. 69; 2001-414, s. 23; 2001-427, s. 4(a); 2002-106, s. 1; 2002-126, s. 30C.1(a); 2003-25, s. 1; 2003-284, s. 37A.1; 2003-416, s. 4(d); 2004-110, s. 1.1; 2005-276, ss. 35.1(a), (d); 2006-18, s. 1; 2007-323, s. 31.1(a); 2007-491, s. 25; 2008-107, s. 28.1(a); 2009-451, s. 27A.6(a), (b); 2010-31, s. 31.1(a); 2011-5, s. 1; 2011-145, s. 13.25(xx); 2011-330, ss. 11, 31(a), 37; 2012-79, s. 1.7(a); 2013-10, s. 1; 2014-3, s. 14.16(a); 2014-101, s. 7; 2015-2, s. 1.1; 2016-6, s. 1; 2017-39, s. 1; 2018-5, ss. 38.1(a), 38.3(g); 2019-6, s. 1.1; 2019-169, s. 6.3(a); 2020-58, ss. 1(a), 4.4(a); 2021-180, s. 42.4(a).

Editor’s Note.

Session Laws 2011-145, s. 13.25(xx), provides: “The Revisor of Statutes shall make the conforming statutory changes necessary to reflect the transfers under this section. The Revisor of Statutes may correct any reference in the General Statutes to the statutes that are recodified by this section and make any other conforming changes necessitated by this section.” Pursuant to that provision, conforming changes have been made in subsection (a) and subdivisions (b)(5), (b)(7), and (b)(8). “Article 81 of Chapter 106” was substituted for “Article 12 of Chapter 113A.”

Session Laws 2011-145, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2011.’ ”

Session Laws 2011-145, s. 32.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2011-2013 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2011-2013 fiscal biennium.”

Session Laws 2011-145, s. 32.5 is a severability clause.

Session Laws 2016-6, s. 6, provides, in part: “Notwithstanding Section 1 of this act, any amendments to the Internal Revenue Code enacted after January 1, 2015, that increase North Carolina taxable income for the 2015 taxable year are effective for taxable years beginning on or after January 1, 2016.” For prior similar provisions, see Session Laws 2015-2, s. 1.4, 2014-3, s. 14.16(b), 2013-10, s. 11, 2012-79, s. 1.7(b), 2011-5, s. 4, as amended by 2011-330, s. 11, 2010-31, s. 31.1(c), 2009-451, s. 27A.6(g); 2008-107, s. 28.1(b); 2007-323, s. 31.1(b); 2006-18, s. 2; 2005-276, s. 35.1(c); 2004-110, s. 1.2; 2003-25, s. 2; 2002-126, s. 30C.1(b), 2001-427, s. 4(c), 2000-126, s. 7, 1998-171, s. 5, and 1997-55, s. 2.

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.

Session Laws 2016-76, s. 2(c), provides: “Notwithstanding Article 9 of Chapter 105 of the General Statutes, a taxpayer may contest a determination issued prior to the enactment of this section that an amended return or claim for refund was filed outside the statute of limitations if both of the following conditions are met:

“(1) The Department of Revenue determined that the amended return or claim for refund was filed outside the statute of limitations.

“(2) The taxpayer contests the statute of limitations determination in accordance with G.S. 105-241.15(b), as enacted by this act, within 60 days of the enactment of this act. For purposes of this section, a determination by the Department that an amended return or claim for refund was filed outside the statute of limitations is considered to be a notice of denial issued by the Department for purposes of G.S. 105-241.15(b).”

Session Laws 2018-5, s. 38.3(h), made subdivision (b)(3a) of this section, as added by Session Laws 2018-5, s. 38.3(g), effective June 12, 2018, and applicable to federal amended returns filed on or after that date.

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 2019-169, s. 6.3(d), made the amendments to subdivision (b)(3a) by Session Laws 2019-169, s. 6.3(a), effective July 26, 2019, and applicable to a federal determination on or after that date.

Session Laws 2020-58, s. 1(b), provides: “The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-228.90(b) to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory subsection.” Pursuant to this authority, the subdivisions in this section have been renumbered to maintain numeric order and so that the definitions remain in alphabetical order, to eliminate alphanumeric designations, and to reserve sufficient space for future subdivisions.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2002-106, s. 1, effective December 1, 2002, and applicable to actions that are committed on or after that date, added subdivision (b)(4), which had formerly been reserved.

Session Laws 2003-25, s. 1, effective April 24, 2003, substituted “January 1, 2003” for “May 1, 2002” in subdivision (b)(1b).

Session Laws 2003-284. s. 37A.1, effective June 30, 2003, substituted “June 1, 2003” for “January 1, 2003” in subdivision (b)(1b).

Session Laws 2003-416, s. 4(d), effective August 14, 2003, inserted subdivision (b)(4d).

Session Laws 2004-110, s. 1, effective July 17, 2004, substituted “May 1, 2004” for “June 1, 2003” in subdivision (b)(1b).

Session Laws 2005-276, s. 35.1(a), effective August 13, 2005, in subdivision (b)(1b), substituted “January 1, 2005” for “May 1, 2004,” and added “but not including the amendments made to section 164 of the Code by section 501 of P.L. 108-537.”

Session Laws 2005-276, s. 35.1(d), effective for taxable years beginning on or after January 1, in subdivision (b)(1b), deleted “but not including the amendments made to section 164 of the Code by section 501 of P.L. 108-537,” as added by s. 35.1(a).

Session Laws 2006-18, s. 1, effective June 21, 2006, substituted “2006” for “2005” in subdivision (b)(1b).

Session Laws 2007-323, s. 31.1(a), effective July 1, 2007, substituted “January 1, 2007,” for “January 1, 2006,” in subdivision (b)(1b).

Session Laws 2007-491, s. 25, effective January 1, 2008, substituted “the term ‘tax’ includes” for “the terms ‘tax’ and ‘additional tax’ includes” in subdivision (b)(7). For applicability, see Editor’s note.

Session Laws 2008-107, s. 28.1(a), effective July 16, 2008, substituted “May 1, 2008” for “January 1, 2007” in subdivision (b)(1b).

Session Laws 2009-451, s. 27A.6(a), effective for taxable years beginning on or after January 1, 2008, in subdivision (b)(1b), substituted “May 1, 2009” for “May 1, 2008” near the beginning, and added “but not including the amendments made to section 63(c) of the Code by section 3012 of P.L. 110-289” at the end.

Session Laws 2009-451, s. 27A.6(b), effective for taxable years beginning on or after January 1, 2009, deleted “but not including the amendments made to Section 63(c) of the Code by section 3012 of P.L. 110-289” at the end of subdivision (b)(1b).

Session Laws 2010-31, s. 31.1(a), effective June 30, 2010, in subdivision (b)(1b), substituted “May 1, 2010” for “May 1, 2009” and made a minor grammatical change.

Session Laws 2011-5, s. 1, as amended by Session Laws 2011-390, s. 11, effective March 17, 2011, and applicable to the estates of decedents dying on or after January 1, 2011, substituted “January 1, 2011” for “May 1, 2010” in subdivision (b)(1b).

Session Laws 2011-330, ss. 31(a) and (37), effective June 27, 2011, subdivided former subsection (a); added “all of the following” in the introductory language; added the subdivision (a)(1) through (a)(4) designations; and added subdivisions (a)(5) and (b)(4b).

Session Laws 2012-79, s. 1.7(a), effective June 26, 2012, substituted “January 1, 2012” for “January 1, 2011” in subdivision (b)(1b). For additional effective date information, see editor’s note.

Session Laws 2013-10, s. 1, substituted “January 2, 2013” for “January 1, 2012” in subdivision (b)(1b). For effective date and applicability, see editor’s note.

Session Laws 2014-3, s. 14.16(a), substituted “December 31, 2013” for “January 1, 2013” in subdivision (b)(1b). For effective date, see Editor’s note.

Session Laws 2014-101, s. 7, effective August 6, 2014, substituted “G.S. 115C-218.5” for “G.S. 115C-238.29D” in subdivision (b)(1). See Editor’s note for applicability.

Session Laws 2015-2, s. 1.1, effective March 31, 2015, substituted “January 1, 2015” for “December 31, 2013” in subdivision (b)(1b).

Session Laws 2016-6, s. 1, effective June 1, 2016, substituted “January 1, 2016” for “January 1, 2015” in subdivision (1b).

Session Laws 2017-39, s. 1, effective June 21, 2017, substituted “January 1, 2017” for “January 1, 2016” in subdivision (b)(1b).

Session Laws 2018-5, s. 38.1(a), effective June 12, 2018, substituted “February 9, 2018” for “January 1, 2017” in subdivision (b)(1b).

Session Laws 2018-5, s. 38.3(g), added subdivision (b)(3a). For effective date and applicability, see editor’s note.

Session Laws 2019-6, s. 1.1, effective March 20, 2019, substituted “January 1, 2019” for “February 9, 2018” in subdivision (b)(1b).

Session Laws 2019-169, s. 6.3(a), rewrote subdivision (b)(3a), which formerly read: “Federal determination. — A change or correction of the amount of a federal tax due arising from an audit by the Commissioner of Internal Revenue.” For effective date and applicability, see editor’s note.

Session Laws 2020-58, ss. 1(a), 4.4(a), effective June 30, 2020, added the definition for “CARES Act” in subdivision (b)(1); substituted “May 1, 2020” for “January 1, 2019” in the definition for “Code” in subdivision (b)(7); and added definitions for “Taxpayer Identification Number (TIN)” and “Truncated Taxpayer Identification Number (TTIN)” in subdivisions (b)(31) and (b)(33), respectively. For renumbering of subdivisions, see editor’s note for Session Laws 2020-58, s. 1(b).

Session Laws 2021-180, s. 42.4(a), effective November 18, 2021, in subdivision (b)(7), substituted “April 1, 2021” for “May 1, 2020.”

CASE NOTES

Penalties Collected for Failing to Comply with Statutory or Regulatory Tax Provisions. —

Monetary payments for a taxpayer’s noncompliance with a mandate of Chapter 105 are penalties and, therefore, subject to N.C. Const., Art. IX, § 7; thus, monies collected by the North Carolina Department of Revenue for late filings, underpayments, and for failing to comply with statutory or regulatory tax provisions are payable to public schools. N.C. Sch. Bds. Ass'n v. Moore, 359 N.C. 474 , 614 S.E.2d 504, 2005 N.C. LEXIS 694 (2005).

Cape Hatteras Electric Membership Corporation. —

Although G.S. 105-164.4(a)(4a) and G.S. 105-228.90(b)(5) standing alone served as a basis for imposing sales tax on the Cape Hatteras Electric Membership Corporation (CHEMC), An Act To Declare Cape Hatteras Electric Membership Corporation To Be A Public Agency And Provide That It Shall Be Exempt From Certain Taxation exempted CHEMC from sales tax as sales tax was only levied on those entities that were already subject to the franchise tax, and in essence did not increase the tax burden. Cape Hatteras Elec. Mbrshp. Corp. v. Lay, 210 N.C. App. 92, 708 S.E.2d 399, 2011 N.C. App. LEXIS 307 (2011).

§ 105-229. [Repealed]

Repealed by Session Laws 1995 (Regular Session, 1996), c. 646, s. 9.

§ 105-230. Charter suspended for failure to report.

  1. If a corporation or a limited liability company fails to file any report or return or to pay any tax or fee required by this Subchapter for 90 days after it is due, the Secretary shall inform the Secretary of State of this failure. The Secretary of State shall suspend the articles of incorporation, articles of organization, or certificate of authority, as appropriate, of the corporation or limited liability company. The Secretary of State shall immediately notify by mail every domestic or foreign corporation or limited liability company so suspended of its suspension. The powers, privileges, and franchises conferred upon the corporation or limited liability company by the articles of incorporation, the articles of organization, or the certificate of authority terminate upon suspension.
  2. Any act performed or attempted to be performed during the period of suspension is invalid and of no effect, unless the Secretary of State reinstates the corporation or limited liability company pursuant to G.S. 105-232 . However, a suspended entity’s state tax filing obligations and the payment of its tax liability is not affected by the suspension, nor does a suspension affect the liability of a responsible person under G.S. 105-242.2 , whether the obligation or liability is enforced in the context of a civil or criminal proceeding or otherwise.

History. 1939, c. 158, ss. 901, 902; 1957, c. 498; 1967, c. 823, s. 31; 1969, c. 965, s. 2; 1973, c. 476, s. 193; 1987, c. 644, s. 1; 1989 (Reg. Sess., 1990), c. 1024, s. 19(a); 1993, c. 354, ss. 19, 20; 1998-212, s. 29A.14(l); 2001-387, s. 152; 2018-5, s. 38.10(a).

Editor’s Note.

Session Laws 2001-387, s. 154(b), provides that nothing in this act shall supersede the provisions of Article 10 or 65 of Chapter 58 of the General Statutes, and this act does not create an alternate means for an entity governed by Article 65 of Chapter 58 of the General Statutes to convert to a different business form.

Effect of Amendments.

Session Laws 2018-5, s. 38.10(a), effective June 12, 2018, added the second sentence in subsection (b).

CASE NOTES

Constitutionality. —

The court declined to address the plaintiff’s allegation that this section argue is unconstitutional because it does not require the corporation, whose certificate of authority has been suspended, be notified of the suspension prior to the suspension taking effect because this argument was not asserted at trial. Ben Johnson Homes, Inc. v. Watkins, 142 N.C. App. 162, 541 S.E.2d 769, 2001 N.C. App. LEXIS 32 , aff'd, 354 N.C. 563 , 555 S.E.2d 608, 2001 N.C. LEXIS 1227 (2001).

Reinstatement of Charter. —

When a corporation’s charter is suspended pursuant to this section, the same may be reinstated within five years upon payment of fees and taxes due the Revenue Department. Raleigh Swimming Pool Co. v. Wake Forest Country Club, 11 N.C. App. 715, 182 S.E.2d 273, 1971 N.C. App. LEXIS 1621 (1971).

Liquidation of Corporation If Charter Not Reinstated. —

If a suspended charter is not reinstated within five years, then liquidation of corporate assets is as provided in G.S. 105-232 rather than in G.S. 55-114 et seq. (see now G.S. 55-14-05 et seq.). Raleigh Swimming Pool Co. v. Wake Forest Country Club, 11 N.C. App. 715, 182 S.E.2d 273, 1971 N.C. App. LEXIS 1621 (1971).

This section was not intended to deprive a corporation of its properties nor to penalize innocent parties. Page v. Miller, 252 N.C. 23 , 113 S.E.2d 52, 1960 N.C. LEXIS 402 (1960); Parker v. Life Homes, Inc., 22 N.C. App. 297, 206 S.E.2d 344, 1974 N.C. App. LEXIS 2306 (1974).

Effect of Suspension of Charter on Corporation’s Capacity to Sue. —

Allegations in the complaint to the effect that plaintiff corporation’s charter was temporarily suspended under this section less than a year prior to the institution of the action do not disclose that the corporation did not have legal capacity to institute the action. Mica Indus., Inc. v. Penland, 249 N.C. 602 , 107 S.E.2d 120, 1959 N.C. LEXIS 397 (1959).

A corporation whose articles of incorporation were suspended under this section for failure to pay taxes had standing under G.S. 55-114 (see now G.S. 55-14-05 et seq.) to maintain an action to recover the amount due on a contract. Raleigh Swimming Pool Co. v. Wake Forest Country Club, 11 N.C. App. 715, 182 S.E.2d 273, 1971 N.C. App. LEXIS 1621 (1971).

A corporation whose charter has been suspended is not required to remain completely dormant for five years. Such a corporation may bring an action in court or defend an action brought against it. Parker v. Life Homes, Inc., 22 N.C. App. 297, 206 S.E.2d 344, 1974 N.C. App. LEXIS 2306 (1974).

A corporation could not bring suit to enforce contract entered into during a period of revenue suspension. South Mecklenburg Painting Contractors v. Cunnane Group, Inc., 134 N.C. App. 307, 517 S.E.2d 167, 1999 N.C. App. LEXIS 743 (1999).

Effect of Suspension of Certificate of Authority on Corporation’s Capacity to Sue. —

Construction company which entered into a contract with defendant-homeowner and performed that contract at a time when its certificate of authority was in a state of suspension could not assert or enforce its rights under the contract, including claims based in equity (i.e., claims based on quantum meruit). Ben Johnson Homes, Inc. v. Watkins, 142 N.C. App. 162, 541 S.E.2d 769, 2001 N.C. App. LEXIS 32 , aff'd, 354 N.C. 563 , 555 S.E.2d 608, 2001 N.C. LEXIS 1227 (2001).

Ability to Take Property Under Will. —

A corporation whose charter has been suspended may take property under a will. Parker v. Life Homes, Inc., 22 N.C. App. 297, 206 S.E.2d 344, 1974 N.C. App. LEXIS 2306 (1974).

Power to Assign Bid Made at Foreclosure Sale. —

When the rights of third parties are involved, a corporation whose charter has been suspended has the power to assign a bid made at a foreclosure sale, regardless of whether the exercise of that power subjects the corporation to a penalty under G.S. 105-231 . Parker v. Life Homes, Inc., 22 N.C. App. 297, 206 S.E.2d 344, 1974 N.C. App. LEXIS 2306 (1974).

Power to Purchase Property at Foreclosure Sale. —

A corporation whose charter has been suspended has the power to purchase property at a foreclosure sale and to convey it validly to an innocent third party. Parker v. Life Homes, Inc., 22 N.C. App. 297, 206 S.E.2d 344, 1974 N.C. App. LEXIS 2306 (1974).

Duty of Officers to Corporation. —

While corporate officers in North Carolina are not trustees, their fiduciary duty to the corporation is a high one; this includes a duty not to continue to incur ordinary business obligations on behalf of the corporation when they have knowledge that the corporation’s charter has been suspended. Pierce Concrete, Inc. v. Cannon Realty & Constr. Co., 77 N.C. App. 411, 335 S.E.2d 30, 1985 N.C. App. LEXIS 4065 (1985).

Where plaintiff corporation had no legal existence on date of conveyance of certain real property, the deed could not operate to convey title to plaintiff corporation. Piedmont & W. Inv. Corp. v. Carnes-Miller Gear Co., 96 N.C. App. 105, 384 S.E.2d 687, 1989 N.C. App. LEXIS 935 (1989) (decided prior to 1987 amendment) .

Use of Corporate Name as Shield. —

The law will not permit a corporate officer to create obligations in the name of the corporation, knowing the acts are without authority and invalid, and then be permitted to use the corporate name as a shield against creditors. Pierce Concrete, Inc. v. Cannon Realty & Constr. Co., 77 N.C. App. 411, 335 S.E.2d 30, 1985 N.C. App. LEXIS 4065 (1985).

§ 105-231.

Recodified as the second paragraph of G.S. 105-230 by Session Laws 1998-212, s. 29A.14(k).

§ 105-232. Rights restored; receivership and liquidation.

  1. Any corporation or limited liability company whose articles of incorporation, articles of organization, or certificate of authority to do business in this State has been suspended by the Secretary of State under G.S. 105-230 , that complies with all the requirements of this Subchapter and pays all State taxes, fees, or penalties due from it (which total amount due may be computed, for years prior and subsequent to the suspension, in the same manner as if the suspension had not taken place), and pays to the Secretary of Revenue a fee of twenty-five dollars ($25.00) to cover the cost of reinstatement, is entitled to exercise again its rights, privileges, and franchises in this State. The Secretary of Revenue shall notify the Secretary of State of this compliance and the Secretary of State shall reinstate the corporation or limited liability company by appropriate entry upon the records of the office of the Secretary of State. Upon entry of reinstatement, it relates back to and takes effect as of the date of the suspension by the Secretary of State and the corporation or limited liability company resumes carrying on its business as if the suspension had never occurred, subject to the rights of any person who reasonably relied, to that person’s prejudice, upon the suspension. The Secretary of State shall immediately notify by mail the corporation or limited liability company of the reinstatement.
  2. When the articles of incorporation, articles of organization, or certificate of authority to do business in this State has been suspended by the Secretary of State under G.S. 105-230 , and the corporation or limited liability company has ceased to operate as a going concern, if there remains property held in the name of the corporation or limited liability company or undisposed of at the time of the suspension, or there remain future interests that may accrue to the corporation, the limited liability company, or its successors, members, or stockholders, any interested party may apply to the superior court for the appointment of a receiver. Application for the receiver may be made in a civil action to which all stockholders, members, or their representatives or next of kin shall be made parties. Stockholders or members whose whereabouts are unknown, unknown stockholders or members, unknown heirs and next of kin of deceased stockholders, members, creditors, dealers, and other interested persons may be served by publication. A guardian ad litem may be appointed for any stockholders, members, or their representatives who are infants or incompetent. The receiver shall enter into a bond if the court requires one and shall give notice to creditors by publication or otherwise as the court may prescribe. Any creditor who fails to file a claim with the receiver within the time set shall be barred of the right to participate in the distribution of the assets. The receiver may (i) sell the property interests of the corporation or limited liability company upon such terms and in such manner as the court may order, (ii) apply the proceeds to the payment of any debts of the corporation or limited liability company, and (iii) distribute the remainder among the stockholders, the members, or their representatives in proportion to their interests in the property interests. Shares due to any stockholder or member who is unknown or whose whereabouts are unknown shall be paid into the office of the clerk of the superior court, to be disbursed according to law. In the event the records of the corporation or limited liability company are lost or do not reflect the owners of the property interests, the court shall determine the owners from the best evidence available, and the receiver shall be protected in acting in accordance with the court’s finding. This proceeding is authorized for the sole purpose of providing a procedure for disposing of the assets of the corporation or limited liability company by the payment of its debts and by the transfer to its stockholders, its members, or their representatives their proportionate shares of its assets.

History. 1939, c. 158, s. 903; c. 370, s. 1; 1943, c. 400, s. 9; 1947, c. 501, s. 9; 1951, c. 29; 1969, c. 541, s. 10; 1973, c. 476, s. 193; c. 1065; 1987, c. 644, s. 2; 1989 (Reg. Sess., 1990), c. 1024, s. 19(b); 1991, c. 645, s. 21; 1993, c. 354, s. 21; 2001-387, s. 153; 2001-487, s. 62(dd).

Editor’s Note.

Session Laws 2001-387, s. 154(b), provides that nothing in this act shall supersede the provisions of Article 10 or 65 of Chapter 58 of the General Statutes, and this act does not create an alternate means for an entity governed by Article 65 of Chapter 58 of the General Statutes to convert to a different business form.

Session Laws 2001-387, s. 175(b), as amended by Session Laws 2001-487, s. 62(ff), provides: “The amendment to G.S. 105-232 set forth in Section 153 of this act is intended to be retroactive. Accordingly, any act performed or attempted to be performed during the period of suspension of any corporation or limited liability company reinstated pursuant to G.S. 105-232 (a) prior to January 1, 2002, shall not be deemed to be invalid and of no effect under G.S. 105-230 , subject to the rights of any person who reasonably relied, to that person’s prejudice, on the suspension.”

CASE NOTES

Liquidation of Corporation if Suspended Charter Not Reinstated. —

When a corporation’s charter is suspended pursuant to G.S. 105-230 , the same may be reinstated within five years upon payment of fees and taxes due the Revenue Department; and if the charter is not so reinstated within five years, then liquidation of corporate assets is as provided in this section rather than in G.S. 55-114 et seq. (see now G.S. 55-14-05 et seq.). Raleigh Swimming Pool Co. v. Wake Forest Country Club, 11 N.C. App. 715, 182 S.E.2d 273, 1971 N.C. App. LEXIS 1621 (1971).

Property Transferred While Winding Up Affairs. —

Trial court erred in declaring that a homeowners association was the fee simple owner of a strip of land because quitclaim deeds conveyed the developer’s interest in the strip to a corporation; even if the developer was under revenue suspension, it could transfer its property while winding up its affairs, and since the corporation was de facto when the deed was signed and the developer transferred corporate property pursuant to winding up its affairs, it acquired the interest the developer had. Le Oceanfront, Inc. v. Lands End of Emerald Isle Ass'n, 238 N.C. App. 405, 768 S.E.2d 15, 2014 N.C. App. LEXIS 1337 (2014).

§§ 105-233, 105-234. [Repealed]

Repealed by Session Laws 2006-162, s. 12(a), effective July 24, 2006.

§ 105-235. Every day’s failure a separate offense.

The willful failure, refusal, or neglect to observe and comply with any order, direction, or mandate of the Secretary of Revenue, or to perform any duty enjoined by this Subchapter, by any person, firm, or corporation subject to the provisions of this Subchapter, or any officer, agent, or employee thereof, shall, for each day such failure, refusal, or neglect continues, constitute a separate and distinct offense.

History. 1939, c. 158, s. 906; 1973, c. 476, s. 193.

§ 105-236. Penalties; situs of violations; penalty disposition.

  1. Penalties. —  The following civil penalties and criminal offenses apply:
    1. Penalty for Bad Checks. —  When the bank upon which any uncertified check tendered to the Department of Revenue in payment of any obligation due to the Department returns the check because of insufficient funds or the nonexistence of an account of the drawer, the Secretary shall assess a penalty equal to ten percent (10%) of the check, subject to a minimum of one dollar ($1.00) and a maximum of one thousand dollars ($1,000). This penalty does not apply if the Secretary finds that, when the check was presented for payment, the drawer of the check had sufficient funds in an account at a financial institution to pay the check and, by inadvertence, the drawer of the check failed to draw the check on the account that had sufficient funds. (1a) Penalty for Bad Electronic Funds Transfer. — When an electronic funds transfer cannot be completed due to insufficient funds or the nonexistence of an account of the transferor, the Secretary shall assess a penalty equal to ten percent (10%) of the amount of the transfer, subject to a minimum of one dollar ($1.00) and a maximum of one thousand dollars ($1,000). This penalty may be waived by the Secretary in accordance with G.S. 105-237 .

      (1b) Making Payment in Wrong Form. — For making a payment of tax in a form other than the form required by the Secretary pursuant to G.S. 105-241(a), the Secretary shall assess a penalty equal to five percent (5%) of the amount of the tax, subject to a minimum of one dollar ($1.00) and a maximum of one thousand dollars ($1,000). This penalty may be waived by the Secretary in accordance with G.S. 105-237 .

    2. Failure to Obtain a License. —  For failure to obtain a license before engaging in a business, trade or profession for which a license is required, the Secretary shall assess a penalty equal to five percent (5%) of the amount prescribed for the license per month or fraction thereof until paid, not to exceed twenty-five percent (25%) of the amount so prescribed, but in any event shall not be less than five dollars ($5.00). In cases in which the taxpayer, after written notification by the Department, fails to obtain a license as required under G.S. 105-113.4 I, 105-449.65, or 105-449.131, the Secretary may assess a penalty of one thousand dollars ($1,000).
    3. Failure to File Return. —  In case of failure to file any return on the date it is due, determined with regard to any extension of time for filing, the Secretary shall assess a penalty equal to five percent (5%) of the amount of the tax if the failure is for not more than one month, with an additional five percent (5%) for each additional month, or fraction thereof, during which the failure continues, not exceeding twenty-five percent (25%) in aggregate.
    4. (Effective until July 1, 2022) Failure to Pay Tax When Due. —  In the case of failure to pay any tax when due, without intent to evade the tax, the Secretary shall assess a penalty equal to ten percent (10%) of the tax. This penalty does not apply in any of the following circumstances:
      1. When the amount of tax shown as due on an amended return is paid when the return is filed.
      2. When the Secretary proposes an assessment for tax due but not shown on a return and the tax due is paid within 45 days after the later of the following:
        1. The date of the notice of proposed assessment of the tax, if the taxpayer does not file a timely request for a Departmental review of the proposed assessment.
        2. The date the proposed assessment becomes collectible under one of the circumstances listed in G.S. 105-241.22(3) through (6), if the taxpayer files a timely request for a Departmental review of the proposed assessment.
      3. When a taxpayer timely files a consolidated or combined return at the request of the Secretary under Part 1 of Article 4 of this Chapter and the tax due is paid within 45 days after the latest of the following:
        1. The date the return is filed.
        2. The date of a notice of proposed assessment based on the return, if the taxpayer does not file a timely request for a Departmental review of the proposed assessment.
        3. The date the Departmental review of the proposed assessment ends as a result of the occurrence of one of the actions listed in G.S. 105-241.22(3) through (6), if the taxpayer files a timely request for a Departmental review.

          (4) (Effective July 1, 2022) Failure to Pay Tax When Due. — In the case of failure to pay any tax when due, without intent to evade the tax, the Secretary shall assess a penalty equal to two percent (2%) of the amount of the tax if the failure is for not more than one month, with an additional two percent (2%) for each additional month, or fraction thereof, during which the failure continues, not exceeding ten percent (10%) in aggregate. This penalty does not apply in any of the following circumstances:

          a. When the amount of tax shown as due on an amended return is paid when the return is filed.

          b. When the Secretary proposes an assessment for tax due but not shown on a return and the tax due is paid within 45 days after the later of the following:

          1. The date of the notice of proposed assessment of the tax, if the taxpayer does not file a timely request for a Departmental review of the proposed assessment.

          2. The date the proposed assessment becomes collectible under one of the circumstances listed in G.S. 105-241.22(3) through (6), if the taxpayer files a timely request for a Departmental review of the proposed assessment.

          c. When a taxpayer timely files a consolidated or combined return at the request of the Secretary under Part 1 of Article 4 of this Chapter and the tax due is paid within 45 days after the latest of the following:

          1. The date the return is filed.

          2. The date of a notice of proposed assessment based on the return, if the taxpayer does not file a timely request for a Departmental review of the proposed assessment.

          3. The date the Departmental review of the proposed assessment ends as a result of the occurrence of one of the actions listed in G.S. 105-241.22(3) through (6), if the taxpayer files a timely request for a Departmental review.

    5. Negligence.    —
      1. Finding of negligence. —  For negligent failure to comply with any of the provisions to which this Article applies, or rules issued pursuant thereto, without intent to defraud, the Secretary shall assess a penalty equal to ten percent (10%) of the deficiency due to the negligence.
      2. Large individual income tax deficiency. —  In the case of individual income tax, if a taxpayer understates taxable income, by any means, by an amount equal to twenty-five percent (25%) or more of gross income, the Secretary shall assess a penalty equal to twenty-five percent (25%) of the deficiency. For purposes of this subdivision, “gross income” means gross income as defined in section 61 of the Code.
      3. Other large tax deficiency. —  In the case of a tax other than individual income tax, if a taxpayer understates tax liability by twenty-five percent (25%) or more, the Secretary shall assess a penalty equal to twenty-five percent (25%) of the deficiency.
      4. No double penalty. —  If a penalty is assessed under subdivision (6) of this section, no additional penalty for negligence shall be assessed with respect to the same deficiency.
      5. Repealed by Session Laws 2013-316, s. 7(c), effective January 1, 2013, and applicable to estates of decedents dying on or after that date.
      6. Consolidated or combined return. —  The amount of tax shown as due on a consolidated or combined return filed at the request of the Secretary under Part 1 of Article 4 of this Chapter is not considered a deficiency and is not subject to this subdivision unless one or more of the following applies:
        1. The return is an amended consolidated or combined return that includes the same corporations as the initial consolidated or combined return filed at the request of the Secretary. In this case the deficiency is the extent to which the amount shown as due on the amended return exceeds the amount shown as due on the initial return.
        2. Repealed by Session Laws 2011-390, s. 5, effective January 1, 2012.
        3. Pursuant to a written request from a taxpayer, the Secretary has provided written advice to that taxpayer stating that the Secretary will require a consolidated or combined return under the facts and circumstances set out in the request, and the Secretary requires a taxpayer to file a consolidated or combined return under G.S. 105-130.5 A because the taxpayer’s facts and circumstances meet those described in the written advice.

          (5a) Misuse of Exemption Certificate. — For misuse of an exemption certificate by a purchaser, the Secretary shall assess a penalty equal to two hundred fifty dollars ($250.00). An exemption certificate is a certificate issued by the Secretary that authorizes a retailer to sell tangible personal property to the holder of the certificate and either collect tax at a preferential rate or not collect tax on the sale. Examples of an exemption certificate include a certificate of exemption, a direct pay certificate, and a conditional exemption certificate.

          (5b) Road Tax Understatement. — If a motor carrier understates its liability for the road tax imposed by Article 36B of this Chapter by twenty-five percent (25%) or more, the Secretary shall assess the motor carrier a penalty in an amount equal to two times the amount of the deficiency.

    6. Fraud. —  If there is a deficiency or delinquency in payment of any tax because of fraud with intent to evade the tax, the Secretary shall assess a penalty equal to fifty percent (50%) of the total deficiency.
    7. Attempt to Evade or Defeat Tax. —  Any person who willfully attempts, or any person who aids or abets any person to attempt in any manner to evade or defeat a tax or its payment, shall, in addition to other penalties provided by law, be guilty of a Class H felony.
    8. Willful Failure to Collect, Withhold, or Pay Over Tax. —  Any person required to collect, withhold, account for, and pay over any tax who willfully fails to collect or truthfully account for and pay over the tax shall, in addition to other penalties provided by law, be guilty of a Class 1 misdemeanor. Notwithstanding any other provision of law, no prosecution for a violation brought under this subdivision shall be barred before the expiration of six years after the date of the violation.
    9. Willful Failure to File Return, Supply Information, or Pay Tax. —  Any person required to pay any tax, to file a return, to keep any records, or to supply any information, who willfully fails to pay the tax, file the return, keep the records, or supply the information, at the time or times required by law, or rules issued pursuant thereto, is, in addition to other penalties provided by law, guilty of a Class 1 misdemeanor. Notwithstanding any other provision of law, no prosecution for a violation brought under this subdivision is barred before the expiration of six years after the date of the violation.

      (9a) Aid or Assistance. — Any person, pursuant to or in connection with the revenue laws, who willfully aids, assists in, procures, counsels, or advises the preparation, presentation, or filing of a return, affidavit, claim, or any other document that the person knows is fraudulent or false as to any material matter, whether or not the falsity or fraud is with the knowledge or consent of the person authorized or required to present or file the return, affidavit, claim, or other document, is guilty of a felony as follows:

      1. If the person who commits an offense under this subdivision is an income tax return preparer and the amount of all taxes fraudulently evaded on returns filed in one taxable year is one hundred thousand dollars ($100,000) or more, the person is guilty of a Class C felony.
      2. If the person who commits an offense under this subdivision is an income tax return preparer and the amount of all taxes fraudulently evaded on returns filed in one taxable year is less than one hundred thousand dollars ($100,000), the person is guilty of a Class F felony.
      3. If the person who commits an offense under this subdivision is not covered under sub-subdivision a. or b. of this subdivision, the person is guilty of a Class H felony.

        (9b) Identity Theft. — A person who knowingly obtains, possesses, or uses identifying information of another person, living or dead, with the intent to fraudulently utilize that information in a submission to the Department to obtain anything of value, benefit, or advantage for themselves or another is guilty of a Class G felony. If the person whose identifying information is obtained, possessed, or used by another in this manner suffers any adverse financial impact as a proximate result of the offense, then the person who obtained, possessed, or used the identifying information is guilty of a Class F felony. Each person’s identity obtained, possessed, or used in this manner shall count as a separate offense. The term “identifying information” as used in this subdivision includes the following:

        a. Legal name.

        b. Date of birth.

        c. Social Security Number.

      4. Taxpayer Identification Number.
      5. Federal Identification Number.
      6. Bank account numbers.
      7. Federal or State tax or tax return information.
    10. Penalties Regarding Informational Returns. —  The following penalties apply with regard to an informational return required by Article 2A, 2C, 4, 4A, 5, 9, 36C, or 36D of this Chapter:
      1. Repealed by Session Laws 1998-212, s. 29A.14(m), effective January 1, 1999.
      2. Repealed by Session Laws 2018-5, s. 38.10(p), effective June 12, 2018.
      3. For failure to file with the Secretary by the date the return is due, the Secretary shall assess a penalty of fifty dollars ($50.00) per day, up to a maximum penalty of one thousand dollars ($1,000).
      4. For failure to file in the format prescribed by the Secretary, the Secretary shall assess a penalty of two hundred dollars ($200.00).

        (10a) Filing a Frivolous Return. — If a taxpayer files a frivolous return under Part 2 of Article 4 of this Chapter, the Secretary shall assess a penalty in the amount of up to five hundred dollars ($500.00). A frivolous return is a return that meets both of the following requirements:

        a. It fails to provide sufficient information to permit a determination that the return is correct or contains information which positively indicates the return is incorrect, and

        b. It evidences an intention to delay, impede or negate the revenue laws of this State or purports to adopt a position that is lacking in seriousness.

        (10b) Misrepresentation Concerning Payment. — A person who receives money from a taxpayer with the understanding that the money is to be remitted to the Secretary for application to the taxpayer’s tax liability and who willfully fails to remit the money to the Secretary is guilty of a Class F felony.

    11. Repealed by Session Laws 2006-162, s. 12(b), effective July 24, 2006.
    12. Repealed by Session Laws 1991, c. 45, s. 27.
  2. Situs. —  A violation of a tax law is considered an act committed in part at the office of the Secretary in Raleigh. The certificate of the Secretary that a tax has not been paid, a return has not been filed, or information has not been supplied, as required by law, is prima facie evidence that the tax has not been paid, the return has not been filed, or the information has not been supplied.
  3. Penalty Disposition. —  Civil penalties assessed by the Secretary are assessed as an additional tax. The clear proceeds of civil penalties assessed by the Secretary must be credited to the Civil Penalty and Forfeiture Fund established in G.S. 115C-457.1 .

History. 1939, c. 158, s. 907; 1953, c. 1302, s. 7; 1959, c. 1259, s. 8; 1963, c. 1169, s. 6; 1967, c. 1110, s. 9; 1973, c. 476, s. 193; c. 1287, s. 13; 1979, c. 156, s. 2; 1985, c. 114, s. 11; 1985 (Reg. Sess., 1986), c. 983; 1987 (Reg. Sess., 1988), c. 1076; 1989, c. 557, ss. 7 to 10; 1989 (Reg. Sess., 1990), c. 1005, s. 9; 1991, c. 45, s. 27; 1991 (Reg. Sess., 1992), c. 914, s. 2; c. 1007, s. 10; 1993, c. 354, s. 22; c. 450, s. 10; c. 539, ss. 709, 710, 1292, 1293; 1994, Ex. Sess., c. 24, s. 14(c); 1995, c. 390, s. 36; 1995 (Reg. Sess., 1996), c. 646, s. 10; c. 647, s. 51; c. 696, s. 1; 1997-6, s. 8; 1997-109, s. 3; 1998-178, ss. 1, 2; 1998-212, s. 29A.14(m); 1999-415, ss. 2, 3; 1999-438, ss. 15, 16; 2000-119, s. 2; 2000-120, s. 7; 2000-140, s. 70; 2002-106, ss. 2, 4; 2005-276, s. 6.37(n); 2005-435, s. 1; 2006-162, s. 12(b); 2007-491, s. 26; 2008-107, s. 28.18(b); 2010-31, s. 31.10(a), (b); 2011-330, s. 32; 2011-390, s. 5; 2011-411, s. 8(b); 2012-79, s. 2.18(a); 2013-316, s. 7(c); 2013-414, s. 1(h); 2014-3, s. 3.1(c); 2015-259, s. 7.1(b); 2017-204, s. 3.1(a); 2018-5, s. 38.10(p); 2018-98, s. 2(a); 2019-169, ss. 5.2(a), 6.8; 2021-180, ss. 42.11(a), 42.13E(i).

Cross References.

As to exception under subdivisions (a)(2), (3) and (4) of this section when time period is extended because of a presidentially declared disaster, see G.S. 105-249.2 .

Editor’s Note.

Session Laws 2005-276, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2005’.”

Session Laws 2005-276, s. 6.37(w), provides: “The Office of State Budget and Management shall develop a methodology for computing the actual costs of collection of civil penalties by State departments and agencies. This methodology shall apply to all State departments and agencies, effective July 1, 2006.”

Session Laws 2005-276, s. 46.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2005-2007 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2005-2007 fiscal biennium.”

Session Laws 2005-276, s. 46.5 is a severability clause.

Session Laws 2008-107, s. 28.8(e), provides: “This section does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute repealed by this act before the effective date of its repeal; nor does it affect the right to any refund or credit of a tax that accrued under the repealed statute before the effective date of its repeal.”

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2017-204, s. 3.1(b) made subdivision (a)(9b), as added by Session Laws 2017-204, s. 3.1(a), effective December 1, 2017, and applicable to offenses committed on or after that date.

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

Session Laws 2018-98, s. 2(b), made the amendment of subsection (b) of this section by Session Laws 2018-98, s. 2(a), effective December 1, 2018, and applicable to offenses committed on or after that date.

Session Laws 2019-169, s. 5.2(b), made the amendment to subdivision (a)(10) of this section by Session Laws 2019-169, s. 5.2(a), effective January 1, 2020, and applicable to informational returns due to be filed on or after that date.

Session Laws 2019-169, s. 6.8(b) made the amendment to subsection (b) of this section by Session Laws 2019-169, s. 6.8(a), effective December 1, 2018, and applicable to offenses committed on or after that date.

Session Laws 2021-180, s. 42.13E(o), made the amendments to subdivision (a)(2) of this section by Session Laws 2021-180, s. 42.13E(i), effective January 1, 2022, and applicable to penalties assessed on or after that date.

Session Laws 2021-180, s. 42.11(b), made the amendments to subdivision (a)(4) of this section by Session Laws 2021-180, s. 42.11(a), effective July 1, 2022, and applicable to tax assessed on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2005-276, s. 6.37(n), effective July 1, 2005, added the present second sentence to the introductory paragraph.

Session Laws 2005-435, s. 1, effective January 1, 2006, added the last sentence in subdivision (2).

Session Laws 2006-162, s. 12(b), effective July 24, 2006, added “situs of violations; penalty disposition” at the end of the section catchline; designated the existing provisions as subsection (a); rewrote the introductory paragraph of (a) which read: “Penalties assessed by the Secretary under this Subchapter are assessed as an additional tax. The clear proceeds of any civil penalties levied pursuant to subdivisions (3), (4), (5)a., and (6) of this section shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with G.S. 115C-457.2 . Except as otherwise provided by law, and subject to the provisions of G.S. 105-237 , the following penalties shall be applicable:”; deleted “in this State” preceding “to pay” near the middle of the last sentence in subdivision (a)(1); deleted former (11) which read: “Any violation of Subchapter I, V, or VIII of this Chapter or of Article 3 of Chapter 119 of the General Statutes is considered an act committed in part at the office of the Secretary in Raleigh. The certificate of the Secretary that a tax has not been paid, a return has not been filed, or information has not been supplied, as required by law, is prima facie evidence that the tax has not been paid, the return has not been filed, or the information has not been supplied.”; and added subsections (b) and (c).

Session Laws 2007-491, s. 26, effective January 1, 2008, substituted “subject to a minimum of” for “except that the penalty shall in no event be less than” in the introductory paragraph of subdivision (a)(4); and rewrote sub-subdivision (a)(4)b. For applicability, see Editor’s note.

Session Laws 2008-107, s. 28.18(b), effective January 1, 2009, and applicable to gifts made on or after the date, in sub-subdivision (a)(5)e., substituted “Estate tax” for “Inheritance and gift tax” at the beginning, and substituted “estate tax” for “inheritance, estate, and gift tax” near the middle.

Session Laws 2010-31, s. 31.10(a) and (b), effective June 30, 2010, and applicable to penalties and taxes that are assessed but unpaid as of the effective date, except penalties and taxes that are the subject of pending litigation in a General Court of Justice as of the effective date, and to penalties and taxes assessed on or after the effective date, rewrote sub-subdivision (a)(4)b., which formerly read: “When the Secretary proposes an assessment for tax due but not shown on a return and the tax due is paid within 45 days after the date of the notice of proposed assessment of the tax”; and added sub-subdivisions (a)(4)c. and (a)(5)f.

Session Laws 2011-330, s. 32, effective June 27, 2011, inserted “after written notification by the Department” near the end of subdivision (a)(2).

Session Laws 2011-390, s. 5, as amended by Session Laws 2011-411, s. 8(b), effective January 1, 2012, repealed subdivision (a)(5)f.2., which pertained to permanent rules adopted by the Secretary; and updated the section reference in subdivision (a)(5)f.3.

Session Laws 2012-79, s. 2.18(a), effective January 1, 2014, in subdivision (a)(3), substituted “in aggregate” for “in the aggregate, or five dollars ($5.00), whichever is the greater”; and in the introductory language of subdivision (a)(4), substituted “(10%) of the tax” for “(10%) of the tax, subject to a minimum of five dollars ($5.00).”

Session Laws 2013-316, s. 7(c), effective January 1, 2013, deleted sub-subdivision (a)(5)e. For applicability, see editor’s note.

Session Laws 2013-414, s. 1(h), effective August 23, 2013, in subdivision (a)(9), substituted “file” for “make” twice preceding “a return” and “the return,” “is” for “shall” and “shall be” preceding “in addition” and “barred,” and deleted “be” preceding “guilty of.”

Session Laws 2014-3, s. 3.1(c), effective July 1, 2014, substituted “certificate of exemption, a direct pay certificate, and a conditional exemption certificate” for “certificate of resale, a direct pay certificate and a farmer’s certificate” in the last sentence in subsection (a)(5a). See Editor’s note for applicability.

Session Laws 2015-259, s. 7.1(b), effective for taxable years beginning on or after January 1, 2016, inserted “with the Secretary” following “failure to file” in subdivision (a)(10)c.; and substituted “Article 4A, 36C, or 36D” for “Article 36C or 36D” in subdivision (a)(10)c. For applicability, see Editor’s note.

Session Laws 2017-204, s. 3.1(a), added subdivision (a)(9b). For effective date and applicability, see editor’s note.

Session Laws 2018-5, s. 38.10(p), effective June 12, 2018, rewrote subdivision (a)(10).

Session Laws 2018-98, s. 2(a), in subsection (b), in the first sentence, substituted “Civilly, a violation” for “Violation” and added the second and third sentences. For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 5.2(a), inserted “2A, 2C, 4,” in the introductory paragraph of subdivision (a)(10). For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 6.8(a), in subsection (b), in the first sentence, substituted “A violation” for “Civilly, a violation” and deleted the former second and third sentences, which read: “Criminally, a violation of a tax law shall not be considered an act committed at the office of the Secretary in Raleigh. The District Attorney of the county where the charged offense occurred shall have sole jurisdiction to prosecute violations of tax law, but the Attorney General shall have concurrent jurisdiction in such prosecutions if the District Attorney requests, in writing, that the Attorney General prosecute the violation.” For effective date and applicability, see editor’s note.

Session Laws, 2021-180, s. 42.11, rewrote the introductory paragraph of subdivision (a)(4). For effective date and applicability, see editor's note.

Session Laws 2021-180, s. 42.13E(i), in subdivision (a)(2), substituted “G.S. 105-113.4I, 105-449.65, or 105-449.131” for “G.S. 105-449.65 or G.S. 105-449.131 .” For effective date and applicability, see editor's note.

Legal Periodicals.

For brief comment on the 1953 amendment which rewrote the section, see 31 N.C.L. Rev. 440 (1953).

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 survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

CASE NOTES

Constitutionality. —

G.S. 105-236 withstood defendants’ vagueness challenge and was held to be constitutional. State v. Sinnott, 163 N.C. App. 268, 593 S.E.2d 439, 2004 N.C. App. LEXIS 370 (2004), cert. denied, 544 U.S. 962, 125 S. Ct. 1740, 161 L. Ed. 2d 604, 2005 U.S. LEXIS 2993 (2005).

Penalties. —

The criminal and civil penalties of the Tax Code did not provide an exclusive remedy, where a retailer allegedly did not pay sales and use taxes collected from a purchaser, and thus, the retailer could be prosecuted under the embezzlement statutes. State v. Kennedy, 130 N.C. App. 399, 503 S.E.2d 133, 1998 N.C. App. LEXIS 938 (1998), aff'd, 350 N.C. 87 , 511 S.E.2d 305, 1999 N.C. LEXIS 43 (1999).

Monetary payments for a taxpayer’s noncompliance with a mandate of Chapter 105 are penalties and, therefore, subject to N.C. Const., Art. IX, § 7; thus, monies collected by the North Carolina Department of Revenue for late filings, underpayments, and for failing to comply with statutory or regulatory tax provisions are payable to public schools. N.C. Sch. Bds. Ass'n v. Moore, 359 N.C. 474 , 614 S.E.2d 504, 2005 N.C. LEXIS 694 (2005).

As a North Carolina corporation understated its tax liability by more than 25 percent as a result of its transfer of assets to a related, Florida-based corporation in an unsuccessful attempt to reduce its North Carolina income tax liability, the corporation was obliged to pay the penalty imposed by the North Carolina Department of Revenue pursuant to G.S. 105-236(a)(5)(c). Delhaize Am., Inc. v. Lay, 222 N.C. App. 336, 731 S.E.2d 486, 2012 N.C. App. LEXIS 1021 (2012).

North Carolina Department of Revenue properly penalized the taxpayer under the statute because she understated her taxable income by nearly 64% by claiming certain deductions that she was unable to substantiate with sufficient documentation; whether the taxpayer acted innocently or with an improper motive, her claiming deductions and then failing to substantiate them was undoubtedly a “means” of understating her taxable income, subjecting her to the penalty provided for under the statute. N.C. Dep't of Revenue v. Clifton, 2022 NCBC 20, 2022 NCBC LEXIS 38 (N.C. Super. Ct. Apr. 28, 2022).

Taxes Are Not Debt Within Meaning of Constitution. —

Taxes which are imposed are not contractual obligations of the taxpayer to the State, and do not constitute a debt within the meaning of the Constitution. State v. Locklear, 21 N.C. App. 48, 203 S.E.2d 63, 1974 N.C. App. LEXIS 1706 (1974).

Designating Failure to Pay Tax Misdemeanor Is Within Police Power. —

In the enactment of this section, the General Assembly has determined that any person required by the State Revenue Act to pay any tax who willfully fails to pay such tax shall be guilty of a misdemeanor. The legislature had full authority to make this decision. It is a valid exercise of legislative power. State v. Locklear, 21 N.C. App. 48, 203 S.E.2d 63, 1974 N.C. App. LEXIS 1706 (1974).

Selective Prosecution of Tax Evaders. —

The prosecution of individuals who publicly assert privileges not to pay taxes does not necessarily constitute selection for prosecution upon an impermissible basis. Such prosecutions, predicated in part upon a potential deterrent effect, serve a legitimate interest in promoting more general tax compliance. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

Penalty for Failure to File New Return. —

The taxpayer whose net income for any year is corrected by the Commissioner of Internal Revenue or other authorized federal officer must file a new return reflecting his corrected net income within two years after receipt of the federal agent’s report. Failure to make such a new return within the time specified under G.S. 105-159 subjects the taxpayer to all penalties provided by this section including, when applicable, the criminal penalty provided by subdivision (7) of this section. State v. Patton, 57 N.C. App. 702, 292 S.E.2d 172, 1982 N.C. App. LEXIS 2699 (1982).

Failure to file an income tax return upon correction of income for three years by a federal tax audit and placing income in wife’s bank account committed in a willful attempt to evade or defeat income taxes, would constitute the offense defined by subdivision (7) of this section. State v. Patton, 57 N.C. App. 702, 292 S.E.2d 172, 1982 N.C. App. LEXIS 2699 (1982).

What Must Be Shown Under Subdivision (7). —

Where a defendant is charged with attempting to evade or defeat the ascertainment of a tax, and that person also fails to file a return, the State must only show that defendant was subject to being taxed under the law, and that he willfully attempted to evade or defeat imposition of the tax. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

What Constitutes New Offense Under Subdivision (7). —

An attempt to evade or defeat taxes on April 29, 1979, by failing to file a return for an earlier year within the time required by G.S. 105-159 and by placing assets in the account of another would constitute a new offense, and the statute of limitations applicable to subdivision (7) of this section would begin to run anew as of that date. State v. Patton, 57 N.C. App. 702, 292 S.E.2d 172, 1982 N.C. App. LEXIS 2699 (1982).

G.S. 105-241.1 addresses only the civil assessment of taxes and is fully independent of the criminal offenses set forth in subdivisions (7) and (9) of this section. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

And Its Procedural Protections Are Not Applicable to Individual Charged Under This Section. —

Individual charged with violation of subdivisions (7) and (9) of this section was entitled to all the due process protections of a person charged under a criminal statute. However, he was not entitled to any procedural protections offered under the civil assessment statute, G.S. 105-241.1 [repealed]. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

Evidence Pertained to Willfulness Element. —

Opinion evidence of defendant’s friend as to defendant’s character trait of being trusting of others was improperly excluded since the evidence was pertinent to whether she willfully attempted to evade paying taxes where she claimed that she believed the representations made to her by the sellers of a form that the purported tax exemption was legal and thus she had a good faith belief that she was exempt from having to pay state income tax, and the State claimed that her actions were undertaken as a tax protestor. State v. Tatum-Wade, 229 N.C. App. 83, 747 S.E.2d 382, 2013 N.C. App. LEXIS 894 (2013).

Willfulness Shown. —

Defendant’s admission that he considered it unconstitutional to pay taxes, along with evidence that on at least four occasions during the period in question (1984 to 1986) he claimed on his employee withholding certificates personal and dependent exemptions totaling at least $16,800 to which he was not entitled, and that he did not file a state personal income tax return between 1980 and 1986, taken together, was adequate to show a willfull attempt to evade a tax. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

Sufficient substantial evidence was presented to support the denial of a motion to dismiss, had it been made, since the evidence consisted of: (1) statements made by defendant to a North Carolina Department of Revenue investigator regarding defendant’s views on taxes and the reason why defendant did not file returns for two years; and (2) defendant’s failure to file individual income tax returns for two years, and defendants’ filing of a fraudulent return for one year. Defendant’s statements, coupled with defendant’s actions, were sufficient to warrant a finding that defendant willfully attempted to evade the state individual income tax. State v. Howell, 191 N.C. App. 349, 662 S.E.2d 922, 2008 N.C. App. LEXIS 1312 (2008).

Defendants’ Belief No Defense to Willfulness. —

Belief of defendant charged with failure to pay state income taxes that he was not liable to pay income taxes on his wages because his wages were not “income,” but rather compensation for services rendered, was not a defense to willfulness. Essentially, the trial court was required to inform the jury that while a good-faith misunderstanding of the law may negate willfulness, a good-faith disagreement with the law does not. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

Any Error In Jury Instructions Was Harmless. —

Even if the trial court erroneously instructed the jury regarding willfulness, defendant failed to show prejudice by making a conclusory, unsubstantiated claim that the jury would have reached a different verdict had the trial court not committed the alleged instructional errors. State v. Tatum-Wade, 229 N.C. App. 83, 747 S.E.2d 382, 2013 N.C. App. LEXIS 894 (2013).

Penalties assessed as an additional tax under G.S. 105-236 and other provisions of the North Carolina Revenue Act for failure to comply with the tax code are remedial, not punitive, and are thus not subject to N.C. Const., Art. IX, § 7. N.C. Sch. Bds. Ass'n v. Moore, 160 N.C. App. 253, 585 S.E.2d 418, 2003 N.C. App. LEXIS 1794 (2003), aff'd in part and rev'd in part, 359 N.C. 474 , 614 S.E.2d 504, 2005 N.C. LEXIS 694 (2005) (see notes under catchline “Penalties” above).

Evidence Sufficient to Support Conviction. —

Evidence was sufficient to establish that that defendants willfully attempted to evade or defeat a tax or its payment in violation of the state tax laws; in addition, the evidence tended to show that one defendant failed to file an income tax return for four years despite the fact that his gross income exceeded his federal and state exemption allowances and necessitated that he file a return in each of those years, thus supporting conviction under G.S. 105-236(9). State v. Sinnott, 163 N.C. App. 268, 593 S.E.2d 439, 2004 N.C. App. LEXIS 370 (2004), cert. denied, 544 U.S. 962, 125 S. Ct. 1740, 161 L. Ed. 2d 604, 2005 U.S. LEXIS 2993 (2005).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. Henry W. Underhill, Jr., Charlotte City Attorney, 40 N.C. Op. Att'y Gen. 866 (1970).

§ 105-236.1. Enforcement of revenue laws by revenue law enforcement agents.

  1. General. —  The Secretary may appoint employees of the Unauthorized Substances Tax Section of the Tax Enforcement Division to serve as revenue law enforcement officers having the responsibility and subject-matter jurisdiction to enforce the excise tax on unauthorized substances imposed by Article 2D of this Chapter.The Secretary may appoint up to 11 employees of the Motor Fuels Investigations Section of the Tax Enforcement Division to serve as revenue law enforcement officers having the responsibility and subject-matter jurisdiction to enforce the taxes on motor fuels imposed by Articles 36B, 36C, and 36D of this Chapter and by Chapter 119 of the General Statutes.The Secretary may appoint employees of the Criminal Investigations Section of the Tax Enforcement Division to serve as revenue law enforcement officers having the responsibility and subject-matter jurisdiction to enforce the following tax violations and criminal offenses:
    1. The felony and misdemeanor tax violations in G.S. 105-236 .
    2. The misdemeanor tax violations in G.S. 105-449.117 and G.S. 105-449.120 .
    3. The following criminal offenses when they involve a tax imposed under Chapter 105 of the General Statutes:
      1. G.S. 14-91 (Embezzlement of State Property).
      2. G.S. 14-92 (Embezzlement of Funds).
      3. G.S. 14-100 (Obtaining Property By False Pretenses). c1. G.S. 14-113.20 (Identity Theft).

        c2. G.S. 14-113.20 A (Trafficking in Stolen Identities).

      4. G.S. 14-119 (Forgery).
      5. G.S. 14-120 (Uttering Forged Paper).
      6. G.S. 14-401.18 (Sale of Certain Packages of Cigarettes).
      7. G.S. 14-118.7 (Possession, transfer, or use of automated sales suppression device).
      8. G.S. 105-259 (Secrecy of tax information).
  2. Authority. —  A revenue law enforcement officer is a State officer with jurisdiction throughout the State within the officer’s subject-matter jurisdiction. A revenue law enforcement officer may serve and execute notices, orders, warrants, or demands issued by the Secretary or the General Court of Justice in connection with the enforcement of the officer’s subject-matter jurisdiction. A revenue law enforcement officer has the full powers of arrest as provided by G.S. 15A-401 while executing the notices, orders, warrants, or demands.
  3. Qualifications. —  To serve as a revenue law enforcement officer, an employee must be certified as a criminal justice officer under Article 1 of Chapter 17C of the General Statutes. The Secretary may administer the oath of office to revenue law enforcement officers appointed pursuant to this section.

History. 1997-503, s. 1; 2000-119, s. 1; 2004-124, s. 23.4; 2013-414, s. 17; 2014-3, s. 14.12; 2020-58, s. 6.1.

Editor’s Note.

“Article 1 of Chapter 17C” has been substituted for “Chapter 17C” in subsection (c) at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2004-124, s. 23.4, effective July 1, 2004, inserted the second paragraph in subsection (a).

Session Laws 2013-414, s. 17, effective August 23, 2013, in subsection (a), inserted “Section of the Tax Enforcement” in the first and third paragraphs, and substituted “Investigations Section of the Tax Enforcement Division” for “Tax Division” in the second paragraph; and added sub-subdivisions (a)(3)c1. and (a)(3)c2.

Session Laws 2014-3, s. 14.12, effective May 29, 2014, in sub-subdivision (a)(3)c2., substituted “G.S. 14-113.20A” for “G.S. 14-133.20A” and added sub-subdivision (a)(3)g.

Session Laws 2020-58, s. 6.1, effective June 30, 2020, added sub-subdivision (a)(3)h.

CASE NOTES

Penalties. —

The criminal and civil penalties of the Tax Code did not provide an exclusive remedy, where a retailer allegedly did not pay sales and use taxes collected from a purchaser, and thus, the retailer could be prosecuted under the embezzlement statutes. State v. Kennedy, 130 N.C. App. 399, 503 S.E.2d 133, 1998 N.C. App. LEXIS 938 (1998), aff'd, 350 N.C. 87 , 511 S.E.2d 305, 1999 N.C. LEXIS 43 (1999).

§ 105-237. Waiver; installment payments.

  1. Waiver. —  The Secretary may, upon making a record of the reasons therefor, do the following:
    1. Reduce or waive any penalties provided for in this Subchapter.
    2. Reduce or waive any interest provided for in this Subchapter on taxes imposed prior to or during a period for which a taxpayer has declared bankruptcy under Chapter 7 or Chapter 13 of Title 11 of the United States Code.
  2. Installment Payments. —  After a proposed assessment of a tax becomes final, the Secretary may enter into an agreement with the taxpayer for payment of the tax in installments if the Secretary determines that the agreement will facilitate collection of the tax. The agreement may include a waiver of penalties but may not include a waiver of liability for tax or interest due. The Secretary may modify or terminate the agreement if one or more of the following findings is made:
    1. Information provided by the taxpayer in support of the agreement was inaccurate or incomplete.
    2. Collection of tax to which the agreement applies is in jeopardy.
    3. The taxpayer’s financial condition has changed.
    4. The taxpayer has failed to pay an installment when due or to pay another tax when due.
    5. The taxpayer has failed to provide information requested by the Secretary.The Secretary must give a taxpayer who has entered into an installment agreement at least 30 days’ written notice before modifying or terminating the agreement on the grounds that the taxpayer’s financial condition has changed unless the taxpayer failed to disclose or concealed assets or income when the agreement was made or the taxpayer has acquired assets since the agreement was made that can satisfy all or part of the tax liability. A notice must specify the basis for the Secretary’s finding of a change in the taxpayer’s financial condition.

History. 1939, c. 158, s. 908; c. 370, s. 1; 1973, c. 476, s. 193; 1993, c. 532, s. 1; 1999-438, s. 17; 2015-259, s. 7.2.

Effect of Amendments.

Session Laws 2015-259, s. 7.2, effective September 30, 2015, deleted “of penalties” following “Waiver” in the section heading; and rewrote subsection (a).

§ 105-237.1. Compromise of liability.

  1. Authority. —  The Secretary may compromise a taxpayer’s liability for a tax that is collectible under G.S. 105-241.22 when the Secretary determines that the compromise is in the best interest of the State and makes one or more of the following findings:
    1. There is a reasonable doubt as to the amount of the liability of the taxpayer under the law and the facts.
    2. The taxpayer is insolvent and the Secretary probably could not otherwise collect an amount equal to or in excess of the amount offered in compromise. A taxpayer is considered insolvent only in one of the following circumstances:
      1. It is plain and indisputable that the taxpayer is clearly insolvent and will remain so in the reasonable future.
      2. The taxpayer has been determined to be insolvent in a judicial proceeding.
    3. Collection of a greater amount than that offered in compromise is improbable, and the funds or a substantial portion of the funds offered in the settlement come from sources from which the Secretary could not otherwise collect.
    4. A federal tax assessment arising out of the same facts has been compromised with the federal government on the same or a similar basis as that proposed to the State and the Secretary could probably not collect an amount equal to or in excess of that offered in compromise.
    5. Collection of a greater amount than that offered in compromise would produce an unjust result under the circumstances.
    6. The taxpayer is a retailer or a person under Article 5 of this Chapter; the assessment is for sales or use tax the retailer failed to collect or the person failed to pay on an item taxable under G.S. 105-164.4 (a)(10) through (a)(15), and the retailer or person made a good-faith effort to comply with the sales and use tax laws. This subdivision applies to assessments for any tax due for a reporting period ending prior to July 1, 2020.
    7. The assessment is for sales tax the taxpayer failed to collect or use tax the taxpayer failed to pay as a result of the change in the definition of retailer or the sales tax base expansion to (i) service contracts, (ii) repair, maintenance, and installation services, or (iii) sales transactions for a person in retail trade. The Secretary must determine that the taxpayer made a good-faith effort to comply with the sales and use tax laws. This subdivision applies to assessments for any reporting period beginning March 1, 2016, and ending December 31, 2022.
    8. The assessment is for sales tax the taxpayer failed to collect or use tax the taxpayer failed to pay on repair, maintenance, and installation services provided by a real property manager under a property management contract. The Secretary must determine that the taxpayer made a good-faith effort to comply with the sales and use tax laws. Absent fraud or other egregious activities, a taxpayer that substantiated the time spent managing real property for a billing or invoice period as provided under G.S. 105-164.4 K(c) will be determined to have made a good-faith effort to comply with the sales and use tax laws.
    9. The taxpayer is an auctioneer licensed under Chapter 85B of the General Statutes, and the assessment is for sales tax that the taxpayer failed to collect for the sale of livestock at auction. The Secretary must determine that the taxpayer has made a good-faith effort to comply with the tax laws, including being registered as a retailer on or before July 1, 2020. This subdivision applies to assessments for any tax due for a reporting period ending prior to July 1, 2020. This subdivision does not apply if the person received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period or for tax collected and not remitted to the Department.
  2. Written Statement. —  When the Secretary compromises a tax liability under this section and the amount of the liability is at least one thousand dollars ($1,000), the Secretary must make a written statement that sets out the amount of the liability, the amount accepted under the compromise, a summary of the facts concerning the liability, and the findings on which the compromise is based. The Secretary must sign the statement and keep a record of the statement. If the compromise settles a dispute that is in litigation, the Secretary must obtain the approval of the Attorney General before accepting the compromise, and the Attorney General must sign the statement describing the compromise.

History. 1957, c. 1340, s. 10; 1959, c. 1259, s. 8; 1973, c. 476, s. 193; 1985, c. 114, s. 11; 1991 (Reg. Sess., 1992), c. 1007, s. 11; 2008-107, s. 28.16(f); 2013-316, s. 9(b); 2015-241, s. 32.18(f); 2016-94, s. 38.5(b); 2018-5, s. 38.10(c); 2019-169, s. 3.9(f); 2019-246, s. 7(a); 2020-6, s. 1(c).

Editor’s Note.

Session Laws 2008-107, s. 28.16(a), provides: “The General Assembly makes the following findings:

“(1) The following areas of the sales and use tax laws are the areas for which the Department of Revenue receives the most questions from taxpayers:

“a. The rate of tax that applies to food and prepared food.

“b. The distinction between a retailer and a performance contractor.

“c. The distinction between a service that is necessary to complete the sale of tangible personal property, and therefore taxable, and a service that is incidental to the sale of tangible personal property, and therefore not taxable.

“d. The determination of whether a person is a manufacturer.

“(2) These areas of the sales and use tax laws have been the subject of legislative changes in recent years.

“(3) Small businesses have fewer resources to devote to resolving the complexities of the sales and use tax laws than large businesses have and, therefore, may be at a disadvantage with respect to compliance issues in complex areas and changing areas.

“(4) Assessments against a small business for inadvertent noncompliance in these complex areas may threaten the viability of the small business.

“(5) The sales and use tax laws are not intended to place the viability of small businesses in jeopardy.

“(6) A study of these complex areas is needed to determine how to make the laws in these areas clearer and to reduce the compliance burden.”

Session Laws 2008-107, s. 28.16(h) and (i), provide: “(h) The Revenue Laws Study Committee shall study the issues listed in this Section and report on the study, including any recommendations or legislative proposals, to the 2009 General Assembly.

“(1) The taxation of services necessary to complete the sale of tangible personal property and standards for distinguishing between a service that is taxable as one that is necessary to complete the sale and a service that is incidental to the sale of tangible personal property.

“(2) The applicability of the sales and use tax to performance contracts and standards for distinguishing between performance contractors and retailers.

“(3) The distinction between food and prepared food under the sales and use tax laws and whether to eliminate this distinction by applying a uniform, revenue-neutral rate to all food.

“(i) The Department of Revenue shall make a report to the Revenue Laws Study Committee on customer service improvement initiatives conducted by the Department. The report is due prior to the convening of the 2009 General Assembly and shall address, at a minimum, the following issues:

“(1) A review of the Department’s efforts to ensure that inquiries on complicated tax matters are handled or reviewed by appropriate personnel within the Department.

“(2) A review of the Department’s efforts to provide accurate and timely information regarding changes in tax law resulting from legislative changes, court decisions, or revised interpretations.

“(3) A review of the Department’s outreach efforts designed to assist taxpayers, particularly small business taxpayers, in complying with the State’s tax laws.

“(4) A review of the Department’s efforts to ensure that taxpayers are informed of their right to request written advice from the Department upon which they may reasonably rely.

“(5) A review of the Department’s plan to record telephone calls at the Department’s Taxpayer Assistance Center.”

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2016-94, s. 38.5(a), provides: “A retailer is not liable for an undercollection of sales or use tax as a result of the changes made under Section 32.18 of S.L. 2015-241 and under Part V of S.L. 2015-259 if the retailer made a good-faith effort to comply with the law and collect the proper amount of tax. This applies only to the period beginning March 1, 2016, and ending December 31, 2016.”

Session Laws 2016-94, s. 38.5( l ), provides: “The Department of Revenue must issue written guidance on the implementation of the sales tax changes imposed by this act by November 15, 2016.”

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Session Laws 2019-169, s. 3.9(g), as amended by Session Laws 2019-246, s. 7(a), made subdivision (a)(8), as added by Session Laws 2019-169, s. 3.9(f), effective July 26, 2019, and further provided: “The provisions of G.S. 105-164.15 A apply to the implementation of this change as if it is a decrease in the tax rate.”

Effect of Amendments.

Session Laws 2008-107, s. 28.16(f), effective July 16, 2008, rewrote the section.

Session Laws 2013-316, s. 9(b), effective July 23, 2013, added subdivision (a)(6).

Session Laws 2015-241, s. 32.18(f), effective March 1, 2016, substituted “through (a)(15)” for “and (a)(11)” in the first sentence of subdivision (a)(6). For applicability, see editor’s note.

Session Laws 2016-94, s. 38.5(b), effective July 14, 2016, added subdivision (a)(7).

Session Laws 2018-5, s. 38.10(c), effective June 12, 2018, substituted “applies to assessments for any tax due for a reporting period ending prior to” for “expires for assessments issued after” in subdivision (a)(6).

Session Laws 2019-169, s. 3.9(f), added subdivision (a)(8). For effective date and applicability, see editor’s note.

Session Laws 2020-6, s. 1(c), effective June 5, 2020, added subdivision (a)(9).

§ 105-238. Tax a debt.

Every tax imposed by this Subchapter, and all increases, interest, and penalties thereon, shall become, from the time it is due and payable, a debt from the person, firm, or corporation liable to pay the same to the State of North Carolina.

History. 1939, c. 158, s. 909.

CASE NOTES

For prior law see Gatling v. Commissioners of Carteret County, 92 N.C. 536 , 1885 N.C. LEXIS 253 (1885); Worth v. Wright, 122 N.C. 335 , 29 S.E. 361, 1898 N.C. LEXIS 257 (1898); Commissioners of Yancey County v. Hall, 177 N.C. 490 , 99 S.E. 372, 1919 N.C. LEXIS 153 (1919).

§ 105-239. [Repealed]

Repealed by Session Laws 2007-491, s. 2, effective January 1, 2008.

§ 105-239.1. Transferee liability.

  1. Lien and Liability. —  Property transferred for an inadequate consideration to a donee, heir, devisee, distributee, stockholder of a liquidated corporation, or any other person at a time when the transferor is insolvent or is rendered insolvent by reason of the transfer is subject to a lien for any taxes owing by the transferor to the State of North Carolina at the time of the transfer whether or not the amount of the taxes has been ascertained or assessed at the time of the transfer. G.S. 105-241 applies to this tax lien. In the event the transferee has disposed of the property so that it cannot be subjected to the State’s tax lien, the transferee is personally liable for the difference between the fair market value of the property at the time of the transfer and the actual consideration, if any, paid to the transferor by the transferee.
  2. Procedure. —  The Department may proceed to enforce a lien that arises under this section against property transferred by a taxpayer to another person or to hold that person liable for the tax due by sending the person a notice of proposed assessment in accordance with G.S. 105-241.9 . The Department has the burden of establishing that a person to whom property was transferred is liable. The period of limitations for assessment of any liability against a transferee or enforcing the lien against the transferred property expires one year after the expiration of the period of limitations for assessment against the transferor.
  3. Proceeds. —  When property transferred by a taxpayer to another person is sold to satisfy the lien that arises under this section, the person is entitled to receive from the proceeds of the sale the amount of consideration, if any, the person paid for the property. The proceeds must be applied for this purpose before they are applied to satisfy the lien.
  4. Repealed by Session Laws 2007-491, s. 27, effective January 1, 2008.

History. 1957, c. 1340, s. 10; 1973, c. 476, s. 193; 1993, c. 450, s. 11; 2007-491, s. 27; 2011-284, s. 69.

Effect of Amendments.

Session Laws 2007-491, s. 27, effective January 1, 2008, rewrote the section. For applicability, see Editor’s note.

Session Laws 2011-284, s. 69, effective June 24, 2011, deleted “legatee” following “heir” in the first sentence of subsection (a).

§ 105-240. Tax upon settlement of fiduciary’s account.

No final account of a fiduciary shall be allowed by the probate court unless such account shows, and the judge of said court finds, that all taxes imposed by the provisions of this Subchapter upon said fiduciary, which have become payable, have been paid, and that all taxes which may become due are secured by bond, deposit, or otherwise. The certificate of the Secretary of Revenue and the receipt for the amount of tax herein certified shall be conclusive as to the payment of the tax to the extent of said certificate.

For the purpose of facilitating the settlement and distribution of estates held by fiduciaries, the Secretary of Revenue, with the approval of the Attorney General, may, on behalf of the State, agree upon the amount of taxes at any time due or to become due from such fiduciaries under the provisions of this Subchapter, and the payment in accordance with such agreement shall be full satisfaction of the taxes to which the agreement relates.

History. 1939, c. 158, s. 911; 1973, c. 476, s. 193.

§ 105-240.1. Agreements with respect to domicile.

Whenever reasonably necessary in order to facilitate the collection of any tax, the Secretary of Revenue with the consent and approval of the Attorney General, is authorized to make agreements with the taxing officials of other states of the United States or with taxpayers in cases of disputes as to the domicile of a decedent.

History. 1957, c. 1340, s. 10; 1973, c. 476, s. 193.

§ 105-241. Where and how taxes payable; tax period; liens.

  1. Form of Payment. —  Taxes are payable in the national currency. The Secretary shall prescribe where taxes are to be paid and whether taxes must be paid in cash, by check, by electronic funds transfer, or by another method.
  2. Electronic Funds Transfer. —  Payment by electronic funds transfer is required as provided in this subsection.
    1. Corporate estimated taxes. —  A corporation that is required under the Code to pay its federal-estimated corporate income tax by electronic funds transfer must pay its State-estimated corporate income tax by electronic funds transfer as provided in G.S. 105-163.40 .
    2. Prepayment taxes. —  A taxpayer that is required to prepay tax under G.S. 105-116 or G.S. 105-164.16 must pay the tax by electronic funds transfer. (2a) Motor fuel taxes. — A taxpayer that files an electronic return under Subchapter V of this Chapter or Article 3 of Chapter 119 of the General Statutes must pay the tax by electronic funds transfer.
    3. Large tax payments. —  Except as otherwise provided in this subsection, the Secretary shall not require a taxpayer to pay a tax by electronic funds transfer unless, during the applicable period for that tax, the average amount of the taxpayer’s required payments of the tax was at least twenty thousand dollars ($20,000) a month. The twenty thousand dollar ($20,000) threshold applies separately to each tax. The applicable period for a tax is a 12-month period, designated by the Secretary, preceding the imposition or review of the payment requirement. The requirement that a taxpayer pay a tax by electronic funds transfer remains in effect until suspended by the Secretary. Every 12 months after requiring a taxpayer to pay a tax by electronic funds transfer, the Secretary must determine whether, during the applicable period for that tax, the average amount of the taxpayer’s required payments of the tax was at least twenty thousand dollars ($20,000) a month. If it was not, the Secretary must suspend the requirement that the taxpayer pay the tax by electronic funds transfer and must notify the taxpayer in writing that the requirement has been suspended.
  3. Tax Period. —  Except as otherwise provided in this Chapter, taxes are levied for the fiscal year of the state in which they became due.
  4. Lien. —  This subsection applies except when another Article of this Chapter contains contrary provisions with respect to a lien for a tax levied in that Article. The lien of a tax attaches to all real and personal property of a taxpayer on the date a tax owed by the taxpayer becomes due. The lien continues until the tax and any interest, penalty, and costs associated with the tax are paid. A tax lien is not extinguished by the sale of the taxpayer’s property. A tax lien, however, is not enforceable against a bona fide purchaser for value or the holder of a duly recorded lien unless:
    1. In the case of real property, a certificate of tax liability or a judgment was first docketed in the office of the clerk of superior court of the county in which the real property is located.
    2. In the case of personal property, there has already been a levy on the property under an execution or a tax warrant.

      The priority of these claims and liens is determined by the date and time of recording, docketing, levy, or bona fide purchase.If a taxpayer executes an assignment for the benefit of creditors or if insolvency proceedings are instituted against a taxpayer who owes a tax, the tax lien attaches to all real and personal property of the taxpayer as of the date and time the taxpayer executes the assignment for the benefit of creditors or the date and time the insolvency proceedings are instituted. In these cases, the tax lien is subject only to a prior recorded specific lien and the reasonable costs of administering the assignment or the insolvency proceedings.

History. 1939, c. 158, s. 912; 1949, c. 392, s. 6; 1957, c. 1340, s. 5; 1993, c. 450, s. 2; 1999-389, s. 8; 2001-427, s. 6(b); 2005-435, s. 2; 2007-527, s. 31; 2010-95, s. 25; 2012-79, s. 2.15.

Editor’s Note.

Section 105-116, referred to in subdivision (b)(2), was repealed by Session Laws 2013-316, s. 4.1(a), effective July 1, 2014.

Effect of Amendments.

Session Laws 2005-435, s. 2, effective January 1, 2006, added subdivision (b)(2a).

Session Laws 2007-527, s. 31, effective August 31, 2007, in subdivision (b)(2), substituted “Prepayment taxes” for “Semimonthly taxes,” and substituted “prepay tax under G.S. 105-116 or G.S. 105-164.16 ” for “pay tax on a semimonthly schedule.”

Session Laws 2010-95, s. 25, effective July 17, 2010, substituted “under Subchapter V of this Chapter or Article 3 of Chapter 119 of the General Statutes” for “under Article 36C or Article 36D of this Chapter” in subdivision (b)(2a).

Session Laws 2012-79, s. 2.15, effective June 26, 2012, substituted “files” for “is required to file” in subdivision (b)(2a).

Legal Periodicals.

For brief comment on the 1949 amendment which rewrote the section, see 27 N.C.L. Rev. 485 (1949).

For article, “Foreign Corporations in North Carolina: The ‘Doing Business’ Standards of Qualification, Taxation, and Jurisdiction,” see 16 Wake Forest L. Rev. 711 (1980).

CASE NOTES

Purchase of Warehouse Receipt Without Knowledge of Lien Senior in Time. —

Under this section a lien for State taxes on personal property is not enforceable against a bona fide purchaser for value, except upon a levy upon such property under an execution or a tax warrant; but when a tax lien is perfected, it is, by G.S. 105-356(b), superior to all other liens or rights prior or subsequent in time. By G.S. 25-7-502(1)(c) a bona fide purchaser of a warehouse receipt acquires good title against a lien senior in time of which the purchaser had no notice. Thus, an enforceable lien on oil stored in North Carolina would not arise until it was executed on; but it could not be attached when a warehouse receipt therefor was in the hands of one who purchased it not knowing of the lien. Davenport v. Ralph N. Peters & Co., 386 F.2d 199, 1967 U.S. App. LEXIS 4877 (4th Cir. 1967).

Local ad valorem tax liens do not fall within the scope of “other recorded specific liens”. County of Lenoir v. Moore, 114 N.C. App. 110, 441 S.E.2d 589, 1994 N.C. App. LEXIS 318 (1994), aff'd, 340 N.C. 104 , 455 S.E.2d 158, 1995 N.C. LEXIS 158 (1995).

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, 1996 U.S. Dist. LEXIS 21765 (W.D.N.C. 1996).

Illustrative Case. —

A jury could find by a preponderance that plaintiff was directly injured by defendants’ acts; the plaintiff could not receive income from harvesting trees on property owned jointly with a co-plaintiff, upon whom certificates of tax liability were filed, and consequently the plaintiff was unable to meet his obligations and was forced into bankruptcy. Andrews v. Crump, 984 F. Supp. 393, 1996 U.S. Dist. LEXIS 21765 (W.D.N.C. 1996).

§ 105-241.01. Electronic filing of returns.

  1. Purpose. —  The General Assembly finds that the various statutes within Chapter 105 of the General Statutes that address the filing of tax returns or informational returns were originally drafted for the use of paper returns submitted either personally or through the mail. Through technological advances, there are many methods by which tax returns can be filed electronically that can be processed more efficiently by the Department of Revenue, are easier and more convenient for taxpayers, improve the accuracy of the return, and are safer to use with respect to identity theft.The General Assembly further finds that, in some cases, it is proper to require returns to be filed electronically, while in other cases it is more appropriate to provide electronic filing as an option instead of a requirement. In addition, the General Assembly recognizes that, because of constant technological advances, it is necessary to allow the Department of Revenue flexibility to provide specific guidance for how to file returns electronically, with a goal of continually improving the process and reducing the costs of and time to process returns.
  2. Electronically Filed Returns. —  The Department shall offer electronic filing for returns required under this Chapter if the Department determines that it is cost-effective to do so and the Department has established and implemented procedures to electronically file specific returns.
  3. Form of Filing Electronically; Electronic Signature. —  The Secretary shall prescribe the form of electronically filing each return that is required to or may be filed electronically and how the taxpayer or return preparer signs an electronically filed return.
  4. Waiver of Requirement to File Electronically. —  The Secretary may, upon showing of good cause, waive any electronic submission requirement for returns required to be filed electronically under this Chapter.
  5. Notice to Taxpayers. —  The Department shall, by December 1 of each year, publish on its Web site a list of returns required to be filed electronically and permitted to be filed electronically during the next calendar year.

History. 2018-5, s. 38.10(r).

Editor’s Note.

Session Laws 2018-5, s. 38.10(s), 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.

§§ 105-241.1 through 105-241.5. [Repealed]

Repealed by Session Laws 2007-491, s. 2, effective January 1, 2008.

§ 105-241.6. Statute of limitations for refunds.

  1. General. —  The general statute of limitations for obtaining a refund of an overpayment applies unless a different period applies under subsection (b) of this section. The general statute of limitations for obtaining a refund of an overpayment is the later of the following:
    1. Three years after the due date of the return.
    2. Two years after payment of the tax.
  2. Exceptions. —  The exceptions to the general statute of limitations for obtaining a refund of an overpayment are as follows:
    1. Federal Determination. —  If a taxpayer files a return reflecting a federal determination and the return is filed within the time required by this Subchapter, the period for requesting a refund is one year after the return reflecting the federal determination is filed or three years after the original return was filed or due to be filed, whichever is later.
    2. Waiver. —  A taxpayer’s waiver of the statute of limitations for making a proposed assessment extends the period in which the taxpayer can obtain a refund to the end of the period extended by the waiver.
    3. Worthless Debts or Securities. —  Section 6511(d)(1) of the Code applies to an overpayment of the tax levied in Part 2 or 3 of Article 4 of this Chapter to the extent the overpayment is attributable to either of the following:
      1. The deductibility by the taxpayer under section 166 of the Code of a debt that becomes worthless, or under section 165(g) of the Code of a loss from a security that becomes worthless.
      2. The effect of the deductibility of a debt or loss described in subpart a. of this subdivision on the application of a carryover to the taxpayer.
    4. Capital Loss and Net Operating Loss Carrybacks. —  Section 6511(d)(2) of the Code applies to an overpayment of the tax levied in Part 2 or 3 of Article 4 of this Chapter to the extent the overpayment is attributable to a capital loss carryback under section 1212(c) of the Code or to a net operating loss carryback under section 172 of the Code.
    5. Contingent Event. —  The period to request a refund of an overpayment may be extended once as provided in this subdivision:
      1. Litigation or a State Tax Audit. —  If a taxpayer is subject to litigation or a state tax audit that prevents the taxpayer from filing an accurate and definite request for a refund of an overpayment within the period under this section, the period to request a refund of an overpayment is six months after the litigation or state tax audit concludes. The taxpayer must file written notice to the Secretary prior to expiration of the statute of limitations under this section. The notice must identify and describe the litigation or state tax audit, identify the type of tax, list the return or payment affected, and state in clear terms the basis for and an estimated amount of the overpayment.
      2. Other Event. —  If a taxpayer contends that an event has occurred that prevents the taxpayer from filing an accurate and definite request for a refund of an overpayment within the period under this section, the taxpayer may submit a written request to the Secretary seeking an extension of the statute of limitations. The taxpayer must file a written request to the Secretary prior to expiration of the statute of limitations under this section. The request must establish by clear, convincing proof that the event is beyond the taxpayer’s control and prevents the taxpayer from timely filing an accurate and definite request for a refund of an overpayment. The Secretary’s decision on the request is final and is not subject to administrative or judicial review. If the Secretary agrees to the request, the period to file a request for a refund of an overpayment is six months after the event concludes.
    6. Expired.

History. 2007-491, s. 1; 2013-414, s. 47(a); 2015-6, s. 2.16; 2016-6, s. 5(a); 2019-169, s. 6.1(a); 2021-180, s. 42.13A(f).

Editor’s Note.

Session Laws 2015-6, s. 2.24(a)-(d), provides: “(a) Purpose. — The purpose of this section is to extend the statute of limitations for requesting a refund of State income taxes to conform to federal tax treatment of the rollover of an airline payment amount by a qualified airline employee to a traditional or Roth IRA so as to prevent double taxation of the amount for State income tax purposes.

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

“(1) Airline payment amount. — Defined in section 1106(c)(1) of Public Law 112-95, as amended by Public Law 113-243.

“(2) Qualified airline employee. — Defined in section 1106(c)(2) of Public Law 112-95, as amended by Public Law 113-243.

“(c) Extension of Time to File Claim for Refund. — Notwithstanding the general statute of limitations for obtaining a refund of an overpayment of tax under G.S. 105-241.6(a), a qualified airline employee, or the surviving spouse of a qualified airline employee, that meets all of the following conditions may apply to the Department of Revenue for a refund of the State individual income tax paid on the airline payment amount that was transferred to a traditional IRA:

“(1) Received an airline payment amount in a taxable year beginning before January 1, 2012, and included the amount in federal adjusted gross income.

“(2) Transferred any portion of the airline payment amount to a traditional IRA, either directly or indirectly from a Roth IRA, by August 13, 2012.

“(3) Filed a claim for refund of federal individual income tax paid on the airline payment amount by April 15, 2015, that was accepted by the Internal Revenue Service.

“(d) Late Refund Request. — A request for a refund under this section must be made to the Secretary of Revenue on or before October 15, 2015. A request for a refund received after that date is barred.”

Session Laws 2016-5, s. 5(a), which added subdivision (b)(6), also provided that subdivision (b)(6) would expire effective December 16, 2016.

Session Laws 2016-5, s. 6.1, provides, in part: “Notwithstanding the general statute of limitations for obtaining a refund of an overpayment of tax under G.S. 105-241.6(a), a taxpayer that had an amount added to taxable income as deferred income under section 108(i)(1) of the Internal Revenue Code and the amount would be excluded under Sections 1.9, 2.1, or 2.4 of this act may apply to the Department of Revenue for a refund of the State income tax paid on the deferred income. A request for a refund under this section must be made to the Secretary of Revenue on or before July 1, 2016. A request for a refund received after that date is barred unless authorized by G.S. 105-241.6(a).”

Session Laws 2018-5, s. 38.5(aa), provides, in part: “Subsection (k) of this section is effective retroactively to July 1, 2014. A person who paid sales and use tax for a return period ending prior to the date this section becomes law on an item exempt from sales and use tax pursuant to G.S. 105-164.13 E, as amended by subsection (k) of this section, 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 subsection (k) of this section. A request for a refund must be made on or before October 1, 2018. Notwithstanding G.S. 105-241.6 , a request for a refund received after this date is barred and the provisions of G.S. 105-164.11 do not apply.”

Session Laws 2019-169, s. 6.1(b), made the amendments to subdivision (b)(5) of this section by Session Laws 2019-169, s. 6.1(a), effective July 26, 2019, and applicable to a request for a refund of an overpayment of tax filed on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”.

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2013-414, s. 47(a), effective January 1, 2014, added subdivision (b)(5). For applicability, see editor’s note.

Session Laws 2015-6, s. 2.16, effective April 9, 2015, rewrote subdivision (b)(5).

Session Laws 2016-6, s. 5(a), effective June 1, 2016 and expiring December 19, 2016, added subdivision (b)(6).

Session Laws 2019-169, s. 6.1(a), rewrote subdivision (b)(5). For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 42.13A(f), effective November 18, 2021, added the last sentence in sub-subparagraph (b)(5)b.

§ 105-241.7. Procedure for obtaining a refund.

  1. Initiated by Department. —  The Department must refund an overpayment made by a taxpayer if the Department discovers the overpayment before the expiration of the statute of limitations for obtaining a refund. Discovery occurs in any of the following circumstances:
    1. The automated processing of a return indicates the return requires further review.
    2. A review of a return by an employee of the Department indicates an overpayment.
    3. An audit of a taxpayer by an employee of the Department indicates an overpayment.
  2. Initiated by Taxpayer. —  A taxpayer may request a refund of an overpayment made by the taxpayer by taking one of the actions listed in this subsection within the statute of limitations for obtaining a refund. A taxpayer may not request a refund of an overpayment based on a contingent event as defined in G.S. 105-241.6(b)(5) until the event is finalized and an accurate and definite request for refund of an overpayment may be determined. The actions are:
    1. Filing an amended return reflecting an overpayment due the taxpayer.
    2. Filing a claim for refund. The claim must identify the taxpayer, the type and amount of tax overpaid, the filing period to which the overpayment applies, and the basis for the claim. The taxpayer’s statement of the basis of the claim does not limit the taxpayer from changing the basis.
  3. Action on Request. —  When a taxpayer files an amended return or a claim for refund, the Department must take one of the actions listed in this subsection within six months after the date the amended return or claim for refund is filed. If the Department does not take one of these actions within this time limit, the inaction is considered a proposed denial of the requested refund.
    1. Send the taxpayer a refund of the amount shown due on the amended return or claim for refund.
    2. Adjust the amount of the requested refund by increasing or decreasing the amount shown due on the amended return or claim for refund and send the taxpayer a refund of the adjusted amount. If the adjusted amount is less than the amount shown due on the amended return or claim for refund, the adjusted refund must include a reason for the adjustment. The adjusted refund is considered a notice of proposed denial for the amount of the requested refund that is not included in the adjusted refund.
    3. Deny the refund and send the taxpayer a notice of proposed denial.
    4. Send the taxpayer a letter requesting additional information concerning the requested refund. If a taxpayer does not respond to a request for information, the Department may deny the refund and send the taxpayer a notice of proposed denial. If a taxpayer provides the requested information, the Department must take one of the actions listed in this subsection within the later of the following:
      1. The remainder of the six-month period.
      2. 30 days after receiving the information.
      3. A time period mutually agreed upon by the Department and the taxpayer.

        (c1) Action on Request Regarding Statute of Limitations. — When the taxpayer files an amended return or a claim for refund which the Department determines to be outside the statute of limitations, the Department must deny the refund and send the taxpayer a notice of denial.

  4. Notice. —  A notice of a proposed denial of a request for refund issued pursuant to subsection (c) of this section and a notice of denial of a request for a refund issued pursuant to subsection (c1) of this section must contain the following information:
    1. The basis for the denial or the proposed denial. The statement of the basis of the denial does not limit the Department from changing the basis.
    2. The circumstances under which a proposed denial will become final.
  5. Restrictions. —  The Department may not refund any of the following:
    1. Until a taxpayer files a final return for a tax period, an amount paid before the final return is filed.
    2. An overpayment setoff under Chapter 105A, the Setoff Debt Collection Act, or under another setoff debt collection program authorized by law.
    3. An income tax overpayment the taxpayer has elected to apply to another purpose as provided in this Article.
    4. An individual income tax overpayment of less than one dollar ($1.00) or another tax overpayment of less than three dollars ($3.00), unless the taxpayer files a written claim for the refund.
  6. Effect of Denial or Refund. —  A proposed denial of a refund and a denial of a refund by the Secretary are presumed to be correct. A refund does not absolve a taxpayer of a tax liability that may in fact exist. The Secretary may propose an assessment for any deficiency as provided in this Article.

History. 2007-491, s. 1; 2011-4, s. 1; 2013-414, s. 47(b); 2016-76, s. 2(a); 2017-204, s. 4.1(a).

Editor’s Note.

Session Laws 2011-4, s. 2(a), (b), provides: “(a) The General Assembly makes the following findings concerning the application of the statute of limitations to a refund initiated by the Department of Revenue:

“(1) The statute of limitations is satisfied when the Department is on notice that a refund may be due.

“(2) The Department is on notice that a refund may be due when the Department’s automated processing of a return indicates that the return requires further review, regardless of when an employee of the Department verifies whether a refund is in fact due.

“(3) Former G.S. 105-266 and G.S. 105-241.7 are consistent with the findings in this section and require the Department to refund an overpayment of tax if, before the statute of limitations expires, the Department discovers through its automated processing that a return requires further review.

“(b) The Department of Revenue is directed to issue refunds the Department discovered within the statute of limitations as applied in accordance with subsection (a) of this section.”

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2011-4, s. 1, effective March 9, 2011, rewrote subsection (a), relating to circumstances regarding refunding of an overpayment.

Session Laws 2013-414, s. 47(b), effective January 1, 2014, in subsection (b), substituted “actions listed in this subsection” for “following actions” in the first sentence, and added the second and third sentences. For applicability, see editor’s note.

Session Laws 2016-76, s. 2(a), effective June 30, 2016, added subsection (c1).

Session Laws 2017-204, s. 4.1(a), effective August 11, 2017, in subsection (d), inserted “issued pursuant to subsection (c) of this section and a notice of denial of a request for a refund issued pursuant to subsection (c1) of this section” in the introductory language, and inserted “denial or the” in subdivision (d)(1), and made a minor stylistic change; and in the first sentence of subsection (f), inserted “and a denial of a refund” and substituted “are presumed” for “is presumed”. For applicability, see editor’s note.

§ 105-241.8. Statute of limitations for assessments.

  1. General. —  The general statute of limitations for proposing an assessment applies unless a different period applies under subsection (b) of this section. The general statute of limitations for proposing an assessment is the later of the following:
    1. Three years after the due date of the return.
    2. Three years after the taxpayer filed the return.
  2. Exceptions. —  The exceptions to the general statute of limitations for proposing an assessment are as follows:
    1. Federal determination. —  If a taxpayer files a return reflecting a federal determination and the return is filed within the time required by this Subchapter, the period for proposing an assessment of any tax due is one year after the return is filed or three years after the original return was filed or due to be filed, whichever is later. If there is a federal determination and the taxpayer does not file the return within the required time, the period for proposing an assessment of any tax due is three years after the date the Secretary received the final report of the federal determination.

      (1a) Federal amended return. — If a taxpayer files a return as a result of filing a federal amended return and the return is filed within the time required by this Subchapter, the period for proposing an assessment of any tax due is one year after the return is filed or three years after the original return was filed or due to be filed, whichever is later. If the taxpayer does not file the return within the required time, the period for proposing an assessment of any tax due is three years after the date the federal amended return was filed with the Commissioner of Internal Revenue. The date the federal amended return was filed is presumed to be the date recorded by the Internal Revenue Service.

    2. Failure to file or filing false return. —  There is no statute of limitations and the Secretary may propose an assessment of tax due from a taxpayer at any time if any of the following applies:
      1. The taxpayer did not file a return.
      2. The taxpayer filed a fraudulent return.
      3. The taxpayer attempted in any manner to fraudulently evade or defeat the tax.

        (2a) Failure to pay trust taxes. — If a taxpayer, as a trustee, collects taxes on behalf of the State, but fails to remit all the taxes held in trust when due, the period for proposing an assessment is the later of the following:

        a. Ten years after the due date of the return.

        b. Ten years after the taxpayer filed the return.

    3. Tax forfeiture. —  If a taxpayer forfeits a tax credit or tax benefit pursuant to forfeiture provisions of this Chapter, the period for proposing an assessment of any tax due as a result of the forfeiture is three years after the date of the forfeiture.
    4. Nonrecognition of gain. —  If a taxpayer elects under section 1033(a)(2)(A) of the Code not to recognize gain from involuntary conversion of property into money, the period for proposing an assessment of any tax due as a result of the conversion or election is the applicable period provided under section 1033(a)(2)(C) or section 1033(a)(2)(D) of the Code.

History. 2007-491, s. 1; 2018-5, s. 38.3(e); 2019-169, s. 6.2(a); 2020-58, s. 6.2(a).

Editor’s Note.

Session Laws 2018-5, s. 38.3(h), made subdivision (b)(1a) of this section, as added by Session Laws 2018-5, s. 38.3(e), effective June 12, 2018, and applicable to federal amended returns filed on or after that date.

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 2019-169, s. 6.2(b), made the last sentence in subdivision (b)(1a) as added by Session Laws 2019-169, s. 6.2(a), effective July 26, 2019, and applicable to an assessment proposed on or after that date.

Session Laws 2020-58, s. 6.2(b), made subdivision (b)(2a), as added by Session Laws 2020-58, s. 6.2(a), effective June 30, 2020, and applicable to assessments not barred by the statute of limitations prior to that date.

Effect of Amendments.

Session Laws 2018-5, s. 38.3(e), added subdivision (b)(1a). For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 6.2(a), added the last sentence in subdivision (b)(1a). For effective date and applicability, see editor’s note.

Session Laws 2020-58, s. 6.2(a), added subdivision (b)(2a). For effective date and applicability, see editor’s note.

§ 105-241.9. Procedure for proposing an assessment.

  1. Authority. —  The Secretary may propose an assessment against a taxpayer for tax due from the taxpayer. The Secretary must base a proposed assessment on the best information available. A proposed assessment of the Secretary is presumed to be correct.
  2. Time Limit. —  The Secretary must propose an assessment within the statute of limitations for proposed assessments unless the taxpayer waives the limitations period before it expires by agreeing in writing to extend the period. A taxpayer may waive the limitations period for either a definite or an indefinite time. If the taxpayer waives the limitations period, the Secretary may propose an assessment at any time within the time extended by the waiver.
  3. Notice. —  The Secretary must give a taxpayer written notice of a proposed assessment. The notice of a proposed assessment must contain the following information:
    1. The basis for the proposed assessment. The statement of the basis for the proposed assessment does not limit the Department from changing the basis.
    2. The amount of tax, interest, and penalties included in the proposed assessment. The amount for each of these must be stated separately.

      (2a) The date a failure to pay penalty will apply to the proposed assessment if the proposed assessment is not paid by that date and the amount of the penalty. If the proposed assessment is not paid by the specified date, the failure to pay penalty is considered to be assessed and applies to the proposed assessment without further notice.

    3. The circumstances under which the proposed assessment will become final and collectible.

History. 2007-491, s. 1; 2010-95, s. 8(a); 2011-330, s. 34.

Effect of Amendments.

Session Laws 2010-95, s. 8(a), effective July 17, 2010, added subdivision (c)(2a).

Session Laws 2011-330, s. 34, effective June 27, 2011, substituted “before it expires by agreeing in writing to extend the period” for “in writing” in the first sentence of subsection (b).

§ 105-241.10. Limit on refunds and assessments after a federal determination.

The limitations in this section apply when a taxpayer files a timely return reflecting a federal determination that affects the amount of State tax payable and the general statute of limitations for requesting a refund or proposing an assessment of the State tax has expired. A return reflecting a federal determination is timely if it is filed within the time required by G.S. 105-130.20 , 105-159, 105-160.8, or 105-163.6A, as appropriate. A federal determination has the same meaning as defined in G.S. 105-228.90 . The limitations are:

  1. Refund. —  A taxpayer is allowed a refund only if the refund is the result of adjustments related to the federal determination.
  2. Assessment. —  A taxpayer is liable for additional tax only if the additional tax is the result of adjustments related to the federal determination. A proposed assessment may not include an amount that is outside the scope of this liability.

History. 2007-491, s. 1; 2008-107, s. 28.18(d); 2013-316, s. 7(b); 2018-5, s. 38.3(f).

Editor’s Note.

Session Laws 2018-5, s. 38.3(h), made the amendment of this section by Session Laws 2018-5, s. 38.3(f), effective June 12, 2018, and applicable to federal amended returns filed on or after that date.

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 2008-107, s. 28.18(d), effective January 1, 2009, and applicable to gifts made on or after that date, deleted “or 105-197.1” near the end of the introductory paragraph and made a related stylistic change.

Session Laws 2013-316, s. 7(b), effective January 1, 2013, deleted “G.S. 105-32.8” preceding “G.S. 105-130.20” in the introductory language. For applicability, see editor’s note.

Session Laws 2018-5, s. 38.3(f), in the introductory paragraph, deleted the former second sentence, which read: “A federal determination is a correction or final determination by the federal government of the amount of a federal tax due.”, and added the present third sentence. For effective date and applicability, see editor’s note.

§ 105-241.11. Requesting review of a proposed denial of a refund or a proposed assessment.

  1. Procedure. —  A taxpayer who objects to a proposed denial of a refund or a proposed assessment of tax may request a Departmental review of the proposed action by filing a request for review. The request for review must be in the form prescribed by the Secretary and include an explanation for the request for review. The request must be filed with the Department as follows:
    1. Within 45 days of the date the notice of the proposed denial of the refund or proposed assessment was mailed to the taxpayer, if the notice was delivered by mail.
    2. Within 45 days of the date the notice of the proposed denial of the refund or proposed assessment was delivered to the taxpayer, if the notice was delivered in person.
    3. At any time between the date that inaction by the Department on a request for refund is considered a proposed denial of the refund and the date the time periods set in the other subdivisions of this subsection expire.
  2. Filing. —  A request for a Departmental review of a proposed denial of a refund or a proposed assessment is considered filed on the following dates:
    1. For a request that is delivered in person, the date it is delivered.
    2. For a request that is mailed, the date determined in accordance with G.S. 105-263 .
    3. For a request delivered by another method, the date the Department receives it.
  3. FTP Penalty. —  A request for a Departmental review of a proposed assessment is considered a request for a Departmental review of a failure to pay penalty that is based on the assessment. A taxpayer who does not request a Departmental review of a proposed assessment may not request a Departmental review of a failure to pay penalty that is based on the assessment but is assessed on a subsequent date in another notice.

History. 2007-491, s. 1; 2008-134, s. 5(a); 2010-95, ss. 8(b), 10(b); 2017-204, s. 4.1(b).

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. 105-241.13 A.”

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

Session Laws 2020-3, s. 1.1(a)-(d), provides: “(a) Interest Waiver. — As a result of the COVID-19 outbreak, the Secretary of Revenue has extended the franchise, corporate income, and individual income tax payment deadline from April 15, 2020, to July 15, 2020, and pursuant to G.S. 105-249.2 , the Secretary will not assess a penalty for failure to file a return or pay a tax due as long as the return is filed and the tax due is paid by July 15, 2020. Notwithstanding G.S. 105-241.21(b), the Secretary of Revenue shall also waive the accrual of interest from April 15, 2020, through July 15, 2020, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, 2020, through July 15, 2020. The relief from accrual of interest from April 15, 2020, through July 15, 2020, also includes interest imposed pursuant to G.S. 105-163.15 and G.S. 105-163.41 for payments due on or before July 15, 2020.

“(b) Refund Request. — For franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, 2020, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, 2020, and before July 15, 2020.

“(c) Time-Sensitive Actions. — Certain actions required to be taken by a taxpayer on or after April 1, 2020, and before July 15, 2020, will be considered timely if the request or petition is filed on or before July 15, 2020. This subsection applies to requests for Departmental review under G.S. 105-241.11 , petitions for a contested case hearing at the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes and G.S. 105-241.15 , and petitions for judicial review under Article 4 of Chapter 150B of the General Statutes and G.S. 105-241.16 .

“(d) This section is effective when it becomes law.”

Session Laws 2020-3, s. 5, is a severability clause.

Effect of Amendments.

Session Laws 2008-134, s. 5(a), effective for taxable years beginning on or after January 1, 2008, in subsection (a), in the introductory language, substituted “as follows” for “within 45 days after the following”; in subdivisions (a)(1) and (a)(2), substituted “Within 45 days of the date” for “The date”; and in subdivision (a)(3), substituted “At any time between the date that inaction” for “The date that inaction” at the beginning, substituted “refund is considered” for “refund was considered” near the middle, and added language following “denial of the refund.”

Session Laws 2010-95, ss. 8(b) and 10(b), effective July 17, 2010, rewrote subdivision (b)(2), which formerly read: “For a request that is not delivered in person, the date the Department receives it”; added subdivision (b)(3); and added subsection (c).

Session Laws 2017-204, s. 4.1(b), effective August 11, 2017, added the second sentence in the introductory language of subsection (a); added “but is assessed on a subsequent date in another notice” at the end of the last sentence in subsection (c); and made stylistic changes. For applicability, see editor’s note.

§ 105-241.12. Result when taxpayer does not request a review.

  1. Refund. —  If a taxpayer does not file a timely request for a Departmental review of a proposed denial of a refund, the proposed denial is final and is not subject to further administrative or judicial review. A taxpayer whose proposed denial becomes final may not file another amended return or claim for refund to obtain the denied refund.
  2. Assessment. —  If a taxpayer does not file a timely request for a Departmental review of a proposed assessment, the proposed assessment is final and is not subject to further administrative or judicial review. Upon payment of the tax, the taxpayer may request a refund of the tax.Before the Department collects a proposed assessment that becomes final when the taxpayer does not file a timely request for a Departmental review, the Department must send the taxpayer a notice of collection. A notice of collection must contain the following information:
    1. A statement that the proposed assessment is final and collectible.
    2. The amount of tax, interest, and penalties payable by the taxpayer.
    3. An explanation of the collection options available to the Department if the taxpayer does not pay the amount shown due on the notice and any remedies available to the taxpayer concerning these collection options.

History. 2007-491, s. 1.

§ 105-241.13. Action on request for review.

  1. Action on Request. —  If a taxpayer files a timely request for a Departmental review of a proposed denial of a refund or a proposed assessment, the Department must conduct a review of the proposed denial or proposed assessment and do one or more of the following:
    1. Grant the refund or remove the assessment.
    2. Adjust the amount of tax due or refund owed.
    3. Request additional information from the taxpayer concerning the requested refund or proposed assessment. If a taxpayer makes no response to the Department’s request for additional information by the requested response date, the Department must reissue the request. The Department must give a taxpayer at least 30 days to respond to a request for additional information and to respond to the reissuance of a request for additional information. If a taxpayer makes no response to the reissuance of the request for additional information by the requested response date, the refund or assessment is subject to the provisions of G.S. 105-241.13 A. (a1) Payment by Taxpayer. — If a taxpayer timely requests a Departmental review of a proposed assessment and thereafter pays the amount due or the amount due as adjusted by the Department, the Department may accept payment and take no further action on the request for Departmental review, unless the taxpayer states in writing that the taxpayer wishes to continue the Departmental review. If the review is not continued, the taxpayer may request a refund of taxes paid pursuant to G.S. 105-241.7(b).
  2. Conference. —  When the Department and the taxpayer agree that an action taken under subsection (a) or (a1) of this section resolves the taxpayer’s objection to the Department’s proposed denial of a refund or a proposed assessment, the Department does not need to take further action on the request for review. When an action taken under subsection (a) or (a1) of this section does not resolve the taxpayer’s objection to the Department’s proposed denial of a refund or a proposed assessment, the Department must schedule a conference with the taxpayer. The Department must set the time and place for the conference, which may include a conference by telephone, and must send the taxpayer notice of the designated time and place. The Department must send the notice at least 30 days before the date of the conference or, if the Department and the taxpayer agree, within a shorter period. The Department and the taxpayer may reschedule the conference by mutual agreement. If a taxpayer fails to attend a scheduled conference on the proposed denial of a refund or a proposed assessment, the Department and the taxpayer are considered to be unable to resolve the taxpayer’s objection.The conference is an informal proceeding at which the taxpayer and the Department must attempt to resolve the case. Testimony under oath is not taken, and the rules of evidence do not apply. A taxpayer may designate a representative to act on the taxpayer’s behalf. The taxpayer may present any objections to the proposed denial of refund or proposed assessment at the conference and is not limited by the explanation set forth in the taxpayer’s request for review.
  3. After Conference. —  One of the following must occur after the Department conducts a conference on a proposed denial of a refund or a proposed assessment:
    1. The Department and the taxpayer agree on a resolution.
    2. The Department and the taxpayer agree that additional time is needed to resolve the taxpayer’s objection to the proposed denial of the refund or proposed assessment.
    3. The Department and the taxpayer are unable to resolve the taxpayer’s objection to the proposed denial of the refund or proposed assessment.

History. 2007-491, s. 1; 2017-204, s. 4.1(d); 2020-58, s. 4.5.

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2017-204, s. 4.1(d), effective August 11, 2017, rewrote subsection (a); added subsection (a1); in subsection (b), in the first paragraph, added the present first sentence, and rewrote the present second sentence, and added “and is not limited by the explanation set forth in the taxpayer’s request for review” at the end of the last sentence in the second paragraph; and substituted “resolution” for “settlement” in subdivision (c)(1). For applicability, see editor’s note.

Session Laws 2020-58, s. 4.5, effective June 30, 2020, added the last two sentences in the first paragraph of subsection (b); and deleted the former last sentence of subdivision (c)(3), which read: “If a taxpayer fails to attend a scheduled conference on the proposed denial of a refund or a proposed assessment without prior notice to the Department, the Department and the taxpayer are considered to be unable to resolve the taxpayer’s objection.”

§ 105-241.13A. Taxpayer inaction.

  1. Consequence of Inaction. —  Inaction by a taxpayer after timely filing a request for review shall result in the proposed denial of a refund or the proposed assessment becoming final as provided in this section. As used in this section, “inaction” means that the taxpayer made no response to the Department’s initial request for additional information or to the reissuance of the request by the requested response date as provided under G.S. 105-241.13(a). A partial response, a request for additional time, or any other contact by the taxpayer with the Department does not constitute inaction under this section. The Department must send the taxpayer a notice of inaction stating that the proposed denial of a refund or the proposed assessment becomes final 10 days from the date of the notice unless the taxpayer responds to the Department. A proposed denial of a refund or a proposed assessment that becomes final is not subject to further administrative or judicial review. A taxpayer may not file another amended return or claim for refund to obtain the denied refund. Upon payment of the tax, the taxpayer may request a refund of the tax.
  2. Notice of Collection. —  Before the Department collects a proposed assessment that becomes final under this section, the Department must send the taxpayer a notice of collection containing the information required under G.S. 105-241.12 .
  3. Determining Timely Response. —  The provisions of G.S. 105-241.11(b) apply for purposes of determining whether a taxpayer has timely responded to the Department as required under this section.

History. 2017-204, s. 4.1(c).

Editor’s Note.

Session Laws 2017-204, s. 4.9, made this section effective August 11, 2017, and applicable 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. 105-241.13 A.”

§ 105-241.14. Final determination after Departmental review.

  1. Refund. —  If a taxpayer files a timely request for a Departmental review of a proposed denial of a refund and the Department and the taxpayer are unable to resolve the taxpayer’s objection to the proposed denial, the Department must send the taxpayer a notice of final determination concerning the refund. The notice of final determination must state the basis for the determination and inform the taxpayer of the procedure for contesting the determination. The statement of the basis for the determination does not limit the Department from changing the basis.
  2. Assessment. —  If a taxpayer files a timely request for a Departmental review of a proposed assessment and the Department and the taxpayer are unable to resolve the taxpayer’s objection to the proposed assessment, the Department must send the taxpayer a notice of final determination concerning the proposed assessment. A notice of final determination concerning the proposed assessment must contain the following information:
    1. The basis for the determination. This information may be stated on the notice or be set out in a separate document. The statement of the basis for the determination does not limit the Department from changing the basis.
    2. The amount of tax, interest, and penalties payable by the taxpayer.
    3. The procedure the taxpayer must follow to contest the final determination.
    4. A statement that the amount payable stated on the notice is collectible by the Department unless the taxpayer contests the final determination.
    5. An explanation of the collection options available to the Department if the taxpayer does not pay the amount shown due on the notice and any remedies available to the taxpayer concerning these collection options.
  3. Time Limit. —  The process set out in G.S. 105-241.13 for reviewing and attempting to resolve a proposed denial of a refund or a proposed assessment must conclude, and a final determination must be issued within nine months after the date the taxpayer files a request for review. The Department and the taxpayer may extend this time limit by mutual agreement. Failure to issue a notice of final determination within the required time does not affect the validity of a proposed denial of a refund or proposed assessment.

History. 2007-491, s. 1; 2008-134, s. 6(a); 2019-6, s. 5.7.

Effect of Amendments.

Session Laws 2008-134, s. 6(a), effective for taxable years beginning on or after January 1, 2008, inserted “proposed denial of a refund or” in the last sentence of subsection (c).

Session Laws 2019-6, s. 5.7, effective March 20, 2019, in subsection (b), in the introductory paragraph, inserted “proposed” before “assessment” at the end of the first sentence and substituted “the proposed assessment” for “an assessment” in the second sentence.

§ 105-241.15. Contested case hearing on final determination.

  1. Contest Final Determination. —  A taxpayer who disagrees with a notice of final determination issued by the Department may contest the determination by filing a petition for a contested case hearing at the Office of Administrative Hearings in accordance with Article 3 of Chapter 150B of the General Statutes. A taxpayer may file a petition for a contested case hearing only if the taxpayer has exhausted the prehearing remedy. A taxpayer’s prehearing remedy is exhausted when the Department issues a final determination after conducting a review and a conference.
  2. Contest Statute of Limitations. —  A taxpayer who disagrees with a notice of denial issued by the Department pursuant to G.S. 105-241.7(c1) may contest the statute of limitations determination by filing a petition for a contested case hearing at the office of Administrative Hearings in accordance with Article 3 of Chapter 150B of the General Statutes on the sole issue of whether the statute of limitations bars the taxpayer’s claim. A final decision by the administrative law judge regarding the statute of limitations is subject to judicial review under Article 4 of Chapter 150B of the General Statutes and under G.S. 105-241.16 . In the event judicial review of the decision is not sought and the final decision is that the taxpayer’s claim was not barred by the statute of limitations, then the administrative law judge must remand the matter to the Department for consideration of the substantive issues. In the event judicial review is sought and it is finally determined that the taxpayer’s claim was not barred by the statute of limitations, then the matter shall be remanded to the Department for consideration of the substantive issues. Any remand shall be regarded as a new amended return or claim for refund timely filed within the statute of limitations under G.S. 105-241.7(c).

History. 2007-491, s. 1; 2016-76, s. 2(b).

Editor’s Note.

Session Laws 2016-76, s. 2(c), provides: “Notwithstanding Article 9 of Chapter 105 of the General Statutes, a taxpayer may contest a determination issued prior to the enactment of this section that an amended return or claim for refund was filed outside the statute of limitations if both of the following conditions are met:

“(1) The Department of Revenue determined that the amended return or claim for refund was filed outside the statute of limitations.

“(2) The taxpayer contests the statute of limitations determination in accordance with G.S. 105-241.15(b), as enacted by this act, within 60 days of the enactment of this act. For purposes of this section, a determination by the Department that an amended return or claim for refund was filed outside the statute of limitations is considered to be a notice of denial issued by the Department for purposes of G.S. 105-241.15(b).”

Session Laws 2020-3, s. 1.1(a)-(d), provides: “(a) Interest Waiver. — As a result of the COVID-19 outbreak, the Secretary of Revenue has extended the franchise, corporate income, and individual income tax payment deadline from April 15, 2020, to July 15, 2020, and pursuant to G.S. 105-249.2 , the Secretary will not assess a penalty for failure to file a return or pay a tax due as long as the return is filed and the tax due is paid by July 15, 2020. Notwithstanding G.S. 105-241.21(b), the Secretary of Revenue shall also waive the accrual of interest from April 15, 2020, through July 15, 2020, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, 2020, through July 15, 2020. The relief from accrual of interest from April 15, 2020, through July 15, 2020, also includes interest imposed pursuant to G.S. 105-163.15 and G.S. 105-163.41 for payments due on or before July 15, 2020.

“(b) Refund Request. — For franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, 2020, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, 2020, and before July 15, 2020.

“(c) Time-Sensitive Actions. — Certain actions required to be taken by a taxpayer on or after April 1, 2020, and before July 15, 2020, will be considered timely if the request or petition is filed on or before July 15, 2020. This subsection applies to requests for Departmental review under G.S. 105-241.11 , petitions for a contested case hearing at the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes and G.S. 105-241.15 , and petitions for judicial review under Article 4 of Chapter 150B of the General Statutes and G.S. 105-241.16 .

“(d) This section is effective when it becomes law.”

Session Laws 2020-3, s. 5, is a severability clause.

Effect of Amendments.

Session Laws 2016-76, s. 2(b), effective June 30, 2016, added the subsection (a) designation and the subsection heading to the previously existing provisions; and added subsection (b).

§ 105-241.16. Judicial review of decision after contested case hearing.

A party aggrieved by the final decision in a contested case commenced at the Office of Administrative Hearings may seek judicial review of the decision in accordance with Article 4 of Chapter 150B of the General Statutes. Notwithstanding G.S. 150B-45 , a petition for judicial review must be filed in the Superior Court of Wake County and in accordance with the procedures for a mandatory business case set forth in G.S. 7A-45.4(b) through (f). Before filing a petition for judicial review, a taxpayer must pay the amount of tax, penalties, and interest the final decision states is due. A party may appeal a decision of the Business Court to the appellate division in accordance with G.S. 150B-52 .

History. 2007-491, s. 1; 2010-95, s. 9; 2017-204, s. 4.1(e).

Editor’s Note.

Session Laws 2017-204, s. 4.9 made the amendment by Session Laws 2017-204, s. 4.1(e), effective retroactively to January 1, 2012, and applicable to contested cases commenced on or after that date.

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

Session Laws 2020-3, s. 1.1(a)-(d), provides: “(a) Interest Waiver. — As a result of the COVID-19 outbreak, the Secretary of Revenue has extended the franchise, corporate income, and individual income tax payment deadline from April 15, 2020, to July 15, 2020, and pursuant to G.S. 105-249.2 , the Secretary will not assess a penalty for failure to file a return or pay a tax due as long as the return is filed and the tax due is paid by July 15, 2020. Notwithstanding G.S. 105-241.21(b), the Secretary of Revenue shall also waive the accrual of interest from April 15, 2020, through July 15, 2020, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, 2020, through July 15, 2020. The relief from accrual of interest from April 15, 2020, through July 15, 2020, also includes interest imposed pursuant to G.S. 105-163.15 and G.S. 105-163.41 for payments due on or before July 15, 2020.

“(b) Refund Request. — For franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, 2020, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, 2020, and before July 15, 2020.

“(c) Time-Sensitive Actions. — Certain actions required to be taken by a taxpayer on or after April 1, 2020, and before July 15, 2020, will be considered timely if the request or petition is filed on or before July 15, 2020. This subsection applies to requests for Departmental review under G.S. 105-241.11 , petitions for a contested case hearing at the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes and G.S. 105-241.15 , and petitions for judicial review under Article 4 of Chapter 150B of the General Statutes and G.S. 105-241.16 .

“(d) This section is effective when it becomes law.”

Session Laws 2020-3, s. 5, is a severability clause.

Effect of Amendments.

Session Laws 2010-95, s. 9, effective July 17, 2010, substituted “Before filing a petition for a judicial review, a taxpayer must pay” for “A taxpayer who files a petition for judicial review must pay” in the third sentence.

Session Laws 2017-204, s. 4.1(e), substituted “A party” for “A taxpayer” in the first and last sentences of the section. For effective date and applicability, see editor’s note.

§ 105-241.17. Civil action challenging statute as unconstitutional.

A taxpayer who claims that a tax statute is unconstitutional may bring a civil action in the Superior Court of Wake County to determine the taxpayer’s liability under that statute if all of the conditions in this section are met. In filing an action under this section, a taxpayer must follow the procedures for a mandatory business case set forth in G.S. 7A-45.4(b) through (f). The conditions for filing a civil action are:

  1. The taxpayer exhausted the prehearing remedy by receiving a final determination after a review and a conference.
  2. The taxpayer commenced a contested case at the Office of Administrative Hearings.
  3. The Office of Administrative Hearings dismissed the contested case petition for lack of jurisdiction because the sole issue is the constitutionality of a statute and not the application of a statute.
  4. The taxpayer has paid the amount of tax, penalties, and interest the final determination states is due.
  5. The civil action is filed within two years of the dismissal.

History. 2007-491, s. 1.

§ 105-241.18. Class actions.

  1. Authority. —  A class action against the State for the refund of a tax paid may be maintained only on the grounds of an alleged unconstitutional statute and only if the requirements of Rule 23 of the North Carolina Rules of Civil Procedure and the requirements of this section are met. For purposes of this section, a class action commences upon the later of the following:
    1. The date a complaint is filed in accordance with G.S. 105-241.17 alleging the existence of a class pursuant to Rule 23 of the North Carolina Rules of Civil Procedure.
    2. The date a complaint filed in accordance with G.S. 105-241.17 is amended to allege the existence of a class.
  2. Class. —  To serve as a class representative of a class action brought under this section, a taxpayer must comply with all of the conditions in G.S. 105-241.17 and the taxpayer’s claims must be typical of the claims of the class members. A taxpayer who is not a class representative is eligible to become a member of a class if the taxpayer could have filed a claim for refund under G.S. 105-241.7 as of the date the class action commenced or as of a subsequent date set by the court, whether or not the taxpayer actually filed a claim for refund as of that date. An eligible class member who is not a class representative and who indicates a desire to be included in the class in accordance with the procedure approved by the court under subsection (c) of this section is not required to follow the procedures in G.S. 105-241.11 through G.S. 105-241.17 for the administrative and judicial review of a request for refund or a proposed denial of a request for refund.
  3. Procedure. —  To become a member of a class action brought under this section, an eligible taxpayer must affirmatively indicate a desire to be included in the class in response to a notice of the class action. If the court so orders, the Department must provide to a class representative a list of names and last known addresses of all taxpayers who are readily determinable by the Department and who are eligible to become a member of the class. The court must approve the content of a notice of a class action, the method for distributing the notice, and the procedure by which an eligible taxpayer affirmatively indicates a desire to be included in the class. The class representative must advance the costs of notifying eligible taxpayers of the class action.
  4. Statute of Limitations. —  The statute of limitations for filing a claim for refund of tax paid due to an alleged unconstitutional statute is tolled for a taxpayer who is eligible to become a member of a class action. The tolling begins on the date the class action is commenced. For a taxpayer who does not join the class, the tolling ends when the taxpayer does not affirmatively indicate a desire to be included in the class within the time and in accordance with the procedure approved by the court under subsection (c) of this section. For a taxpayer who joins the class, the tolling ends when a court enters any of the following in the class action:
    1. A final order denying certification of the class.
    2. A final order decertifying the class.
    3. A final order dismissing the class action without an adjudication on the merits.
    4. A final judgment on the merits.
  5. Effect on Nonparticipating Taxpayers. —  A taxpayer who does not become a member of a class may file and prosecute a claim for refund, if the statute of limitations has not otherwise expired for filing the claim, or may contest a pending assessment in accordance with the procedures in G.S. 105-241.11 through G.S. 105-241.17 . Except as otherwise provided in this subsection, the effect of an adjudication in a class action on a nonparticipating taxpayer’s claim for refund or contest of an assessment is governed by the normal rules relating to claim preclusion and issue preclusion.If a final judgment on the merits is entered in a class action in favor of the class, the following applies to an eligible taxpayer who did not become a member of the class:
    1. The taxpayer is not entitled to receive any monetary relief awarded to the class on account of taxes previously paid by the taxpayer.
    2. If the taxpayer has been assessed for failure to pay the tax at issue in the class action and the taxpayer has not paid the assessment, then the assessment is abated.
    3. The taxpayer is relieved of any future liability for the tax that is the subject of the class action.

History. 2008-107, s. 28.28(b).

Editor’s Note.

Session Laws 2008-107, s. 28.28(d), made this section effective October 1, 2008, and applicable to actions filed on or after that date.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Legal Periodicals.

For article, “An ‘Insurmountable Hurdle’ to Class Action Certification? The Heightened Ascertainability Requirement’s Effect on Small Consumer Claims,” see 94 N.C.L. Rev. 1382 (2016).

For article, “23RD Annual Institute for Law & Economic Policy Symposium: Secrecy: Revolution v. Evolution in Class Action Reform,” see 96 N.C.L. Rev. 903 (2018).

For article, “A Real-World Perspective on Withdrawal of Objections to Class-Action Settlements and Attorneys’ Fee Awards: Reflections on the Proposed Revisions to Federal Rule of Civil Procedure 23(e)(5),” see 10 Elon L. Rev. 35 (2018).

§ 105-241.19. Declaratory judgments, injunctions, and other actions prohibited.

The remedies in G.S. 105-241.11 through G.S. 105-241.18 set out the exclusive remedies for disputing the denial of a requested refund, a taxpayer’s liability for a tax, or the constitutionality of a tax statute. Any other action is barred. Neither an action for declaratory judgment, an action for an injunction to prevent the collection of a tax, nor any other action is allowed.

History. 2007-491, s. 1; 2008-107, s. 28.28(c).

Effect of Amendments.

Session Laws 2008-107, s. 28.28(c), effective October 1, 2008, and applicable to actions filed on or after that date, substituted “G.S. 105-241.18” for “G.S. 105-241.17” in the first sentence.

§ 105-241.20. Delivery of notice to the taxpayer.

  1. Scope. —  This section applies to the following notices:
    1. A proposed denial of a refund or a denial of a refund.
    2. A proposed assessment.
    3. A notice of collection.
    4. A final determination.
  2. Method. —  The Secretary must deliver a notice listed in subsection (a) of this section to a taxpayer either in person or by United States mail sent to the taxpayer’s last known address. A notice mailed to a taxpayer is presumed to have been received by the taxpayer unless the taxpayer makes an affidavit to the contrary within 90 days after the notice was mailed. If the taxpayer makes this affidavit, the notice is considered to have been delivered on the date the taxpayer makes the affidavit, and any time limit affected by the notice is extended to the date the taxpayer makes the affidavit.

History. 2007-491, s. 1; 2019-169, s. 6.5.

Editor’s Note.

Session Laws 2019-246, s. 8.1, as amended by Session Laws 2021-180, s. 34.4, provides: “(a) The Department of Revenue shall update its electronic tax systems to store and recognize power of attorney registrations to ensure that notices generated by the Department are simultaneously sent to both the taxpayer and the person designated in the taxpayer’s power of attorney registration. By January 31, 2020, the Department shall report to the Joint Legislative Oversight Committee on General Government on its progress in updating its electronic tax systems to store and recognize power of attorney registrations.

“(b) By January 1, 2022, and monthly thereafter, the Department of Revenue shall submit a written report on the status of the power of attorney registration project required by subsection (a) of this section to the chairs of the House Appropriations Committee on General Government and the Senate Appropriations Committee on General Government and Information Technology and the Fiscal Research Division. The monthly report shall also include an update on the status of the Collections Case Management system implementation and the IBM 4100 replacement project currently underway in the Department.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2019-169, s. 6.5, effective July 26, 2019, substituted “refund or a denial of a refund” for “refund” in subdivsion (a)(1).

§ 105-241.21. Interest on taxes.

  1. Rate. —  The interest rate set by the Secretary applies to interest that accrues on overpayments and assessments of tax. On or before June 1 and December 1 of each year, the Secretary must establish the interest rate to be in effect during the six-month period beginning on the next succeeding July 1 and January 1, respectively. In determining the interest rate, the Secretary must give due consideration to current market conditions and to the rate that will be in effect on that date pursuant to the Code. If no new rate is established, the rate in effect during the preceding six-month period continues in effect. The rate established by the Secretary may not be less than five percent (5%) per year and may not exceed sixteen percent (16%) per year.
  2. Accrual on Underpayments. —  Interest accrues on an underpayment of tax from the date set by statute for payment of the tax until the tax is paid. Interest accrues only on the principal of the tax and does not accrue on any penalty.
  3. Accrual on Refund. —  Interest accrues on an overpayment of tax from the time set in the following subdivisions until the refund is paid.
    1. Franchise, income, and gross premiums. —  Interest on an overpayment of a tax levied under Article 3 of this Chapter and payable on an annual basis or of a tax levied under Article 4 or 8B of this Chapter accrues from a date 45 days after the latest of the following dates:
      1. The date the final return was filed.
      2. The date the final return was due to be filed.
      3. The date of the overpayment. The date of an overpayment of a tax levied under Article 4 or Article 8B of this Chapter is determined in accordance with section 6611(d), (f), (g), and (h) of the Code.
    2. All other taxes. —  Interest on an overpayment of a tax that is not included in subdivision (1) of this subsection accrues from a date that is 90 days after the date the tax was paid.
  4. When Refund Is Paid. —  A refund sent to a taxpayer is considered paid on a date determined by the Secretary that is no sooner than five days after a refund check is mailed. A refund set off against a debt pursuant to Chapter 105A of the General Statutes is considered paid five days after the Department mails the taxpayer a notice of the setoff, unless G.S. 105A-5 or G.S. 105A-8 requires the agency that requested the setoff to return the refund to the taxpayer. In this circumstance, the refund that was set off is not considered paid until five days after the agency that requested the refund mails the taxpayer a check for the refund.

History. 2007-491, s. 1.

Editor’s Note.

Session Laws 2020-3, s. 1.1(a)-(d), provides: “(a) Interest Waiver. — As a result of the COVID-19 outbreak, the Secretary of Revenue has extended the franchise, corporate income, and individual income tax payment deadline from April 15, 2020, to July 15, 2020, and pursuant to G.S. 105-249.2 , the Secretary will not assess a penalty for failure to file a return or pay a tax due as long as the return is filed and the tax due is paid by July 15, 2020. Notwithstanding G.S. 105-241.21(b), the Secretary of Revenue shall also waive the accrual of interest from April 15, 2020, through July 15, 2020, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, 2020, through July 15, 2020. The relief from accrual of interest from April 15, 2020, through July 15, 2020, also includes interest imposed pursuant to G.S. 105-163.15 and G.S. 105-163.41 for payments due on or before July 15, 2020.

“(b) Refund Request. — For franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, 2020, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, 2020, and before July 15, 2020.

“(c) Time-Sensitive Actions. — Certain actions required to be taken by a taxpayer on or after April 1, 2020, and before July 15, 2020, will be considered timely if the request or petition is filed on or before July 15, 2020. This subsection applies to requests for Departmental review under G.S. 105-241.11 , petitions for a contested case hearing at the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes and G.S. 105-241.15 , and petitions for judicial review under Article 4 of Chapter 150B of the General Statutes and G.S. 105-241.16 .

“(d) This section is effective when it becomes law.”

Session Laws 2020-3, s. 5, is a severability clause.

Session Laws 2021-16, s. 1.2(a), as amended by Session Laws 2021-180, s. 42.13A(h), provides: “Nonaccrual of Interest. — As a result of the automatic extension of the federal tax filing due date for individuals for the 2020 calendar year, the Secretary of Revenue has automatically extended the State tax filing due date for individuals for the 2020 tax year from April 15, 2021, to May 17, 2021. The Secretary will waive the penalty for failure to file an individual income tax return, including a partnership and estate and trust tax return, or pay individual income tax due if the return is filed and the tax due is paid by May 17, 2021. Notwithstanding G.S. 105-241.21(b), interest shall not accrue from April 15, 2021, through May 17, 2021, on an underpayment of tax imposed on an individual income tax return, including a partnership and estate and trust tax return, due April 15, 2021.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

CASE NOTES

Applicability. —

Legal rate of interest applied to the entire judgment and the Secretary’s rate did not apply to taxes paid by the Cape Hatteras Electric Membership Corporation (CHEMC) after 1 January 2008 as: (1) G.S. 105-241.21(a) and G.S. 105-241.21(c)(2) did not apply as CHEMC filed suit under former G.S. 105-267 , which provided for interest at the legal rate where the judgment rendered was pursuant to a determination that the tax levied was invalid; (2) G.S. 105-241.21(a) and G.S. 105-241.21(c)(2) were enacted after the suit was instituted in the trial court; and (3) while 2007 Sess. Laws 491, § 47 stated that the procedures for review of disputed tax matters enacted by the act applied to assessments of tax that were not final as of the effective date of the act and to claims for refund pending on or filed on or after the effective date of the act, CHEMC’s requested refund was not pending before the North Carolina Department of Revenue on 1 January 2008, but was before the superior court pursuant to former G.S. 105-267 . Cape Hatteras Elec. Mbrshp. Corp. v. Lay, 210 N.C. App. 92, 708 S.E.2d 399, 2011 N.C. App. LEXIS 307 (2011).

§ 105-241.22. Collection of tax.

The Department may collect a tax in the following circumstances:

  1. When a taxpayer files a return showing an amount due with the return and does not pay the amount shown due. This subdivision does not apply to a consolidated or combined return filed at the request of the Secretary under Part 1 of Article 4 of this Chapter.
  2. When the Department sends a notice of collection after a taxpayer does not file a timely request for a Departmental review of a proposed assessment of tax or based upon taxpayer inaction in accordance with G.S. 105-241.13 A.
  3. When a taxpayer and the Department agree on a settlement concerning the amount of tax due.
  4. When the Department sends a notice of final determination concerning an assessment of tax and the taxpayer does not file a timely petition for a contested case hearing on the assessment.
  5. When a final decision is issued on a proposed assessment of tax after a contested case hearing.
  6. When a petition for a contested case at the Office of Administrative Hearings is dismissed and the period for timely filing a petition has expired.

History. 2007-491, s. 1; 2008-134, s. 7(a); 2010-31, s. 31.10(c); 2017-204, s. 4.2; 2019-169, s. 6.7.

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2008-134, s. 7(a), effective for taxable years beginning on or after January 1, 2008, substituted “showing an amount due” for “showing tax due” in subdivision (1).

Session Laws 2010-31, s. 31.10(c), effective June 30, 2010, added the second sentence in subdivision (1).

Session Laws 2017-204, s. 4.2, effective August 11, 2017, added “or based upon taxpayer inaction in accordance with G.S. 105-241.13 A” at the end of subdivision (2). For applicability, see editor’s note.

Session Laws 2019-169, s. 6.7, effective July 26, 2019, rewrote subdivision (6), which formerly read: “When the Office of Administrative Hearings dismisses a petition for a contested case for lack of jurisdiction because the sole issue is the constitutionality of a statute and not the application of a statute.”

§ 105-241.23. Jeopardy assessment and collection.

  1. Action. —  The Secretary may at any time within the statute of limitations immediately assess and collect any tax the Secretary finds is due from a taxpayer if the Secretary determines that collection of the tax is in jeopardy and immediate assessment and collection are necessary in order to protect the interest of the State. In making a jeopardy collection, the Secretary may use any of the collection remedies in G.S. 105-242 and is not required to wait any period of time before using these remedies. Within 30 days after initiating a jeopardy collection, the Secretary must give the taxpayer the notice of proposed assessment required by G.S. 105-241.9 .
  2. Review by Department. —  Within five days after initiating a jeopardy collection that is not the result of a criminal investigation or of a liability for a tax imposed under Article 2D of this Chapter, the Secretary must provide the taxpayer with a written statement of the information upon which the Secretary relied in initiating the jeopardy collection. Within 30 days after receipt of this written statement or, if no statement is received, within 30 days after the statement was due, the taxpayer may request the Secretary to review the action taken. After receipt of this request, the Secretary must determine whether initiating the jeopardy collection was reasonable under all the circumstances and whether the amount assessed and collected was reasonable under all the circumstances. The Secretary must give the taxpayer written notice of this determination within 30 days after the request.
  3. Judicial Review. —  Within 90 days after the earlier of the date a taxpayer received or should have received a determination of the Secretary concerning a jeopardy collection under subsection (b) of this section, the taxpayer may bring a civil action seeking review of the jeopardy collection. The taxpayer may bring the action in the Superior Court of Wake County or in the county in North Carolina in which the taxpayer resides. Within 20 days after the action is filed, the court must determine whether the initiation of the jeopardy collection was reasonable under the circumstances. If the court determines that an action of the Secretary was unreasonable or inappropriate, the court may order the Secretary to take any action the court finds appropriate. If the taxpayer shows reasonable grounds why the 20-day limit on the court should be extended, the court may grant an extension of not more than 40 additional days.

History. 2007-491, s. 1.

§ 105-242. Warrants for collection of taxes; garnishment and attachment; certificate or judgment for taxes.

  1. Levy and Sale. —  If a taxpayer does not pay a tax within 30 days after it is collectible under G.S. 105-241.22 , the Secretary may take either of the following actions to collect the tax:
    1. Issue a warrant directing the sheriff of any county of the State to levy upon and sell the real and personal property of the taxpayer found within the county for the payment of the tax and the cost of executing the warrant and to return to the Secretary the money collected, within a time to be specified in the warrant but not less than 60 days from the date of the warrant. The procedure for executions issued against property upon judgments of a court apply to executions under a warrant.
    2. Issue a warrant to any revenue officer or other employee of the Department charged with the duty to collect taxes, commanding the officer or employee to levy upon and sell the taxpayer’s personal property found within the State for the payment of the tax. Except as otherwise provided in this subdivision, the levy upon and sale of personal property by an officer or employee of the Department is subject to and must be conducted in accordance with the laws governing the sale of property levied upon under execution. The Secretary may sell the property levied upon in any county and may advertise the sale in any reasonable manner and for any reasonable period of time to produce an adequate bid for the property. Levy and sale fees, plus actual advertising costs, must be added to and collected in the same manner as taxes. The Secretary is not required to file a report of sale with the clerk of superior court, if the sale is otherwise publicly reported.
  2. Attachment and Garnishment. —  Intangible property that belongs to a taxpayer, is owed to a taxpayer, or has been transferred by a taxpayer under circumstances that would permit it to be levied upon if it were tangible property is subject to attachment and garnishment in payment of a tax that is due from the taxpayer and is collectible under G.S. 105-241.22 . Intangible personal property includes bank deposits, rent, salaries, wages, property held in the Escheat Fund, and any other property incapable of manual levy or delivery. G.S. 105-242.1 sets out the procedure for attachment and garnishment of intangible property.A person who is in possession of intangible property that is subject to attachment and garnishment is the garnishee and is liable for the amount the taxpayer owes. The liability applies only to the amount of the taxpayer’s property in the garnishee’s possession, reduced by any amount the taxpayer owes the garnishee.The Secretary may submit to a financial institution, as defined in G.S. 53B-2 , information that identifies a taxpayer who owes a tax debt that is collectible under G.S. 105-241.22 and the amount of the debt. The Secretary may submit the information on a quarterly basis or, with the agreement of the financial institution, on a more frequent basis. A financial institution that receives the information must determine the amount, if any, of intangible property it holds that belongs to the taxpayer and must inform the Secretary of its determination. The Secretary must reimburse a financial institution for its costs in providing the information, not to exceed the amount payable to the financial institution under G.S. 110-139 for providing information for use in locating a noncustodial parent.No more than ten percent (10%) of a taxpayer’s wages or salary is subject to attachment and garnishment. The wages or salary of an employee of the United States, the State, or a political subdivision of the State are subject to attachment and garnishment.
  3. Certificate of Tax Liability. —  The Department may file a certificate of tax liability to collect a tax that is owed by a taxpayer and is collectible under G.S. 105-241.22 . A certificate of tax liability must state the taxpayer’s name and the type and amount of tax owed. If the taxpayer resides in this State or has property in this State, the Department must file the certificate of tax liability with the clerk of the superior court of a county in which the taxpayer resides or has property. If the taxpayer does not reside in this State or have property in this State, the Department must file the certificate of tax liability in Wake County.The clerk of court must record a certificate of tax liability in the same manner as a judgment. A recorded certificate of tax liability is considered a judgment and is enforceable in the same manner as other judgments. The legal rate of interest set in G.S. 24-1 applies to the principal amount of tax stated on the certificate of tax liability. The tax stated on a certificate of tax liability is a lien on real and personal property from the date the certificate is recorded.A certificate of tax liability is enforceable for a period of 10 years from the date it is recorded. If the certificate is not satisfied within this period, the remaining liability of the taxpayer is abated and the Department must cancel the certificate. An execution sale initiated before the end of the 10-year period may be completed after the end of this period, regardless of whether resales are required because of the posting of increased bids. The Secretary may accept tax payments made after a certificate has expired, regardless of whether any collection actions were taken before the certificate expired. A taxpayer may waive the 10-year period for enforcement of the certificate for either a definite or an indefinite time.The 10-year period in which a certificate of tax liability is enforceable is tolled during the following periods:
    1. While the taxpayer is absent from the State. The period is tolled during the taxpayer’s absence plus one year after the taxpayer returns.
    2. Upon the death of the taxpayer. The period is tolled while the taxpayer’s estate is administered plus one year after the estate is closed.
    3. While an action is pending to set aside a conveyance made by the taxpayer as a fraudulent conveyance.
    4. While an insolvency proceeding against the taxpayer is pending.
    5. During the period of any statutory or judicial bar to the enforcement of the certificate.
    6. The period for which a taxpayer has waived the 10-year period.The release shall be noted on the judgment docket only upon conditions prescribed by the Secretary and shall have effect only as to the real estate described therein and shall not affect any other rights of the State under said judgment. (c1) Release of Lien. — The Secretary shall release the State tax lien on a taxpayer’s property if the liability for which the lien attached has been satisfied. The Secretary may release the State tax lien on all or part of a taxpayer’s property if one or more of the following findings is made:

      (1) The liability for which the lien attached has become unenforceable due to lapse of time.

      (2) The lien is creating an economic hardship due to the financial condition of the taxpayer.

      (3) The fair market value of the property exceeds the tax liability and release of the lien on part of the property would not hinder collection of the liability.

      (4) Release of the lien will probably facilitate, expedite, or enhance the State’s chances for ultimately collecting a tax due the State.

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  4. Remedies Cumulative. —  The remedies herein given are cumulative and in addition to all other remedies provided by law for the collection of said taxes.
  5. Exempt Property. —  Only the following property is exempt from levy, attachment, and garnishment under this Article:
    1. The taxpayer’s principal residence, unless the Secretary approves of the levy in writing or the Secretary finds that collection of the tax is in jeopardy.
    2. Tangible personal property that is exempt from federal levy as provided in section 6334 of the Code.
    3. Intangible personal property that is exempt from federal levy under section 6334 of the Code.
    4. Ninety percent (90%) of the taxpayer’s salary or wages per month.
  6. Uneconomical Levy. —  The Secretary shall not levy against any property if the Secretary estimates before levy that the expenses the Department would incur in levying against the property would exceed the fair market value of the property.
  7. Erroneous Lien. —  A taxpayer may appeal to the Secretary after a certificate is filed under subsection (c) of this section if the taxpayer alleges an error in the filing of the lien. The Secretary shall make a determination of such an appeal as quickly as possible. If the Secretary finds that the filing of the certificate was erroneous, the Secretary shall withdraw the lien as quickly as possible by issuing a certificate of withdrawal.

If the Secretary of Revenue shall find that it will be for the best interest of the State in that it will probably facilitate, expedite or enhance the State’s chances for ultimately collecting a tax due the State, he may authorize a deputy or agent to release the lien of a State tax judgment or certificate of tax liability upon a specified parcel or parcels of real estate by noting such release upon the judgment docket where such certificate of tax liability is recorded. Such release shall be signed by the deputy or agent and witnessed by the clerk of court or his deputy or assistant and shall be in substantially the following form: “The lien of this judgment upon (insert here a short description of the property to be released sufficient to identify it, such as reference to a particular tract described in a recorded instrument) is hereby released, but this judgment shall continue in full force and effect as to other real property to which it has heretofore attached or may hereafter attach. This day of , Revenue Officer, N.C. Department of Revenue WITNESS: 42 C.S.C.’’ The release shall be noted on the judgment docket only upon conditions prescribed by the Secretary and shall have effect only as to the real estate described therein and shall not affect any other rights of the State under said judgment.

History. 1939, c. 158, s. 913; 1941, c. 50, s. 10; 1949, c. 392, s. 6; 1951, c. 643, s. 9; 1955, c. 1285; c. 1350, s. 23; 1957, c. 1340, s. 10; 1959, c. 368; 1963, c. 1169, s. 6; 1969, c. 1071, s. 1; 1973, c. 476, s. 193; c. 1287, s. 13; 1979, c. 103, ss. 1, 2; c. 179, s. 5; 1979, 2nd Sess., c. 1085, s. 1; 1989, c. 37, s. 6; c. 580; 1991, c. 228, s. 1; 1991 (Reg. Sess., 1992), c. 1007, ss. 12, 13; 1993, c. 532, s. 5; 1997-121, s. 1; 1999-456, s. 59; 2003-349, s. 2; 2007-491, ss. 28, 29, 31; 2010-31, s. 31.8(h); 2014-3, s. 14.17.

Cross References.

As to interpleader in cases of attachment and garnishment, see G.S. 1-440.43 .

Effect of Amendments.

Session Laws 2003-349, s. 2, effective July 27, 2003, added the last sentence in subdivision (a)(2).

Session Laws 2007-491, ss. 28, 29, and 31, effective January 1, 2008, rewrote subsections (a) through (c). For applicability, see Editor’s note.

Session Laws 2010-31, s. 31.8(h), effective January 1, 2011, rewrote subsection (b).

Session Laws 2014-3, s. 14.17, effective May 29, 2014, substituted “withdraw the lien as quickly as possible by issuing a certificate of withdrawal” for “issue a certificate of release of the lien as quickly as possible” in the last sentence in subsection (g).

Legal Periodicals.

For comment on the 1941 amendment which inserted subsection (b), see 19 N.C.L. Rev. 541 (1941); on the 1949 amendment which added the third paragraph to subsection (c), see 27 N.C.L. Rev. 485 (1949).

CASE NOTES

Federal Tax Lien Entitled to Priority Where Taxpayer Insolvent. —

A tax lien filed by the State of North Carolina under subsection (c) of this section is no more than a general lien, and thus, under 31 U.S.C. § 191, where taxpayer was insolvent within the meaning of that statute, the federal government’s lien for unpaid income tax was entitled to priority though State lien for unpaid taxes was filed prior to date of federal tax lien. United States v. Williams, 139 F. Supp. 94, 1956 U.S. Dist. LEXIS 3578 (M.D.N.C. 1956).

No Showing That Property Rights Affected. —

Relatives alleged nothing to show that they had any property rights under state law that were affected by revenue enforcement officer’s seizing their property to satisfy a tax assessment for the purposes of a due process claim. Lynn v. West, 134 F.3d 582, 1998 U.S. App. LEXIS 403 (4th Cir.), cert. denied, 525 U.S. 813, 119 S. Ct. 47, 142 L. Ed. 2d 36, 1998 U.S. LEXIS 4799 (1998) (But see Milligan v. State, 135 N.C. App. 781, 522 S.E.2d 330, 1999 N.C. App. LEXIS 1234 (1999), cert. denied, 531 U.S. 819, 121 S. Ct. 60, 148 L. Ed. 2d 26, 2000 U.S. LEXIS 5099 (2000)).

Remedies of Taxpayer. —

Where the Secretary of Revenue assesses additional income tax against a taxpayer in accordance with provisions of G.S. 105-160 et seq., and has the certificate filed in the county in which the taxpayer has property for the purpose of creating a lien under subsection (c) of this section, the taxpayer may not move in such county to vacate and set aside the certificate on the ground of irregularity or invalidity, no execution having been issued thereon nor any effort made to enforce the lien, but the taxpayer is remitted to the statutory remedies given him to contest the assessment or attack its validity. Gill v. Smith, 233 N.C. 50 , 62 S.E.2d 544, 1950 N.C. LEXIS 661 (1950).

Execution on Judgment Under Subsection (c) Must Be Issued by Clerk. —

Where the Secretary of Revenue has the clerk of a superior court to docket his certificate setting forth the tax due by a resident of the county pursuant to subsection (c) of this section, execution on such judgment directed to the sheriff of the county must be issued by the clerk of the superior court of the county, or in his name by a deputy or assistant clerk, and it cannot be issued by the Secretary of Revenue. A sale under execution issued by the Secretary is a nullity. Daniels v. Yelverton, 239 N.C. 54 , 79 S.E.2d 311, 1953 N.C. LEXIS 376 (1953).

Garnishee Held Liable for Costs. —

Where the Secretary of Revenue has garnished a bank deposit for taxes due by the depositor, and the garnishee bank, in refusing to comply with the order, asserts no defense or setoff against the taxpayer, the bank, in the Secretary’s action to compel compliance, will be held liable also for the costs. Gill v. Bank of French Bd., 230 N.C. 118 , 52 S.E.2d 4, 1949 N.C. LEXIS 565 (1949).

Garnishee Not Liable. —

Because defendant payroll analyst simply complied with the facially valid notice of garnishment issued by North Carolina Department of Revenue, as required of him by North Carolina law, G.S. 105-242(b) specifically shielded the payroll analyst from liability. Gust v. Tolson, 2006 U.S. Dist. LEXIS 28994 (W.D.N.C. May 4, 2006), aff'd, 204 Fed. Appx. 179, 2006 U.S. App. LEXIS 27203 (4th Cir. 2006).

§ 105-242.1. Procedure for attachment and garnishment.

  1. Notice. — G.S. 105-242 specifies when intangible property is subject to attachment and garnishment. Before the Department attaches and garnishes intangible property in payment of a tax, the Department must send the garnishee a notice of garnishment. The notice must be sent in accordance with the methods authorized in G.S. 105-241.20 or, with the agreement of the garnishee, by electronic means. The notice must contain all of the following information, unless the notice is an electronic notice subject to subsection (a1) of this section:
    1. The taxpayer’s name.
    2. The taxpayer’s social security number or federal identification number.
    3. The amount of tax, interest, and penalties the taxpayer owes.
    4. An explanation of the liability of a garnishee for tax owed by a taxpayer.
    5. An explanation of the garnishee’s responsibility concerning the notice. (a1) Electronic Notice. — Before the Department sends an electronic notice of garnishment to a garnishee, the Department and the garnishee must have an agreement that establishes the protocol for transmitting the notice and provides the information required under subdivisions (4) and (5) of subsection (a) of this section. An electronic notice must contain the information required under subdivisions (1), (2), and (3) of subsection (a) of this section.
  2. Action. —  A garnishee must comply with a notice of garnishment or file a written response to the notice within the time set in this subsection. A garnishee that is a financial institution must comply or file a response within 20 days after receiving a notice of garnishment. All other garnishees must comply or file a response within 30 days after receiving a notice of garnishment. A written response must explain why the garnishee is not subject to garnishment and attachment.Upon receipt of a written response, the Department must contact the garnishee and schedule a conference to discuss the response or inform the garnishee of the Department’s position concerning the response. If the Department does not agree with the garnishee on the garnishee’s liability, the Department may proceed to enforce the garnishee’s liability for the tax by sending the garnishee a notice of proposed assessment in accordance with G.S. 105-241.9 .
  3. Release. —  A notice of garnishment sent to a financial institution is released when the financial institution complies with the notice. A notice of garnishment sent to all other garnishees is released when the Department sends the garnishee a notice of release. A notice of release must state the name and social security number or federal identification number of the taxpayer to whom the release applies.
  4. Financial Institution. —  As used in this section, the term “financial institution” has the same meaning as in G.S. 53B-2 .

History. 2007-491, s. 30; 2010-31, s. 31.8(i).

Effect of Amendments.

Session Laws 2010-31, s. 31.8(i), effective June 30, 2010, rewrote the section.

§ 105-242.2. Personal liability when certain taxes not paid.

  1. Definitions. —  The following definitions apply in this section:
    1. Business entity. — A corporation, a limited liability company, or a partnership, regardless of whether the entity is suspended under G.S. 105-230 or is dissolved under Article 14 of Chapter 55 of the General Statutes or under Article 6 of Chapter 57D of the General Statutes.
    2. Responsible person. — Any of the following:
      1. The president, treasurer, or chief financial officer of a corporation.
      2. A manager of a limited liability company or a partnership.
      3. An officer of a corporation, a member or company official of a limited liability company, or a partner in a partnership who has a duty to deduct, account for, or pay taxes listed in subsection (b) of this section.
      4. A partner who is liable for the debts and obligations of a partnership under G.S. 59-45 or G.S. 59-403 .
  2. Responsible Person. —  Each responsible person in a business entity is personally and individually liable for the principal amount of taxes that are owed by the business entity and are listed in this subsection. If a business entity does not pay the amount it owes after the amount becomes collectible under G.S. 105-241.22 , the Secretary may enforce the responsible person’s liability for the amount by sending the responsible person a notice of proposed assessment in accordance with G.S. 105-241.9 . This subsection applies to the following:
    1. All sales and use taxes collected by the business entity upon its taxable transactions.
    2. All sales and use taxes due upon taxable transactions of the business entity but upon which it failed to collect the tax, but only if the person knew, or in the exercise of reasonable care should have known, that the tax was not being collected.
    3. All taxes due from the business entity pursuant to the provisions of Articles 36C and 36D of Subchapter V of this Chapter and all taxes payable under those Articles by it to a supplier for remittance to this State or another state.
    4. All income taxes required to be withheld by the business entity.
  3. Repealed by Session Laws 1991 (Regular Session, 1992), c. 1007, s. 15.
  4. Distributions. —  An officer, partner, trustee, or receiver of a business entity required to file a report with the Secretary who has custody of funds of the entity and who allows the funds to be paid out or distributed to the owners of the entity without having remitted to the Secretary any State taxes that are due is personally liable for the payment of the tax. The Secretary may enforce an individual’s liability under this subsection by sending the individual a notice of proposed assessment in accordance with G.S. 105-241.9 .
  5. Statute of Limitations. —  The period of limitations for assessing a responsible person for unpaid taxes under this section expires the later of (i) one year after the expiration of the period of limitations for assessing the business entity or (ii) one year after a tax becomes collectible from the business entity under G.S. 105-241.22(3), (4), (5), or (6).
  6. Scope. —  This section shall not apply to, or limit, the criminal liability of any person.

History. 1939, c. 158, s. 923; 1941, c. 50, s. 10; 1955, c. 1350, s. 23; 1973, c. 476, s. 193; c. 1287, s. 13; 1983, c. 220, s. 1; 1991, c. 690, s. 7; 1991 (Reg. Sess., 1992), c. 1007, s. 15; 1995, c. 390, s. 15; 1995 (Reg. Sess., 1996), c. 647, s. 52; 1997-6, s. 9; 1998-212, s. 29A.14(p); 1999-337, s. 34; 2007-491, s. 34; 2008-134, s. 10(a); 2013-414, s. 56(a); 2014-3, s. 14.18; 2016-5, s. 5.1(a); 2018-5, s. 38.10(b); 2020-58, s. 6.3.

Editor’s Note.

This section was formerly G.S. 105-253 , as enacted by Session Laws 1939-158, s. 923. It was recodified as this section by Session Laws 2008-134, s. 10(a), effective July 1, 2008, and applicable to taxes that become collectible on or after that date.

Effect of Amendments.

Session Laws 2007-491, s. 34, effective January 1, 2008, in the second paragraph of subsection (b), rewrote the second sentence, in the third sentence, substituted “president, treasurer, and chief financial officer” for “president and the treasurer,” and inserted “other” preceding “office of a corporation or member of a limited liability,” and deleted the former last sentence, which read: “The provisions of this Article apply to an assessment made under this section to the extent they are not inconsistent with this section.” For applicability, see Editor’s note.

Session Laws 2008-134, s. 10(a), effective July 1, 2008, and applicable to taxes that become collectible on or after that date, recodified former G.S. 105-253 as this section and rewrote the section.

Session Laws 2013-414, s. 56(a), effective August 23, 2013, in subsection (b), substituted “the principal amount of taxes that are owed by the business entity and are” for “all of the taxes,” substituted “the amount” for “a tax” and similar language, and rewrote the last sentence, which formerly read “The taxes for which a responsible person may be held personally and individually liable are.” For applicability, see editor’s note.

Session Laws 2014-3, s. 14.18, effective May 29, 2014, in sub-subdivision (a)(2)c., inserted “or company official”; and in subdivision (b)(4), substituted “withheld by” for “withheld from the wages of employees of. ”

Session Laws 2016-5, s. 5.1(a), effective May 11, 2016, in subsection (e), inserted “the later of (i)” and added “or (ii) one year after a tax becomes collectible from the business entity under G.S. 105-241.22(3), (4), (5), or (6)” at the end. See editor’s note for applicability.

Session Laws 2018-5, s. 38.10(b), effective June 12, 2018, added “regardless of whether the entity is suspended under G.S. 105-230 or is dissolved under Article 14 of Chapter 55 of the General Statutes or under Article 6 of Chapter 57D of the General Statutes” at the end of subdivision (a)(1).

Session Laws 2020-58, s. 6.3, effective June 30, 2020, added subsection (f).

CASE NOTES

Editor’s Note. —

The cases cited below were decided under former G.S. 105-253 .

The first two paragraphs of this section are independent of each other; each provides a means for holding officers personally liable for unpaid corporate taxes. The two paragraphs were enacted at different times; the first in 1939, the second in 1973. They differ in scope; the first applies to all state tax schedules, while the second is limited to sales and use taxes. Neither paragraph requires reference to the other for definition of terms or for any other reason. In re Jonas, 70 N.C. App. 116, 318 S.E.2d 869, 1984 N.C. App. LEXIS 3624 (1984).

§ 105-243. Taxes recoverable by action.

When requested by the Secretary, the Attorney General must bring an action to recover the amount of tax that is due from a taxpayer and is collectible under G.S. 105-241.22 . In the action, the taxpayer may not challenge the liability for the tax. A judgment in the action has the same priority as a tax lien. The judgment is not subject to a claim for a homestead exemption. The action must be brought in one of the following:

  1. The Superior Court of Wake County.
  2. The taxpayer’s county of residence.
  3. A county where the taxpayer owns real property.
  4. The county in which the taxpayer has its principal place of business.
  5. A court of competent jurisdiction of another state.

History. 1939, c. 158, s. 914; 1973, c. 476, s. 193; 2007-491, s. 32.

Effect of Amendments.

Session Laws 2007-491, s. 32, effective January 1, 2008, rewrote the section. For applicability, see Editor’s note.

§ 105-243.1. Collection of tax debts.

  1. Definitions. —   The following definitions apply in this section:
    1. Overdue tax debt. — Any part of a tax debt that remains unpaid 60 days or more after it becomes collectible under G.S. 105-241.22 . The term does not include a tax debt for which the taxpayer entered into an installment agreement for the tax debt under G.S. 105-237 within 60 days after the tax debt became collectible, if the taxpayer has not failed to make any payments due under the installment agreement.
    2. Tax debt. — The total amount of tax, penalty, and interest collectible under G.S. 105-241.22 .
  2. Outsourcing. —   The Secretary may contract for the collection of tax debts owed by nonresidents and foreign entities. At least 30 days before the Department submits a tax debt to a contractor for collection, the Department must notify the taxpayer by mail that the debt may be submitted for collection if payment is not received within 30 days after the notice was mailed.

    (b1) [Outsourcing Limitation. —] In determining the liability of any person for a tax, the Secretary may not employ an agent who is compensated in whole or in part by the State for services rendered on a contingent basis or any other basis related to the amount of tax, interest, or penalty assessed against or collected from the person.

  3. Secrecy. —   A contract for the collection of tax debts is conditioned on compliance with G.S. 105-259 . If a contractor violates G.S. 105-259 , the contract is terminated, and the Secretary must notify the contractor of the termination. A contractor whose contract is terminated for violation of G.S. 105-259 is not eligible for an award of another contract under this section for a period of five years from the termination. These sanctions are in addition to the criminal penalties set out in G.S. 105-259.
  4. Fee. —   A collection assistance fee is imposed on an overdue tax debt. In order to impose a collection assistance fee on a tax debt, the Department must notify the taxpayer that the fee will be imposed in accordance with this section at least 60 days prior to its imposition. The fee notice may be included on the notice of collection. The fee is collectible as part of the debt. The Secretary may waive the fee pursuant to G.S. 105-237 to the same extent as if it were a penalty.The amount of the collection assistance fee is twenty percent (20%) of the amount of the overdue tax debt. If a taxpayer pays only part of an overdue tax debt, the payment is credited proportionally to fee revenue and tax revenue.
  5. Use. —   The fee is a receipt of the Department and may be expended only pursuant to appropriation by the General Assembly.
  6. Reports. —   The report of Department activities required by G.S. 105-256 contains information on the Department’s efforts to collect tax debts and its use of the proceeds of the collection assistance fee.

History. 2001-380, ss. 2, 8; 2002-126, s. 22.2; 2003-349, s. 3; 2004-124, ss. 23.2(a), 23.3(c); 2004-170, s. 22.5; 2005-276, ss. 22.1(a), (b), 22.6(a); 2006-66, ss. 19.2, 19.3(a); 2007-323, s. 6.9(a); 2007-491, s. 33; 2012-152, s. 1; 2012-194, s. 61.5(b); 2014-3, s. 10.1(d); 2014-100, s. 26.1; 2015-109, s. 1; 2015-241, s. 28.2; 2019-169, s. 5.1(a); 2020-58, s. 6.4(a), (b); 2021-180, s. 34.1.

Editor’s Note.

Session Laws 2001-380, which enacted G.S. 105-243.1 , provides in s. 1: “The General Assembly finds that the Department of Revenue has documented that the State’s cost of collecting overdue tax debts exceeds twenty percent (20%) of the amount of the overdue tax debts. The General Assembly finds that the cost of collecting overdue tax debts is currently borne by taxpayers who pay their taxes on time. It is the intent of the General Assembly by this act to shift this cost to the delinquent taxpayers who owe overdue tax debts.”

Session Laws 2001-424, s. 14D.1, provides: “Funds appropriated to the Department of Revenue for Project Collect Tax shall be transferred to a separate Fund Code in the Department’s budget.”

Session Laws 2001-424, s. 14D.2, provides: “The Department of Revenue shall report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division by October 1, 2001, and monthly thereafter regarding its progress in developing a request for proposal for a performance-based contract to collect overdue tax debts as defined in G.S. 105-243.1 . The report shall include a list of any funds expended in developing the request for proposal and the purposes for which the funds were spent.

“The Department of Revenue shall consult with the Joint Legislative Commission on Governmental Operations prior to issuing the request for proposal for performance-based contracts.”

Session Laws 2001-424, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2001’.”

Session Laws 2001-424, s. 36.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2001-2003 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2001-2003 fiscal biennium.”

Session Laws 2001-424, s. 36.5 is a severability clause.

Session Laws 2002-126, s. 22.4, provides: “The Department of Revenue may use up to six hundred thousand dollars ($600,000) during the 2002-2003 fiscal year from the collection assistance fee account created in G.S. 105-243.1 to be allocated as follows:

“(1) Two hundred thousand dollars ($200,000) for contractual services related to system changes for managing and filing bankruptcies.

“(2) Four hundred thousand dollars ($400,000) for identifying delinquent taxpayers.”

Session Laws 2002-126, ss. 22.6(a) to (c), as amended by Session Laws 2003-284, s. 23.1, and as amended by Session Laws 2004-124, ss. 23.1 and 23.3(a), provides: “(a) There is appropriated from the collection assistance fee account created in G.S. 105-243.1 to the Department of Revenue the sum of one million six hundred twenty-two thousand eight hundred ninety-six dollars ($1,622,896) for the 2003-2004 fiscal year and the sum of two million one hundred fifty-four thousand five hundred ninety-three dollars ($2,154,593) for the 2004-2005 fiscal year to pay for the costs of establishing and equipping a central taxpayer telecommunications service center for collections and assistance and for the costs associated with aligning local field offices with the new center. Of the funds appropriated in this subsection, the sum of three million dollars ($3,000,000) that was designated for the 2003-2005 biennium to pay for the costs of establishing and equipping a central taxpayer telecommunications service center does not revert at the end of the 2004-2005 fiscal year but remains available until June 30, 2006, for operating costs of the service center.

“(b) Repealed by Session Laws 2003-284, s. 23.1, effective July 1, 2003.

“(c) Beginning January 1, 2003, and ending six months following completion of the projects described in subsection (a) of this section, the Department of Revenue must report semiannually to the Joint Legislative Commission on Governmental Operations on the use of the funds and the progress of establishing the new center.”

Session Laws 2002-126, s. 1.2, provides: “This act shall be known as ‘The Current Operations, Capital Improvements, and Finance Act of 2002’.”

Session Laws 2002-126, s. 31.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2002-2003 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2002-2003 fiscal year. For example, uncodified provisions of this act relating to the Medicaid program apply only to the 2002-2003 fiscal year.”

Session Laws 2002-126, s. 31.6 is a severability clause.

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 2004-124, s. 23.2(b), provides: “Funds are appropriated in this act from the collection assistance fee account created in G.S. 105-243.1 to the Department of Revenue for postage for correspondence directly and primarily relating to collecting overdue tax debts, for operating expenses for Project Collect Tax, and for expenses of the Examinations and Collections Division directly and primarily relating to collecting overdue tax debts as defined in G.S. 105-243.1 . The Department of Revenue and the Office of State Budget and Management must account for all expenditures using accounting procedures that clearly distinguish costs allocable to collecting overdue tax debts as defined in G.S. 105-243.1 from costs allocable to other purposes and must demonstrate that none of the fee proceeds are used for any purpose other than collecting overdue tax debts.

“The Department of Revenue must report to the 2005 General Assembly on its implementation of this section.”

Session Laws 2004-124, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2004’.”

Session Laws 2004-124, s. 33.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2004-2005 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2004-2005 fiscal year.”

Session Laws 2004-124, s. 33.5, contains a severability clause.

Session Laws 2005-345, s. 37, repealed Session Laws 2005-276, s. 22.6, which had proposed to amend subsection (d) of this section by inserting “the actual cost of collection, not to exceed” preceding “twenty percent” in the second paragraph.

Session Laws 2007-323, s. 6.9(b), as amended by Session Laws 2008-107, s. 23.1, provides: “The General Assembly finds that a computer system that records tax payments and determines when the payments are overdue directly and primarily relates to the collection of overdue tax debts and that the proceeds of the collection assistance fee imposed by G.S. 105-243.1 may be applied to the cost of the computer system. The Department of Revenue is authorized to use funds in the 20% Collection Assistance Fee Account, Budget Code 24704-2474, during the 2007-2008 and 2008-2009 fiscal years to replace the Department’s current computer system, and these funds are appropriated to the Department for that purpose. For fiscal year 2007-2008, the Department shall not use more than fifteen million dollars ($15,000,000) from the Account to replace the Department’s current computer system. For fiscal year 2008-2009, the Department shall not use more than twenty-five million dollars ($25,000,000) from the Account to replace the Department’s current computer system.

“Funds appropriated under this subsection may be transferred to Budget Code 24708-2478 to be applied to expenditures for a replacement computer system. Funds appropriated under this subsection that are not transferred to Budget Code 24708-2478 remain in the Account until they are transferred to that Budget Code or withdrawn for expenditures for a replacement computer system. Funds appropriated under this subsection that are not expended at the end of the 2007-2009 biennium remain available for expenditure for the purpose designated in this subsection.”

Session Laws 2007-323, s. 6.9(c), provides: “The Department of Revenue shall contract with private counsel with the pertinent information technology and computer law expertise to review requests for proposals and to negotiate and review contracts associated with the Integrated Tax Administration System. G.S. 114-2.3 does not apply to this subsection.”

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 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.”

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Subsection (b1) was enacted by Session Laws 2012-152, s. 1, as subsection (a1). It was redesignated, and the bracketed subsection catchline was added, at the direction of the Revisor of Statutes.

Session Laws 2012-152, s. 6, as amended by Session Laws 2012-194, s. 61.5(b), and as amended by Session Laws 2015-109, s. 1, provides: “Sections 1, 3, and 3.1 of this act become effective October 1, 2012. The Treasurer shall not renew any contingency fee-based contracts for these services after October 1, 2012. The Treasurer shall not assign further audits on a contingency fee basis to an auditing firm under a contract that meets all the following conditions: (i) the contract would have been prohibited under this act had the contract been entered into after October 1, 2012, and (ii) the contract allows the assignment of audits on a discretionary basis by the Treasurer. Sections 2, 4, and 5 of this act become effective July 1, 2013. After July 1, 2013, cities and counties shall not renew any contingency fee-based contracts for these services. After July 1, 2013, cities and counties shall not assign further audits on a contingency fee basis to an auditing firm under a contract that meets all the following conditions: (i) the contract would have been prohibited under this act had the contract been entered into after July 1, 2013, and (ii) the contract allows the assignment of audits on a discretionary basis. The remainder of the act is effective when the act becomes law.”

Session Laws 2014-100, s. 26.3, provides: “Notwithstanding the use requirements of G.S. 105-243.1(e) , for the 2014-2015 fiscal year, the Department of Revenue may use funds, not to exceed one million six hundred thousand dollars ($1,600,000) from the special account created by G.S. 105-243.1(e) , for the purchase of new document scanners.”

Session Laws 2014-100, s. 1.1, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2014.’ ”

Session Laws 2014-100, s. 38.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2014-2015 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2014-2015 fiscal year.”

Session Laws 2014-100, s. 38.7, is a severability clause.

Session Laws 2019-169, s. 5.1(b), as amended by Session Laws 2020-58, s. 6.4(b), made the amendment to subsection (d) by Session Laws 2019-169, s. 5.1(a), effective August 1, 2020, and applicable to tax debts that become collectible on or after that date.

Session Laws 2020-58, s. 6.4(c), made the amendment of subsections (a) and (d) of this section by Session Laws 2020-58, s. 6.4(a), effective August 1, 2020, and applicable to tax debts that become collectible on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2001-380, s. 8, as amended by Session Laws 2003-384, s. 3, effective October 1, 2005, inserted “owed by nonresidents and foreign entities” at the end of the first sentence of subsection (b).

Session Laws 2004-124, ss. 23.2(a) and 23.3(c), effective July 1, 2004, rewrote subsection (e); and in subsection (f), inserted “semiannually” following “report” near the beginning of the first sentence, and deleted the former second sentence.

Session Laws 2004-170, s. 22.5, effective August 2, 2004, inserted the third sentence of subsection (e).

Session Laws 2005-276, s. 22.1(a) and (b), effective July 1, 2005, in subsection (e), in the first paragraph, added the last sentence, and added subdivisions (e)(4) through (e)(6); and in subsection (f), added the second paragraph.

Session Laws 2006-66, ss. 19.2 and 19.3(a), effective July 1, 2006, substituted “one hundred fifty thousand dollars ($150,000)” for “one hundred thousand dollars ($100,000)” in subdivision (e)(3); and inserted “not to exceed three hundred fifty-three thousand dollars ($353,000) a year” in subdivision (e)(4); and rewrote subsection (f), which detailed reporting requirements.

Session Laws 2007-323, s. 6.9(a), effective July 1, 2007, substituted “five hundred thousand dollars ($500,000)” for “three hundred fifty three thousand dollars ($353,000)” at the end of subdivision (e)(4).

Session Laws 2007-491, s. 33, effective January 1, 2008, in subdivision (a)(1), substituted “it becomes collectible under G.S. 105-241.22 ” for “the notice of final assessment was mailed to the taxpayer” in the first sentence, and “the tax debt became collectible, if the taxpayer” for “the notice of final assessment was mailed and” in the last sentence; rewrote subdivision (a)(2); and substituted “the tax debt becomes collectible under G.S. 105-241.22 ” for “the notice of final assessment for the tax debt was mailed to the taxpayer” in the next-to-last sentence in subsection (d). For applicability, see Editor’s note.

Session Laws 2012-152, s. 1, as amended by Session Laws 2012-194, s. 61.5(b), effective October 1, 2012, added subsection (a1). For redesignation of subsection and applicability, see editor’s notes.

Session Laws 2014-3, s. 10.1(d), effective May 29, 2014, substituted “five hundred thousand dollars ($500,000)” for “one hundred fifty thousand dollars ($150,000)” in subdivision (e)(3).

Session Laws 2014-100, s. 25.3, effective July 1, 2014, in subdivision (e)(3), substituted “locator” for “locater” and substituted “three hundred fifty thousand dollars ($350,000)” for “five hundred thousand dollars ($500,000).”

Session Laws 2015-241, s. 28.2, effective July 1, 2015, in subsection (e), in the introductory paragraph, substituted “collecting and reducing the incidence of overdue” for “collecting overdue” in the first and third sentences, substituted “the purposes listed in this subsection” for “the costs of collecting overdue tax debts” in the fifth sentence, and in the last sentence substituted “the purposes listed in this subsection” for “collecting overdue tax debts” and “other purpose” for “purpose other than collecting overdue tax debts”, in subdivision (1), inserted “(i)” and substituted “this section” for “this section and (ii) auditors responsible for identifying overdue tax debts”, substituted “seven hundred fifty thousand dollars ($750,000)” for “five hundred thousand dollars ($500,000” in subdivision (4), and added subdivision (7).

Session Laws 2019-169, s. 5.1(a), in subsection (d), substituted “60” for “30” in the first and second sentences, substituted “tax debt is deemed collectible under G.S. 105-241.22 ” for “fee notice required by this subsection is mailed to the taxpayer” in the first sentence, “notice of collection” for “fee notice” in the second sentence, and deleted the former third sentence, which read: “The Department may not mail the fee notice earlier than 60 days after the tax debt becomes collectible under G.S. 105-241.22 .” For effective date and applicability, see editor’s note.

Session Laws 2020-58, s. 6.4(a), substituted “60 days” for “90 days” twice in subdivision (a)(1); and rewrote the first paragraph of subsection (d). For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 34.1, effective July 1, 2021, rewrote subsection (e).

§ 105-244. [Repealed]

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

§ 105-244.1. Cancellation of certain assessments.

The Secretary of Revenue is hereby authorized, empowered and directed to cancel and abate all assessments made after October 16, 1940, for or on account of any tax owing to the State of North Carolina and which is payable to the Department of Revenue against any person who was killed while a member of the Armed Forces of the United States or who has a service connected disability as a result of which the United States is paying him disability compensation. This provision shall apply only to assessments made after October 16, 1940, for taxes which were due prior to the time the taxpayer was inducted into the Armed Forces of the United States. If any such assessment is or has been paid, the Secretary of Revenue may refund the amount paid but shall not add thereto any interest.

History. 1949, c. 392, s. 6; 1973, c. 476, s. 193; 2011-183, s. 73.

Effect of Amendments.

Session Laws 2011-183, s. 73, effective June 20, 2011, substituted “Armed Forces of the United States” for “armed forces” in the first two sentences.

§ 105-244.2.

Expired pursuant to its own terms, effective January 1, 2010.

History. 2008-107, s. 28.16(b), expired pursuant to its own terms, effective January 1, 2010.

Editor’s Note.

Former G.S. 105-244.2 , pertained to reduction of certain sales tax assessments against small businesses.

§ 105-244.3. Sales tax base expansion protection act.

  1. Grace Period. —  The Department shall take no action to assess any tax due for a filing period beginning on or after March 1, 2016, and ending prior to January 1, 2019, if one or more of the conditions of this subsection apply and the retailer did not receive specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable periods. Except as otherwise provided, this subsection also applies to use tax liability imposed on a purchaser under G.S. 105-164.6 . The conditions are as follows:
    1. A retailer failed to charge sales tax due on separately stated installation charges that are part of the sales price of tangible personal property or certain digital property sold at retail.
    2. A person failed to properly classify themselves as a retailer in retail trade for the period beginning March 1, 2016, and ending December 31, 2016, and did not charge sales tax on all retail transactions but rather treated some transactions as real property contracts in error for sales and use tax purposes. This subdivision does not prohibit the Secretary from assessing use tax on purchases used to fulfill a transaction erroneously treated as a real property contract.
    3. A person treated a transaction as a real property contract in error and did not collect sales tax on the transaction as a retail sale. This subdivision does not prohibit the Secretary from assessing use tax on purchases used to fulfill a transaction erroneously treated as a real property contract.
    4. A person failed to collect sales tax on the sales price of a service contract for one or more components, systems, or accessories for a motor vehicle on or after March 1, 2016, and prior to January 1, 2017, where the contract was sold by a motor vehicle dealer, a motor vehicle service agreement company, or a motor vehicle dealer on behalf of a motor vehicle service agreement company.
    5. A person failed to collect sales tax on the retail sale of a service contract for tangible personal property that becomes a part of or is affixed to real property.
    6. A person failed to collect sales tax on the retail sale of a service contract for a pool, a fish tank, or similar aquatic feature on or after January 1, 2017, and prior to January 1, 2019, provided the person paid tax on any purchases used to fulfill the service contract.
    7. A person failed to collect sales tax on the sales price of or the gross receipts derived from the retail sale of a home warranty on or after January 1, 2017, and prior to January 1, 2019, provided the warranty includes coverage for real property.
    8. A person failed to collect sales tax on the taxable portion of a mixed service contract that exceeds ten percent (10%) for a transaction on or after January 1, 2017, and prior to January 1, 2019. This subdivision does not prohibit the Secretary from assessing use tax on purchases used to fulfill a mixed service contract. (8a) A person failed to collect sales tax on the taxable portion of a mixed transaction contract that exceeds twenty-five percent (25%) for a transaction on or after January 1, 2017, and prior to January 1, 2019. This subdivision does not prohibit the Secretary from assessing use tax on purchases used to fulfill a mixed transaction contract.

      (8b) A person failed to collect sales tax on the taxable portion of a bundled transaction that included a contract for two or more services, one of which was subject to tax and one of which was not subject to tax, for a transaction on or after March 1, 2016, and prior to January 1, 2017.

    9. A person treats a transaction as a real property contract for remodeling instead of the retail sale of repair, maintenance, and installation services sold at retail prior to January 1, 2019. This subdivision does not prohibit the Secretary from assessing use tax on purchases used to fulfill the transaction.
    10. A person failed to collect sales tax on repair, maintenance, and installation services for tangible personal property, motor vehicles, or certain digital property.
  2. Limitations. —  This section does not prohibit the following assessments:
    1. The assessment of tax collected by a person and not remitted to the Department.
    2. The assessment of tax due on an amount included in the definition of sales price where a retailer failed to charge or remit the tax, except as allowed under subsection (a) of this section.
    3. Repealed by Session Laws 2019-169, s. 3.6, effective July 26, 2019.

History. 2017-204, s. 2.8(c); 2018-5, s. 38.5(q); 2019-6, s. 5.8; 2019-169, s. 3.6.

Editor’s Note.

Session Laws 2017-204, s. 2.13, made this section effective retroactively to January 1, 2017, and applicable to sales and purchases made on or after that date, and further provided, in part, that: “Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law [August 11, 2017].”

Session Laws 2017-204, s. 2.8(a), effective retroactively to January 1, 2017, and expiring on July 1, 2018, as provided by Session Laws 2017-204, s. 2.8(d), provides: “If the Secretary of Revenue determines that a seller paid sales and use taxes on a product and the seller uses the product as part of a taxable repair, maintenance, and installation service to real property, the Secretary will allow the seller to offset the sales tax liability on the taxable repair, maintenance, and installation service with the sales and use tax paid on the products provided the retailer can support the amount of tax originally paid. A retailer entitled to a credit for tax originally paid under this provision may reduce taxable receipts by the taxable amount of the credit for the period in which the credit occurs.”

Session Laws 2017-204, s. 2.8(b), provides: “The Revenue Laws Study Committee is directed to study the feasibility of providing a seller of taxable repair, maintenance, and installation services to real property the option of paying sales tax on the property used to fulfill the repair, maintenance, and installation service at the time the property is purchased and offsetting the sales tax liability on the taxable repair, maintenance, and installation service with the sales and use tax paid on the products. Subsection (a) of this section provides sellers this option until July 1, 2018. The Revenue Laws Study Committee must recommend to the 2018 Regular Session of the 2017 General Assembly whether this option should be allowed on a permanent basis.”

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

Effect of Amendments.

Session Laws 2018-5, s. 38.5(q), effective June 12, 2018, in the introductory paragraph of subsection (a), substituted “prior to January 1, 2019” for “before January 1, 2018” in the first sentence, and added the second sentence; in subdivisions (a)(6), (7), and (9), substituted “January 1, 2019” for “January 1, 2018”; in subdivision (a)(8), substituted “taxable portion of a mixed service contract that exceeds ten percent (10%) for a transaction on or after January 1, 2017, and prior to January 1, 2019” for “portion of a mixed contract for repair, maintenance, and installation services that exceeds ten percent (10%) for a transaction prior to January 1, 2017” in the first sentence; and added subdivisions (a)(8a), (8b), and (10).

Session Laws 2019-6, s. 5.8, effective March 20, 2019, inserted “service” in the second sentence in subdivision (a)(8); and inserted “or” after “two” in subdivision (a)(8b).

Session Laws 2019-169, s. 3.6, effective July 26, 2019, inserted “certain” preceding “digital property” in subdivision (a)(1); substituted “or certain digital” for “and digital” in subdivision (a)(10); and deleted subdivision (b)(3).

§ 105-244.4. Reduction of certain sales tax assessments.

  1. Reduction. —  The Secretary may reduce an assessment against a taxpayer who requests relief for State and local sales and use taxes in the amount as provided in this section and waive any penalties imposed as part of the assessment when the assessment is the result of an audit of the taxpayer by the Department and all of the following apply:
    1. The taxpayer remitted to the Department during the period under audit all of the sales and use taxes it collected during that period.
    2. The taxpayer had not been informed by the Department in a prior audit to collect sales and use taxes in the circumstance that is the basis of the assessment, as reflected in the written audit comments of the prior audit.
    3. The taxpayer had not requested and received from the Department a private letter ruling advising to collect sales and use taxes in the circumstance that is the basis of the assessment.
    4. The assessment is based on the incorrect application of one or both of the following areas of the sales and use tax statutes:
      1. The failure to collect sales tax on separately stated linen charges where the linens are furnished by a facilitator, rental agent, or other person and the charges are part of the gross receipts derived from the rental of the accommodation taxed in accordance with G.S. 105-164.4 F.
      2. The failure to pay sales or use tax to the lessor on the rental of the linens used by a facilitator, rental agent, or other person in providing the rental of an accommodation taxed in accordance with G.S. 105-164.4 F where the facilitator, rental agent, or other person issued a certificate of exemption or the required data elements per G.S. 105-164.28 to the lessor.
    5. The taxpayer meets one of the following:
      1. The taxpayer received a proposed assessment dated on or before August 15, 2017, did not file a request for review, paid the tax due, and files a written request with the Secretary on or before December 29, 2017, to request the amount of sales or use taxes be reduced as provided in this section citing the specific reasons therefor.
      2. The taxpayer received a proposed assessment dated on or before September 30, 2017, timely filed a request for review, and files a written request with the Secretary on or before December 29, 2017, to request the amount of sales or use taxes be reduced as provided in this section citing the specific reasons therefor. The Department does not need to take further action on the taxpayer’s request for review unless the taxpayer states in writing, when filing a request for reduction under this section, that the reduction does not resolve the taxpayer’s objection to the proposed assessment and that the taxpayer wishes to continue the Departmental review.
      3. The taxpayer receives a proposed assessment after September 30, 2017, and timely files a request for review as provided in G.S. 105-241.11 and files a written request with the Secretary no later than 45 days from the date of the notice of the proposed assessment to request the amount of sales or use taxes be reduced as provided in this section citing the specific reasons therefor.
  2. Amount. —  A sales and use tax assessment against a taxpayer may be reduced by ninety percent (90%) of the total amount of sales and use tax assessed. The Secretary may also waive all penalties that were imposed as part of the assessment. A reduction of an assessment under this section and the waiver of penalties imposed as part of the assessment apply only to the amount of the assessment attributable to the incorrect application of one or both of the areas of the law listed in subdivision (a)(4) of this section.
  3. Application. —  This section applies to the following for a tax period ending prior to January 1, 2018:
    1. A proposed assessment or portion of a proposed assessment.
    2. An assessment that becomes collectible under G.S. 105-241.22 .
    3. A pending request for review case.
    4. This section does not authorize a refund for sales or use taxes that were originally collected and remitted to the Department.
  4. Expiration. —  This section is not applicable to an assessment attributable to the incorrect application of one or both areas listed in subdivision (a)(4) of this section for a period beginning on or after January 1, 2018.

History. 2017-204, s. 2.8A; 2017-212, s. 7.1(a); 2019-169, s. 3.7.

Editor’s Note.

Session Laws 2017-204, s. 2.13, made this section effective August 11, 2017.

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

Effect of Amendments.

Session Laws 2017-212, s. 7.1(a), effective August 11, 2017, inserted “who requests relief” in the introductory language of subsection (a); and rewrote subdivision (a)(5).

Session Laws 2019-169, s. 3.7, effective July 26, 2019, in subdivision (a)(1), in the first sentence, inserted “during the period under audit” near the middle and substituted “that period” for “the audit period” at the end; and inserted “to the lessor” and made a stylistic change in sub-subdivision (a)(4)b.

§ 105-244.4A. Grace period from sales and use tax enforcement actions with respect to the sale of certain digital property by certain continuing education and professional development providers.

The Department shall take no action to assess a person for any sales and use tax due for a filing period beginning on or after October 1, 2019, and ending prior to August 1, 2020, with respect to the retail sale of digital audio works or digital audiovisual works that meet either of the conditions listed in this section. This section does not apply to a person that received specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable period or to a person that collected tax and failed to remit it to the Department. The conditions are:

  1. The digital audio works or digital audiovisual works consist of continuing education instruction approved or required by an occupational licensing board.
  2. The digital audio works or digital audiovisual works consist of professional development instruction for school board members, administrators, or staff.

History. 2020-6, s. 3(d); 2020-58, s. 3.6.

Editor’s Note.

Session Laws 2020-6, s. 3(e), made this section effective June 5, 2020.

Effect of Amendments.

Session Laws 2020-58, s. 3.6, effective June 30, 2020, added “works” following “audiovisual” in the first sentence of the introductory paragraph, and added “or required” in subdivision (1).

§ 105-245. Failure of sheriff to execute order.

If any sheriff of this State shall willfully fail, refuse, or neglect to execute any order directed to him by the Secretary of Revenue and within the time provided in this Subchapter, the official bond of such sheriff shall be liable for the tax, penalty, interest, and cost due by the taxpayer.

History. 1939, c. 158, s. 916; 1973, c. 476, s. 193.

§ 105-246. Actions, when tried.

All actions or processes brought in any of the superior courts of this State, under provisions of this Subchapter, shall have precedence over any other civil causes pending in such courts, and the courts shall always be deemed open for trial of any such action or proceeding brought therein.

History. 1939, c. 158, s. 917.

§ 105-247. Municipalities not to levy income and inheritance tax.

No city, town, township, or county shall levy any tax on income or inheritance.

History. 1939, c. 158, s. 918.

§ 105-248. Purpose of State taxes.

The taxes levied in this Subchapter are for the expenses of the State government, the appropriations to its educational, charitable, and penal institutions, the interest on the debt of the State, the public schools, and other specific appropriations made by law, and shall be collected and paid into the General Fund.

History. 1939, c. 158, s. 919; 1981, c. 3; 1993 (Reg. Sess., 1994), c. 745, s. 17.

Legal Periodicals.

For discussion of section, see 12 N.C.L. Rev. 23 (1934).

For a survey of 1996 developments in constitutional law, see 75 N.C.L. Rev. 2252 (1997).

§ 105-248.1. [Repealed]

Repealed by Session Laws 2007-527, s. 32, effective August 31, 2007.

§ 105-249. [Repealed]

Repealed by Session Laws 1998-95, s. 27, effective July 1, 1999.

§ 105-249.1. [Repealed]

Repealed by Session Laws 1998-95, s. 28, effective July 1, 1999.

§ 105-249.2. Due date extended and penalties waived for certain military personnel or persons affected by a presidentially declared disaster.

  1. Combat. —  The Secretary may not assess interest or a penalty against a taxpayer for any period that is disregarded under section 7508 of the Code in determining the taxpayer’s liability for a federal tax. A taxpayer is granted an extension of time to file a return or take another action concerning a State tax for any period during which the Secretary may not assess interest or a penalty under this section.
  2. Disaster. —  The penalties in G.S. 105-236(a)(2), (3), and (4) may not be assessed for any period in which the time for filing a federal return or report or for paying a federal tax is extended under section 7508A of the Code because of a presidentially declared disaster. For the purpose of this section, “presidentially declared disaster” has the same meaning as in section 1033(h)(3) of the Code.

History. 1967, c. 706, s. 1; 1991, c. 439, s. 1; 1991 (Reg. Sess., 1992), c. 922, s. 10; 2001-87, s. 1; 2001-414, s. 24; 2006-162, s. 18; 2008-187, s. 16.

Editor’s Note.

Session Laws 2020-3, s. 1.1(a)-(d), provides: “(a) Interest Waiver. — As a result of the COVID-19 outbreak, the Secretary of Revenue has extended the franchise, corporate income, and individual income tax payment deadline from April 15, 2020, to July 15, 2020, and pursuant to G.S. 105-249.2 , the Secretary will not assess a penalty for failure to file a return or pay a tax due as long as the return is filed and the tax due is paid by July 15, 2020. Notwithstanding G.S. 105-241.21(b), the Secretary of Revenue shall also waive the accrual of interest from April 15, 2020, through July 15, 2020, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, 2020, through July 15, 2020. The relief from accrual of interest from April 15, 2020, through July 15, 2020, also includes interest imposed pursuant to G.S. 105-163.15 and G.S. 105-163.41 for payments due on or before July 15, 2020.

“(b) Refund Request. — For franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, 2020, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, 2020, and before July 15, 2020.

“(c) Time-Sensitive Actions. — Certain actions required to be taken by a taxpayer on or after April 1, 2020, and before July 15, 2020, will be considered timely if the request or petition is filed on or before July 15, 2020. This subsection applies to requests for Departmental review under G.S. 105-241.11 , petitions for a contested case hearing at the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes and G.S. 105-241.15 , and petitions for judicial review under Article 4 of Chapter 150B of the General Statutes and G.S. 105-241.16 .

“(d) This section is effective when it becomes law.”

Session Laws 2020-3, s. 5 is a severability clause.

Effect of Amendments.

Session Laws 2006-162, s. 18, effective July 24, 2006, substituted “persons” for “individuals” in the middle of the section catchline.

Session Laws 2008-187, s. 16, effective August 7, 2008, substituted “G.S. 105-236(a)(2), (3), and (4)” for “G.S. 105-236(2), (3), and (4)” in the first sentence of subsection (b).

§ 105-249.3. [Repealed]

Repealed by Session Laws 1998-98, s. 19, effective August 14, 1998.

§ 105-250. Law applicable to foreign corporations.

All foreign corporations, and the officers and agents thereof, doing business in this State, shall be subject to all the liabilities and restrictions that are or may be imposed upon corporations of like character, organized under the laws of this State, and shall have no other or greater powers.

History. 1939, c. 158, s. 920.

§ 105-250.1. [Repealed]

Repealed by Session Laws 1981 (Regular Session, 1982), c. 1209.

§ 105-251. Information required of taxpayer and corrections based on information.

  1. Scope of Information. —   A taxpayer must give information to the Secretary when the Secretary requests the information. The Secretary may request a taxpayer to provide only the following kinds of information on a return, a report, or otherwise:
    1. Information that identifies the taxpayer.
    2. Information needed to determine the liability of the taxpayer for a tax.
    3. Information needed to determine whether an item is subject to a tax.
    4. Information that enables the Secretary to collect a tax. (4a) Financial or tax documentation required to determine the appropriate adjustment under G.S. 105-130.5 A. If such information is not timely provided as required under G.S. 105-130.5 A(a), the Secretary may propose any adjustment allowable under Part 1 of Article 4 of this Chapter.
    5. Other information the law requires a taxpayer to provide or the Secretary needs to perform a duty a law requires the Secretary to perform.
  2. Correction of Liability. —  When a taxpayer provides information to the Secretary within the statute of limitations and the information establishes that an assessment against the taxpayer is incorrect or that the taxpayer is allowed a refund, the Secretary must adjust the assessment or issue the refund in accordance with the information. This action is a correction of an error by the Department or by the taxpayer and is not part of the process for the administrative or judicial review of a proposed assessment or a claim for refund.

History. 1939, c. 158, s. 921; 1973, c. 476, s. 193; 1993 (Reg. Sess., 1994), c. 661, s. 2; 2008-134, s. 71; 2021-180, s. 42.13B(f).

Editor's Note.

Session Laws 2021-180, s. 42.13B(f), added a new subdivision (a)(5) and renumbered subdivision (a)(5) as subdivision (a)(6). At the direction of the Revisor of Statutes, the new subdivision has been renumbered as subdivision (a)(4a) and subdivision (a)(5) has retained its designation.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2008-134, s. 71, effective July 28, 2008, rewrote the section heading, which formerly read: “Type of information a taxpayer must provide”; designated the previously existing provisions as subsection (a); in subsection (a), inserted “Scope of Information. —” at the beginning; and added subsection (b).

Session Laws 2021-180, s. 42.13B(f), effective November 18, 2021, added subdivision (a)(5), and renumbered former subdivision (a)(5) as subdivision (a)(6). For renumbering of subdivisions by the Revisor of Statutes, see editor’s note.

§ 105-251.1. [Repealed]

Repealed by Session Laws 1991 (Regular Session, 1992), c. 1007, s. 14.

§ 105-251.2. Compliance informational returns.

  1. Occupational Licensing Board. —  An occupational licensing board must give information to the Secretary when the Secretary requests the information. The Secretary may not request the information more than one time per calendar year. The Secretary may request the board to provide on a return, a report, or otherwise, a licensee’s name, license number, tax identification number, business address, and any other information pertaining to the licensee in possession of the board that the Secretary deems necessary to determine the licensee’s compliance with this Chapter. For purposes of this subsection, the term “occupational licensing board” has the same meaning as defined in G.S. 93B-1 .
  2. Alcohol Vendor. —  An alcohol vendor must give information to the Secretary when the Secretary requests the information. The Secretary may not request the information more than one time per calendar year. The Secretary may request the alcohol vendor to provide on a return, a report, or otherwise, for a permittee to which the alcohol vendor provides alcohol, a permittee’s name, license number, and business address and any other information pertaining to the permittee in possession of the alcohol vendor that the Secretary deems necessary to determine the permittee’s compliance with this Chapter. This subsection applies to the following alcohol vendors:
    1. An ABC store in the ABC system, as defined in G.S. 18B-101 .
    2. A wine wholesaler, as defined in G.S. 18B-1201 .
    3. A wholesaler, as defined in G.S. 18B-1301 .
    4. The holder of an unfortified winery permit, a fortified winery permit, a brewery permit, or a distillery permit under G.S. 18B-1100 .
  3. Payment Settlement Entity. —  For any year in which a payment settlement entity is required to make a return pursuant to section 6050W of the Code, the entity shall submit the information in the return to the Secretary at the time the return is made. For purposes of this subsection, the term “payment settlement entity” has the same meaning as provided in section 6050W of the Code.
  4. Electronic Format. —  All reports submitted to the Department of Revenue under this section shall be in an electronic format as prescribed by the Secretary.

History. 2015-259, s. 7.3(a); 2017-204, s. 3.2; 2018-5, s. 38.10(o).

Editor’s Note.

Session Laws 2015-259, s. 7.3(c) made this section effective July 1, 2016.

Effect of Amendments.

Session Laws 2017-204, s. 3.2, effective August 11, 2017, added subsections (c) and (d).

Session Laws 2018-5, s. 38.10(o), effective June 12, 2018, in the section heading, substituted “informational returns” for “information requests”; in subsection (b), in the introductory paragraph, substituted “permittee’s” for “pemittee’s”; and in subsection (d), substituted “prescribed by” for “requested by”, and deleted the former last sentence, which read: “Any report not timely filed under this section is subject to a penalty of one thousand dollars ($1,000).”

§ 105-252. Returns required.

A person who receives from the Secretary any form requiring information shall fill the form out properly and answer each question fully and correctly. If unable to answer a question, the person shall explain why in writing. The person shall return the form to the Secretary at the time and place required by the Secretary. The person shall also furnish an oath or affirmation verifying the return; the oath or affirmation shall be in the form required by the Secretary.

History. 1939, c. 158, s. 922; 1973, c. 476, s. 193; 1991 (Reg. Sess., 1992), c. 930, s. 5.

§ 105-252.1. Use of a TTIN.

A TTIN may not be used on any return, statement, or other document required to be filed with or furnished to the Department unless specifically authorized by the Secretary.

History. 2020-58, s. 4.4(b); 2021-180, s. 42.13A(g).

Editor’s Note.

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

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2021-180, s. 42.13A(g), effective November 18, 2021, substituted “by the Secretary” for “in this Chapter.”

§ 105-253.

Recodified as G.S. 105-242.2 by Session Laws 2008-134, s. 10(a), effective July 1, 2008, and applicable to taxes that become collectible on or after that date.

Editor’s Note.

Former G.S. 105-253 was recodified as G.S. 105-242.2 by Session Laws 2008-134, s. 10(a), effective July 1, 2008, and applicable to taxes that become collectible on or after that date.

§ 105-254. Secretary to furnish forms.

The Secretary shall prepare forms suitable for carrying out the duties delegated to the Secretary. Upon request, the Secretary shall provide forms to any person subject to the laws administered by the Secretary. Failure to receive or secure a form does not relieve a person from a duty to file a return or a report.

History. 1939, c. 158, s. 924; 1973, c. 476, s. 193; 1991 (Reg. Sess., 1992), c. 930, s. 6.

§ 105-254.1. Identification of veterans on income tax form D-400.

  1. The Secretary shall provide appropriate space and instructions on the individual income tax form D-400 for an individual to voluntarily indicate whether or not the filing individual is a veteran and, on a joint return, whether or not the individual’s spouse is a veteran.
  2. Using the information reported pursuant to this section, the Secretary shall compile summary information on an aggregate basis about the number of veterans filing tax returns in this State and shall annually provide that information to the Department of Military and Veterans Affairs no later than January 15 of each year. Information specific to individual employers or employees shall remain confidential in accordance with G.S. 105-259 .
  3. As used in this section, the term “veteran” shall mean a person as defined in G.S. 143B-1213(3) b.

History. 2016-112, s. 1.

Editor’s Note.

Session Laws 2016-112, s. 3, made this section effective July 26, 2016.

The preamble to Session Laws 2016-112, provides: “Whereas, over 770,000 veterans reside across all of North Carolina’s one hundred counties; and

“Whereas, North Carolina proudly has one of the largest veteran populations in the country; and

“Whereas, the number of veterans across our State underscores the importance and impact of the State’s current military base populations to our State and how veterans and their families continue to reside in the State after the conclusion of their military service to further contribute to the State’s workforce and economy; Now, therefore,”

Session Laws 2016-112, s. 2, provides: “The Department of Revenue shall update individual income tax form D-400 to comply with Section 1 of this act for taxable years beginning on or after January 1, 2016. The Department of Revenue may include in the instructions for the individual income tax form D-400 an explanation that veteran status is being requested to assist the State in documenting the importance and impact of the State’s military population in our communities and on our State and local economies, and that information specific to individual filers will remain confidential in accordance with G.S. 105-259 .”

§ 105-255. Secretary of Revenue to keep records.

The Secretary of Revenue shall keep books of account and records of collections of taxes as may be prescribed by the Director of the Budget; shall keep an assessment roll for the taxes levied, assessed, and collected under this Subchapter, showing in same the name of each taxpayer, the amount of tax assessed against each, when assessed, the increase or decrease in such assessment; the penalties imposed and collected, and the total tax paid; and shall make monthly reports to the Director of the Budget and to the Auditor and/or State Treasurer of all collections of taxes on such forms as prescribed by the Director of the Budget.

History. 1939, c. 158, s. 925; 1973, c. 476, s. 193.

Cross References.

As to photographic reproductions of records of Department of Revenue, see G.S. 8-45.3 .

§ 105-256. Publications prepared by Secretary of Revenue; report on fraud prevention progress.

  1. Publications. —  The Secretary shall prepare and publish the following:
    1. At least every two years, statistics concerning taxes imposed by this Chapter, including amounts collected, classifications of taxpayers, geographic distribution of taxes, and other facts considered pertinent and valuable.
    2. At least every two years, a tax expenditure report that lists the tax expenditures made by a provision in this Chapter, other than a provision in Subchapter II, and gives an estimate of the amount by which revenue is reduced by each tax expenditure. A “tax expenditure” is an exemption, an exclusion, a deduction, an allowance, a credit, a refund, a preferential tax rate, or another device that reduces the amount of tax revenue that would otherwise be available to the State. An estimate of the amount by which revenue is reduced by a tax expenditure may be stated as ranging between two amounts if the Department does not have sufficient data to make a more specific estimate. (2a) By May 1 of each year, an economic incentives report that contains information on tax credits and tax refunds, itemized by credit or refund and by taxpayer, for the previous calendar year.
    3. As often as required, a report that is not listed in this subsection but is required by another law.
    4. As often as the Secretary determines is needed, other reports concerning taxes imposed by this Chapter.
    5. At least once a year, a statement of the taxpayer’s bill of rights, which sets forth in simple and nontechnical terms the following:
      1. The taxpayer’s right to have the taxpayer’s tax information kept confidential.
      2. The rights of a taxpayer and the obligations of the Department during an audit.
      3. The procedure for a taxpayer to appeal an adverse decision of the Department at each level of determination.
      4. The procedure for a taxpayer to claim a refund for an alleged overpayment.
      5. The procedure for a taxpayer to request information, assistance, and interpretations or to make complaints.
      6. Penalties and interest that may apply and the basis for requesting waiver of a penalty.
      7. The procedures the Department may use to enforce the collection of a tax, including assessment, jeopardy assessment, enforcement of liens, and garnishment and attachment.
    6. On an annual basis, a report on the quality of services provided to taxpayers through the Taxpayer Assistance Call Center, walk-in assistance, and taxpayer education. The report must be submitted to the Joint Legislative Commission on Governmental Operations and the Joint Legislative Oversight Committee on General Government.
    7. Repealed by Session Laws 2011-330, s. 35, effective June 27, 2011.
    8. By February 15 and August 15 of each year, a semiannual report on the Department’s activities listed in this subdivision. The report must be submitted to the Joint Legislative Commission on Governmental Operations, to the Joint Legislative Oversight Committee on General Government, and to the Revenue Laws Study Committee.
      1. Its efforts to increase compliance with the tax laws. The report must describe the Department’s existing initiatives in this area as of July 1, 2006, and must estimate, by tax type and amount, the revenue expected in the fiscal year by the initiative. The report must describe any new initiative implemented since July 1, 2006, and estimate, by tax type and amount, the revenue expected in the fiscal year by the initiative.
      2. Its efforts to identify and address fraud and other abuses of the voluntary tax compliance system that result in unreported and underreported tax. The report must describe the Department’s long-term plan for achieving greater voluntary compliance and must summarize the steps taken since the last report and their results.
      3. Its efforts to collect tax debts. The report must include a breakdown of the amount and age of tax debts collected through warning letters and by other means, must itemize collections by type of tax, must describe the Department’s long-term collection plan, and must summarize the steps taken since the last report and their results.
      4. Its use of the proceeds of the collection assistance fee imposed by G.S. 105-243.1 .
    9. Repealed by Session Laws 2013-416, s. 18(a), effective August 23, 2013.

      (a1) [Fraud Prevention Progress Reports. —] Beginning March 1, 2016, and every six months thereafter, the Department of Revenue and the Government Data Analytics Center must make written progress reports to the Revenue Laws Study Committee on the following:

      (1) Prevention or reduction of the occurrence of stolen identities and refund fraud.

      (2) Elimination of fraudulent returns.

      (3) Tax compliance by business professionals and alcohol vendors.

      (4) Coordination of efforts between the Department of Revenue and the Government Data Analytics Center to identify and integrate into the Department’s operations and procedures the most effective and accurate processes and scalable tools available to reduce refund fraud, payment of fraudulent returns, and business tax compliance.

  2. Information. —  The Secretary may require a unit of State or local government to furnish the Secretary statistical information the Secretary needs to prepare a report under this section. Upon request of the Secretary, a unit of government shall submit statistical information on one or more forms provided by the Secretary.
  3. Distribution. —  The Secretary shall distribute reports prepared by the Secretary as follows without charge:
    1. Five copies to the Division of State Library of the Department of Natural and Cultural Resources, as required by G.S. 125-11.7 .
    2. Five copies to the Legislative Services Commission for the use of the General Assembly.
    3. Upon request, one copy to each entity and official to which a copy of the reports of the Appellate Division of the General Court of Justice is furnished under G.S. 7A-343.1 .
    4. One copy of the tax expenditure report to each member of the General Assembly and, upon request, one copy of any other report to each member of the General Assembly.
    5. One copy of the taxpayer’s bill of rights to each taxpayer the Department contacts regarding determination or collection of a tax, other than by providing a tax form.
    6. Upon request, one copy of the taxpayer’s bill of rights to each taxpayer.The Secretary may charge a person not listed in this subsection a fee for a report prepared by the Secretary in an amount that covers publication or copying costs and mailing costs.
  4. Other Requirements. —  The following requirements apply to the Secretary:
    1. Repealed by Session Laws 2006-6, s. 10, effective July 1, 2007.
    2. Escheats. —  G.S. 116B-60(g) requires the Secretary to furnish information to the Escheat Fund on October 1 of each year.
  5. Repealed by Session Laws 2004-124, s. 23.3(b), effective July 1, 2004.

History. 1939, c. 158, s. 926; 1955, c. 1350, s. 8; 1973, c. 476, s. 193; 1991, c. 10, s. 1; 1991 (Reg. Sess., 1992), c. 1007, s. 16; 1993, c. 433, s. 1; c. 532, s. 6; 2001-414, ss. 25, 26; 2002-87, s. 8; 2002-126, s. 22.5; 2004-124, s. 23.3(b); 2006-6, s. 10; 2006-66, s. 19.3(b); 2007-491, ss. 35, 36; 2010-166, s. 1.21; 2011-330, ss. 33(a), 35; 2013-414, s. 18(a); 2015-241, s. 14.30(s); 2015-259, s. 7.3(b); 2021-180, s. 37.10.

Cross References.

As to the annual report by the Department of Revenue to the Joint Legislative Commission on Governmental Operations, see G.S. 143B-218.1 .

Editor’s Note.

Session Laws 2001-414, ss. 25 and 26, effective September 14, 2001, recodified G.S. 143B-218.1 as subdivision (a)(6) of this section.

Session Laws 2003-284, s. 7.6(j), provides: “Department of Revenue Reports. — The Department of Revenue shall provide to the Department of Public Instruction a preliminary report for the current fiscal year of the assessed value of the property tax base for each county prior to March 1 of each year and a final report prior to May 1 of each year. The reports shall include for each county the annual sales assessment ratio and the taxable values of (i) total real property, (ii) the portion of total real property represented by the present-use value of agricultural land, horticultural land, and forestland as defined in G.S. 105-277.2 , (iii) property of public service companies determined in accordance with Article 23 of Chapter 105 of the General Statutes, and (iv) personal property.”

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 2004-124, s. 30.9, provides: “Any funds received by the Department of Transportation as a result of the Department of Revenue’s Fuel Tax Action Plan in an amount greater than the costs of administering the program during the 2004-2005 fiscal year shall be distributed equally among the 14 Highway Divisions. One-half of the funds distributed to each Highway Division shall be used for contract resurfacing and the remaining one-half of the funds distributed to each Highway Division shall be used for highway maintenance.

“The Department of Revenue shall submit periodic reports to the Joint Legislative Transportation Oversight Committee and the Joint Legislative Commission on Governmental Operations on the implementation of the Department’s Fuel Tax Action Plan. The initial report shall describe the plan, the steps the Department intends to take to implement the plan, the timetable for implementation of the steps, and the amount of revenue the Department expects to generate. Subsequent reports shall describe the Department’s progress in implementing the plan, the number of newly authorized positions that have been filled, and the amount and source of revenue generated from implementation. The Department shall submit the initial report August 1, 2004. Subsequent reports shall be submitted every three months starting November 1, 2004, until the end of the plan. The Department shall not distribute revenue generated by the Fuel Tax Action Plan until the revenue has been included in a report submitted under this section.”

Session Laws 2004-124, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2004’.”

Session Laws 2004-124, s. 33.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2004-2005 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2004-2005 fiscal year.”

Session Laws 2004-124, s. 33.5, contains a severability clause.

Session Laws 2006-6, s. 10, provides, in part, that the repeal of subdivision (d)(1) does not affect reports for activities prior to July 1, 2007.

Session Laws 2006-6, s. 12, provides: “Prosecutions for offenses committed before the effective dates in 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. If a final Order by a court of competent jurisdiction prohibits possession or operation of video gaming machines by a federally recognized Indian tribe because that activity is not allowed elsewhere in this State, this act is void.”

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. 19.3(c), provides: “The first report required under G.S. 105-256(a)(8), as enacted by this section, is due by January 1, 2007.”

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.”

Session Laws 2010-166, s. 4, provides in part, “The first economic incentives report required by G.S. 105-256 , as amended by this act, is due by May 1, 2011. 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.”

Session Laws 2015-259, s. 7.3(b), effective September 30, 2015, was codified as subsection (a1) at the direction of the Revisor of Statutes.

Session Laws 2021-180, s. 37.13, made the amendments to subdivisions (a)(6) and (a)(8) of this section by Session Laws 2021-180, s. 37.10, effective November 18, 2021, and applicable to reports submitted on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2004-124, s. 23.3(b), effective July 1, 2004, repealed former subsection (e) concerning local tax administration expenses.

Session Laws 2006-6, s. 10, effective July 1, 2007, and applicable to offenses committed on or after that date, repealed subdivision (d)(1) relating to video poker.

Session Laws 2006-66, s. 19.3(b), effective July 1, 2006, substituted “through the Taxpayer Assistance Call Center” for “including telephone and walk-in assistance” in subdivision (a)(6); and added subdivision (a)(8).

Session Laws 2007-491, ss. 35, 36, effective January 1, 2008, substituted “Publications” for “Reports” in the section catchline and in subsection (a); and added subdivision (a)(9). For applicability, see Editor’s note.

Session Laws 2010-166, s. 1.21, effective July 1, 2010, added subdivision (a)(2a).

Session Laws 2011-330, ss. 33(a) and 35, effective June 27, 2011, repealed subdivision (a)(7), which read: “The reports required under G.S. 105-129.19 and G.S. 105-129.44 ”; and deleted the last sentence in subdivision (a)(9), which read: “The Secretary must redact identifying taxpayer information from a final decision prior to publication.”

Session Laws 2013-414, s. 18(a), effective August 23, 2013, repealed subdivision (a)(9). For applicability, see editor’s note.

Session Laws 2015-241, s. 14.30(s), effective July 1, 2015, substituted “Department of Natural and Cultural Resources” for “Department of Cultural Resources” in subdivision (c)(1).

Session Laws 2021-180, s. 37.10, in subdivision (a)(6), added “and the Joint Legislative Oversight Committee on General Government” at the end; and, in subdivision (a)(8), substituted “February 15 and August 15” for “January 1 and July 1” at the beginning of the first sentence, and substituted “Operations, to the Joint Legislative Oversight Committee on General Government” for “Operations” in the last sentence. For effective date and applicability, see editor's note.

§ 105-256.1. Corporate annual report.

A corporation that files its annual report with the Secretary must pay the amount provided in G.S. 55-1-22 when it files the report. Amounts collected under this section shall be credited to the General Fund as tax revenue. The Secretary must transmit an annual report filed with the Secretary in accordance with G.S. 55-16-22 to the Secretary of State.

History. 1997-475, s. 6.10.

§ 105-257. Department may charge fee for report or other document.

The Secretary of Revenue may charge a fee for a report or another document in an amount that covers copying or publication costs and mailing costs.

History. 1933, c. 88, s. 2; 1955, c. 1350, s. 9; 1973, c. 476, s. 193; 1991, c. 10, s. 2.

Legal Periodicals.

For discussion of section, see 11 N.C.L. Rev. 250 (1933).

§ 105-258. Powers of Secretary of Revenue; who may sign and verify legal documents; who may serve civil papers.

  1. Secretary May Examine Data and Summon Persons. —  The Secretary of Revenue is authorized to do any of the following for the purpose of ascertaining the correctness of any return, filing a return where none has been filed, or determining the liability of any person for a tax, or collecting any tax:
    1. Examine, personally, or by an agent designated by him, any books, papers, records, or other data that may be relevant or material to the inquiry.
    2. Summon any of the following persons to appear at a time and place named in the summons, to produce such books, papers, records, or other data, and to give such testimony under oath as may be relevant or material to the inquiry:
      1. Any person liable for the tax or required to perform the act, or any officer or employee of such person.
      2. Any person having possession, custody, care or control of books of account containing entries relevant or material to the income and expenditures of the person liable for the tax or required to perform the act, or any other person having knowledge in the premises.
    3. Administer oaths to the persons listed in this subsection.
    4. Apply to the Superior Court of Wake County for an order requiring any person who refuses to obey the summons or to give testimony when summoned. Failure to comply with the court order shall be punished as for contempt.
  2. Department Employees May Sign and Verify Legal Documents. —  In a matter to which the Secretary of Revenue is a party or in which the Secretary has an interest, all legal documents may be signed and verified on behalf of the Secretary by (i) a Deputy or Assistant Secretary; (ii) any director or assistant director of any division of the Department of Revenue; or (iii) any other agent or employee of the Department so authorized by the Secretary of Revenue.
  3. Department Employees May Serve Civil Papers. —  In a civil matter to which the Secretary of Revenue is a party or in which the Secretary has an interest, any agent or employee of the Department of Revenue may serve summonses and other legal documents lawfully issued when so authorized by the Secretary of Revenue.

History. 1939, c. 158, s. 927; 1943, c. 400, s. 9; 1955, c. 435; 1959, c. 1259, s. 8A; 1973, c. 476, s. 193; 1987 (Reg. Sess., 1988), c. 1044, s. 1; 1991, c. 157, s. 1; 2007-527, s. 15; 2013-414, s. 1(i).

Effect of Amendments.

Session Laws 2007-527, s. 15, effective August 31, 2007, substituted “a tax” for “any tax imposed by this Subchapter” in the first sentence of subsection (a).

Session Laws 2013-414, s. 1(i), effective August 23, 2013, rewrote subsection (a).

CASE NOTES

Constitutionality. —

This section is not unconstitutional under N.C. Const., Art. I, § 19 and 20. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

Rules of Civil Procedure Do Not Apply. —

G.S. 105-258(a) establishes a proceeding of a civil nature with its own specialized procedure that supplants the Rules of Civil Procedure. In re Summons Issued to Ernst & Young, LLP, 363 N.C. 612 , 684 S.E.2d 151, 2009 N.C. LEXIS 897 (2009).

In filing an application for the enforcement of an administrative summons, the Secretary of Revenue seeks merely to question persons and examine records in the course of an investigation, and the inquiry does not involve filing a civil complaint or otherwise initiating a civil action as defined in G.S. 1-2 . It is only after conducting the investigation that the Secretary is able to identify any violations of the tax laws, as well as the persons potentially liable for such violations, and determine whether to pursue civil or criminal penalties. In re Summons Issued to Ernst & Young, LLP, 363 N.C. 612 , 684 S.E.2d 151, 2009 N.C. LEXIS 897 (2009).

Engrafting the Rules of Civil Procedure onto G.S. 105-258(a) would eviscerate the statute’s function. The Secretary of Revenue’s summons enforcement power is inquisitory, not dependent on a case or controversy, but rather the authority to investigate based on suspicion. Applying the Rules of Civil Procedure to summons enforcement proceedings under G.S. 105-258(a) would all but eliminate the use of that power. In re Summons Issued to Ernst & Young, LLP, 363 N.C. 612 , 684 S.E.2d 151, 2009 N.C. LEXIS 897 (2009).

Jurisdiction Existed. —

Because a taxpayer did not contend that the Secretary of the North Carolina Department of Revenue failed to follow the procedure prescribed in G.S. 105-258 , the trial court did not err in denying the taxpayer’s motion to dismiss on the grounds of lack of jurisdiction or failure to serve process in that any failure to file and serve a complaint by civil process as prescribed by the North Carolina Rules of Civil Procedure was not a jurisdictional defect because the statute provided jurisdiction to the superior court upon application by the Secretary. In re Summons Issued to Ernst & Young, LLP, 191 N.C. App. 668, 663 S.E.2d 921, 2008 N.C. App. LEXIS 1472 (2008), modified, aff'd in part, 363 N.C. 612 , 684 S.E.2d 151, 2009 N.C. LEXIS 897 (2009).

This section does not violate constitutional search and seizure provisions, because the statute is not self-enforcing. The Secretary of Revenue does not have the authority to compel compliance with a summons, and if a revenue agent is forced to go to superior court to enforce compliance with an order, the court’s scrutiny of the order will ensure that no abuse of process occurs. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

Scope of Administrative Summons Power. —

The administrative summons power under this section is more analogous to that held by a grand jury than to the search and seizure power of a police officer. It grants inquisitional powers, allowing investigations on the suspicion that a law is being violated, or even because the Department wants assurances that it is not. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

This section does not require that a tax investigator have probable cause before examining a taxpayer’s records. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

A summons under this section would violate constitutional protections if it was overly broad, not issued in good faith for a legitimate purpose, or not relevant to that purpose. State v. Davis, 96 N.C. App. 545, 386 S.E.2d 743, 1989 N.C. App. LEXIS 1107 (1989).

Sufficiency of Application to Compel Production. —

Trial court did not err in denying a taxpayer’s motion to dismiss for failure to state a claim because the application to compel the production of documents in response to an administrative summons contained specific facts sufficient to provide notice to the taxpayer’s accounting firm of the nature of the claim. In re Summons Issued to Ernst & Young, LLP, 191 N.C. App. 668, 663 S.E.2d 921, 2008 N.C. App. LEXIS 1472 (2008), modified, aff'd in part, 363 N.C. 612 , 684 S.E.2d 151, 2009 N.C. LEXIS 897 (2009).

§ 105-258.1. Taxpayer interviews.

  1. Scope. —  This section applies to in-person interviews between a taxpayer and an officer or employee of the Department relating to the determination or collection of a tax, other than an in-person interview concerning any of the following:
    1. A criminal investigation.
    2. The determination or collection of a tax imposed by Article 2D of this Chapter.
    3. Repealed by Session Laws 2007-491, s. 37, effective January 1, 2008.
    4. A jeopardy assessment and collection.
  2. Recording of Interview. —  The Department shall allow a taxpayer to make an audio recording of an interview at the taxpayer’s expense and using the taxpayer’s equipment. The Department may make an audio recording of an interview at its own expense and using its own equipment. The Department shall, upon request of the taxpayer, provide the taxpayer a transcript of an interview recorded by the Department; the Department may charge the taxpayer for the cost of the requested transcription and reproduction of the transcript.
  3. Disclosure of Procedure. —  At or before an initial interview relating to the determination of a tax, the Department shall provide the taxpayer a written explanation of the audit process and the taxpayer’s rights in the process. At or before an initial interview relating to the collection of a tax, the Department shall provide the taxpayer a written explanation of the collection process and the taxpayer’s rights in the process.
  4. Right of Consultation. —  A taxpayer may authorize a person to represent the taxpayer in an interview if the person has a written power of attorney executed by the taxpayer. The Department may not require a taxpayer to accompany the taxpayer’s representative to the interview unless the Secretary has summoned the taxpayer pursuant to G.S. 105-258 .
  5. Suspension of Interview. —  The Department shall suspend an interview relating to the determination of a tax if the taxpayer is not accompanied by a representative and, at any time during the interview, expresses the desire to consult with another person.

History. 1993, c. 532, s. 7; 1993 (Reg. Sess., 1994), c. 745, s. 18; 2007-491, s. 37.

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.”

Session Laws 2019-246, s. 8.1, as amended by Session Laws 2021-180, s. 34.4, provides: “(a) The Department of Revenue shall update its electronic tax systems to store and recognize power of attorney registrations to ensure that notices generated by the Department are simultaneously sent to both the taxpayer and the person designated in the taxpayer’s power of attorney registration. By January 31, 2020, the Department shall report to the Joint Legislative Oversight Committee on General Government on its progress in updating its electronic tax systems to store and recognize power of attorney registrations.

“(b) By January 1, 2022, and monthly thereafter, the Department of Revenue shall submit a written report on the status of the power of attorney registration project required by subsection (a) of this section to the chairs of the House Appropriations Committee on General Government and the Senate Appropriations Committee on General Government and Information Technology and the Fiscal Research Division. The monthly report shall also include an update on the status of the Collections Case Management system implementation and the IBM 4100 replacement project currently underway in the Department.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.5, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2021-2023 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2021-2023 fiscal biennium.”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2007-491, s. 37, effective January 1, 2008, repealed former subdivision (a)(3) which read: “The assessment under G.S. 105-241.1(g) of a tax whose collection is in jeopardy”; and rewrote subdivision (a)(4). For applicability, see Editor’s note.

§ 105-258.2. Taxpayer conversations.

  1. Scope. —  This section applies to a conversation that is conducted by telephone or in person, is between a taxpayer and an employee of the Department, and occurs at an office of the Department if the conversation is in person. It does not apply to a conversation that occurs at a presentation, a conference, or another forum.
  2. Documentation. —  The Secretary must document advice given to a taxpayer in a conversation with that taxpayer when the taxpayer gives the Secretary the taxpayer’s identifying information, asks the Secretary about the application of a tax to the taxpayer in specific circumstances, and requests that the Secretary document the advice in the taxpayer’s records. The documentation may be an entry in the account record of the taxpayer or by another method determined by the Secretary. The documentation must set out the date of the conversation, the question asked, and the advice given.
  3. Sales Tax Inquiries. —  The Secretary must document advice given in a conversation with a person who is not registered as a retailer or a wholesale merchant under Article 5 of this Chapter when the person gives the Secretary the person’s name and address, describes a business in which the person is engaged, asks if the person is required to be registered under Article 5 of this Chapter, and requests that the Secretary document the advice. The Secretary must keep a record of the person’s inquiry that sets out the date of the conversation, the person making the inquiry, the business described in the conversation, and the advice given.

History. 2008-107, s. 28.16(c), (d).

Editor’s Note.

Session Laws 2008-107, s. 28.16(j), makes this section effective January 1, 2009.

Session Laws 2008-107, s. 28.16(a), provides: “The General Assembly makes the following findings:

“(1) The following areas of the sales and use tax laws are the areas for which the Department of Revenue receives the most questions from taxpayers:

“a. The rate of tax that applies to food and prepared food.

“b. The distinction between a retailer and a performance contractor.

“c. The distinction between a service that is necessary to complete the sale of tangible personal property, and therefore taxable, and a service that is incidental to the sale of tangible personal property, and therefore not taxable.

“d. The determination of whether a person is a manufacturer.

“(2) These areas of the sales and use tax laws have been the subject of legislative changes in recent years.

“(3) Small businesses have fewer resources to devote to resolving the complexities of the sales and use tax laws than large businesses have and, therefore, may be at a disadvantage with respect to compliance issues in complex areas and changing areas.

“(4) Assessments against a small business for inadvertent noncompliance in these complex areas may threaten the viability of the small business.

“(5) The sales and use tax laws are not intended to place the viability of small businesses in jeopardy.

“(6) A study of these complex areas is needed to determine how to make the laws in these areas clearer and to reduce the compliance burden.”

Session Laws 2008-107, ss. 28.16(g), (h), and (i), provide: “(g) The Department of Revenue is directed to establish a plan to record telephone calls received at the Department’s Taxpayer Assistance Center and to implement this plan by July 1, 2010. The plan shall, at a minimum, provide for recording calls for the purpose of training and evaluation with respect to customer service and quality control measures. The Department may retain up to seven hundred thousand dollars ($700,000) of the amount collected under Article 5 of Chapter 105 of the General Statutes in fiscal year 2008-2009 for this purpose, and this amount is appropriated to the Department for this purpose. Amounts not used in fiscal year 2008-2009 for this purpose do not revert but remain available to the Department for this purpose until the system is implemented.

“(h) The Revenue Laws Study Committee shall study the issues listed in this Section and report on the study, including any recommendations or legislative proposals, to the 2009 General Assembly.

“(1) The taxation of services necessary to complete the sale of tangible personal property and standards for distinguishing between a service that is taxable as one that is necessary to complete the sale and a service that is incidental to the sale of tangible personal property.

“(2) The applicability of the sales and use tax to performance contracts and standards for distinguishing between performance contractors and retailers.

“(3) The distinction between food and prepared food under the sales and use tax laws and whether to eliminate this distinction by applying a uniform, revenue-neutral rate to all food.

“(i) The Department of Revenue shall make a report to the Revenue Laws Study Committee on customer service improvement initiatives conducted by the Department. The report is due prior to the convening of the 2009 General Assembly and shall address, at a minimum, the following issues:

“(1) A review of the Department’s efforts to ensure that inquiries on complicated tax matters are handled or reviewed by appropriate personnel within the Department.

“(2) A review of the Department’s efforts to provide accurate and timely information regarding changes in tax law resulting from legislative changes, court decisions, or revised interpretations.

“(3) A review of the Department’s outreach efforts designed to assist taxpayers, particularly small business taxpayers, in complying with the State’s tax laws.

“(4) A review of the Department’s efforts to ensure that taxpayers are informed of their right to request written advice from the Department upon which they may reasonably rely.

“(5) A review of the Department’s plan to record telephone calls at the Department’s Taxpayer Assistance Center.”

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Effect of Amendments.

Session Laws 2008-107, s. 28.16(d), effective July 1, 2009, added subsection (c).

§ 105-258.3. Power of attorney.

The Secretary of Revenue may require a proper power of attorney of each and every agent for any taxpayer.

History. 1939, c. 158, s. 217; 1973, c. 476, s. 193; 2019-169, s. 6.6(a), (b).

Editor’s Note.

This section is former G.S. 105-128 , as recodified by Session Laws 2019-169, s. 6.6(a), effective July 26, 2019. The historical citation from the former section has been added to this section as recodified.

Effect of Amendments.

Session Laws 2019-169, s. 6.6(b), effective July 26, 2019, substituted “may” for “shall have the authority to”; and deleted “under this Article” following “any taxpayer.”

§ 105-259. Secrecy required of officials; penalty for violation. [Effective until January 1, 2023]

  1. Definitions. —  The following definitions apply in this section:
    1. Employee or officer. — The term includes a former employee, a former officer, and a current or former member of a State board or commission.
    2. Tax information. — Any information from any source concerning the liability of a taxpayer for a tax, as defined in G.S. 105-228.90 . The term includes the following:
      1. Information contained on a tax return, a tax report, or an application for a license for which a tax is imposed.
      2. Information obtained through an audit of a taxpayer or by correspondence with a taxpayer.
      3. Information on whether a taxpayer has filed a tax return or a tax report.
      4. A list or other compilation of the names, addresses, social security numbers, or similar information concerning taxpayers. The term does not include (i) statistics classified so that information about specific taxpayers cannot be identified, (ii) an annual report required to be filed under G.S. 55-16-22 or (iii) the amount of tax refunds paid to a governmental entity listed in G.S. 105-164.14(c) or to a State agency.
  2. Disclosure Prohibited. —  An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person except as provided in this subsection. Standards used or to be used for the selection of returns for examination and data used or to be used for determining the standards may not be disclosed for any purpose. All other tax information may be disclosed only if the disclosure is made for one of the following purposes:
    1. To comply with a court order, an administrative law judge’s order in a contested tax case, or a law.
    2. Review by the Attorney General or a representative of the Attorney General.
    3. To exchange the following types of information with a tax official of another jurisdiction if the laws of the other jurisdiction allow it to provide similar tax information to a representative of this State:
      1. Information to aid the jurisdiction in collecting a tax imposed by this State or the other jurisdiction.
      2. Information needed for statistical reports and revenue estimates.
    4. To provide a governmental agency or an officer of an organized association of taxpayers with a list of taxpayers who have paid a privilege license tax under Article 2 of this Chapter.
    5. To furnish to the chair of a board of county commissioners information on the county sales and use tax. (5a) Reserved.

      (5b) Repealed by Session Laws 2021-180, s. 42.13C(b), effective November 18, 2021.

      (5c) To provide the following information to a regional public transportation authority or a regional transportation authority created pursuant to Article 26 or Article 27 of Chapter 160A of the General Statutes on an annual basis, when the information is needed to enable the authority to administer its tax laws:

      1. The name, address, and identification number of retailers who collect the tax on leased vehicles imposed by G.S. 105-187.5 .
      2. The name, address, and identification number of a retailer audited by the Department of Revenue regarding the tax on leased vehicles imposed by G.S. 105-187.5 , when the Department determines that the audit results may be of interest to the authority.

        (5d) To provide the following information to a county or city on an annual basis, when the county or city needs the information for the administration of its local prepared food and beverages tax, room occupancy tax, vehicle rental tax, or heavy equipment rental tax:

        a. The name, address, and identification number of retailers who collect the sales and use taxes imposed under Article 5 of this Chapter and may be engaged in a business subject to one or more of these local taxes.

        b. The name, address, and identification number of a retailer audited by the Department regarding the sales and use taxes imposed under Article 5 of this Chapter, when the Department determines that the audit results may be of interest to the county or city in the administration of one or more of these local taxes.

    6. To sort, process, or deliver tax information on behalf of the Department of Revenue.

      (6a) To furnish the county or city official designated under G.S. 105-164.29 B a list of claimants that have received a refund of the county sales or use tax to the extent authorized in that statute.

    7. To exchange information with the State Highway Patrol of the Department of Public Safety, the Division of Motor Vehicles of the Department of Transportation, the International Fuel Tax Association, Inc., or the Joint Operations Center for National Fuel Tax Compliance when the information is needed to fulfill a duty imposed on the Department of Revenue, the State Highway Patrol of the Department of Public Safety, or the Division of Motor Vehicles of the Department of Transportation.

      (7a) To furnish the name and identifying information of motor carriers whose licenses have been revoked to the administrator of a national criminal justice system database that makes the information available only to criminal justice agencies and public safety organizations.

    8. To furnish to the Department of State Treasurer, upon request, the name, address, and account and identification numbers of a taxpayer who may be entitled to property held in the Escheat Fund.
    9. To furnish to the Division of Employment Security the name, address, and account and identification numbers of a taxpayer when the information is requested by the Division in order to fulfill a duty imposed under Article 2 of Chapter 96 of the General Statutes.

      (9a) To furnish information to the Division of Employment Security to the extent required for its NC WORKS study of the working poor pursuant to G.S. 108A-29(r). The Division of Employment Security shall use information furnished to it under this subdivision only in a nonidentifying form for statistical and analytical purposes related to its NC WORKS study. The information that may be furnished under this subdivision is the following with respect to individual income taxpayers, as shown on the North Carolina income tax forms:

      1. Name, social security number, spouse’s name, spouse’s social security number, and county of residence.
      2. Filing status and federal personal exemptions.
      3. Federal taxable income, additions to federal taxable income, and total of federal taxable income plus additional income.
      4. Income while a North Carolina resident, total income from North Carolina sources while a nonresident, and total income from all sources.
      5. Exemption for children, nonresidents’ and part-year residents’ exemption for children, and credit for children.
      6. Expenses for child and dependent care, portion of expenses paid while a resident of North Carolina, portion of expenses paid while a resident of North Carolina that was incurred for dependents who were under the age of seven and dependents who were physically or mentally incapable of caring for themselves, credit for child and dependent care expenses, other qualifying expenses, credit for other qualifying expenses, total credit for child and dependent care expenses.
    10. Review by the State Auditor to the extent authorized in G.S. 147-64.7 .
    11. To give a spouse who elects to file a joint tax return a copy of the return or information contained on the return.

      (11a) To provide a copy of a return to the taxpayer who filed the return.

      (11b) In the case of a return filed by a corporation, a partnership, a trust, or an estate, to provide a copy of the return or information on the return to a person who has a material interest in the return if, under the circumstances, section 6103(e)(1) of the Code would require disclosure to that person of any corresponding federal return or information.

      (11c) In the case of a return of an individual who is legally incompetent or deceased, to provide a copy of the return to the legal representative of the estate of the incompetent individual or decedent.

    12. To contract with a financial institution for the receipt of withheld income tax payments under G.S. 105-163.6 or for the transmittal of payments by electronic funds transfer.
    13. To furnish the following to the Fiscal Research Division of the General Assembly, upon request:
      1. A sample, suitable in character, composition, and size for statistical analyses, of tax returns or other tax information from which taxpayers’ names and identification numbers have been removed.
      2. An analysis of the fiscal impact of proposed legislation.
    14. To exchange information concerning a tax imposed by Subchapter V of this Chapter with the Standards Division of the Department of Agriculture and Consumer Services when the information is needed to administer the Gasoline and Oil Inspection Act, Article 3 of Chapter 119 of the General Statutes.
    15. To exchange information concerning a tax imposed by Articles 2A, 2C, or 2D of this Chapter with one of the following agencies when the information is needed to fulfill a duty imposed on the Department or the agency:
      1. The North Carolina Alcoholic Beverage Control Commission.
      2. The Alcohol Law Enforcement Division of the Department of Public Safety.
      3. The Bureau of Alcohol, Tobacco, and Firearms of the United States Department of Justice.

        c1. The Alcohol and Tobacco Tax and Trade Bureau of the United States Department of the Treasury.

      4. Law enforcement agencies.
      5. The Section of Community Corrections of the Division of Adult Correction and Juvenile Justice of the Department of Public Safety.

        (15a) To furnish to the appropriate local, State, or federal law enforcement agency, including a prosecutorial agency, information concerning the commission of an offense under the jurisdiction of that agency when the Department has initiated a criminal investigation of the taxpayer.

    16. To furnish to the Department of Secretary of State the name, address, tax year end, and account and identification numbers of a corporation liable for corporate income or franchise taxes or of a limited liability company liable for a corporate or a partnership tax return to enable the Secretary of State to notify the corporation or the limited liability company of the annual report filing requirement or that its articles of incorporation or articles of organization or its certificate of authority has been suspended.

      (16a) To provide the North Carolina Self-Insurance Security Association information on self-insurers’ premiums as determined under G.S. 105-228.5(b), (b1), and (c) for the purpose of collecting the assessments authorized in G.S. 97-133(a).

    17. To inform the Business License Information Office of the Department of Commerce of the status of an application for a license for which a tax is imposed and of any information needed to process the application.
    18. To furnish to the Office of the State Controller information needed by the State Controller to implement the setoff debt collection program established under G.S. 147-86.25 , verify statewide vendor files, or track debtors of the State.
    19. To furnish to the North Carolina Industrial Commission information concerning workers’ compensation reported to the Secretary under G.S. 105-163.7 .
    20. (See note for expiration date)  To furnish to the Environmental Management Commission information concerning whether a person who is requesting certification of a dry-cleaning facility or wholesale distribution facility from the Commission is liable for privilege tax under Article 5D of this Chapter. This subdivision is repealed when Part 6 of Article 21A of Chapter 143 of the General Statutes expires.
    21. To exchange information concerning the tax on piped natural gas imposed by Article 5E of this Chapter with the North Carolina Utilities Commission or the Public Staff of that Commission.
    22. To provide the Secretary of Administration pursuant to G.S. 143-59.1 a list of vendors and their affiliates who meet one or more of the conditions of G.S. 105-164.8(b) but refuse to collect the use tax levied under Article 5 of this Chapter on their sales delivered to North Carolina.
    23. To provide public access to a database containing the names and account numbers of taxpayers who are not required to pay sales and use taxes under Article 5 of this Chapter to a retailer because of an exemption or because they are authorized to pay the tax directly to the Department of Revenue.
    24. To furnish the Department of Commerce and the Division of Employment Security a copy of the qualifying information required in G.S. 105-129.7(b) or G.S. 105-129.86(b).
    25. To provide public access to a database containing the names and registration numbers of retailers who are registered to collect sales and use taxes under Article 5 of this Chapter.
    26. To contract for the collection of tax debts pursuant to G.S. 105-243.1 .
    27. To provide a publication or written determination required under this Chapter. The term “written determination” has the same meaning as defined in G.S. 105-264.2 .
    28. To exchange information concerning a tax credit claimed under Article 3E of this Chapter with the North Carolina Housing Finance Agency.
    29. To provide to the Economic Investment Committee established pursuant to G.S. 143B-437.54 information necessary to implement economic development programs under the responsibility of the Committee.
    30. To prove that a business does not meet the definition of “small business” under Article 3F of this Chapter because the annual receipts of the business, combined with the annual receipts of all related persons, exceeds the applicable amount.
    31. Repealed by Session Laws 2010-166, s. 3.7, effective July 1, 2010.
    32. Repealed by Session Laws 2006-162, s. 4(c), as amended by Session Laws 2007-527, s. 24, effective July 24, 2006.
    33. To provide to the North Carolina State Lottery Commission the information required under G.S. 18C-141 .
    34. To exchange information concerning a tax credit claimed under G.S. 105-130.47 or G.S. 105-151.29 with the North Carolina Film Office of the Department of Commerce and with the regional film commissions.

      (34a) To exchange information concerning a grant awarded under G.S. 143B-437.02 A with the Department of Revenue, the Department of Commerce, or a contractor hired by the Department of Commerce and necessary for the Department to administer the program. A contractor hired pursuant to this subdivision shall be an agent of the State subject to the provisions of this statute with respect to any tax information provided.

    35. Repealed by Session Laws 2010-166, s. 3.7, effective July 1, 2010.
    36. To furnish to a taxpayer claiming a credit under G.S. 105-130.47 or G.S. 105-151.29 information used by the Secretary to adjust the amount of the credit claimed by the taxpayer.
    37. To furnish the Department of Commerce with the information needed to complete the study required under G.S. 105-129.82 .
    38. To verify with a nonprofit organization or a unit of State or local government information relating to eligibility for a credit under G.S. 105-129.16H.
    39. To furnish the Department of State Treasurer with information it requests about whether a unit of local government has timely filed a withholding report, has been charged a penalty, or has paid a penalty, as such information may be helpful in auditing local government accounts pursuant to G.S. 159-34 and determining compliance with the Local Government Finance Act.

      (39a) To furnish the Department of State Treasurer periodically upon request, the State tax return of a beneficiary, or the wage and income statement of beneficiary, or the NC-3 information of an employer, for the purpose of substantiating the beneficiary’s statement required to be submitted under G.S. 135-5(e)(4), 135-109, or 128-27(e)(4); or for the purpose of assisting a fraud or compliance investigation in accordance with G.S. 135-1(7b), 135-1(11b), 135-6(q), 128-21(7b), 128-21(11c), and 128-28(r); provided that no federal tax information may be disclosed under this subdivision unless such a disclosure is permitted by section 6103 of the Code.

      (39b) To furnish to the Department of State Treasurer periodically upon request the State tax return of a beneficiary, or the wage and income statement of a beneficiary, or the NC-3 information of an employer for the purpose of assisting a fraud or compliance investigation or audit under G.S. 135-48.30(a)(9), or in accordance with G.S. 135-48.16 ; provided, however, that no federal tax information may be disclosed under this subdivision unless such a disclosure is permitted by section 6103 of the Code.

    40. To furnish a nonparticipating manufacturer, as defined in G.S. 66-292 , the amount of the manufacturer’s tobacco products that a taxpayer sold in this State by distributor, and that the Secretary reports to the Attorney General under G.S. 105-113.4 C.

      (40a) To furnish a data clearinghouse the information required to be released in accordance with the State’s agreement under the December 2012 Term Sheet Settlement, as finalized by the State in the NPM Adjustment Settlement Agreement, concerning annual tobacco product sales by a nonparticipating manufacturer. Such information released to a data clearinghouse may be released to parties to the NPM Adjustment Settlement Agreement provided confidentiality protections are agreed to by the parties and overseen and enforced by this State’s applicable court for enforcement of the Master Settlement Agreement for (i) any state information constituting confidential tax information or otherwise confidential under state law and (ii) manufacturer information designated confidential. The following definitions apply in this subdivision:

      1. Data clearinghouse. — Defined in the Term Sheet Settlement and in the NPM Adjustment Settlement Agreement.
      2. Master Settlement Agreement. — Defined in G.S. 66-290 .
      3. Nonparticipating manufacturer. — Defined in G.S. 66-292 .
      4. NPM Adjustment Settlement Agreement. — The final executed settlement document resulting from the 2012 Term Sheet Settlement.
      5. Participating manufacturer. — Defined in G.S. 66-292.
      6. Term Sheet Settlement. — The settlement agreement entered into in December 2012 by the State and certain participating manufacturers under the Master Settlement Agreement.
    41. To furnish the North Carolina Forest Service of the Department of Agriculture and Consumer Services pertinent contact and financial information concerning companies that are involved in the primary processing of timber products so that the Commissioner of Agriculture is able to comply with G.S. 106-1029 under the Primary Forest Product Assessment Act.
    42. To furnish to a taxpayer claiming a credit under G.S. 105-129.16A information used by the Secretary to adjust the amount of the credit claimed by the taxpayer.
    43. To furnish requested workforce data to the North Carolina Longitudinal Data System, as required by G.S. 116E-6 . Information furnished to the North Carolina Longitudinal Data System shall be provided in a nonidentifying form for statistical and analytical purposes to facilitate and enable the linkage of student data and workforce data and shall not include information allowing the identification of specific taxpayers.
    44. To furnish the State Budget Director or the Director’s designee a sample of tax returns or other tax information from which taxpayers’ names and identification numbers have been removed that is suitable in character, composition, and size for statistical analyses by the Office of State Budget and Management.
    45. To furnish tax information to the State Chief Information Officer pursuant to G.S. 143B-1385 . The use and reporting of individual data may be restricted to only those activities specifically allowed by law when potential fraud or other illegal activity is indicated.
    46. To furnish to a person who provides the State with a bond or irrevocable letter of credit on behalf of a taxpayer the information necessary for the Department to collect on the bond or letter of credit in the case of noncompliance with the tax laws by the taxpayer covered by the bond or letter of credit.
    47. To provide the Alcoholic Beverage Control Commission the information required under G.S. 18B-900 .
    48. To furnish to the Department of Environmental Quality the name, address, tax year end, and account and identification numbers of an entity liable for severance tax to enable the Secretary of Environmental Quality to notify the entity that the Department of Environmental Quality shall suspend permits of the entity for oil and gas exploration using horizontal drilling and hydraulic fracturing under G.S. 113-395 .
    49. To exchange information concerning a tax imposed by Article 8B of this Chapter with the North Carolina Department of Insurance or the North Carolina Department of Health and Human Services when the information is needed to fulfill a duty imposed on the Department of Revenue.
    50. To make available a list containing the name, physical address, and account number of entities licensed under Article 2A of this Chapter to all entities licensed under Article 2A of this Chapter.
    51. To exchange information regarding the tax imposed on motor carriers under Article 36B of this Chapter with other jurisdictions that administer the International Fuel Tax Agreement to aid in the administration of the Agreement.
    52. To furnish tax information to the State Education Assistance Authority as necessary for administering the coordinated and centralized residency determination process in accordance with Article 14 of Chapter 116 of the General Statutes.
    53. To furnish to the North Carolina Department of Labor, the Division of Employment Security within the North Carolina Department of Commerce, the North Carolina Industrial Commission, and the Employee Classification Section within the Industrial Commission employee misclassification information pursuant to Article 83 of Chapter 143 of the General Statutes.
    54. To provide to the Office of Child Support and Enforcement of the Department of Health and Human Services State tax information that relates to noncustodial parent location information as required under 45 C.F.R. § 303.3 and Title IV-D of the Social Security Act.
    55. To provide data drawn from an individual taxpayer’s tax information to the Office of Recovery and Resiliency for the purpose of facilitating such a taxpayer’s application for any means-tested federal or state disaster relief following a federal major disaster declaration; provided, however, that no federal tax information may be disclosed under this subpart unless such a disclosure is permitted by section 6103 of the Code.

      (b1) Information Security. — The Secretary shall, consistent with the requirements of this section to maintain secrecy of tax information, determine when, how, and under what conditions the disclosure of tax information authorized by subsection (b) of this section shall be made. The Secretary shall be solely responsible for determining whether information security protections for systems or services that store, process, or transmit State or federal tax information are adequate, and the Secretary is not required to use any systems or services determined to be inadequate.

  3. Punishment. —  A person who violates this section is guilty of a Class 1 misdemeanor. If the person committing the violation is an officer or employee, that person shall be dismissed from public office or public employment and may not hold any public office or public employment in this State for five years after the violation.

History. 1939, c. 158, s. 928; 1951, c. 190, s. 2; 1973, c. 476, s. 193; c. 903, s. 4; c. 1287, s. 13; 1975, c. 19, s. 29; c. 275, s. 7; 1977, c. 657, s. 6; 1979, c. 495; 1983, c. 7; 1983 (Reg. Sess., 1984), c. 1004, s. 3; c. 1034, s. 125; 1987, c. 440, s. 4; 1989, c. 628; c. 728, s. 1.47; 1989 (Reg. Sess., 1990), c. 945, s. 15; 1993, c. 485, s. 31; c. 539, s. 712; 1994, Ex. Sess., c. 14, s. 51; c. 24, s. 14(c); 1993 (Reg. Sess., 1994), c. 679, s. 8.4; 1995, c. 17, s. 11; c. 21, s. 2; 1997-118, s. 6; 1997-261, s. 14; 1997-340, s. 2; 1997-392, s. 4.1; 1997-475, s. 6.11; 1998-22, ss. 10, 11; 1998-98, ss. 13.1(b), 20; 1998-139, s. 1; 1998-212, s. 12.27A(o); 1999-219, s. 7.1; 1999-340, s. 8; 1999-341, s. 8; 1999-360, s. 2.1; 1999-438, s. 18; 1999-452, s. 28.1; 2000-120, s. 8; 2000-173, s. 11; 2001-205, s. 1; 2001-380, s. 5; 2001-476, s. 8(b); 2001-487, ss. 47(d), 123; 2002-87, s. 7; 2002-106, s. 5; 2002-172, s. 2.3; 2003-349, s. 4; 2003-416, s. 2; 2004-124, s. 32D.3; 2004-170, s. 23; 2004-204, 1st Ex. Sess., s. 4; 2005-276, ss. 31.1(cc), 39.1(c), 7.27(b); 2005-400, s. 20; 2005-429, s. 2.13; 2005-435, ss. 32(b), 32(c), 37, 48; 2006-162, s. 4(c); 2006-196, s. 11; 2006-252, s. 2.21; 2007-397, s. 13(d); 2007-491, s. 38; 2007-527, ss. 24, 33, 34, 35, 36.; 2008-107, s. 28.25(d); 2008-144, s. 4; 2009-283, s. 1; 2009-445, s. 39; 2009-483, ss. 5, 10; 2010-31, ss. 13.15, 31.8(g); 2010-95, s. 11; 2010-166, s. 3.7; 2010-167, s. 2(c); 2011-145, ss. 19.1(g), (h), (k), (n), (p), 13.25(nn), (xx); 2011-330, s. 33(b); 2011-401, ss. 3.9, 5.1; 2012-83, s. 35; 2012-133, s. 1(b); 2013-155, s. 6; 2013-360, ss. 6.9, 7.10(c); 2013-414, s. 19; 2014-3, ss. 9.3, 10.1(c); 2014-4, s. 17(b); 2014-100, s. 17.1(xxx); 2014-115, s. 56.8(e); 2015-99, s. 2; 2015-241, ss. 6.24(h), 7A.4(h), 14.30(u), (v), 15.25(b), 16A.7(j); 2016-5, s. 4.5(a); 2016-57, s. 2(f); 2016-103, s. 7; 2017-128, s. 6(a); 2017-135, s. 7(a); 2017-186, s. 2(uuuu); 2017-203, s. 2; 2017-204, s. 4.7; 2018-5, ss. 37.5(a), 38.6(e); 2018-136, 3rd Ex. Sess., s. 5.17; 2019-6, s. 4.10; 2019-203, s. 9(a); 2020-58, s. 2.2(b); 2020-88, s. 16(e); 2021-180, s. 42.13C(b).

Cross References.

As to Office of Recovery and Resiliency, see G.S. 143B-1040 .

Section Set Out Twice.

The section above is effective until January 1, 2023. For the section as amended January 1, 2023, see the following section, also numbered G.S. 105-259 .

Expiration Date for Subdivision (b)(20).

Session Laws 2009-483, s. 5, amended Session Laws 1997-392, s. 8, by deleting the January 1, 2012 repeal date for Session Laws 1997-392, s. 4.1, which had enacted G.S. 105-259(b)(20). Session Laws 2009-483, s. 10, amended subdivision (b)(20) by making its repeal effective when Part 6 of Article 21A of Chapter 143 expires. For January 1, 2022, expiration date of Part 6 of Article 21A of Chapter 143, see G.S. 143-215.104 A.

Editor’s Note.

The number of subdivision (b)(24) was assigned by the Revisor of Statutes, the designation in Session Laws 1999-360, s. 2.1 having been subdivision (b)(22).

G.S. 108A-29(r), referred to in subdivision (b)(9a) of this section, was repealed by Session Laws 2009-489, s. 12. G.S. 108A-29(r), referred to in subdivision (b)(9a) of this section, was repealed by Session Laws 2009-489, s. 12.

Subdivision (b)(37) was added by Session Laws 2006-252, s. 2.21, as subdivision (b)(36), and was redesignated at the direction of the Revisor of Statutes.

Subdivision (b)(42) was added by Session Laws 2010-167, s. 2(c), as subdivision (b)(40), and was redesignated at the direction of the Revisor of Statutes.

Subdivision (b)(27) of this section was amended twice in 2006 in the code bill drafting format provided in G.S. 120-1 . Session Laws 2006-162, s. 4(c), rewrote subdivision (b)(27). Session Laws 2006-252, s. 2.21, amended subdivision (b)(27) by inserting “105-129.85,” without referring to changes made by Session Laws 2006-162. Subdivision (b)(27) has been set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2006-162, s. 33, as amended by Session Laws 2007-527, s. 24, provides: “Sections 4(a) and 4(b) of this act are effective for taxable years beginning on or after January 1, 2006. Section 13 of this act becomes effective July 1, 2007, and applies to motor fuel transported on or after that date. Sections 14, 15, and 17 of this act become effective January 1, 2007, and apply to motor fuel purchased on or after that date. An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007. Section 26 of this act is effective when it becomes law and applies to the estates of decedents dying on or after January 1, 2005. Section 32 of this act becomes effective January 1, 2007. The remainder of this act is effective when it becomes law.”

Session Laws 2007-345, s. 14.8(a), repealed Session Laws 2007-323, s. 24.4, which transferred certain revenue hearings positions to the Department of Administration. Session Laws 2007-345, s. 14.8(c), provides that the actions taken by the Administrative Hearings Officer at the Department of Revenue from the period beginning July 1, 2007, are given full force and effect as if Session Laws 2007-323, s. 24.4 had never been enacted. Session Laws 2007-345, s. 14.8(c) further provides: “Notwithstanding any provision of G.S. 105-259 to the contrary, any officer, employee, or agent of the State that provided access to tax information to the Administrative Hearings Officer or Administrative Assistant transferred under Section 24.4 of S.L. 2007-323 is not guilty of any offense to the extent that the provision of the information would have been authorized by that statute if the transfer had not occurred.”

Session Laws 2007-397, s. 15, contains 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.”

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.”

Session Laws 2011-145, s. 13.25(xx), provides: “The Revisor of Statutes shall make the conforming statutory changes necessary to reflect the transfers under this section. The Revisor of Statutes may correct any reference in the General Statutes to the statutes that are recodified by this section and make any other conforming changes necessitated by this section.” Pursuant to that provision, conforming changes have been made in subdivision (b)(41). “Commissioner of Agriculture” was substituted for “Secretary of Environment and Natural Resources” and “G.S. 106-1029” was substituted for “G.S. 113A-193.”

Session Laws 2011-145, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2011.’ ”

Session Laws 2011-145, s. 32.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2011-2013 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2011-2013 fiscal biennium.”

Session Laws 2011-145, s. 32.5 is a severability clause.

Session Laws 2013-360, ss. 6.9 and 7.10(c) both enacted subdivisions designated as subdivision (b)(44). Subdivision (b)(44), as enacted by Session Laws 2013-360, s. 7.10(c) has been renumbered as subdivision (b)(45) at the direction of the Revisor of Statutes.

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.5 is a severability clause.

Session Laws 2013-364, s. 7, as amended by Session Laws 2013-363, s. 3.17, provides: “Notwithstanding the definition for ‘eligible student’ set forth in G.S. 115C-112.2 , as enacted by this act, a child who is otherwise eligible to receive a scholarship grant for the spring semester of the 2013-2014 school year is deemed to have met the requirements of G.S. 115C-112.2 (2)f., as enacted by this act, if the child is a dependent child for whom a taxpayer is allowed a credit for the fall semester of the 2013-2014 school year under G.S. 105-151.33 (now repealed) and the taxpayer affirms, under oath, that the taxpayer will claim the credit for that semester. Notwithstanding G.S. 105-259(b), the Department of Revenue shall furnish, upon request, to the Authority a list of claimants that received a credit pursuant to G.S. 105-151.33 (now repealed) for the taxable year beginning on or after January 1, 2013. Notwithstanding the definition for ‘eligible student’ set forth in G.S. 115C-112.2, as enacted by this act, a child who meets the requirements of G.S. 115C-112.2(a) through (e) and who is eligible for enrollment in kindergarten or the first grade in a North Carolina public school during the 2013-2014 school year shall be eligible to receive a scholarship grant for the spring semester of the 2013-2014 school year.”

Section 105-116, referred to in subdivision (b)(5b), was repealed by Session Laws 2013-316, s. 4.1(a), effective July 1, 2014.

Section 105-116.1, referred to in subdivision (b)(5b), was repealed by Session Laws 2013-316, s. 4.1(a), effective July 1, 2014.

Section 105-187.44, referred to in subdivision (b)(5b), was repealed by Session Laws 2013-316, s. 4.1(d), effective July 1, 2014.

Session Laws 2014-3, s. 9.3, Session Laws 2014-3, s. 10.1(c), and Session Laws 2014-4, s. 17(b), each enacted new subdivisions designated as (b)(46). At the direction of the Revisor of Statutes, subdivision (b)(46), as added by Session Laws 2014-3, s. 10.1(c), has been renumbered as subdivision (b)(47), and subdivision (b)(46), as added by Session Laws 2014-4, s. 17(b), has been renumbered as subdivision (b)(48).

The amendment to subdivision (b)(45) by Session Laws 2015-241, s. 7A.4(h), included a reference to “G.S. 143B-1344.” “G.S. 143B-1381” has been substituted for “G.S. 143B-1344” at the direction of the Revisor of Statutes.

Session Laws 2017-128, s. 6(b), provides: “No later than June 30, 2018, the Department of Revenue and the Department of the State Treasurer shall develop and implement an information exchange system as contemplated by subsection (a) of this section. The two departments shall enter into a confidential information sharing agreement settling transfer protocols, required security measures, audit mechanisms, and other measures designed to protect confidential information.”

Session Laws 2017-128, s. 9, is a severability clause.

Session Laws 2017-135, s. 7(b), provides: “The Department of Revenue and the Department of the State Treasurer shall, within a reasonable time following the effective date of this act but not later than June 30, 2018, enter into a confidential information sharing agreement settling data transfer protocols, required security measures, audit mechanisms, and the like, so that the two departments can thereafter develop and implement the information exchange authorized by this act.”

Subdivision (b)(53), as added by Session Laws 2017-135, s. 7(a), was renumbered as subdivision (b)(39b) at the direction of the Revisor of Statutes.

Subdivision (b)(53), as added by Session Laws 2017-204, s. 4.7, was renumbered as subdivision (b)(54) at the direction of the Revisor of Statutes.

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. 105-241.13 A.”

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

Session Laws 2018-136, 3rd Ex. Sess., s. 1.1, provides: “This act shall be known as ‘2018 Hurricane Florence Disaster Recovery Act.’ ”

Session Laws 2018-136, 3rd Ex. Sess., s. 5.17(b), provides: “(b) The Department of Revenue and the Office of Recovery and Resiliency shall, within a reasonable time following the effective date of this act but not later than June 30, 2019, enter into a confidential information sharing agreement settling data transfer protocols, required security measures, audit mechanisms, and other issues necessary to develop and implement the information exchange provided in subsection (a) of this section.

Session Laws 2018-136, 3rd Ex. Sess., s. 6.3, is a severability clause.

Session Laws 2019-200, s. 8, provides: “Nothing in this act [which provides for miscellaneous and technical changes to statutes relating the Department of Information Technology, state agency cybersecurity, emergency telephone service and the 911 Board, cable service providers, the Information Technology Strategy Board, and training and certification of police telecommunicators] alters or diminishes the exclusive responsibility and authority of the Secretary of Revenue to maintain and safeguard the secrecy and security of taxpayer information under G.S. 105-259 .”

Session Laws 2020-88, s. 16(f), made the amendment of subdivision (b)(49) of this section by Session Laws 2020-88, s. 16(e), effective 30 days after it becomes law and applicable to capitation payments received by prepaid health plans on or after that date. Session Laws 2020-88 became law on July 2, 2020, making the effective date of this amendment August 1, 2020.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2003-349, s. 4, effective July 27, 2003, in subdivision (b)(7), substituted “Division of the State Highway Patrol of the Department of Crime Control and Public Safety” for “Division of Motor Vehicles of the Department of Transportation” and substituted “Division of the State Highway Patrol of the Department of Crime Control and Public Safety” for “Division of Motor Vehicles.”

Session Laws 2003-416, s. 2, effective August 14, 2003, reenacted Session Laws 2002-172.

Session Laws 2004-124, s. 32D.3, effective for business activities occurring on or after May 1, 2005, added subdivision (b)(30).

Session Laws 2004-170, s. 23, effective August 2, 2004, in subdivision (b)(7), inserted “the Division of Motor Vehicles of the Department of Transportation,” following “Safety,” substituted “Revenue,” for “Revenue or,” and added “or the Division of Motor Vehicles of the Department of Transportation” following “Safety.”

Session Laws 2004-204, s. 4, as amended by Session Laws 2005-435, s. 48, effective, for business activities occurring on or after November 1, 2004, and for taxable years beginning on or after January 1, 2005, and repealed for business activities occurring in taxable years beginning on or after January 1, 2020, added the subdivision designated herein as subdivision (31).

Session Laws 2005-276, s. 7.27(b), effective July 1, 2005, added subdivision (b)(32).

Session Laws 2005-276, s. 39.1(c), effective for taxable years beginning on or after January 1, 2005, and applicable to qualifying expenses incurred on or after July 1, 2005, added subdivision (b)(34).

Session Laws 2005-344, s. 10.2(b), as added by Session Laws 2005-276, s. 31.1(cc), effective August 31, 2005, added subdivision (b)(33).

Session Laws 2005-400, s. 20, effective January 1, 2006, substituted “Security” for “Guaranty” in subdivision (b)(16a).

Session Laws 2005-429, s. 2.13, effective January 1, 2007, rewrote subdivision (b)(27).

Session Laws 2005-435, ss. 32(b), 32(c) and 37, effective January 1, 2006, substituted “the amount of tax refunds paid to a governmental entity listed in G.S. 105-164.14(c) or to a State agency” for “information submitted to the Business License Information Office of the Department of Secretary of State on a master application form for various business licenses” at the end of the second paragraph of subdivision (a)(2); in subdivision (b)(6a), inserted “or city” following “To furnish the county” and made a minor stylistic change; substituted “Commerce” for “Secretary of State” in subdivision (b)(17); and added subdivision (b)(32), because a subdivision (b)(32) had already been added by Session Laws 2005-276, s. 7.27(b), the subdivision added by this act was redesignated as (b)(35) at the direction of the Revisor of Statutes.

Session Laws 2006-162, s. 4, as amended by Session Laws 2007-527, s. 24, in subsection (b), rewrote subdivision (b)(27) which read: “To publish the information required under G.S. 105-129.6, 105-129.19, 105-129.26, 105-129.38, 105-129.44, 105-129.65A, 105-130.41, 105-130.45, 105-151.22, and 105-164.14.”; deleted “publish the information required under G.S. 105-129.52 and to” preceding “prove that” in subdivision (b)(30); deleted former subdivision (b)(32) which read: “To provide the report required under G.S. 105-164.14(c) to the Department of Public Information and the Fiscal Research Division of the General Assembly.”; deleted “and to publish the reports required under those sections” following “commissions” at the end of subdivision (b)(34); and added subdivision (b)(36). For effective dates, see Editor’s note.

Session Laws 2006-196, s. 11, effective August 3, 2006, in paragraph (b)(5d), substituted “prepared food and beverages tax or room occupancy tax” for “tax on prepared food and beverages” at the end of the introductory paragraph, substituted “a business subject to a local prepared food and beverages tax or room occupancy tax” for “the business of selling prepared food and beverages” at the end of paragraph (b)(5d)a and substituted “local prepared food and beverages tax or room occupancy tax” for “local tax on prepared food and beverages” at the end of paragraph (b)(5d)b.

Session Laws 2006-252, s. 2.21, effective January 1, 2007, added “or G.S. 105-129.86(b)” at the end of subdivision (b)(24); inserted “105-129.85” in subdivision (b)(27); and added subdivision (b)(37).

Session Laws 2007-397, s. 13(d), effective for taxable years beginning on or after January 1, 2008, added subdivision (b)(38).

Session Laws 2007-491, s. 38, effective January 1, 2008, substituted “order, an administrative law judge’s order in a contested tax case” for “order” in subdivision (b)(1). For applicability, see Editor’s note.

Session Laws 2007-527, ss. 33-36, effective August 31, 2007, rewrote subdivision (b)(3); in subdivision (b)(7), inserted “or the Joint Operations Center for National Fuel Tax Compliance” and made a stylistic change; rewrote subdivision (b)(13); and in subdivision (b)(27), deleted “105-129.85” following “under this Chapter.”

Session Laws 2008-107, s. 28.25(d), effective for taxable years beginning on or after January 1, 2008, inserted “or a unit of State or local government” in subdivision (b)(38).

Session Laws 2008-144, s. 4, effective August 2, 2008, in subdivision (b)(5d), substituted “tax, room occupancy tax, vehicle rental tax, or heavy equipment rental” for “tax or room occupancy” in the introductory language, in sub-subdivision (b)(5d)a, substituted “one or more of these local taxes” for “a local prepared food and beverages tax or room occupancy tax,” and in sub-subdivision (b)(5d)b, deleted “of Revenue” following “Department”, and substituted “one or more of these local taxes” for “its local prepared food and beverages tax or room occupancy tax.”

Session Laws 2009-283, s. 1, effective July 10, 2009, added subdivision (b)(39).

Session Laws 2009-445, s. 39, effective August 7, 2009, in subsection (b), substituted “except as provided in this subsection. Standards used or to be used for the selection of returns for examination and data used or to be used for determining the standards may not be disclosed for any purpose. All other tax information may be disclosed only if the disclosure is made for one of the following purposes” for “unless the disclosure is made for one of the following purposes” in the introductory language.

Session Laws 2009-483, s. 10, effective August 26, 2009, added the second sentence in subdivision (b)(20).

Session Laws 2010-31, s. 13.15, effective July 1, 2010, added subdivision (b)(41).

Session Laws 2010-31, s. 31.8(g), effective June 30, 2010, rewrote subdivision (b)(18), which formerly read: “To furnish to the Office of the State Controller the name, address, and account and identification numbers of a taxpayer upon request to enable the State Controller to verify statewide vendor files or track debtors of the State.”

Session Laws 2010-95, s. 11, effective July 17, 2010, added subdivision (b)(40).

Session Laws 2010-166, s. 3.7, effective July 1, 2010, in subdivision (b)(6a), substituted “G.S. 105-164.29B” for “G.S. 105-164.14(f)” and substituted “that statute” for “G.S. 105-164.14(f)”; deleted subdivisions (b)(31) and (b)(35), which pertained to verification and furnishing of information under Article 3G of this Chapter; and in subdivision (b)(37), substituted “study required under G.S. 105-129.82 ” for “studies required under G.S. 105-129.2 A and G.S. 105-129.82 .”

Session Laws 2010-167, s. 2(c), effective for taxable years beginning on or after January 1, 2010, added subdivision (b)(42).

Session Laws 2011-145, s. 19.1(g), (h), (k), (n), and (p), effective January 1, 2012, substituted “Public Safety” for “Crime Control and Public Safety” twice in subdivision (b)(7) and in sub-subdivision (b)(15)b.; substituted “State Highway Patrol Section” for “Division of the State Highway Patrol” twice in subdivision (b)(7); substituted “Alcohol Law Enforcement Section” for “Division of Alcohol Law Enforcement” in sub-subdivision (b)(15)b.; and substituted “Section of Community Corrections of the Division of Adult Correction of the Division of Adult Correction of the Department of Public Safety” for “Division of Community Corrections of the Department of Correction” in sub-subdivision (b)(15)e.

Session Laws 2011-145, s. 13.25(nn), effective July 1, 2011, substituted “Department of Agriculture and Consumer Services” for “Department of Environment and Natural Resources” in subdivision (b)(41).

Session Laws 2011-330, s. 33(b), effective June 27, 2011, substituted “publication” for “report” in subdivision (b)(27).

Session Laws 2011-401, ss. 3.9 and 5.1, effective November 1, 2011, substituted “Division of Employment Security” for “Employment Security Commission” in subdivisions (b)(9), (b)(9a), and (b)(24); and substituted “Division” for “Commission” in subdivision (b)(9).

Session Laws 2012-83, s. 35, effective June 26, 2012, substituted “United States Department of Justice” for “United States Treasury Department” in sub-subdivision (b)(15)c.

Session Laws 2012-133, s. 1(b), effective June 29, 2012, added subdivision (b)(43).

Session Laws 2013-155, s. 6, effective July 1, 2013, substituted “North Carolina Forest Service” for “Division of Forest Resources” in subdivision (b)(41).

Session Laws 2013-360, s. 6.9, effective July 1, 2013, added subdivision (b)(44).

Session Laws 2013-360, s. 7.10(c), effective July 26, 2013, added subdivision (b)(45).

Session Laws 2013-414, s. 19, effective August 23, 2013, rewrote subdivisions (b)(15a) and (b)(29); and inserted “and registration numbers” in subdivision (b)(25).

Session Laws 2014-3, s. 9.3, effective May 29, 2014, added subdivisions (b)(40a) and (b)(46).

Session Laws 2014-3, s. 10.1(c), effective May 1, 2015, added subdivision (b)(46) (redesignated as subdivision (b)(47)).

Session Laws 2014-4, s. 17(b), effective July 1, 2015, added subdivision (b)(46) (redesignated as subdivision (b)(47)). See Editor’s note for applicability.

Session Laws 2014-100, s. 17.1(xxx), effective July 1, 2014, substituted “Branch” for “Section” in sub-subdivision (b)(15)b.

Session Laws 2014-115, s. 56.8(e), effective August 11, 2014, substituted “State Chief Information Officer” for “State Controller” in the first sentence of subdivision (b)(45).

Session Laws 2015-99, s. 2, effective June 19, 2015, added subdivision (b)(49).

Session Laws 2015-241, ss. 6.24(h), 14.30(u), (v), and 16A.7(j), effective July 1, 2015, in subsection (b), substituted “State Highway Patrol” for “State Highway Patrol Section” twice in subdivision (7), added the present second sentence in the introductory language of subdivision (40a), and in subdivision (48), substituted “Department of Environmental Quality” for “Department of Environment and Natural Resources” twice and substituted “Secretary of Environmental Quality” for “Secretary of Environment and Natural Resources”.

Session Laws 2015-241, s. 7A.4(h), effective September 18, 2015, in the first sentence of subdivision (b)(45), deleted “Office of the” preceding “State Chief” and substituted “pursuant to G.S. 143B-1344 ” for “under G.S. 143B-426.38 A”. For conforming change, see editor’s note.

Session Laws 2015-241, s. 15.25(b), effective September 18, 2015, added subdivision (b)(34a). For applicability, see editor’s note.

Session Laws 2016-5, s. 4.5(a), effective May 11, 2016, substituted “sold in this State by distributor, and” for “sells in this State and” in subdivision (b)(40); and added subdivisions (b)(50) and (b)(51).

Session Laws 2016-57, s. 2(f), effective September 1, 2016, added subdivision (b)(52). See editor’s note for applicability.

Session Laws 2016-103, s. 7, effective July 22, 2016, in subdivision (b)(27), inserted “or written determination” in the first sentence, and added the last sentence.

Session Laws 2017-128, s. 6(a), effective July 20, 2017, added subdivision (b)(39a).

Session Laws 2017-135, s. 7(a), effective July 20, 2017, added subdivision (b)(39a). For redesignation of subdivision, see editor’s note.

Session Laws 2017-186, s. 2(uuuu), effective December 1, 2017, inserted “and Juvenile Justice” in subdivision (b)(15)e.

Session Laws 2017-203, s. 2, effective December 31, 2017, added subdivision (b)(53).

Session Laws 2017-204, s. 4.7, effective August 11, 2017, substituted “G.S. 143B-1385” for “G.S. 143B-1381” in the first sentence of subdivision (b)(45), and added subdivision (b)(53). For applicability and for redesignation of subdivision, see editor’s notes.

Session Laws 2018-5, ss. 37.5(a), 38.6(e), effective June 12, 2018, substituted “the name, physical address” for “the name” in subdivision (b)(50); and added subsection (b1).

Session Laws 2018-136, 3rd Ex. Sess., s. 5.17(a), effective October 15, 2018, added subdivision (b)(55).

Session Laws 2019-6, s. 4.10, effective March 20, 2019, added sub-subdivision (b)(15)c1.

Session Laws 2019-203, s. 9(a), effective October 1, 2019, substituted “Alcohol Law Enforcement Division” for “Alcohol Law Enforcement Branch” in sub-subdivision (b)(15)b.

Session Laws 2020-58, s. 2.2(b), effective June 30, 2020, in subdivision (b)(50), substituted “make available” for “provide public access” near the beginning, and substituted “all entities licensed under Article 2A of this Chapter” for “aid in the administration of the tobacco products tax” at the end.

Session Laws 2020-88, s. 16(e), added “or the North Carolina Department of Health and Human Services” and “of Revenue” in subdivision (b)(49). For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 42.13C(b), effective November 18, 2021, repealed subdivision (b)(5b).

Legal Periodicals.

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

See legislative survey, 21 Campbell L. Rev. 323 (1999).

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).

OPINIONS OF ATTORNEY GENERAL

The failure of Session Laws 2002-190 (HB 314) to include subdivision (b)(7) of this section in the series of specific statutes for which the term “Department of Crime Control and Public Safety” was substituted for the term “Division of Motor Vehicles of the Department of Transportation,” has no legal significance because the General Assembly intended that the subdivision should remain a viable exception to the general prohibition against disclosure of tax information. See opinion of Attorney General to Sabra J. Faires, Assistant Secretary for Tax Administration, Department of Revenue, 2002 N.C. Op. Att'y Gen. 30 (11/18/02).

Effective January 1, 2003, the Department of Revenue should administer subdivision (b)(7) of this section as if it reads: “To exchange information with Motor Vehicles Enforcement Section of the Department of Crime Control and Public Safety or the International Fuel Tax Association Inc. when the information is needed to fulfill a duty imposed on the Department of Revenue or the Motor Vehicles Enforcement Section of the Department of Crime Control and Public Safety.” See opinion of Attorney General to Sabra J. Faires, Assistant Secretary for Tax Administration, Department of Revenue, 2002 N.C. Op. Att'y Gen. 30 (11/18/02).

The Tax Review Board is exempt from the Open Meetings Law while it is meeting “solely for the purpose of making a decision” in a petition pending before the Board; however, the exemption only applies to the deliberations of the Board and does not apply when it is receiving evidence or arguments in a hearing prior to deliberating upon the evidence, nor when it is meeting for any purpose other than deciding the outcome of a petition pending before it. See opinion of Attorney General to The Honorable Richard H. Moore, Treasurer, State of North Carolina, 2004 N.C. Op. Att'y Gen. 10 (10/12/04).

Employees and officers of the State, including members of the Tax Review Board are prohibited from disclosing any tax information as defined in subdivision (a)(2) of this section. See opinion of Attorney General to The Honorable Richard H. Moore, Treasurer, State of North Carolina, 2004 N.C. Op. Att'y Gen. 10 (10/12/04).

Members of the Tax Review Board and staff must comply with both the confidentiality obligations of subsection (b) of this section and the obligations for disclosure set forth in the Public Records Law, G.S.132-1 et seq., with respect to the release of records and other information; the obligation does not vary based upon whether the Board receives a request for information prior to or after publication of an order by the Board. See opinion of Attorney General to The Honorable Richard H. Moore, Treasurer, State of North Carolina, 2004 N.C. Op. Att'y Gen. 10 (10/12/04).

§ 105-259. Secrecy required of officials; penalty for violation. [Effective January 1, 2023]

  1. Definitions. —  The following definitions apply in this section:
    1. Employee or officer. — The term includes a former employee, a former officer, and a current or former member of a State board or commission.
    2. Tax information. — Any information from any source concerning the liability of a taxpayer for a tax, as defined in G.S. 105-228.90 . The term includes the following:
      1. Information contained on a tax return, a tax report, or an application for a license for which a tax is imposed.
      2. Information obtained through an audit of a taxpayer or by correspondence with a taxpayer.
      3. Information on whether a taxpayer has filed a tax return or a tax report.
      4. A list or other compilation of the names, addresses, social security numbers, or similar information concerning taxpayers. The term does not include (i) statistics classified so that information about specific taxpayers cannot be identified, (ii) an annual report required to be filed under G.S. 55-16-22 or (iii) the amount of tax refunds paid to a governmental entity listed in G.S. 105-164.14(c) or to a State agency.
  2. Disclosure Prohibited. —  An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person except as provided in this subsection. Standards used or to be used for the selection of returns for examination and data used or to be used for determining the standards may not be disclosed for any purpose. All other tax information may be disclosed only if the disclosure is made for one of the following purposes:
    1. To comply with a court order, an administrative law judge’s order in a contested tax case, or a law.
    2. Review by the Attorney General or a representative of the Attorney General.
    3. To exchange the following types of information with a tax official of another jurisdiction if the laws of the other jurisdiction allow it to provide similar tax information to a representative of this State:
      1. Information to aid the jurisdiction in collecting a tax imposed by this State or the other jurisdiction.
      2. Information needed for statistical reports and revenue estimates.
    4. To provide a governmental agency or an officer of an organized association of taxpayers with a list of taxpayers who have paid a privilege license tax under Article 2 of this Chapter.
    5. To furnish to the chair of a board of county commissioners information on the county sales and use tax. (5a) Reserved.

      (5b) Repealed by Session Laws 2021-180, s. 42.13C(b), effective November 18, 2021.

      (5c) To provide the following information to a regional public transportation authority or a regional transportation authority created pursuant to Article 26 or Article 27 of Chapter 160A of the General Statutes on an annual basis, when the information is needed to enable the authority to administer its tax laws:

      1. The name, address, and identification number of retailers who collect the tax on leased vehicles imposed by G.S. 105-187.5 .
      2. The name, address, and identification number of a retailer audited by the Department of Revenue regarding the tax on leased vehicles imposed by G.S. 105-187.5 , when the Department determines that the audit results may be of interest to the authority.

        (5d) To provide the following information to a county or city on an annual basis, when the county or city needs the information for the administration of its local prepared food and beverages tax, room occupancy tax, vehicle rental tax, or heavy equipment rental tax:

        a. The name, address, and identification number of retailers who collect the sales and use taxes imposed under Article 5 of this Chapter and may be engaged in a business subject to one or more of these local taxes.

        b. The name, address, and identification number of a retailer audited by the Department regarding the sales and use taxes imposed under Article 5 of this Chapter, when the Department determines that the audit results may be of interest to the county or city in the administration of one or more of these local taxes.

    6. To sort, process, or deliver tax information on behalf of the Department of Revenue.

      (6a) To furnish the county or city official designated under G.S. 105-164.29 B a list of claimants that have received a refund of the county sales or use tax to the extent authorized in that statute.

    7. To exchange information with the State Highway Patrol of the Department of Public Safety, the Division of Motor Vehicles of the Department of Transportation, the International Fuel Tax Association, Inc., or the Joint Operations Center for National Fuel Tax Compliance when the information is needed to fulfill a duty imposed on the Department of Revenue, the State Highway Patrol of the Department of Public Safety, or the Division of Motor Vehicles of the Department of Transportation.

      (7a) To furnish the name and identifying information of motor carriers whose licenses have been revoked to the administrator of a national criminal justice system database that makes the information available only to criminal justice agencies and public safety organizations.

    8. To furnish to the Department of State Treasurer, upon request, the name, address, and account and identification numbers of a taxpayer who may be entitled to property held in the Escheat Fund.
    9. To furnish to the Division of Employment Security the name, address, and account and identification numbers of a taxpayer when the information is requested by the Division in order to fulfill a duty imposed under Article 2 of Chapter 96 of the General Statutes.

      (9a) To furnish information to the Division of Employment Security to the extent required for its NC WORKS study of the working poor pursuant to G.S. 108A-29(r). The Division of Employment Security shall use information furnished to it under this subdivision only in a nonidentifying form for statistical and analytical purposes related to its NC WORKS study. The information that may be furnished under this subdivision is the following with respect to individual income taxpayers, as shown on the North Carolina income tax forms:

      1. Name, social security number, spouse’s name, spouse’s social security number, and county of residence.
      2. Filing status and federal personal exemptions.
      3. Federal taxable income, additions to federal taxable income, and total of federal taxable income plus additional income.
      4. Income while a North Carolina resident, total income from North Carolina sources while a nonresident, and total income from all sources.
      5. Exemption for children, nonresidents’ and part-year residents’ exemption for children, and credit for children.
      6. Expenses for child and dependent care, portion of expenses paid while a resident of North Carolina, portion of expenses paid while a resident of North Carolina that was incurred for dependents who were under the age of seven and dependents who were physically or mentally incapable of caring for themselves, credit for child and dependent care expenses, other qualifying expenses, credit for other qualifying expenses, total credit for child and dependent care expenses.
    10. Review by the State Auditor to the extent authorized in G.S. 147-64.7 .
    11. To give a spouse who elects to file a joint tax return a copy of the return or information contained on the return.

      (11a) To provide a copy of a return to the taxpayer who filed the return.

      (11b) In the case of a return filed by a corporation, a partnership, a trust, or an estate, to provide a copy of the return or information on the return to a person who has a material interest in the return if, under the circumstances, section 6103(e)(1) of the Code would require disclosure to that person of any corresponding federal return or information.

      (11c) In the case of a return of an individual who is legally incompetent or deceased, to provide a copy of the return to the legal representative of the estate of the incompetent individual or decedent.

    12. To contract with a financial institution for the receipt of withheld income tax payments under G.S. 105-163.6 or for the transmittal of payments by electronic funds transfer.
    13. To furnish the following to the Fiscal Research Division of the General Assembly, upon request:
      1. A sample, suitable in character, composition, and size for statistical analyses, of tax returns or other tax information from which taxpayers’ names and identification numbers have been removed.
      2. An analysis of the fiscal impact of proposed legislation.
    14. To exchange information concerning a tax imposed by Subchapter V of this Chapter with the Standards Division of the Department of Agriculture and Consumer Services when the information is needed to administer the Gasoline and Oil Inspection Act, Article 3 of Chapter 119 of the General Statutes.
    15. To exchange information concerning a tax imposed by Articles 2A, 2C, or 2D of this Chapter with one of the following agencies when the information is needed to fulfill a duty imposed on the Department or the agency:
      1. The North Carolina Alcoholic Beverage Control Commission.
      2. The Alcohol Law Enforcement Division of the Department of Public Safety.
      3. The Bureau of Alcohol, Tobacco, and Firearms of the United States Department of Justice.

        c1. The Alcohol and Tobacco Tax and Trade Bureau of the United States Department of the Treasury.

      4. Law enforcement agencies.
      5. The Division of Community Supervision and Reentry of the Department of Adult Correction.

        (15a) To furnish to the appropriate local, State, or federal law enforcement agency, including a prosecutorial agency, information concerning the commission of an offense under the jurisdiction of that agency when the Department has initiated a criminal investigation of the taxpayer.

    16. To furnish to the Department of Secretary of State the name, address, tax year end, and account and identification numbers of a corporation liable for corporate income or franchise taxes or of a limited liability company liable for a corporate or a partnership tax return to enable the Secretary of State to notify the corporation or the limited liability company of the annual report filing requirement or that its articles of incorporation or articles of organization or its certificate of authority has been suspended.

      (16a) To provide the North Carolina Self-Insurance Security Association information on self-insurers’ premiums as determined under G.S. 105-228.5(b), (b1), and (c) for the purpose of collecting the assessments authorized in G.S. 97-133(a).

    17. To inform the Business License Information Office of the Department of Commerce of the status of an application for a license for which a tax is imposed and of any information needed to process the application.
    18. To furnish to the Office of the State Controller information needed by the State Controller to implement the setoff debt collection program established under G.S. 147-86.25 , verify statewide vendor files, or track debtors of the State.
    19. To furnish to the North Carolina Industrial Commission information concerning workers’ compensation reported to the Secretary under G.S. 105-163.7 .
    20. (See note for expiration date)  To furnish to the Environmental Management Commission information concerning whether a person who is requesting certification of a dry-cleaning facility or wholesale distribution facility from the Commission is liable for privilege tax under Article 5D of this Chapter. This subdivision is repealed when Part 6 of Article 21A of Chapter 143 of the General Statutes expires.
    21. To exchange information concerning the tax on piped natural gas imposed by Article 5E of this Chapter with the North Carolina Utilities Commission or the Public Staff of that Commission.
    22. To provide the Secretary of Administration pursuant to G.S. 143-59.1 a list of vendors and their affiliates who meet one or more of the conditions of G.S. 105-164.8(b) but refuse to collect the use tax levied under Article 5 of this Chapter on their sales delivered to North Carolina.
    23. To provide public access to a database containing the names and account numbers of taxpayers who are not required to pay sales and use taxes under Article 5 of this Chapter to a retailer because of an exemption or because they are authorized to pay the tax directly to the Department of Revenue.
    24. To furnish the Department of Commerce and the Division of Employment Security a copy of the qualifying information required in G.S. 105-129.7(b) or G.S. 105-129.86(b).
    25. To provide public access to a database containing the names and registration numbers of retailers who are registered to collect sales and use taxes under Article 5 of this Chapter.
    26. To contract for the collection of tax debts pursuant to G.S. 105-243.1 .
    27. To provide a publication or written determination required under this Chapter. The term “written determination” has the same meaning as defined in G.S. 105-264.2 .
    28. To exchange information concerning a tax credit claimed under Article 3E of this Chapter with the North Carolina Housing Finance Agency.
    29. To provide to the Economic Investment Committee established pursuant to G.S. 143B-437.54 information necessary to implement economic development programs under the responsibility of the Committee.
    30. To prove that a business does not meet the definition of “small business” under Article 3F of this Chapter because the annual receipts of the business, combined with the annual receipts of all related persons, exceeds the applicable amount.
    31. Repealed by Session Laws 2010-166, s. 3.7, effective July 1, 2010.
    32. Repealed by Session Laws 2006-162, s. 4(c), as amended by Session Laws 2007-527, s. 24, effective July 24, 2006.
    33. To provide to the North Carolina State Lottery Commission the information required under G.S. 18C-141 .
    34. To exchange information concerning a tax credit claimed under G.S. 105-130.47 or G.S. 105-151.29 with the North Carolina Film Office of the Department of Commerce and with the regional film commissions.

      (34a) To exchange information concerning a grant awarded under G.S. 143B-437.02 A with the Department of Revenue, the Department of Commerce, or a contractor hired by the Department of Commerce and necessary for the Department to administer the program. A contractor hired pursuant to this subdivision shall be an agent of the State subject to the provisions of this statute with respect to any tax information provided.

    35. Repealed by Session Laws 2010-166, s. 3.7, effective July 1, 2010.
    36. To furnish to a taxpayer claiming a credit under G.S. 105-130.47 or G.S. 105-151.29 information used by the Secretary to adjust the amount of the credit claimed by the taxpayer.
    37. To furnish the Department of Commerce with the information needed to complete the study required under G.S. 105-129.82 .
    38. To verify with a nonprofit organization or a unit of State or local government information relating to eligibility for a credit under G.S. 105-129.16H.
    39. To furnish the Department of State Treasurer with information it requests about whether a unit of local government has timely filed a withholding report, has been charged a penalty, or has paid a penalty, as such information may be helpful in auditing local government accounts pursuant to G.S. 159-34 and determining compliance with the Local Government Finance Act.

      (39a) To furnish the Department of State Treasurer periodically upon request, the State tax return of a beneficiary, or the wage and income statement of beneficiary, or the NC-3 information of an employer, for the purpose of substantiating the beneficiary’s statement required to be submitted under G.S. 135-5(e)(4), 135-109, or 128-27(e)(4); or for the purpose of assisting a fraud or compliance investigation in accordance with G.S. 135-1(7b), 135-1(11b), 135-6(q), 128-21(7b), 128-21(11c), and 128-28(r); provided that no federal tax information may be disclosed under this subdivision unless such a disclosure is permitted by section 6103 of the Code.

      (39b) To furnish to the Department of State Treasurer periodically upon request the State tax return of a beneficiary, or the wage and income statement of a beneficiary, or the NC-3 information of an employer for the purpose of assisting a fraud or compliance investigation or audit under G.S. 135-48.30(a)(9), or in accordance with G.S. 135-48.16 ; provided, however, that no federal tax information may be disclosed under this subdivision unless such a disclosure is permitted by section 6103 of the Code.

    40. To furnish a nonparticipating manufacturer, as defined in G.S. 66-292 , the amount of the manufacturer’s tobacco products that a taxpayer sold in this State by distributor, and that the Secretary reports to the Attorney General under G.S. 105-113.4 C.

      (40a) To furnish a data clearinghouse the information required to be released in accordance with the State’s agreement under the December 2012 Term Sheet Settlement, as finalized by the State in the NPM Adjustment Settlement Agreement, concerning annual tobacco product sales by a nonparticipating manufacturer. Such information released to a data clearinghouse may be released to parties to the NPM Adjustment Settlement Agreement provided confidentiality protections are agreed to by the parties and overseen and enforced by this State’s applicable court for enforcement of the Master Settlement Agreement for (i) any state information constituting confidential tax information or otherwise confidential under state law and (ii) manufacturer information designated confidential. The following definitions apply in this subdivision:

      1. Data clearinghouse. — Defined in the Term Sheet Settlement and in the NPM Adjustment Settlement Agreement.
      2. Master Settlement Agreement. — Defined in G.S. 66-290 .
      3. Nonparticipating manufacturer. — Defined in G.S. 66-292 .
      4. NPM Adjustment Settlement Agreement. — The final executed settlement document resulting from the 2012 Term Sheet Settlement.
      5. Participating manufacturer. — Defined in G.S. 66-292.
      6. Term Sheet Settlement. — The settlement agreement entered into in December 2012 by the State and certain participating manufacturers under the Master Settlement Agreement.
    41. To furnish the North Carolina Forest Service of the Department of Agriculture and Consumer Services pertinent contact and financial information concerning companies that are involved in the primary processing of timber products so that the Commissioner of Agriculture is able to comply with G.S. 106-1029 under the Primary Forest Product Assessment Act.
    42. To furnish to a taxpayer claiming a credit under G.S. 105-129.16A information used by the Secretary to adjust the amount of the credit claimed by the taxpayer.
    43. To furnish requested workforce data to the North Carolina Longitudinal Data System, as required by G.S. 116E-6 . Information furnished to the North Carolina Longitudinal Data System shall be provided in a nonidentifying form for statistical and analytical purposes to facilitate and enable the linkage of student data and workforce data and shall not include information allowing the identification of specific taxpayers.
    44. To furnish the State Budget Director or the Director’s designee a sample of tax returns or other tax information from which taxpayers’ names and identification numbers have been removed that is suitable in character, composition, and size for statistical analyses by the Office of State Budget and Management.
    45. To furnish tax information to the State Chief Information Officer pursuant to G.S. 143B-1385 . The use and reporting of individual data may be restricted to only those activities specifically allowed by law when potential fraud or other illegal activity is indicated.
    46. To furnish to a person who provides the State with a bond or irrevocable letter of credit on behalf of a taxpayer the information necessary for the Department to collect on the bond or letter of credit in the case of noncompliance with the tax laws by the taxpayer covered by the bond or letter of credit.
    47. To provide the Alcoholic Beverage Control Commission the information required under G.S. 18B-900 .
    48. To furnish to the Department of Environmental Quality the name, address, tax year end, and account and identification numbers of an entity liable for severance tax to enable the Secretary of Environmental Quality to notify the entity that the Department of Environmental Quality shall suspend permits of the entity for oil and gas exploration using horizontal drilling and hydraulic fracturing under G.S. 113-395 .
    49. To exchange information concerning a tax imposed by Article 8B of this Chapter with the North Carolina Department of Insurance or the North Carolina Department of Health and Human Services when the information is needed to fulfill a duty imposed on the Department of Revenue.
    50. To make available a list containing the name, physical address, and account number of entities licensed under Article 2A of this Chapter to all entities licensed under Article 2A of this Chapter.
    51. To exchange information regarding the tax imposed on motor carriers under Article 36B of this Chapter with other jurisdictions that administer the International Fuel Tax Agreement to aid in the administration of the Agreement.
    52. To furnish tax information to the State Education Assistance Authority as necessary for administering the coordinated and centralized residency determination process in accordance with Article 14 of Chapter 116 of the General Statutes.
    53. To furnish to the North Carolina Department of Labor, the Division of Employment Security within the North Carolina Department of Commerce, the North Carolina Industrial Commission, and the Employee Classification Section within the Industrial Commission employee misclassification information pursuant to Article 83 of Chapter 143 of the General Statutes.
    54. To provide to the Office of Child Support and Enforcement of the Department of Health and Human Services State tax information that relates to noncustodial parent location information as required under 45 C.F.R. § 303.3 and Title IV-D of the Social Security Act.
    55. To provide data drawn from an individual taxpayer’s tax information to the Office of Recovery and Resiliency for the purpose of facilitating such a taxpayer’s application for any means-tested federal or state disaster relief following a federal major disaster declaration; provided, however, that no federal tax information may be disclosed under this subpart unless such a disclosure is permitted by section 6103 of the Code.

      (b1) Information Security. — The Secretary shall, consistent with the requirements of this section to maintain secrecy of tax information, determine when, how, and under what conditions the disclosure of tax information authorized by subsection (b) of this section shall be made. The Secretary shall be solely responsible for determining whether information security protections for systems or services that store, process, or transmit State or federal tax information are adequate, and the Secretary is not required to use any systems or services determined to be inadequate.

  3. Punishment. —  A person who violates this section is guilty of a Class 1 misdemeanor. If the person committing the violation is an officer or employee, that person shall be dismissed from public office or public employment and may not hold any public office or public employment in this State for five years after the violation.

History. 1939, c. 158, s. 928; 1951, c. 190, s. 2; 1973, c. 476, s. 193; c. 903, s. 4; c. 1287, s. 13; 1975, c. 19, s. 29; c. 275, s. 7; 1977, c. 657, s. 6; 1979, c. 495; 1983, c. 7; 1983 (Reg. Sess., 1984), c. 1004, s. 3; c. 1034, s. 125; 1987, c. 440, s. 4; 1989, c. 628; c. 728, s. 1.47; 1989 (Reg. Sess., 1990), c. 945, s. 15; 1993, c. 485, s. 31; c. 539, s. 712; 1994, Ex. Sess., c. 14, s. 51; c. 24, s. 14(c); 1993 (Reg. Sess., 1994), c. 679, s. 8.4; 1995, c. 17, s. 11; c. 21, s. 2; 1997-118, s. 6; 1997-261, s. 14; 1997-340, s. 2; 1997-392, s. 4.1; 1997-475, s. 6.11; 1998-22, ss. 10, 11; 1998-98, ss. 13.1(b), 20; 1998-139, s. 1; 1998-212, s. 12.27A(o); 1999-219, s. 7.1; 1999-340, s. 8; 1999-341, s. 8; 1999-360, s. 2.1; 1999-438, s. 18; 1999-452, s. 28.1; 2000-120, s. 8; 2000-173, s. 11; 2001-205, s. 1; 2001-380, s. 5; 2001-476, s. 8(b); 2001-487, ss. 47(d), 123; 2002-87, s. 7; 2002-106, s. 5; 2002-172, s. 2.3; 2003-349, s. 4; 2003-416, s. 2; 2004-124, s. 32D.3; 2004-170, s. 23; 2004-204, 1st Ex. Sess., s. 4; 2005-276, ss. 31.1(cc), 39.1(c), 7.27(b); 2005-400, s. 20; 2005-429, s. 2.13; 2005-435, ss. 32(b), 32(c), 37, 48; 2006-162, s. 4(c); 2006-196, s. 11; 2006-252, s. 2.21; 2007-397, s. 13(d); 2007-491, s. 38; 2007-527, ss. 24, 33, 34, 35, 36.; 2008-107, s. 28.25(d); 2008-144, s. 4; 2009-283, s. 1; 2009-445, s. 39; 2009-483, ss. 5, 10; 2010-31, ss. 13.15, 31.8(g); 2010-95, s. 11; 2010-166, s. 3.7; 2010-167, s. 2(c); 2011-145, ss. 19.1(g), (h), (k), (n), (p), 13.25(nn), (xx); 2011-330, s. 33(b); 2011-401, ss. 3.9, 5.1; 2012-83, s. 35; 2012-133, s. 1(b); 2013-155, s. 6; 2013-360, ss. 6.9, 7.10(c); 2013-414, s. 19; 2014-3, ss. 9.3, 10.1(c); 2014-4, s. 17(b); 2014-100, s. 17.1(xxx); 2014-115, s. 56.8(e); 2015-99, s. 2; 2015-241, ss. 6.24(h), 7A.4(h), 14.30(u), (v), 15.25(b), 16A.7(j); 2016-5, s. 4.5(a); 2016-57, s. 2(f); 2016-103, s. 7; 2017-128, s. 6(a); 2017-135, s. 7(a); 2017-186, s. 2(uuuu); 2017-203, s. 2; 2017-204, s. 4.7; 2018-5, ss. 37.5(a), 38.6(e); 2018-136, 3rd Ex. Sess., s. 5.17; 2019-6, s. 4.10; 2019-203, s. 9(a); 2020-58, s. 2.2(b); 2020-88, s. 16(e); 2021-180, ss. 19C.9(v1), 42.13C(b).

Cross References.

As to Office of Recovery and Resiliency, see G.S. 143B-1040 .

Section Set Out Twice.

The section above is effective January 1, 2023. For the section as in effect until January 1, 2023, see the preceding section, also numbered G.S. 105-259 .

Expiration Date for Subdivision (b)(20).

Session Laws 2009-483, s. 5, amended Session Laws 1997-392, s. 8, by deleting the January 1, 2012 repeal date for Session Laws 1997-392, s. 4.1, which had enacted G.S. 105-259(b)(20). Session Laws 2009-483, s. 10, amended subdivision (b)(20) by making its repeal effective when Part 6 of Article 21A of Chapter 143 expires. For January 1, 2022, expiration date of Part 6 of Article 21A of Chapter 143, see G.S. 143-215.104 A.

Editor’s Note.

The number of subdivision (b)(24) was assigned by the Revisor of Statutes, the designation in Session Laws 1999-360, s. 2.1 having been subdivision (b)(22).

G.S. 108A-29(r), referred to in subdivision (b)(9a) of this section, was repealed by Session Laws 2009-489, s. 12. G.S. 108A-29(r), referred to in subdivision (b)(9a) of this section, was repealed by Session Laws 2009-489, s. 12.

Subdivision (b)(37) was added by Session Laws 2006-252, s. 2.21, as subdivision (b)(36), and was redesignated at the direction of the Revisor of Statutes.

Subdivision (b)(42) was added by Session Laws 2010-167, s. 2(c), as subdivision (b)(40), and was redesignated at the direction of the Revisor of Statutes.

Subdivision (b)(27) of this section was amended twice in 2006 in the code bill drafting format provided in G.S. 120-1 . Session Laws 2006-162, s. 4(c), rewrote subdivision (b)(27). Session Laws 2006-252, s. 2.21, amended subdivision (b)(27) by inserting “105-129.85,” without referring to changes made by Session Laws 2006-162. Subdivision (b)(27) has been set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2006-162, s. 33, as amended by Session Laws 2007-527, s. 24, provides: “Sections 4(a) and 4(b) of this act are effective for taxable years beginning on or after January 1, 2006. Section 13 of this act becomes effective July 1, 2007, and applies to motor fuel transported on or after that date. Sections 14, 15, and 17 of this act become effective January 1, 2007, and apply to motor fuel purchased on or after that date. An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007. Section 26 of this act is effective when it becomes law and applies to the estates of decedents dying on or after January 1, 2005. Section 32 of this act becomes effective January 1, 2007. The remainder of this act is effective when it becomes law.”

Session Laws 2007-345, s. 14.8(a), repealed Session Laws 2007-323, s. 24.4, which transferred certain revenue hearings positions to the Department of Administration. Session Laws 2007-345, s. 14.8(c), provides that the actions taken by the Administrative Hearings Officer at the Department of Revenue from the period beginning July 1, 2007, are given full force and effect as if Session Laws 2007-323, s. 24.4 had never been enacted. Session Laws 2007-345, s. 14.8(c) further provides: “Notwithstanding any provision of G.S. 105-259 to the contrary, any officer, employee, or agent of the State that provided access to tax information to the Administrative Hearings Officer or Administrative Assistant transferred under Section 24.4 of S.L. 2007-323 is not guilty of any offense to the extent that the provision of the information would have been authorized by that statute if the transfer had not occurred.”

Session Laws 2007-397, s. 15, contains 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.”

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.”

Session Laws 2011-145, s. 13.25(xx), provides: “The Revisor of Statutes shall make the conforming statutory changes necessary to reflect the transfers under this section. The Revisor of Statutes may correct any reference in the General Statutes to the statutes that are recodified by this section and make any other conforming changes necessitated by this section.” Pursuant to that provision, conforming changes have been made in subdivision (b)(41). “Commissioner of Agriculture” was substituted for “Secretary of Environment and Natural Resources” and “G.S. 106-1029” was substituted for “G.S. 113A-193.”

Session Laws 2011-145, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2011.’ ”

Session Laws 2011-145, s. 32.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2011-2013 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2011-2013 fiscal biennium.”

Session Laws 2011-145, s. 32.5 is a severability clause.

Session Laws 2013-360, ss. 6.9 and 7.10(c) both enacted subdivisions designated as subdivision (b)(44). Subdivision (b)(44), as enacted by Session Laws 2013-360, s. 7.10(c) has been renumbered as subdivision (b)(45) at the direction of the Revisor of Statutes.

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.5 is a severability clause.

Session Laws 2013-364, s. 7, as amended by Session Laws 2013-363, s. 3.17, provides: “Notwithstanding the definition for ‘eligible student’ set forth in G.S. 115C-112.2 , as enacted by this act, a child who is otherwise eligible to receive a scholarship grant for the spring semester of the 2013-2014 school year is deemed to have met the requirements of G.S. 115C-112.2 (2)f., as enacted by this act, if the child is a dependent child for whom a taxpayer is allowed a credit for the fall semester of the 2013-2014 school year under G.S. 105-151.33 (now repealed) and the taxpayer affirms, under oath, that the taxpayer will claim the credit for that semester. Notwithstanding G.S. 105-259(b), the Department of Revenue shall furnish, upon request, to the Authority a list of claimants that received a credit pursuant to G.S. 105-151.33 (now repealed) for the taxable year beginning on or after January 1, 2013. Notwithstanding the definition for ‘eligible student’ set forth in G.S. 115C-112.2, as enacted by this act, a child who meets the requirements of G.S. 115C-112.2(a) through (e) and who is eligible for enrollment in kindergarten or the first grade in a North Carolina public school during the 2013-2014 school year shall be eligible to receive a scholarship grant for the spring semester of the 2013-2014 school year.”

Section 105-116, referred to in subdivision (b)(5b), was repealed by Session Laws 2013-316, s. 4.1(a), effective July 1, 2014.

Section 105-116.1, referred to in subdivision (b)(5b), was repealed by Session Laws 2013-316, s. 4.1(a), effective July 1, 2014.

Section 105-187.44, referred to in subdivision (b)(5b), was repealed by Session Laws 2013-316, s. 4.1(d), effective July 1, 2014.

Session Laws 2014-3, s. 9.3, Session Laws 2014-3, s. 10.1(c), and Session Laws 2014-4, s. 17(b), each enacted new subdivisions designated as (b)(46). At the direction of the Revisor of Statutes, subdivision (b)(46), as added by Session Laws 2014-3, s. 10.1(c), has been renumbered as subdivision (b)(47), and subdivision (b)(46), as added by Session Laws 2014-4, s. 17(b), has been renumbered as subdivision (b)(48).

The amendment to subdivision (b)(45) by Session Laws 2015-241, s. 7A.4(h), included a reference to “G.S. 143B-1344.” “G.S. 143B-1381” has been substituted for “G.S. 143B-1344” at the direction of the Revisor of Statutes.

Session Laws 2017-128, s. 6(b), provides: “No later than June 30, 2018, the Department of Revenue and the Department of the State Treasurer shall develop and implement an information exchange system as contemplated by subsection (a) of this section. The two departments shall enter into a confidential information sharing agreement settling transfer protocols, required security measures, audit mechanisms, and other measures designed to protect confidential information.”

Session Laws 2017-128, s. 9, is a severability clause.

Session Laws 2017-135, s. 7(b), provides: “The Department of Revenue and the Department of the State Treasurer shall, within a reasonable time following the effective date of this act but not later than June 30, 2018, enter into a confidential information sharing agreement settling data transfer protocols, required security measures, audit mechanisms, and the like, so that the two departments can thereafter develop and implement the information exchange authorized by this act.”

Subdivision (b)(53), as added by Session Laws 2017-135, s. 7(a), was renumbered as subdivision (b)(39b) at the direction of the Revisor of Statutes.

Subdivision (b)(53), as added by Session Laws 2017-204, s. 4.7, was renumbered as subdivision (b)(54) at the direction of the Revisor of Statutes.

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. 105-241.13 A.”

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

Session Laws 2018-136, 3rd Ex. Sess., s. 1.1, provides: “This act shall be known as ‘2018 Hurricane Florence Disaster Recovery Act.’ ”

Session Laws 2018-136, 3rd Ex. Sess., s. 5.17(b), provides: “(b) The Department of Revenue and the Office of Recovery and Resiliency shall, within a reasonable time following the effective date of this act but not later than June 30, 2019, enter into a confidential information sharing agreement settling data transfer protocols, required security measures, audit mechanisms, and other issues necessary to develop and implement the information exchange provided in subsection (a) of this section.

Session Laws 2018-136, 3rd Ex. Sess., s. 6.3, is a severability clause.

Session Laws 2019-200, s. 8, provides: “Nothing in this act [which provides for miscellaneous and technical changes to statutes relating the Department of Information Technology, state agency cybersecurity, emergency telephone service and the 911 Board, cable service providers, the Information Technology Strategy Board, and training and certification of police telecommunicators] alters or diminishes the exclusive responsibility and authority of the Secretary of Revenue to maintain and safeguard the secrecy and security of taxpayer information under G.S. 105-259 .”

Session Laws 2020-88, s. 16(f), made the amendment of subdivision (b)(49) of this section by Session Laws 2020-88, s. 16(e), effective 30 days after it becomes law and applicable to capitation payments received by prepaid health plans on or after that date. Session Laws 2020-88 became law on July 2, 2020, making the effective date of this amendment August 1, 2020.

Session Laws 2021-180, s. 19C.9(aaaaa), made the amendments to this section by Session Laws 2021-180, s. 19C.9(v1), effective January 1, 2023, and further provides: “On and after that date, any references or directives in this act to the Division of Adult Correction and Juvenile Justice, the Section of Adult Correction in the Division of Adult Correction and Juvenile Justice, the Section of Juvenile Justice of the Division of Adult Correction and Juvenile Justice, or the Section of Community Corrections of the Division of Adult Correction and Juvenile Justice shall be construed to apply to the appropriate division of either the Department of Public Safety or the Department of Adult Correction pursuant to the departmental changes enacted by this section.”

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2003-349, s. 4, effective July 27, 2003, in subdivision (b)(7), substituted “Division of the State Highway Patrol of the Department of Crime Control and Public Safety” for “Division of Motor Vehicles of the Department of Transportation” and substituted “Division of the State Highway Patrol of the Department of Crime Control and Public Safety” for “Division of Motor Vehicles.”

Session Laws 2003-416, s. 2, effective August 14, 2003, reenacted Session Laws 2002-172.

Session Laws 2004-124, s. 32D.3, effective for business activities occurring on or after May 1, 2005, added subdivision (b)(30).

Session Laws 2004-170, s. 23, effective August 2, 2004, in subdivision (b)(7), inserted “the Division of Motor Vehicles of the Department of Transportation,” following “Safety,” substituted “Revenue,” for “Revenue or,” and added “or the Division of Motor Vehicles of the Department of Transportation” following “Safety.”

Session Laws 2004-204, s. 4, as amended by Session Laws 2005-435, s. 48, effective, for business activities occurring on or after November 1, 2004, and for taxable years beginning on or after January 1, 2005, and repealed for business activities occurring in taxable years beginning on or after January 1, 2020, added the subdivision designated herein as subdivision (31).

Session Laws 2005-276, s. 7.27(b), effective July 1, 2005, added subdivision (b)(32).

Session Laws 2005-276, s. 39.1(c), effective for taxable years beginning on or after January 1, 2005, and applicable to qualifying expenses incurred on or after July 1, 2005, added subdivision (b)(34).

Session Laws 2005-344, s. 10.2(b), as added by Session Laws 2005-276, s. 31.1(cc), effective August 31, 2005, added subdivision (b)(33).

Session Laws 2005-400, s. 20, effective January 1, 2006, substituted “Security” for “Guaranty” in subdivision (b)(16a).

Session Laws 2005-429, s. 2.13, effective January 1, 2007, rewrote subdivision (b)(27).

Session Laws 2005-435, ss. 32(b), 32(c) and 37, effective January 1, 2006, substituted “the amount of tax refunds paid to a governmental entity listed in G.S. 105-164.14(c) or to a State agency” for “information submitted to the Business License Information Office of the Department of Secretary of State on a master application form for various business licenses” at the end of the second paragraph of subdivision (a)(2); in subdivision (b)(6a), inserted “or city” following “To furnish the county” and made a minor stylistic change; substituted “Commerce” for “Secretary of State” in subdivision (b)(17); and added subdivision (b)(32), because a subdivision (b)(32) had already been added by Session Laws 2005-276, s. 7.27(b), the subdivision added by this act was redesignated as (b)(35) at the direction of the Revisor of Statutes.

Session Laws 2006-162, s. 4, as amended by Session Laws 2007-527, s. 24, in subsection (b), rewrote subdivision (b)(27) which read: “To publish the information required under G.S. 105-129.6, 105-129.19, 105-129.26, 105-129.38, 105-129.44, 105-129.65A, 105-130.41, 105-130.45, 105-151.22, and 105-164.14.”; deleted “publish the information required under G.S. 105-129.52 and to” preceding “prove that” in subdivision (b)(30); deleted former subdivision (b)(32) which read: “To provide the report required under G.S. 105-164.14(c) to the Department of Public Information and the Fiscal Research Division of the General Assembly.”; deleted “and to publish the reports required under those sections” following “commissions” at the end of subdivision (b)(34); and added subdivision (b)(36). For effective dates, see Editor’s note.

Session Laws 2006-196, s. 11, effective August 3, 2006, in paragraph (b)(5d), substituted “prepared food and beverages tax or room occupancy tax” for “tax on prepared food and beverages” at the end of the introductory paragraph, substituted “a business subject to a local prepared food and beverages tax or room occupancy tax” for “the business of selling prepared food and beverages” at the end of paragraph (b)(5d)a and substituted “local prepared food and beverages tax or room occupancy tax” for “local tax on prepared food and beverages” at the end of paragraph (b)(5d)b.

Session Laws 2006-252, s. 2.21, effective January 1, 2007, added “or G.S. 105-129.86(b)” at the end of subdivision (b)(24); inserted “105-129.85” in subdivision (b)(27); and added subdivision (b)(37).

Session Laws 2007-397, s. 13(d), effective for taxable years beginning on or after January 1, 2008, added subdivision (b)(38).

Session Laws 2007-491, s. 38, effective January 1, 2008, substituted “order, an administrative law judge’s order in a contested tax case” for “order” in subdivision (b)(1). For applicability, see Editor’s note.

Session Laws 2007-527, ss. 33-36, effective August 31, 2007, rewrote subdivision (b)(3); in subdivision (b)(7), inserted “or the Joint Operations Center for National Fuel Tax Compliance” and made a stylistic change; rewrote subdivision (b)(13); and in subdivision (b)(27), deleted “105-129.85” following “under this Chapter.”

Session Laws 2008-107, s. 28.25(d), effective for taxable years beginning on or after January 1, 2008, inserted “or a unit of State or local government” in subdivision (b)(38).

Session Laws 2008-144, s. 4, effective August 2, 2008, in subdivision (b)(5d), substituted “tax, room occupancy tax, vehicle rental tax, or heavy equipment rental” for “tax or room occupancy” in the introductory language, in sub-subdivision (b)(5d)a, substituted “one or more of these local taxes” for “a local prepared food and beverages tax or room occupancy tax,” and in sub-subdivision (b)(5d)b, deleted “of Revenue” following “Department”, and substituted “one or more of these local taxes” for “its local prepared food and beverages tax or room occupancy tax.”

Session Laws 2009-283, s. 1, effective July 10, 2009, added subdivision (b)(39).

Session Laws 2009-445, s. 39, effective August 7, 2009, in subsection (b), substituted “except as provided in this subsection. Standards used or to be used for the selection of returns for examination and data used or to be used for determining the standards may not be disclosed for any purpose. All other tax information may be disclosed only if the disclosure is made for one of the following purposes” for “unless the disclosure is made for one of the following purposes” in the introductory language.

Session Laws 2009-483, s. 10, effective August 26, 2009, added the second sentence in subdivision (b)(20).

Session Laws 2010-31, s. 13.15, effective July 1, 2010, added subdivision (b)(41).

Session Laws 2010-31, s. 31.8(g), effective June 30, 2010, rewrote subdivision (b)(18), which formerly read: “To furnish to the Office of the State Controller the name, address, and account and identification numbers of a taxpayer upon request to enable the State Controller to verify statewide vendor files or track debtors of the State.”

Session Laws 2010-95, s. 11, effective July 17, 2010, added subdivision (b)(40).

Session Laws 2010-166, s. 3.7, effective July 1, 2010, in subdivision (b)(6a), substituted “G.S. 105-164.29B” for “G.S. 105-164.14(f)” and substituted “that statute” for “G.S. 105-164.14(f)”; deleted subdivisions (b)(31) and (b)(35), which pertained to verification and furnishing of information under Article 3G of this Chapter; and in subdivision (b)(37), substituted “study required under G.S. 105-129.82 ” for “studies required under G.S. 105-129.2 A and G.S. 105-129.82 .”

Session Laws 2010-167, s. 2(c), effective for taxable years beginning on or after January 1, 2010, added subdivision (b)(42).

Session Laws 2011-145, s. 19.1(g), (h), (k), (n), and (p), effective January 1, 2012, substituted “Public Safety” for “Crime Control and Public Safety” twice in subdivision (b)(7) and in sub-subdivision (b)(15)b.; substituted “State Highway Patrol Section” for “Division of the State Highway Patrol” twice in subdivision (b)(7); substituted “Alcohol Law Enforcement Section” for “Division of Alcohol Law Enforcement” in sub-subdivision (b)(15)b.; and substituted “Section of Community Corrections of the Division of Adult Correction of the Division of Adult Correction of the Department of Public Safety” for “Division of Community Corrections of the Department of Correction” in sub-subdivision (b)(15)e.

Session Laws 2011-145, s. 13.25(nn), effective July 1, 2011, substituted “Department of Agriculture and Consumer Services” for “Department of Environment and Natural Resources” in subdivision (b)(41).

Session Laws 2011-330, s. 33(b), effective June 27, 2011, substituted “publication” for “report” in subdivision (b)(27).

Session Laws 2011-401, ss. 3.9 and 5.1, effective November 1, 2011, substituted “Division of Employment Security” for “Employment Security Commission” in subdivisions (b)(9), (b)(9a), and (b)(24); and substituted “Division” for “Commission” in subdivision (b)(9).

Session Laws 2012-83, s. 35, effective June 26, 2012, substituted “United States Department of Justice” for “United States Treasury Department” in sub-subdivision (b)(15)c.

Session Laws 2012-133, s. 1(b), effective June 29, 2012, added subdivision (b)(43).

Session Laws 2013-155, s. 6, effective July 1, 2013, substituted “North Carolina Forest Service” for “Division of Forest Resources” in subdivision (b)(41).

Session Laws 2013-360, s. 6.9, effective July 1, 2013, added subdivision (b)(44).

Session Laws 2013-360, s. 7.10(c), effective July 26, 2013, added subdivision (b)(45).

Session Laws 2013-414, s. 19, effective August 23, 2013, rewrote subdivisions (b)(15a) and (b)(29); and inserted “and registration numbers” in subdivision (b)(25).

Session Laws 2014-3, s. 9.3, effective May 29, 2014, added subdivisions (b)(40a) and (b)(46).

Session Laws 2014-3, s. 10.1(c), effective May 1, 2015, added subdivision (b)(46) (redesignated as subdivision (b)(47)).

Session Laws 2014-4, s. 17(b), effective July 1, 2015, added subdivision (b)(46) (redesignated as subdivision (b)(47)). See Editor’s note for applicability.

Session Laws 2014-100, s. 17.1(xxx), effective July 1, 2014, substituted “Branch” for “Section” in sub-subdivision (b)(15)b.

Session Laws 2014-115, s. 56.8(e), effective August 11, 2014, substituted “State Chief Information Officer” for “State Controller” in the first sentence of subdivision (b)(45).

Session Laws 2015-99, s. 2, effective June 19, 2015, added subdivision (b)(49).

Session Laws 2015-241, ss. 6.24(h), 14.30(u), (v), and 16A.7(j), effective July 1, 2015, in subsection (b), substituted “State Highway Patrol” for “State Highway Patrol Section” twice in subdivision (7), added the present second sentence in the introductory language of subdivision (40a), and in subdivision (48), substituted “Department of Environmental Quality” for “Department of Environment and Natural Resources” twice and substituted “Secretary of Environmental Quality” for “Secretary of Environment and Natural Resources”.

Session Laws 2015-241, s. 7A.4(h), effective September 18, 2015, in the first sentence of subdivision (b)(45), deleted “Office of the” preceding “State Chief” and substituted “pursuant to G.S. 143B-1344 ” for “under G.S. 143B-426.38 A”. For conforming change, see editor’s note.

Session Laws 2015-241, s. 15.25(b), effective September 18, 2015, added subdivision (b)(34a). For applicability, see editor’s note.

Session Laws 2016-5, s. 4.5(a), effective May 11, 2016, substituted “sold in this State by distributor, and” for “sells in this State and” in subdivision (b)(40); and added subdivisions (b)(50) and (b)(51).

Session Laws 2016-57, s. 2(f), effective September 1, 2016, added subdivision (b)(52). See editor’s note for applicability.

Session Laws 2016-103, s. 7, effective July 22, 2016, in subdivision (b)(27), inserted “or written determination” in the first sentence, and added the last sentence.

Session Laws 2017-128, s. 6(a), effective July 20, 2017, added subdivision (b)(39a).

Session Laws 2017-135, s. 7(a), effective July 20, 2017, added subdivision (b)(39a). For redesignation of subdivision, see editor’s note.

Session Laws 2017-186, s. 2(uuuu), effective December 1, 2017, inserted “and Juvenile Justice” in subdivision (b)(15)e.

Session Laws 2017-203, s. 2, effective December 31, 2017, added subdivision (b)(53).

Session Laws 2017-204, s. 4.7, effective August 11, 2017, substituted “G.S. 143B-1385” for “G.S. 143B-1381” in the first sentence of subdivision (b)(45), and added subdivision (b)(53). For applicability and for redesignation of subdivision, see editor’s notes.

Session Laws 2018-5, ss. 37.5(a), 38.6(e), effective June 12, 2018, substituted “the name, physical address” for “the name” in subdivision (b)(50); and added subsection (b1).

Session Laws 2018-136, 3rd Ex. Sess., s. 5.17(a), effective October 15, 2018, added subdivision (b)(55).

Session Laws 2019-6, s. 4.10, effective March 20, 2019, added sub-subdivision (b)(15)c1.

Session Laws 2019-203, s. 9(a), effective October 1, 2019, substituted “Alcohol Law Enforcement Division” for “Alcohol Law Enforcement Branch” in sub-subdivision (b)(15)b.

Session Laws 2020-58, s. 2.2(b), effective June 30, 2020, in subdivision (b)(50), substituted “make available” for “provide public access” near the beginning, and substituted “all entities licensed under Article 2A of this Chapter” for “aid in the administration of the tobacco products tax” at the end.

Session Laws 2020-88, s. 16(e), added “or the North Carolina Department of Health and Human Services” and “of Revenue” in subdivision (b)(49). For effective date and applicability, see editor’s note.

Session Laws 2021-180, s. 19C.9(v1), effective January 1, 2023, substituted “Division of Community Supervision and Reentry of the Department of Adult Correction” for “Section of Community Corrections of the Division of Adult Correction and Juvenile Justice of the Department of Public Safety” in sub-subdivision (b)(15)e. For effective date and applicability, see editor's note.

Session Laws 2021-180, s. 42.13C(b), effective November 18, 2021, repealed subdivision (b)(5b).

Legal Periodicals.

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

See legislative survey, 21 Campbell L. Rev. 323 (1999).

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).

OPINIONS OF ATTORNEY GENERAL

The failure of Session Laws 2002-190 (HB 314) to include subdivision (b)(7) of this section in the series of specific statutes for which the term “Department of Crime Control and Public Safety” was substituted for the term “Division of Motor Vehicles of the Department of Transportation,” has no legal significance because the General Assembly intended that the subdivision should remain a viable exception to the general prohibition against disclosure of tax information. See opinion of Attorney General to Sabra J. Faires, Assistant Secretary for Tax Administration, Department of Revenue, 2002 N.C. Op. Att'y Gen. 30 (11/18/02).

Effective January 1, 2003, the Department of Revenue should administer subdivision (b)(7) of this section as if it reads: “To exchange information with Motor Vehicles Enforcement Section of the Department of Crime Control and Public Safety or the International Fuel Tax Association Inc. when the information is needed to fulfill a duty imposed on the Department of Revenue or the Motor Vehicles Enforcement Section of the Department of Crime Control and Public Safety.” See opinion of Attorney General to Sabra J. Faires, Assistant Secretary for Tax Administration, Department of Revenue, 2002 N.C. Op. Att'y Gen. 30 (11/18/02).

The Tax Review Board is exempt from the Open Meetings Law while it is meeting “solely for the purpose of making a decision” in a petition pending before the Board; however, the exemption only applies to the deliberations of the Board and does not apply when it is receiving evidence or arguments in a hearing prior to deliberating upon the evidence, nor when it is meeting for any purpose other than deciding the outcome of a petition pending before it. See opinion of Attorney General to The Honorable Richard H. Moore, Treasurer, State of North Carolina, 2004 N.C. Op. Att'y Gen. 10 (10/12/04).

Employees and officers of the State, including members of the Tax Review Board are prohibited from disclosing any tax information as defined in subdivision (a)(2) of this section. See opinion of Attorney General to The Honorable Richard H. Moore, Treasurer, State of North Carolina, 2004 N.C. Op. Att'y Gen. 10 (10/12/04).

Members of the Tax Review Board and staff must comply with both the confidentiality obligations of subsection (b) of this section and the obligations for disclosure set forth in the Public Records Law, G.S.132-1 et seq., with respect to the release of records and other information; the obligation does not vary based upon whether the Board receives a request for information prior to or after publication of an order by the Board. See opinion of Attorney General to The Honorable Richard H. Moore, Treasurer, State of North Carolina, 2004 N.C. Op. Att'y Gen. 10 (10/12/04).

§ 105-260. Evaluation of Department personnel.

The Secretary may not use records of tax enforcement results, or production goals based on these records, as the sole criteria in evaluating employees of the Department who are directly involved in tax collection activities or in evaluating the immediate supervisors of these employees. The Secretary must consider records of taxpayer complaints that named an employee as discourteous, unresponsive, or incompetent in evaluating the employee.

History. 1939, c. 158, s. 929; 1973, c. 476, s. 193; 1981, c. 859, s. 79; c. 1127, s. 53; 1993, c. 532, s. 8.

§ 105-260.1. Delegation of authority to hold hearings.

The Secretary may delegate the authority to hold a hearing required or allowed under this Chapter.

History. 1985, c. 258; 2014-3, s. 9.4.

Effect of Amendments.

Session Laws 2014-3, s. 9.4, effective May 29, 2014, substituted “Secretary may delegate the authority to hold a hearing” for “Secretary of Revenue may delegate to a Deputy or Assistant Secretary of Revenue the authority to hold any hearing.”

§ 105-261. Secretary and deputies to administer oaths.

The Secretary of Revenue and such deputies as he may designate shall have the power to administer an oath to any person or to take the acknowledgment of any person in respect to any return or report required by this Subchapter or under the rules and regulations of the Secretary of Revenue, and shall have access to all the books and records of any person, firm, corporation, county, or municipality in this State.

History. 1939, c. 158, s. 930; 1973, c. 476, s. 193.

§ 105-262. Rules.

  1. Authority. —  The Secretary of Revenue may adopt rules needed to administer a tax collected by the Secretary or to fulfill another duty delegated to the Secretary. G.S. 150B-1 and Article 2A of Chapter 150B of the General Statutes set out the procedure for the adoption of rules by the Secretary.
  2. Repealed by Session Laws 2012-43, s. 1, effective June 20, 2012, and Session Laws 2012-79, s. 1.14(d), effective June 26, 2012.
  3. Fiscal Note. —  The Secretary must ask the Office of State Budget and Management to prepare a fiscal note for a proposed new rule or a proposed change to a rule that has a substantial economic impact, as defined in G.S. 150B-21.4(b1). The Secretary shall not take final action on a proposed rule change that has a substantial economic impact until at least 60 days after the fiscal note has been prepared.

History. 1939, c. 158, s. 931; 1955, c. 1350, s. 2; 1973, c. 476, s. 193; 1981, c. 859, s. 80; c. 1127, s. 53; 1991, c. 45, s. 28; c. 477, s. 7; 1995, c. 507, s. 27.8(p); 2000-140, s. 93.1(a); 2001-424, s. 12.2(b); 2007-491, s. 39; 2010-31, s. 31.10(f); 2012-43, s. 1; 2012-79, s. 1.14(d).

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.”

Session Laws 2010-31, s. 31.10(g), provides, in part: “This section shall not be construed to affect the interpretation of any statute that is the subject of litigation pending as of the effective date of this act [July 1, 2010] in the General Court of Justice or to affect any other pending litigation.”

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 2012-43, s. 4, provides: “On June 30, 2011, the Governor signed into law S.L. 2011-390, House Bill 619, as passed by the General Assembly. The law repealed the Secretary of Revenue’s authority to adjust a corporation’s net income or require a combined return under G.S. 105-130.6 , 105-130.15, and 105-130.16 and replaced it with a new authority under G.S. 105-130.5 A. The Fiscal Research Division of the North Carolina General Assembly prepared a fiscal memo on House Bill 619. Therefore, notwithstanding G.S. 105-262.1 , as enacted by Section 2 of this act, G.S. 105-262(c), and Section 7 of the Budget Manual prepared by the Office of State Budget and Management, the Secretary of Revenue shall not be required to prepare a fiscal note for a proposed new rule submitted to the Codifier of Rules under G.S. 105-262.1 , as enacted by this act, prior to December 31, 2012.”

Effect of Amendments.

Session Laws 2007-491, s. 39, effective January 1, 2008, rewrote the second sentence of subsection (a), which formerly read: “The Tax Review Board shall review a new rule or a change to a rule before it is filed in the North Carolina Administrative Code.” For applicability, see Editor’s note.

Session Laws 2010-31, s. 31.10(f), effective June 30, 2010, in subsection (a), added “Authority. —”; added present subsection (b); and redesignated former subsection (b) as subsection (c), and added “Fiscal Note. —.”

Session Laws 2012-43, s. 1, effective June 20, 2012, deleted subsection (b), regarding notice and hearing requirements.

Session Laws 2012-79, s. 1.14(d), effective June 26, 2012, deleted subsection (b), regarding notice and hearing requirements.

CASE NOTES

Editor’s Note. —

The cases below were decided prior to the 1991 amendment, which rewrote this section.

Remedies of Taxpayer. —

Any interested citizen may procure a copy of the regulations promulgated pursuant to this section and apply the administrator’s interpretation of the law to the citizen’s tax situation. If, under the regulations, tax liability seems likely, he may present the matter to the Secretary of Revenue for examination and determination. If the Secretary assesses a tax, the party who deems himself aggrieved may, as provided by statute, protect himself against an illegal assessment. Duke v. State, 247 N.C. 236 , 100 S.E.2d 506, 1957 N.C. LEXIS 674 (1957).

Petition will not lie directly to the superior court to have an administrative interpretation promulgated by the Secretary under this section declared to be erroneous, unlawful or improper. Duke v. State, 247 N.C. 236 , 100 S.E.2d 506, 1957 N.C. LEXIS 674 (1957).

Interpretation of Secretary Prima Facie Correct. —

While a decision or regulation of the Secretary of Revenue interpreting a taxing statute is not controlling, the Secretary of Revenue is authorized by this section to implement taxing statutes, with certain specific exceptions, and his interpretation is made prima facie correct, and such interpretive regulation will ordinarily be upheld when it is not in conflict with the statute and is within the authority of the Secretary to promulgate. Campbell v. Currie, 251 N.C. 329 , 111 S.E.2d 319, 1959 N.C. LEXIS 571 (1959); In re Alamance Mem. Park, 41 N.C. App. 278, 254 S.E.2d 671, 1979 N.C. App. LEXIS 2421 (1979).

OPINIONS OF ATTORNEY GENERAL

This section does not require that the Tax Review Board approve the Revenue Department’s rules which have been filed with the Attorney General as Title 17 of the North Carolina Administrative Code in order for those rules to become effective. See opinion of Attorney General to Mr. Sam T. Currin, Assistant to the Secretary, Department of Revenue, 46 N.C.A.G. 53 (1976), rendered prior to 1991 amendment.

§ 105-262.1. Rules to exercise authority under G.S. 105-130.5A.

  1. Purpose and Scope. —  It is the policy of the State to provide necessary guidance on a timely basis to corporate taxpayers subject under G.S. 105-130.5 A to have their net income adjusted or to be required to file a combined return. Except for a voluntary redetermination as allowed under G.S. 105-130.5 A(c), the Secretary may not redetermine the State net income of a corporation properly attributable to its business carried on in the State under G.S. 105-130.5A until a rule adopted by the Secretary in accordance with this section becomes effective. This section provides an expedited procedure for the adoption of rules needed to administer G.S. 105-130.5A. The Secretary may not interpret G.S. 105-130.5A in the form of a bulletin or directive under G.S. 105-264 .The Secretary is exempt from G.S. 150B-21.1 through G.S. 150B-21.4 of Part 2 of Article 2A of Chapter 150B of the General Statutes but is subject to the expedited procedure for the adoption of rules as established by this section. The Secretary is exempt from Part 3 of Article 2A of Chapter 150B of the General Statutes but is subject to the expedited review procedure as established by this section.
  2. Definitions. —  The definitions in G.S. 150B-2 apply in this section.
  3. Fiscal Note. —  The Secretary must prepare a fiscal note for a proposed new rule or a proposed change to a rule that has a substantial economic impact. The fiscal note must be submitted with the proposed rule when the rule is submitted to the Codifier of Rules, and the Codifier of Rules must publish the fiscal note with the proposed rule on the Internet. The Secretary must accept a written comment on the fiscal note in the same manner the Secretary accepts written comments on the proposed rule. The Secretary is not subject to the fiscal note requirement under G.S. 105-262(c). For purposes of this section, a “substantial economic impact” has the same meaning as defined in G.S. 150B-21.4(b1).
  4. Adoption. —  The Secretary may adopt a rule under this section by using the procedure for adoption of a temporary rule set forth in G.S. 150B-21.1(a3). The Secretary must provide electronic notification of the adoption of a rule to persons on the mailing list maintained in accordance with G.S. 150B-21.2(d) and any other interested parties, including those originally given notice of the rule making and those who provided comment on the rule. If the Secretary receives written comment objecting to the rule and requesting review by the Commission, the rule must be reviewed in accordance with subsections (e) through (i) of this section. A person may object to the rule and request review by the Commission at any point following the agency’s adoption of the rule and by 5:00 P.M. on the third business day following electronic notification from the Secretary of the adoption of a rule. If the Secretary receives no written comment objecting to the rule and requesting review by the Commission, the Secretary must deliver the rule to the Codifier of Rules. The Codifier of Rules must enter the rule into the North Carolina Administrative Code upon receipt of the rule.
  5. Review. —  If the Secretary receives written comment objecting to the rule and requesting review by the Commission, the Secretary must submit the rule to the Commission for review. The Commission may not consider questions relating to the quality or efficacy of the rule but must restrict its review to a determination of whether the rule meets all of the following criteria:
    1. It is within the authority delegated to the agency by the General Assembly.
    2. It is clear and unambiguous.
    3. It is reasonably necessary to implement or interpret an enactment of the General Assembly, or of Congress, or a regulation of a federal agency. The Commission must consider the cumulative effect of all rules adopted by the agency related to the specific purpose for which the rule is proposed.
    4. It was adopted in accordance with this section.
  6. Manner of Review. —  When the Commission reviews a rule under this section, the time limits in subsections (b) and (b1) of G.S. 150B-21.1 apply. The Commission must review the rule to determine whether the rule meets the standards in subsection (e) of this section. The Commission must direct a member of its staff who is an attorney licensed to practice law in North Carolina to review the rule. The staff member must make a recommendation to the Commission or its designee. The Commission’s designee must be a panel of at least three members of the Commission. The staff member, Commission’s designee, or the Commission may also request technical changes as allowed in G.S. 150B-21.10 . In reviewing the rule, the Commission may consider any information submitted by the Secretary or another person.
  7. Objection. —  If the Commission or its designee finds that the rule does not meet the standards in subsection (e) of this section and objects to the rule, the Commission or its designee must send the Secretary a written statement of the objection and the reason for the objection within one business day. The Secretary must take one of the following actions:
    1. Change the rule to satisfy the Commission’s objection and submit the revised rule to the Commission.
    2. Submit a written response to the Commission indicating that the Secretary has decided not to change the rule.
  8. Changes. —  When the Secretary changes a rule in response to an objection by the Commission, the Commission must determine whether the change satisfies the Commission’s objection. If it does, the Commission must approve the rule. If it does not, the Commission must send the Secretary a written statement of the Commission’s continued objection and the reason for the continued objection.
  9. Approval. —  If the Commission or its designee finds that the rule meets the standards in subsection (e) of this section, the Commission or its designee must approve the rule and deliver the rule to the Codifier of Rules. The Codifier of Rules must enter the rule into the North Carolina Administrative Code upon receipt from the Commission or its designee.
  10. Return of Rule. —  A rule to which the Commission has objected remains under review by the Commission until the Secretary decides not to satisfy the Commission’s objection and makes a written request to the Commission to return the rule to the Secretary. When the Commission returns a rule to the Secretary in accordance with this section, the Secretary may file an action for declaratory judgment in Wake County Superior Court pursuant to Article 26 of Chapter 1 of the General Statutes.
  11. Effective Date. — G.S. 150B-21.3 does not apply to a rule adopted under this section. A rule adopted under this section becomes effective on the last day of the month the Codifier of Rules enters the rule in the North Carolina Administrative Code.

History. 2012-43, s. 2; 2013-414, s. 48.

Editor’s Note.

Session Laws 2012-43, s. 4, provides: “On June 30, 2011, the Governor signed into law S.L. 2011-390, House Bill 619, as passed by the General Assembly. The law repealed the Secretary of Revenue’s authority to adjust a corporation’s net income or require a combined return under G.S. 105-130.6 , 105-130.15, and 105-130.16 and replaced it with a new authority under G.S. 105-130.5 A. The Fiscal Research Division of the North Carolina General Assembly prepared a fiscal memo on House Bill 619. Therefore, notwithstanding G.S. 105-262.1 , as enacted by Section 2 of this act, G.S. 105-262(c), and Section 7 of the Budget Manual prepared by the Office of State Budget and Management, the Secretary of Revenue shall not be required to prepare a fiscal note for a proposed new rule submitted to the Codifier of Rules under G.S. 105-262.1 , as enacted by this act, prior to December 31, 2012.”

Session Laws 2012-43, s. 5, provides: “On April 17, 2012, the Department of Revenue published a directive pursuant to G.S. 105-264 , CD-12-02, that explains the Secretary’s authority under G.S. 105-130.5 A to redetermine a corporation’s net income by adjusting the corporation’s intercompany transactions or requiring a corporation to file a combined income tax return for tax years beginning on or after January 1, 2012. This act supersedes the Directive; however, a taxpayer who relied upon the interpretation in the Directive and whose North Carolina taxable income for the 2012 taxable year is less under the Directive’s interpretation than under an interpretation of G.S. 105-130.5 A by a rule adopted pursuant to G.S. 105-262.1 , as enacted by this act, is entitled to rely on the interpretation under the Directive for the 2012 taxable year.”

Session Laws 2012-43, s. 6, provides: “S.L. 2011-390, as amended by S.L. 2011-411, enacted G.S. 105-130.5 A, effective for taxable years beginning on or after January 1, 2012. The Secretary of Revenue’s authority under G.S. 105-130.5 A exists continuously for taxable years beginning on or after January 1, 2012. G.S. 105-262.1 , as enacted by Section 2 of this act, prevents the Secretary from exercising the authority granted under G.S. 105-130.5A until a rule adopted in accordance with G.S. 105-262.1 becomes effective. After the rule becomes effective, the Secretary may issue a proposed denial of a refund or a proposed assessment under the authority of G.S. 105-130.5A for any taxable year beginning on or after January 1, 2012, subject to the applicable statute of limitations.”

Effect of Amendments.

Session Laws 2013-414, s. 48, effective August 23, 2013, substituted “following the agency’s adoption” for “prior to the adoption” in the fourth sentence of subsection (d).

§ 105-263. Timely filing of mailed documents and requests for extensions.

  1. Mailed Document. —  Sections 7502 and 7503 of the Code govern when a return, report, payment, or any other document that is mailed to the Department is timely filed.
  2. (Effective for taxable years beginning before January 1, 2019) Extension. —  The Secretary may extend the time in which a person must file a return with the Secretary. To obtain an extension of time for filing a return, a person must comply with any application requirement set by the Secretary. An extension of time for filing a franchise tax return or an income tax return does not extend the time for paying the tax due or the time when a penalty attaches for failure to pay the tax. An extension of time for filing any return other than a franchise tax return or an income tax return extends the time for paying the tax due and the time when a penalty attaches for failure to pay the tax. When an extension of time for filing a return extends the time for paying the tax expected to be due with the return, interest, at the rate established pursuant to G.S. 105-241.21 , accrues on the tax due from the original due date of the return to the date the tax is paid. (b) (Effective for taxable years beginning on or after January 1, 2019) Extension. — The Secretary may extend the time in which a person must file a return with the Secretary. Except as provided in subsection (c) of this section, a person must comply with any application requirement set by the Secretary to obtain an extension of time for filing a return. An extension of time for filing a franchise tax return or an income tax return does not extend the time for paying the tax due or the time when a penalty attaches for failure to pay the tax. An extension of time for filing any return other than a franchise tax return or an income tax return extends the time for paying the tax due and the time when a penalty attaches for failure to pay the tax. When an extension of time for filing a return extends the time for paying the tax expected to be due with the return, interest, at the rate established pursuant to G.S. 105-241.21 , accrues on the tax due from the original due date of the return to the date the tax is paid.
  3. (Effective for taxable years beginning on or after January 1, 2019) Automatic Extension. —  A person who is granted an automatic extension to file a federal income tax return, including a return of partnership income, is granted an automatic extension to file the corresponding State income tax return and franchise tax return. The person must certify on the State tax return that the person was granted a federal extension.
  4. Electronic Documents. —  The Secretary shall prescribe when a return, report, payment, or any other document that is electronically submitted to the Department is timely filed.

History. 1939, c. 158, s. 932; 1973, c. 476, s. 193; 1977, c. 1114, s. 2; 1989 (Reg. Sess., 1990), c. 984, s. 14; 1991 (Reg. Sess., 1992), c. 930, s. 11; 1997-300, s. 1; 2007-491, s. 44(1)a; 2008-107, s. 28.18(c); 2010-95, s. 10(a); 2012-79, s. 1.8; 2013-414, s. 1(j); 2018-5, s. 38.4(a), 38.10(q).

Subsection (b) Set Out Twice.

The first version of subsection (b) set out above is effective for taxable years beginning before January 1, 2019. The second version of subsection (b) set out above is effective for taxable years beginning on or after January 1, 2019.

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 2008-107, s. 28.18(e), provides: “This section does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute repealed by this act before the effective date of its repeal; nor does it affect the right to any refund or credit of a tax that accrued under the repealed statute before the effective date of its repeal.”

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Subsection (d) was enacted by Session Laws 2018-5, s. 38.10(q), as subsection (c). It was redesignated at the direction of the Revisor of Statutes.

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 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 last sentence. For applicability, see Editor’s note.

Session Laws 2008-107, s. 28.18(c), effective January 1, 2009, and applicable to gifts made on or after the date, substituted “franchise tax return or an income tax return” for “franchise tax return, an income tax return, or a gift tax return” twice.

Session Laws 2010-95, s. 10(a), effective July 17, 2010, rewrote the section catchline, which formerly read: “Extensions of time for filing a report or return”; added present subsection (a); redesignated the previously existing provisions of the section as subsection (b); and, in subsection (b), added “Extension. —” at the beginning.

Session Laws 2012-79, s. 1.8, effective June 26, 2012, substituted “Sections 7502 and 7503 of the Code govern” for “Section 7502 of the Code governs” in subsection (a).

Session Laws 2013-414, s. 1(j), effective August 23, 2013, deleted “report or” preceding “return” or similar language throughout subsection (b).

Session Laws 2018-5, s. 38.4(a), effective for taxable years beginning on or after January 1, 2019, in the second sentence in subsection (b), substituted “Except as provided in subsection (c) of this section” for “To obtain an extension of time for filing a return” at the beginning, and added “to obtain an extension of time for filing a return” at the end; and added subsection (c).

Session Laws 2018-5, s. 38.10(q), effective June 12, 2018, added subsection (c). For redesignation of subsection, see editor’s note.

§ 105-264. Effect of Secretary’s interpretation of revenue laws.

  1. Interpretation. —  It is the duty of the Secretary to interpret all laws administered by the Secretary. The Secretary’s interpretation of these laws shall be consistent with the applicable rules. An interpretation by the Secretary is prima facie correct. When the Secretary interprets a law by adopting a rule or publishing a bulletin or directive on the law, the interpretation is a protection to the officers and taxpayers affected by the interpretation, and taxpayers are entitled to rely upon the interpretation. If the Secretary changes an interpretation, a taxpayer who relied on it before it was changed is not liable for any penalty or additional assessment on any tax that accrued before the interpretation was changed and was not paid by reason of reliance upon the interpretation.
  2. Advice. —  If a taxpayer requests specific advice from the Department and receives erroneous advice in response, the taxpayer is not liable for any penalty or additional assessment attributable to the erroneous advice furnished by the Department to the extent that the following conditions are all satisfied:
    1. The advice was reasonably relied upon by the taxpayer.
    2. The penalty or additional assessment did not result from the taxpayer’s failure to provide adequate or accurate information.
    3. The Department provided the advice in writing or the Department’s records establish that the Department provided erroneous verbal advice.
  3. Revised Interpretations. —  This section does not prevent the Secretary from changing an interpretation, and it does not prevent a change in an interpretation from applying on and after the effective date of the change. An interpretation that revises a prior interpretation by expanding the scope of a tax or otherwise increasing the amount of tax due may not become effective sooner than the following:
    1. For a tax that is payable on a monthly or quarterly basis, the first day of a month that is at least 90 days after the date the revised interpretation is issued.
    2. For a tax that is payable on an annual basis, the first day of a tax year that begins after the date the revised interpretation is issued.
  4. Fee. —  The Secretary may charge a fee for providing a written determination at the request of a taxpayer. The fee is a receipt of the Department and must be applied to the costs of providing the written determination. The proceeds of the fee must be credited to a special account within the Department and do not revert but remain in the special account until spent by the Department for the costs of providing the written determination. The Secretary may adopt a tiered fee structure based on the taxpayer’s income or gross receipts, the relative complexity of the advice requested, or the tax schedule for which advice is requested. The fee shall not be less than one hundred dollars ($100.00) or more than five thousand dollars ($5,000). The fee may be waived by the Secretary. The term “written determination” has the same meaning as defined in G.S. 105-264.2 .

History. 1939, c. 158, s. 933; 1955, c. 1350, s. 4; 1957, c. 1340, s. 14; 1973, c. 476, s. 193; 1991, c. 45, s. 29; 1993, c. 532, s. 9; 1998-98, s. 21; 2008-107, s. 28.16(e); 2010-31, s. 31.7A(a); 2011-390, s. 6; 2016-103, s. 6.

Editor’s Note.

Session Laws 2008-107, s. 28.16(a), provides: “The General Assembly makes the following findings:

“(1) The following areas of the sales and use tax laws are the areas for which the Department of Revenue receives the most questions from taxpayers:

“a. The rate of tax that applies to food and prepared food.

“b. The distinction between a retailer and a performance contractor.

“c. The distinction between a service that is necessary to complete the sale of tangible personal property, and therefore taxable, and a service that is incidental to the sale of tangible personal property, and therefore not taxable.

“d. The determination of whether a person is a manufacturer.

“(2) These areas of the sales and use tax laws have been the subject of legislative changes in recent years.

“(3) Small businesses have fewer resources to devote to resolving the complexities of the sales and use tax laws than large businesses have and, therefore, may be at a disadvantage with respect to compliance issues in complex areas and changing areas.

“(4) Assessments against a small business for inadvertent noncompliance in these complex areas may threaten the viability of the small business.

“(5) The sales and use tax laws are not intended to place the viability of small businesses in jeopardy.

“(6) A study of these complex areas is needed to determine how to make the laws in these areas clearer and to reduce the compliance burden.”

Session Laws 2008-107, s. 28.16(g), provides: “The Department of Revenue is directed to establish a plan to record telephone calls received at the Department’s Taxpayer Assistance Center and to implement this plan by July 1, 2010. The plan shall, at a minimum, provide for recording calls for the purpose of training and evaluation with respect to customer service and quality control measures. The Department may retain up to seven hundred thousand dollars ($700,000) of the amount collected under Article 5 of Chapter 105 of the General Statutes in fiscal year 2008-2009 for this purpose, and this amount is appropriated to the Department for this purpose. Amounts not used in fiscal year 2008-2009 for this purpose do not revert but remain available to the Department for this purpose until the system is implemented.”

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2012-43, s. 5, provides: “On April 17, 2012, the Department of Revenue published a directive pursuant to G.S. 105-264 , CD-12-02, that explains the Secretary’s authority under G.S. 105-130.5 A to redetermine a corporation’s net income by adjusting the corporation’s intercompany transactions or requiring a corporation to file a combined income tax return for tax years beginning on or after January 1, 2012. This act supersedes the Directive; however, a taxpayer who relied upon the interpretation in the Directive and whose North Carolina taxable income for the 2012 taxable year is less under the Directive’s interpretation than under an interpretation of G.S. 105-130.5 A by a rule adopted pursuant to G.S. 105-262.1 , as enacted by this act, is entitled to rely on the interpretation under the Directive for the 2012 taxable year.”

Effect of Amendments.

Session Laws 2008-107, s. 28.16(e), effective July 16, 2008, rewrote the section.

Session Laws 2010-31, s. 31.7A(a), effective June 30, 2010, rewrote subsection (c).

Session Laws 2011-390, s. 6, effective January 1, 2012, added subsection (d).

Session Laws 2016-103, s. 6, effective July 22, 2016, in subsection (d), substituted “a written determination” for “specific written advice” in the first sentence, substituted “written determination” for “specific advice” in the second and third sentences, and added the last sentence.

CASE NOTES

Applicability of “Prima Facie Correct” Standard. —

Interpretation of a tax statute by the Secretary of Revenue is prima facie correct, and when the Secretary interprets a tax law by adopting a rule or publishing a bulletin on the law, the interpretation is a protection to the officers and taxpayers affected by the interpretation. Polaroid Corp. v. Offerman, 349 N.C. 290 , 507 S.E.2d 284, 1998 N.C. LEXIS 727 (1998), cert. denied, 526 U.S. 1098, 119 S. Ct. 1576, 143 L. Ed. 2d 671, 1999 U.S. LEXIS 3039 (1999), overruled in part, Lenox, Inc. v. Tolson, 353 N.C. 659 , 548 S.E.2d 513, 2001 N.C. LEXIS 671 (2001) (decided prior to the 2002 amendment to the definition of “business income” in this section).

A reading of this entire section indicates that only decisions of the Secretary of Revenue to initiate or propose regulations that modify, change, alter or repeal existing regulations are “prima facie correct.” This “prima facie correct” standard does not apply to administrative interpretations. National Serv. Indus., Inc. v. Powers, 98 N.C. App. 504, 391 S.E.2d 509, 1990 N.C. App. LEXIS 419 (1990).

Under operation of G.S. 105-264 , the North Carolina Secretary of Revenue’s interpretation of a statute he administers is prima facie correct. A&F Trademark, Inc. v. Tolson, 167 N.C. App. 150, 605 S.E.2d 187, 2004 N.C. App. LEXIS 2162 (2004), cert. denied, 546 U.S. 821, 126 S. Ct. 353, 163 L. Ed. 2d 62, 2005 U.S. LEXIS 6033 (2005).

Although the interpretation by the Secretary of the North Carolina Department of Revenue (NCDOR) was prima facie correct under G.S. 105-264 , in conducting statutory interpretation the appellate court considered the fact that NCDOR’s 1965 interpretation of An Act To Declare Cape Hatteras Electric Membership Corporation To Be A Public Agency And Provide That It Shall Be Exempt From Certain Taxation was made within the same historical context, and most likely with a better understanding of its purpose and implications; consequently, the appellate court gave greater weight to that interpretation than the reversal of position in 2000, 35 years later. Cape Hatteras Elec. Mbrshp. Corp. v. Lay, 210 N.C. App. 92, 708 S.E.2d 399, 2011 N.C. App. LEXIS 307 (2011).

Authority of Secretary to Construe This Subchapter. —

This section gives the Secretary of Revenue the power to construe the Revenue Act of 1939, codified as this Subchapter, and such construction will be given due consideration by the courts, although it is not controlling. Valentine v. Gill, 223 N.C. 396 , 27 S.E.2d 2, 1943 N.C. LEXIS 284 (1943). See also Powell v. Maxwell, 210 N.C. 211 , 186 S.E. 326, 1936 N.C. LEXIS 61 (1936); Dayton Rubber Co. v. Shaw, 244 N.C. 170 , 92 S.E.2d 799, 1956 N.C. LEXIS 677 (1956).

Weight Given Secretary’s Construction. —

The construction given a taxing statute by the Secretary of Revenue will be given consideration by the courts though not controlling. Charlotte Coca-Cola Bottling Co. v. Shaw, 232 N.C. 307 , 59 S.E.2d 819, 1950 N.C. LEXIS 501 (1950); Campbell v. Currie, 251 N.C. 329 , 111 S.E.2d 319, 1959 N.C. LEXIS 571 (1959).

Attorney General’s Opinion Advisory Only. —

The responsibility for interpreting a tax statute is placed on the Secretary of Revenue by this section, and an Attorney General’s opinion in regard thereto was advisory only. In re Virginia-Carolina Chem. Corp., 248 N.C. 531 , 103 S.E.2d 823, 1958 N.C. LEXIS 526 (1958).

Court Interpretation Prevails. —

If there should be a conflict between the interpretation placed upon any of the provisions of the Revenue Act by the Secretary of Revenue and the interpretation of the courts, the interpretation or construction by the latter will prevail. Campbell v. Currie, 251 N.C. 329 , 111 S.E.2d 319, 1959 N.C. LEXIS 571 (1959).

Bulletins and Administrative Decisions Published. —

Taxpayer’s argument that a sales tax technical bulletin and the North Carolina Department of Revenue’s administrative decisions should not have applied because they were not published was meritless; the Department of Revenue maintained a website where the sales and use tax technical bulletins were available, and the Department of Revenue’s administrative decisions are published on an available database. Carolina Photography, Inc. v. Hinton, 196 N.C. App. 337, 674 S.E.2d 724, 2009 N.C. App. LEXIS 357 (2009).

§ 105-264.1. Secretary’s interpretation applies to local taxes that are based on State taxes.

An interpretation by the Secretary of a law administered by the Secretary applies to a local law administered by a unit of local government when the local law refers to the State law to determine the application of the local law. A person who is subject to the local law or the unit of local government that administers the local law may ask the Secretary for an interpretation of the State law that determines the application of the local law. An interpretation by the Secretary of a State law that determines the application of a local law provides the same protections against liability under the local law that it provides under the State law.

History. 2008-134, s. 12(a).

§ 105-264.2. Publication of written determinations.

  1. Written Determinations. —  A written determination applies the tax law to a specific set of existing facts furnished by a particular taxpayer. A written determination is applicable only to the individual taxpayer addressed and as such has no precedential value except to the taxpayer to whom the determination is issued.
  2. Publication. —  The text of a written determination must be published on the Department’s Web site within 90 days of the date the determination is provided to the taxpayer. The text of a written determination must be redacted as provided in subsection (c) of this section before it is published. The publication requirement of this section does not include disclosure of background file documents.
  3. Redacted Written Determinations. —  The Secretary must redact all of the following from a written determination before it is published:
    1. The names, addresses, and other identifying details of the taxpayer to whom the written determination pertains.
    2. The names, addresses, and other identifying details of any other person referenced in the written determination.
    3. Information specifically exempted from disclosure by State or federal law.
    4. Trade secrets and commercial or financial information obtained from a person that is privileged or confidential.
  4. Liability. —  The Secretary must determine the appropriate extent of the redactions. The Secretary is not liable for failure to make redactions unless the Secretary fails to make the redactions in intentional and willful disregard of this section, has agreed to redact the information, or has been ordered by a court to make the redaction.
  5. Definitions. —  The following definitions apply in this section:
    1. Alternative apportionment ruling. — Written advice issued by the Secretary to a taxpayer pursuant to a written request by the taxpayer for alternative apportionment under G.S. 105-130.4(t1) or under G.S. 105-122(c1).
    2. Background file document. — Any one or more of the following:
      1. The request for the written determination.
      2. Any written materials submitted in support of the request.
      3. Any communication between the Department and persons outside the Department in connection with the written determination.
      4. Any information submitted by the taxpayer in response to a request from the Department for information that is required to provide the written determination.
    3. Private letter ruling. — Written advice issued by the Secretary to a taxpayer pursuant to a written request by the taxpayer for specific advice under G.S. 105-264(b).
    4. Redetermination private letter ruling. — Written advice issued by the Secretary to a corporation under G.S. 105-130.5 A concerning one or more of the following:
      1. Specific advice requested in writing by a corporation as to whether a redetermination of a corporation’s State net income or a combined return is required by the Secretary, as provided under G.S. 105-130.5 A(m).
      2. A determination and agreement made jointly between the Secretary and a corporation to an alternative filing methodology that accurately reports State net income, as provided under G.S. 105-130.5A(c).
    5. Written determination. — Any one or more of the following:
      1. An alternative apportionment ruling.
      2. A private letter ruling.
      3. A redetermination private letter ruling.

History. 2016-103, s. 5.

Editor’s Note.

Session Laws 2016-103, s. 10, made this section effective July 22, 2016.

Session Laws 2016-103, s. 8, provides: “The Department of Revenue must publish on its Web site the text of any written determination issued on or after January 1, 2010, and before the enactment of this act, within 120 days of the enactment of this act [Session Laws 2016-103 was effective July 22, 2016]. The text of the written determination must be redacted to remove identifying taxpayer information before being published as provided in G.S. 105-264.2 , as enacted by this act.”

§ 105-265. [Repealed]

Repealed by Session Laws 1991, c. 45, s. 19.

§ 105-266. [Repealed]

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 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.”

§ 105-266.1. [Repealed]

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 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.”

§ 105-266.2. Refund of tax paid on substantial income later restored.

This section applies to a taxpayer who is subject to the alternative tax under § 1341(a)(5) of the Code for the current taxable year because the taxpayer restored an item of income that had been included in the taxpayer’s gross income for an earlier taxable year. For the purpose of Article 4 of this Chapter, the taxpayer is considered to have made a payment of tax for the current taxable year on the later of the date the return for the current taxable year was filed or the date the return was due to be filed. The amount of this payment of tax is (i) the amount the taxpayer’s tax under Article 4 for the earlier taxable year was increased because the item of income was included in gross income for that year minus (ii) the amount the taxpayer’s tax under Article 4 for the current taxable year was decreased because the item was deductible for that year. To the extent this payment of tax creates an overpayment, the overpayment is refundable in accordance with G.S. 105-241.21 .

History. 1997-213, s. 1; 2007-491, s. 44(1)c.

Editor’s Note.

Session Laws 1997-213, s. 2, made this section effective for taxable years beginning on or after January 1, 1995.

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)c., effective January 1, 2008, substituted “G.S. 105-241.21” for “G.S. 105-266” in the last sentence. For applicability, see Editor’s note.

§ 105-267. [Repealed]

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.”

§ 105-267.1. [Repealed]

Repealed by Session Laws 1991, c. 45, s. 30.

§ 105-268. Reciprocal comity.

The courts of this State shall recognize and enforce liabilities for taxes lawfully imposed by other states which extend a like comity to this State.

History. 1939, c. 158, s. 938.

Legal Periodicals.

For article, “Recognition of Foreign Judgments,” see 50 N.C.L. Rev. 21 (1971).

§ 105-268.1. Agreements to coordinate the administration and collection of taxes.

The Secretary of Revenue is hereby authorized, with the approval of the Governor and Council of State, to enter into agreements with the United States government or any department or agency thereof, or with a state or any political subdivision thereof, for the purpose of coordinating the administration and collection of taxes imposed by this State and administered and collected by said Secretary with taxes imposed by the United States or by any other state or political subdivision thereof.

History. 1943, c. 747, s. 1; 1971, c. 806, s. 2; 1973, c. 476, s. 193.

Editor’s Note.

Session Laws 1987 (Reg. Sess., 1988), c. 1096, s. 6 provided: “It is the intent of the General Assembly that the Department of Revenue shall collect all of the sales and use taxes due to the State and local governments. Notwithstanding the provisions of G.S. 105-268.1 , the Secretary of Revenue may, without seeking prior approval of the Governor and the Council of State, enter into agreements with any other state to coordinate and promote collection of sales and use taxes by retailers making mail order sales, as defined in this act.”

Legal Periodicals.

For comment on enactment of this section, see 21 N.C.L. Rev. 363 (1943).

For article, “Recognition of Foreign Judgments,” see 50 N.C.L. Rev. 21 (1971).

§ 105-268.2. Expenditures and commitments authorized to effectuate agreements.

The Secretary of Revenue with the approval of the Governor and Council of State is authorized and empowered to undertake such commitments and make such expenditures, within the appropriations provided by law, as may be necessary to effectuate such agreements.

History. 1943, c. 747, s. 2; 1971, c. 806, s. 2; 1973, c. 476, s. 193.

Legal Periodicals.

For article, “Recognition of Foreign Judgments,” see 50 N.C.L. Rev. 21 (1971).

§ 105-268.3. Returns to be filed and taxes paid pursuant to agreements.

Notwithstanding any other provision of law, returns shall be filed and taxes paid in accordance with the provisions of any agreement entered into pursuant to this Article.

History. 1943, c. 747, s. 3; 1971, c. 806, s. 2.

Legal Periodicals.

For article, “Recognition of Foreign Judgments,” see 50 N.C.L. Rev. 21 (1971).

§ 105-269. Extraterritorial authority to enforce payment.

  1. The Secretary, with the assistance of the Attorney General, is authorized to bring suits in the courts of other states to collect taxes legally due this State. The officials of other states that extend a like comity to this State are empowered to sue for the collection of taxes in the courts of this State. A certificate by the Secretary of State, under the Great Seal of the State, that these officers have authority to collect the tax is conclusive evidence of this authority. Whenever the Secretary considers it expedient to employ local counsel to assist in bringing suit in an out-of-state court, the Secretary, with the concurrence of the Attorney General, may employ local counsel on the basis of a negotiated retainer or in accordance with prevailing commercial law league rates.
  2. Repealed by Session Laws 2001-380, s. 4, effective August 20, 2001, and applicable to tax debts that remain unpaid on or after that date.

History. 1939, c. 158, s. 939; 1963, c. 1169, s. 6; 1973, c. 476, s. 193; 1983 (Reg. Sess., 1984), c. 1005; 2001-380, s. 4.

Cross References.

As to collection of tax debts, see G.S. 105-243.1 .

Legal Periodicals.

For article, “Recognition of Foreign Judgments,” see 50 N.C.L. Rev. 21 (1971).

§ 105-269.1. Local authorities authorized to furnish office space.

Boards of county commissioners and governing boards of cities and towns are hereby fully authorized and empowered to furnish adequate and suitable office space for field representatives of the Department of Revenue upon request of the Secretary of Revenue, and are hereby authorized and empowered to make necessary expenditures therefor.

History. 1951, c. 643, s. 9; 1973, c. 476, s. 193.

§ 105-269.2. [Repealed]

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.”

§ 105-269.3. Enforcement of Subchapter V and fuel inspection tax.

The State Highway Patrol and law enforcement officers and other appropriate personnel in the Department of Public Safety may assist the Department of Revenue in enforcing Subchapter V of this Chapter and Article 3 of Chapter 119 of the General Statutes. The State Highway Patrol and law enforcement officers of the Department of Public Safety have the power of peace officers in matters concerning the enforcement of Subchapter V of this Chapter and Article 3 of Chapter 119 of the General Statutes.

History. 1963, c. 1169, s. 6; 1991, c. 42, s. 16; 1991 (Reg. Sess., 1992), c. 1007, s. 17; 1993, c. 485, s. 15; 1993 (Reg. Sess., 1994), c. 745, s. 19; 2002-159, s. 31.5(b); 2002-190, s. 2; 2011-145, s. 19.1(g).

Editor’s Note.

Session Laws 2002-190, s. 17, provides: “The Governor shall resolve any dispute between the Department of Transportation and the Department of Crime Control and Public Safety [now Department of Public Safety] concerning the implementation of this act.”

Effect of Amendments.

Session Laws 2002-190, s. 2, as amended by Session Laws 2002-159, s. 31.5(b), effective January 1, 2003, substituted “Department of Crime Control and Public Safety” for “Division of Motor Vehicles of the Department of Transportation” in the first sentence and for “Division of Motor Vehicles” in the second sentence.

Session Laws 2011-145, s. 19.1(g), effective January 1, 2012, substituted “Public Safety” for “Crime Control and Public Safety” in the first and last sentences.

§ 105-269.4. Election to apply income tax refund to following year’s tax.

Any taxpayer required to file an income tax return under Article 4 of this Subchapter whose return shows that the taxpayer is entitled to a refund may elect to apply part or all of the refund to that taxpayer’s estimated income tax liability for the following year. The Secretary of Revenue shall amend the income tax returns to permit the election authorized by this section.

History. 1983, c. 663, s. 1; 1989 (Reg. Sess., 1990), c. 814, s. 28.

§ 105-269.5. Contribution of income tax refund to Wildlife Conservation Account.

Any taxpayer entitled to a refund of income taxes under Article 4 of this Chapter may elect to contribute all or part of the refund to the Wildlife Conservation Account established under G.S. 143-247.2 to be used for the management, protection, and preservation of wildlife in accordance with that statute. The Secretary shall provide appropriate language and space on the income tax form in which to make the election. The taxpayer’s election becomes irrevocable upon filing the taxpayer’s income tax return for the taxable year. The Secretary shall transmit the contributions made pursuant to this section to the State Treasurer for credit to the Wildlife Conservation Account.

History. 1983, c. 865, s. 2; 1991, c. 45, s. 20; 1993, c. 543, s. 6.

Editor’s Note.

This section is former G.S. 105-130.35 , as amended and recodified as G.S. 105-269.5 by Session Laws 1991, c. 45, s. 20.

Session Laws 1983, c. 865, ss. 3 and 4 provided: “Sec. 3. At least seventy-five percent (75%) of the total amount of the funds derived during any year from the contributions made pursuant to this act must be used for nongame, endangered and threatened species, and urban wildlife programs, and the remainder may be used by the Wildlife Resources Commission for other wildlife management programs.”

§ 105-269.6. [Repealed]

Repealed by Session Laws 2002-158, s. 6(a), effective for taxable years beginning on or after January 1, 2003.

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 2002-158, s. 15, contains a severability clause.

§ 105-269.7. Contribution of income tax refund or payment to the North Carolina Education Endowment Fund.

Any taxpayer entitled to a refund of income taxes under Article 4 of this Chapter, or any taxpayer who desires to make a contribution, may elect to contribute all or part of the refund or may make a contribution to the North Carolina Education Endowment Fund established pursuant to G.S. 115C-472.16 to be used in accordance with that statute. The Secretary shall provide appropriate language and space on the income tax form in which to make the election or contribution. The taxpayer’s election or contribution becomes irrevocable upon filing the taxpayer’s income tax return for the taxable year. The Secretary shall transmit the amounts designated pursuant to this section to the State Treasurer for credit to the North Carolina Education Endowment Fund.

History. 2014-100, s. 8.11(h).

Editor’s Note.

Session Laws 2014-100, s. 8.11(j) makes this section effective for taxable years beginning on or after January 1, 2014.

Session Laws 2014-100, s. 1.1, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2014.’ ”

Session Laws 2014-100, s. 38.7, is a severability clause.

§ 105-269.8. (Effective for taxable years beginning on or after January 1, 2017 and expiring for taxable years beginning on or after January 1, 2026) Contribution by individual for early detection of breast and cervical cancer.

  1. Contribution. —  An individual entitled to a refund of income taxes under Part 2 of Article 4 of this Chapter may elect to contribute all or part of the refund to be used for early detection of breast and cervical cancer at the Cancer Prevention and Control Branch of the Division of Public Health of the Department of Health and Human Services. The Secretary shall provide appropriate language and space on the individual income tax form in which to make the election. The Secretary shall include in the income tax instructions an explanation that the contributions will be used for early detection of breast and cervical cancer only. The election becomes irrevocable upon filing the individual’s income tax return for the taxable year.
  2. Distribution. —  The Secretary shall transmit the contributions made pursuant to this section to the State Treasurer to be distributed for early detection of breast and cervical cancer. The State Treasurer shall distribute the contributions to the Cancer Prevention and Control Branch of the Division of Public Health of the Department of Health and Human Services. Funds distributed pursuant to this section shall be used only for early detection of breast and cervical cancer and shall be used in accordance with North Carolina’s Breast and Cervical Cancer Control Program’s policies and procedures.
  3. Sunset. —  This section expires for taxable years beginning on or after January 1, 2026.

History. 2017-204, s. 6.2(a); 2020-58, s. 7.1.

Editor’s Note.

Session Laws 2017-204, s. 6.2(c), made this section effective for taxable years beginning on or after January 1, 2017.

Session Laws 2017-204, s. 6.2(b), provides: “The General Assembly finds that the funds generated by this section are intended to be additional funding for early detection of breast and cervical cancer and are not intended to replace current appropriations for early detection of breast and cervical cancer.”

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

Effect of Amendments.

Session Laws 2020-58, s. 7.1, effective June 30, 2020, substituted “January 1, 2026” for “January 1, 2021” in subsection (c).

§§ 105-269.9 through 105-269.12.

Reserved for future codification purposes.

§ 105-269.13. Debts not collectible under North Carolina law.

  1. Debts Not Collectible. —  The following debts are not collectible and are not subject to execution under Article 28 of Chapter 1 of the General Statutes or any other provision of law:
    1. A loan made by a person who does not comply with G.S. 105-88 .
    2. A debt owed to a retailer described in subsection (b) of this section as the result of the purchase of tangible personal property.
  2. Retailer. —  A debt owed to a retailer is subject to this section if all of the following applies to the retailer:
    1. The retailer meets one or more of the conditions in G.S. 105-164.8(b) .
    2. The retailer is not registered to collect the use tax due under Article 5 of this Chapter on its sales delivered to an address in North Carolina.
    3. The retailer reported gross sales of at least five million dollars ($5,000,000) on its most recent federal income tax return.
  3. Assignment. —  An assignment to a person of a debt listed in subsection (a) of this section is subject to the collection restrictions imposed by this section.

History. 2000-120, s. 9.

§ 105-269.14. Payment of use tax with individual income tax.

  1. Requirement. —  An individual who owes use tax that is payable on an annual basis pursuant to G.S. 105-164.16(d) and who is required to file an individual income tax return under Part 2 of Article 4 of this Chapter must pay the use tax with the individual income tax return for the taxable year. The Secretary must provide appropriate space and information on the individual income tax form and instructions. The information must include the following:
    1. An explanation of an individual’s obligation to pay use tax on items purchased from mail order, Internet, or other sellers that do not collect State and local sales and use taxes on the items.
    2. A method to help an individual determine the amount of use tax the individual owes. The method must list categories of items, such as personal computers and clothing, that are commonly sold by mail order or Internet and must include a table that gives the average amounts of use tax payable by taxpayers in various income ranges.
  2. Distribution. —  The Secretary must distribute the local portion of the net use tax proceeds collected under this section in accordance with Subchapter VIII of this Chapter and Chapter 1096 of the 1967 Session Laws.

History. 1999-341, s. 2; 2000-120, s. 10; 2002-72, s. 20; 2003-284, s. 44.1; 2005-276, s. 33.24; 2007-323, s. 31.16.3(i); 2009-451, s. 27A.3(b), (c); 2010-95, s. 42; 2019-6, s. 5.9.

Effect of Amendments.

Session Laws 2002-72, s. 20, effective August 12, 2002, rewrote subsection (b).

Session Laws 2007-323, s. 31.16.3(i), effective October 1, 2008, and applicable to distributions for months beginning on or after October 1, 2008, substituted “42, and 43” for “42, 43, and 44” in the next to last sentence of subsection (b).

Session Laws 2019-6, s. 5.9, effective March 20, 2019, rewrote subsection (b).

OPINIONS OF ATTORNEY GENERAL

The federal Internet Tax Freedom Act does not prohibit a state from bundling payment of use taxes with payment for income taxes and, therefore, does not invalidate this section. See opinion of Attorney General to Representative Cary D. Allred, 2000 N.C. AG LEXIS 22 (3/6/2000).

§ 105-269.15. Income tax credits of partnerships.

  1. Qualification. —  A partnership that engages in an activity that is eligible for a tax credit qualifies for the credit as an entity and then passes through to each of its partners the partner’s distributive share of the credit for which the partnership entity qualifies. Maximum dollar limits and other limitations that apply in determining the amount of a tax credit available to a taxpayer apply to the same extent in determining the amount of a tax credit for which the partnership entity qualifies, with one exception. The exception is a limitation that the tax credit cannot exceed the amount of tax imposed on the taxpayer.
  2. Allowance of Credit to Partner. —  A partner’s distributive share of an income tax credit passed through by a partnership is allowed to the partner only to the extent the partner would have qualified for the credit if the partner stood in the position of the partnership. All limitations on an income tax credit apply to each partner to the extent of the partner’s distributive share of the credit, except that a corporate partner’s distributive share of an individual income tax credit is allowed as a corporation income tax credit to the extent the corporate partner could have qualified for a corporation income tax credit if it stood in the position of the partnership. All limitations on an income tax credit apply to the sum of the credit passed through to the partner plus the credit for which the partner qualifies directly.
  3. Determination of Distributive Share. —  A partner’s distributive share of an income tax credit shall be determined in accordance with sections 702 and 704 of the Code.

History. 1993 (Reg. Sess., 1994), c. 674, s. 3; 2001-335, s. 1.

Cross References.

As to tax credits for rehabilitated mill property, see G.S. 105-129.71 and 105-129.72.

Editor’s Note.

Session Laws 2001-335, s. 1, effective for taxable years beginning on or after January 1, 2002, rewrote subsection (a).

Article 10. Liability for Failure to Levy Taxes.

§ 105-270. Repeal of laws imposing liability upon governing bodies of local units.

All laws and clauses of laws, statutes and parts of statutes, imposing civil or criminal liability upon the governing bodies, of local units, or the members of such governing bodies, for failure to levy or to vote for the levy of any particular tax or rate of tax for any particular purpose, are hereby repealed, and said governing bodies and any and all members thereof are hereby freed and released from any civil or criminal liability heretofore imposed by any law or statute for failure to levy or to vote for the levy of any particular tax or tax rate for any particular purpose.

History. 1933, c. 418.

Subchapter II. Listing, Appraisal, and Assessment of Property and Collection of Taxes on Property.

Article 11. Short Title, Purpose, and Definitions.

§ 105-271. Official title.

This Subchapter may be cited as the Machinery Act.

History. 1939, c. 310, s. 1; 1971, c. 806. s. 1.

Cross References.

As to the use and confidential nature of actual addresses of Address Confidentiality Program participants by boards of elections for election-related purposes, see G.S. 15C-8 .

Editor’s Note.

Session Laws 2013-362, s. 1, provides: “Notwithstanding G.S. 105-287 , 105-325, 105-380, any provision of law restricting the time for which a change in appraisal or valuation may be made, or any other provision of Subchapter II of Chapter 105 of the General Statutes inconsistent with the provisions of this act, a board of county commissioners shall undertake the measures required by this act if all of the following conditions are met:

“(1) The county has independent evidence that the majority of commercial neighborhoods in the county reviewed by a qualified appraisal company possess significant issues of inequity.

“(2) The county has independent evidence that for residential neighborhoods instances of inequity or erroneous data had an impact on the valuation of the neighborhood as a whole.

“(3) The county’s last general reappraisal was performed for the 2008 tax year, 2009 tax year, 2010 tax year, 2011 tax year, or 2012 tax year.

“(4) The independent evidence resulted from a review performed by a qualified appraisal company selected and retained by the county and registered with the Department of Revenue and had a sample size of no less than 375 properties, the relevant characteristics of which were reviewed on location at the property.”

Session Laws 2013-362, s. 2, provides: “If all of the conditions of Section 1 of this act are met, a board of county commissioners shall either (i) conduct a reappraisal, using no less than one person certified by the Department of Revenue for mass valuations per 4,250 parcels, pursuant to G.S. 105-286 within 18 months, applicable to all tax years from and including the tax year when the last general reappraisal was performed pursuant to G.S. 105-286 or (ii) have a qualified appraisal company, which may be the same company that provides the evidence in Section 1 of this act, conduct a review of all the values in the county by neighborhoods and make recommendations as to the true value of the properties as of January 1 of the year of the last general reappraisal performed pursuant to G.S. 105-286. After the reappraisal or after each neighborhood review required by this section is complete, the board of county commissioners shall make any change on the abstracts and tax records to ensure that the assessed values of incorrectly appraised properties in the county reflect the true values of those properties effective for the year of the last general reappraisal performed pursuant to G.S. 105-286 and shall apply the adjusted values for those properties for each tax year until the next general reappraisal for real property is performed by the county pursuant to G.S. 105-286 unless those adjusted values are changed in accordance with G.S. 105-287 . In making changes to the abstracts and tax records mandated by this act, the board of county commissioners shall make adjustments for previous errors prioritized as follows:

“(1) Adjustments to parcels with errors that resulted in the parcels having a significantly overstated value.

“(2) Adjustments to parcels with errors that resulted in the parcels having a significantly understated value.

“(3) Adjustments to parcels with errors that resulted in the parcels having an overstated value.

“(4) Adjustments to parcels with errors that resulted in the parcels having an understated value.

“In instances of parcels with errors that resulted in an overpayment of taxes, the governing board shall require that notice of refund and the refund amount be sent to the owner of record as of the date the payment was made. The provisions of G.S. 105-380 do not apply to the issuance of any refund under the provisions of this act.”

Session Laws 2013-362, s. 3, as amended by Session Laws 2015-266, s. 1, provides: “Interest on taxes paid on parcels with errors that resulted in the parcels having an overstated value shall be calculated at a rate of five percent (5%) per annum. Additional taxes levied on parcels as a result of errors causing the parcels to have an understated value (i) shall be treated as taxes on discovered property pursuant to G.S. 105-312 , except that the discovery penalties set forth in subsection (h) of G.S. 105-312 shall not apply, (ii) are due and payable on September 1 of the fiscal year for which the taxes are levied, but not earlier than four years from the last general reappraisal date, and (iii) shall be payable, at the taxpayer’s option, by means of an agreement over a period of not more than 36 months, in equal monthly installments, if the total of the additional taxes levied is greater than one thousand dollars ($1,000). Interest shall not accrue for the period a taxpayer is making timely payments under a payment plan. The tax collector is authorized to issue forms and develop procedures to implement a payment plan authorized under this section. Notwithstanding G.S. 105-365.1(b), for parcels that have been transferred in a tax year for which errors requiring reappraisals under this act resulted in an underpayment of taxes, the following apply:

“(1) The taxes for each tax year prior to and in the fiscal year in which the transfer occurred shall be collected from the owner of record as of January 1 of each tax year for which unpaid taxes exist. Only the remedies available in G.S. 105-367 and G.S. 105-368 may be used to collect against the owner of record as of January 1 of each tax year for which unpaid taxes exist.

“(2) Notwithstanding G.S. 105-355(a), there shall be no lien on the real property for underpaid taxes that arose in a year in which the property is owned by a person other than the current owner as of January 1 of that year. The current owner shall not be held personally responsible for such underpaid taxes.

“(3) If an owner not responsible for underpaid taxes pursuant to this section paid the underpaid taxes, the owner may assert a valid defense for a refund pursuant to G.S. 105-381 , as a tax imposed through clerical error. Interest on the refund shall be calculated at a rate of five percent (5%) per annum from the date the owner asserting the defense paid the underpaid taxes until the date the refund is issued.”

Legal Periodicals.

For note on procedural developments in the discovery of property unlisted for purposes of ad valorem taxation, see 51 N.C.L. Rev. 531 (1973).

For article, “State Jurisdiction To Tax Tangible Personal Property,” see 56 N.C.L. Rev. 807 (1978).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

Consistent with the supremacy clause, a State may impose a nondiscriminatory ad valorem property tax on imported goods stored in a customs-bonded warehouse and destined for domestic manufacture and sale. R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130, 107 S. Ct. 499, 93 L. Ed. 2d 449, 1986 U.S. LEXIS 22 (1986).

Subject of taxation is regulated entirely by statutes, and the revenues of this State are collected under the operation of what is known as the Machinery Act. Wade v. Commissioners of Craven County, 74 N.C. 81 , 1876 N.C. LEXIS 21 (1876).

Assessment, listing, and collection of taxes is regulated by this Subchapter, which prescribes the time and manner for listing and valuing property for ad valorem tax purposes. In re Appeal of Reeves Broadcasting Corp., 273 N.C. 571 , 160 S.E.2d 728, 1968 N.C. LEXIS 634 (1968).

The discovery, assessment, listing and collection of ad valorem taxes on tangible personal property in North Carolina is regulated by this Subchapter, the Machinery Act. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

What Machinery Act Prescribes. —

This Subchapter, the Machinery Act, prescribes the time and manner for listing and valuing property for ad valorem tax purposes; it also fixes the time for payment. Spiers v. Davenport, 263 N.C. 56 , 138 S.E.2d 762, 1964 N.C. LEXIS 749 (1964).

Use, rather than ownership or objective, is the primary exempting characteristic of this Subchapter. In re North Carolina Forestry Found., Inc., 35 N.C. App. 414, 242 S.E.2d 492, 1978 N.C. App. LEXIS 3003 (1978), aff'd, 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

First Lien Priority of Ad Valorem Tax Liens. —

In the Machinery Act the General Assembly has expressly recognized the first lien priority to be afforded local ad valorem tax liens by its recommended wording of documents entitled “orders of collection” which are issued under seal by local governing bodies. County of Lenoir v. Moore, 114 N.C. App. 110, 441 S.E.2d 589, 1994 N.C. App. LEXIS 318 (1994), aff'd, 340 N.C. 104 , 455 S.E.2d 158, 1995 N.C. LEXIS 158 (1995).

Chapter 13 debtor was not prohibited under 11 U.S.C.S. § 1322 from modifying a secured claim in the amount of $104,909 which a bank filed against the debtor’s bankruptcy estate, by dividing the claim into a secured claim in the amount of $15,000 and an unsecured claim in the amount of $89,909, because the debt was secured only by the value of land which the debtor used as his principal residence and not by the value of a manufactured home that was on the land; the home that was personal property under G.S. 105-271 because, inter alia, it was not attached to a permanent foundation and was registered with the North Carolina Division of Motor Vehicles as a motor vehicle. In re Smith, 2015 Bankr. LEXIS 2516 (Bankr. E.D.N.C. July 29, 2015).

§ 105-272. Purpose of Subchapter.

The purpose of this Subchapter is to provide the machinery for the listing, appraisal, and assessment of property and the levy and collection of taxes on property by counties and municipalities. It is the intent of the General Assembly to make the provisions of this Subchapter uniformly applicable throughout the State, and to assure this objective no local act to become effective on or after July 1, 1971, shall be construed to repeal or amend any section of this Subchapter in whole or in part unless it shall expressly so provide by specific reference to the section to be repealed or amended. As used in this section, the term “local act” means any act of the General Assembly that applies to one or more counties by name, to one or more municipalities by name, or to all municipalities within one or more named counties.

History. 1939, c. 310, s. 1802; 1971, c. 806, s. 1; 1991, c. 11, s. 1.

§ 105-273. Definitions.

The following definitions apply in this Subchapter:

  1. Abstract. — The document on which the property of a taxpayer is listed for ad valorem taxation and on which the appraised and assessed values of the property are recorded.
  2. Appraisal. — The true value of property or the process by which true value is ascertained.
  3. Assessment. — The tax value of property or the process by which the assessment is determined.

    (3a) “Builder” means a taxpayer engaged in the business of buying real property, making improvements to it, and then reselling it.

  4. Repealed by Session Laws 1973, c. 695, s. 15, effective January 1, 1974. (4a) Code. — Defined in G.S. 105-228.90 .
  5. Collector or tax collector. — A person charged with the duty of collecting taxes for a county or municipality.

    (5a) Construction contractor. — A taxpayer who is regularly engaged in building, installing, repairing, or improving real property.

  6. Corporation. — An organization having capital stock represented by shares or an incorporated, nonprofit organization.

    (6a) Discovered property. — Any of the following:

    1. Property that was not listed during a listing period.
    2. Property that was listed but the listing included a substantial understatement.
    3. Property that has been granted an exemption or exclusion and does not qualify for the exemption or exclusion.

      (6b) Discover property. — Determine any of the following:

      a. Property has not been listed during a listing period.

      b. A taxpayer made a substantial understatement of listed property.

      c. Property was granted an exemption or exclusion and the property does not qualify for an exemption or exclusion.

  7. Document. — A book, paper, record, statement, account, map, plat, film, picture, tape, object, instrument, or any other thing conveying information.

    (7a) Failure to list property. — Any of the following:

    1. Failure to list property during a listing period.
    2. A substantial understatement of listed property.
    3. Failure to notify the assessor that property granted an exemption or exclusion under an application for exemption or exclusion does not qualify for the exemption or exclusion.
  8. Intangible personal property. — Patents, copyrights, secret processes, formulae, good will, trademarks, trade brands, franchises, stocks, bonds, cash, bank deposits, notes, evidences of debt, leasehold interests in exempted real property, bills and accounts receivable, or other like property.

    (8a) Inventories. — Any of the following:

    1. Goods held for sale in the regular course of business by manufacturers, retail and wholesale merchants, and construction contractors. As to retail and wholesale merchants and construction contractors, the term includes packaging materials that accompany and become a part of the goods sold.
    2. Goods held by construction contractors to be furnished in the course of building, installing, repairing, or improving real property.
    3. As to manufacturers, raw materials, goods in process, finished goods, or other materials or supplies that are consumed in manufacturing or processing or that accompany and become a part of the sale of the property being sold. The term does not include fuel used in manufacturing or processing and materials or supplies not used directly in manufacturing or processing.
    4. A modular home as defined in G.S. 105-164.3(143) that is used exclusively as a display model and held for eventual sale at the retail merchant’s place of business.
    5. Crops, livestock, poultry, feed used in the production of livestock and poultry, or other agricultural or horticultural products held for sale, whether in process or ready for sale.
  9. List or listing. — An abstract, when the term is used as a noun.
  10. Repealed by Session Laws 1987, c. 43, s. 1.

    (10a) Local tax official. — A county assessor, an assistant county assessor, a member of a county board of commissioners, a member of a county board of equalization and review, a county tax collector, or the municipal equivalent of one of these officials.

    (10b) Manufacturer. — A taxpayer who is regularly engaged in the mechanical or chemical conversion or transformation of materials or substances into new products for sale or in the growth, breeding, raising, or other production of new products for sale. The term does not include delicatessens, cafes, cafeterias, restaurants, and other similar retailers that are principally engaged in the retail sale of foods prepared by them for consumption on or off their premises.

  11. Municipal corporation or municipality. — A city, town, incorporated village, sanitary district, rural fire protection district, rural recreation district, mosquito control district, hospital district, metropolitan sewerage district, watershed improvement district, a consolidated city-county as defined by G.S. 160B-2 , or another district or unit of local government by or for which ad valorem taxes are levied.
  12. Person. — An individual, a trustee, an executor, an administrator, another fiduciary, a corporation, a limited liability company, an unincorporated association, a partnership, a sole proprietorship, a company, a firm, or another legal entity.
  13. Real property, real estate, or land. — Any of the following:
    1. The land itself.
    2. Buildings, structures, improvements, or permanent fixtures on land.
    3. All rights and privileges belonging or in any way appertaining to the property.
    4. A manufactured home as defined in G.S. 143-143.9(6), unless it is considered tangible personal property for failure to meet all of the following requirements:
      1. It is a residential structure.
      2. It has the moving hitch, wheels, and axles removed.
      3. It is placed upon a permanent foundation either on land owned by the owner of the manufactured home or on land in which the owner of the manufactured home has a leasehold interest pursuant to a lease with a primary term of at least 20 years and the lease expressly provides for disposition of the manufactured home upon termination of the lease.

        (13a) Retail merchant. — A taxpayer who is regularly engaged in the sale of tangible personal property, acquired by a means other than manufacture, processing, or producing by the merchant, to users or consumers.

        (13b) Substantial understatement. — The omission of a material portion of the value, quantity, or other measurement of taxable property. The determination of materiality in each case shall be made by the assessor, subject to the taxpayer’s right to review of the determination by the county board of equalization and review or board of commissioners and appeal to the Property Tax Commission.

  14. Tangible personal property. — All personal property that is not intangible and that is not permanently affixed to real property.
  15. Tax or taxes. — The principal amount of any property tax or dog license tax and costs, penalties, and interest.
  16. Taxing unit. — A county or municipality authorized to levy ad valorem property taxes.
  17. Taxpayer. — A person whose property is subject to ad valorem property taxation by any county or municipality and any person who, under the terms of this Subchapter, has a duty to list property for taxation.
  18. Valuation. — Appraisal and assessment.
  19. Wholesale merchant. — A taxpayer who is regularly engaged in the sale of tangible personal property, acquired by a means other than manufacture, processing, or producing by the merchant, to other retail or wholesale merchants for resale or to manufacturers for use as ingredient or component parts of articles being manufactured for sale.

History. 1939, c. 310, s. 2; 1971, c. 806, s. 1; 1973, c. 695, ss. 14, 15; 1985, c. 656, s. 20; 1985 (Reg. Sess., 1986), c. 947, ss. 3, 4; 1987, c. 43, s. 1; c. 440, s. 2; c. 805, s. 3; c. 813, ss. 1-4; 1991, c. 34, s. 3; 1991 (Reg. Sess., 1992), c. 975, s. 1; c. 1004, s. 1; 1993, c. 354, s. 23; c. 459, s. 1; 1995, c. 461, s. 15; 1998-212, s. 29A.18(c); 2001-506, s. 1; 2002-156, s. 4; 2003-400, s. 4; 2006-106, ss. 1, 8; 2008-35, s. 1.1; 2009-308, s. 1; 2009-445, s. 20; 2010-95, s. 21; 2015-223, s. 1.

Editor’s Note.

Session Laws 2009-308, s. 4, as amended by Session Laws 2010-95, s. 21, provides, in part: “This act [which added subdivision (3a)] is repealed effective for taxes imposed for taxable years beginning on or after July 1, 2013. Notwithstanding the repeal of this act, residences that are receiving the property tax benefit provided by this act in the year immediately prior to the repeal are not affected by the repeal of this act and remain eligible for approval of this benefit for subsequent taxable years until the occurrence of a disqualifying event.” Subsequent to its repeal, subdivision (3a) was reenacted by Session Laws 2015-223, s. 1. See note below for effective date and applicability.

Session Laws 2019-169, s. 3.1(c), provides, in part, that: “The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-164.3 to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory section.” At the direction of the Revisor of Statutes, a reference was conformed in sub-subdivision (8a)d.

Effect of Amendments.

Session Laws 2001-506, s. 1, as amended by Session Laws 2002-156, s.4, effective for taxes imposed for taxable years beginning on or after July 1, 2003, rewrote subdivision (13).

Session Laws 2003-400, s. 4, effective August 7, 2003, in subdivision (13), inserted “either” in the second sentence, and added “or on land in which the owner of the manufactured home has a leasehold interest pursuant to a lease with a primary term of at least 20 years for the real property on which the manufactured home is affixed and where the lease expressly provides for disposition of the manufactured home upon termination of the lease” at the end of the second sentence.

Session Laws 2006-106, ss. 1 and 8, effective for taxes imposed for taxable years beginning on or after July 1, 2006, added the last sentence in subdivision (17) and added the third sentence in subdivision (8a).

Session Laws 2008-35, s. 1.1, effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote the section.

Session Laws 2009-308, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2010, added subdivision (3a).

Session Laws 2009-445, s. 20, effective August 7, 2009, inserted “shares” in subdivision (6).

Session Laws 2015-223, s. 1, reenacted subdivision (3a); and, in subdivision (3a), deleted “licensed as a general contractor under G.S. 87-1 and” following “means a taxpayer.” For effective date and applicability, see editor’s note.

Legal Periodicals.

For article on the need to reform North Carolina property tax law, see 59 N.C.L. Rev. 675 (1981).

CASE NOTES

“Appraisal” and “Assessment” Synonymous for Public Service Companies. —

For public service companies, the true value of property is its tax value, and “appraisal” and “assessment” are synonymous. In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Privilege “Belonging” or “Appertaining” to Real Property. —

Non-refundable membership fee in a continuing care retirement community was a right and privilege “belonging” or “appertaining to” the taxpayers’ real property and was properly included in its tax appraisal value. In re Appeal of Tillman, 187 N.C. App. 739, 653 S.E.2d 911, 2007 N.C. App. LEXIS 2563 (2007).

Leases are intangible personal property only when they are leases in “exempted real property.” Thus, the only leases taxable to the lessee are leases on fees exempt from taxation on the lessor. Where the fee is nonexempt, the lease is not intangible personal property and is taxable to the owner, as is all real and personal property not exempt under G.S. 105-274 . In re North Carolina Forestry Found., Inc., 35 N.C. App. 430, 242 S.E.2d 502, 1978 N.C. App. LEXIS 3004 (1978), aff'd, 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

Leasehold Estate. —

A lease is a chattel real, and as such is a species of intangible personal property. However, the value of a leasehold estate is subject to ad valorem tax and not to the State intangible tax. Bragg Inv. Co. v. Cumberland County, 245 N.C. 492 , 96 S.E.2d 341, 1957 N.C. LEXIS 585 (1957) (decided under former similar provisions).

Used Machinery Is Not Inventory. —

Where taxpayer which acquired used machinery and equipment primarily for use in its manufacture of textiles and only held the goods for sale after the property was no longer useful in taxpayer’s textile business, the equipment and machinery at issue were not inventory held for sale in the regular course of business by a wholesale merchant. Consequently, the property was not excluded from ad valorem taxation. In re Cone Mills Corp., 112 N.C. App. 539, 435 S.E.2d 835, 1993 N.C. App. LEXIS 1126 (1993).

Use as Income Produce Equipment Incompatible with Character As Inventory. —

Where defendant treated equipment as income producing property rather than inventory for financial reporting purposes, depreciating only that part of its inventory of new and used equipment that it used for rental purposes, this treatment rendered the equipment used for rental purposes ineligible for tax exclusion because its use and consumption as income producing property was incompatible with its character as inventory. In re R.W. Moore Equip. Co., 115 N.C. App. 129, 443 S.E.2d 734, 1994 N.C. App. LEXIS 553 (1994).

Rental Equipment Not “Held.” —

Equipment was not “held” as stated in subsection (8a) by taxpayer when rented to third parties. In re R.W. Moore Equip. Co., 115 N.C. App. 129, 443 S.E.2d 734, 1994 N.C. App. LEXIS 553 (1994).

Husband and Wife Are Separate “Taxpayers” as to Land Held by Entirety. —

A husband and wife are “taxpayers” with reference to taxes levied on account of property owned by each alone, but they are, in contemplation of law, a separate person from either with reference to land owned by them as tenants by the entirety. Consequently, no lien attaches to such land on account of a tax levied upon either on account of separately owned property. Duplin County v. Jones, 267 N.C. 68 , 147 S.E.2d 603, 1966 N.C. LEXIS 978 (1966) (decided under former similar provisions).

Aircraft Tires as Inventories Owned by Manufacturers. —

In a tax dispute, aircraft tires were “inventories owned by manufacturers” under G.S. 105-273 and were excluded from taxation in North Carolina; “finished goods” was not modified by materials or supplies consumed in manufacturing. In re Michelin North Am., Inc., 246 N.C. App. 482, 783 S.E.2d 775, 2016 N.C. App. LEXIS 357 (2016).

Mobile Homes. —

Mobile home that was placed on real property with the wheels and axles removed and affixed to a concrete foundation became realty. The creditor’s claim was thus secured only by the real property that was the debtor’s principal residence, and the claim could not be modified pursuant to 11 U.S.C.S. § 1322(b)(2). In re McNeill, 2006 Bankr. LEXIS 871 (Bankr. M.D.N.C. May 12, 2006).

When a county assessed the value of a mobile home located on leased land without taking into consideration the personal property elements in G.S. 105-317.1 , its appraisal arbitrarily or illegally under G.S. 105-345.2(b) appraised the home as if it were real property and assigned it a value that substantially exceeded its true value, because G.S. 105-273(13) expressly defined differences between real property and tangible personal property as it pertained to manufactured homes. In re Murray, 179 N.C. App. 780, 635 S.E.2d 477, 2006 N.C. App. LEXIS 2157 (2006).

Chapter 13 debtors’ property was not protected by 11 U.S.C.S. § 1322(b)(2) as residence; pursuant to G.S. 105-273(13), the mobile home was personal property because it still had wheels, axles, and hitch, and the certificate of title had not been cancelled. In re Melara, 441 B.R. 749, 2011 Bankr. LEXIS 425 (Bankr. M.D.N.C. 2011).

Manufactured home situated on debtor’s land was on a permanent foundation and met the criterion of G.S. 105-273(13)(d) to be considered real property and included in the property’s valuation, based, in part, on debtor’s representation in an MLS listing that the foundation was built to building codes. In re Tillman, 565 B.R. 586, 2016 Bankr. LEXIS 3600 (Bankr. E.D.N.C. 2016).

Transfer of Possession of Rental Property Pursuant to Lease Purchase Agreement Not a “Sale.” —

North Carolina Property Tax Commission, sitting as the State Board of Equalization and Review, properly determined that property in the physical possession of a taxpayer’s customers pursuant to lease purchase agreements was subject to ad valorem taxation because such property did not fall within the class of exempt “inventories” inasmuch as the transfer of possession of property following the execution of the agreement was not properly categorized as a “sale” where the customers were under no obligation to purchase the property, and the substantial increase in cost by purchasing under the agreement rather than outright was consistent with the denomination of the transactions as a lease rather than a sale of the property. In re Aaron's, Inc., 264 N.C. App. 20, 824 S.E.2d 432, 2019 N.C. App. LEXIS 131 (2019).

OPINIONS OF ATTORNEY GENERAL

Where a town simply possessed a leasehold interest, the real estate was not exempt as property belonging to a municipality; therefore, the county properly discovered the land leased to the town. See opinion of Attorney General to Huey Marshall, County Attorney, 2000 N.C. AG LEXIS 1 (3/28/2000).

Article 12. Property Subject to Taxation.

§ 105-274. Property subject to taxation.

  1. All property, real and personal, within the jurisdiction of the State shall be subject to taxation unless it is:
    1. Excluded from the tax base by a statute of statewide application enacted under the classification power accorded the General Assembly by Article V, § 2(2), of the North Carolina Constitution, or
    2. Exempted from taxation by the Constitution or by a statute of statewide application enacted under the authority granted the General Assembly by Article V, § 2(3), of the North Carolina Constitution.
  2. No provision of this Subchapter shall be construed to exempt from taxation any property situated in this State belonging to any foreign corporation unless the context of the provision clearly indicates a legislative intent to grant such an exemption.

History. 1939, c. 310, ss. 303, 1800; 1961, c. 1169, s. 8; 1967, c. 1185; 1971, c. 806, s. 1.

Property Affected by Alamance/Orange County Boundary Changes.

Session Laws 2011-88, s. 5(a)-(d), provides: “(a) Any properties affected by S.L. 2010-61 or this act and which are subject to taxation under G.S. 105-274 and which were taxed by both the Alamance County and Orange County taxing authorities on or after January 1, 2007, are hereby granted the following relief:

“(1) Property owners of any such dually taxed properties may, pursuant to the terms of G.S. 105-381 , demand refund and/or release of taxes paid to the county from which their property, or portion thereof, was transitioned.

“(2) Any claim for relief pursuant to this section and under the terms of G.S. 105-381 may be made for taxes assessed January 1, 2007, through December 31, 2011. All such claims for relief must be made in writing to the county from which the affected property was transitioned on or before February 28, 2012. Should a claim for relief pursuant to this section not be made by February 28, 2012, such claim is waived, and no further relief shall be granted pursuant to this or any other act. Alamance County and Orange County shall not grant refunds or releases pursuant to this section for any claims made after February 28, 2012, and are released from all liability, and no court action shall be maintained for any such claims made for any act or failure to act pursuant to this section.

“(b) The provisions of this section shall apply only to properties transitioned or reassigned from one county to the other, in whole or in part, by the resurveys of individual qualifying properties pursuant to S.L. 2010-61 and this act.

“(c) For purposes of this section only, the term ‘property owner’ shall include any builder or developer that paid property taxes on real property to both counties and subsequently sold said property or that as part of an escrow agreement in which the buyer of such property paid taxes to one county and the builder or developer who sold the property paid taxes on the same piece of property to the adjoining county.

“(d) The taxing authorities of Alamance County and Orange County shall notify property owners affected by this section of the terms of this section within 30 days after this act becomes law. Such notice shall be by United States mail at the mailing address to which any tax bills were previously submitted. No other notice is or shall be required.”

The purpose of Session Laws 2010-61, referred to in subsections 5(a) and (b) of Session Laws 2011-88, was to clarify or reestablish the boundary between Alamance County and Orange County. For a fuller explanation, see the Editor’s notes under G.S. 153A-18 .

Session Laws 2012-108, s. 5(a)-(d), provides: “(a) Any properties affected by S.L. 2010-61 or this act and that are subject to taxation under G.S. 105-274 and that were taxed by both the Alamance County and Orange County taxing authorities on or after January 1, 2007, are hereby granted the following relief:

“(1) Property owners of any such dually taxed properties may, pursuant to the terms of G.S. 105-381 , demand refund and/or release of taxes paid to the county from which their property, or portion thereof, was transitioned.

“(2) Any claim for relief pursuant to this section and under the terms of G.S. 105-381 may be made for taxes assessed January 1, 2007, through December 31, 2012. All such claims for relief must be made in writing to the county from which the affected property was transitioned on or before February 28, 2013. Should a claim for relief pursuant to this section not be made by February 28, 2013, such claim is waived and no further relief shall be granted pursuant to this or any other act. Alamance County and Orange County shall not grant refunds or releases pursuant to this section for any claims made after February 28, 2013, and are released from all liability, and no court action shall be maintained for any such claims made for any act or failure to act pursuant to this section.

“(b) The provisions of this section shall apply only to properties transitioned or reassigned from one county to the other, in whole or in part, by the resurveys of individual qualifying properties pursuant to S.L. 2010-61 and this act.

“(c) For purposes of this section only, the term ‘property owner’ shall include any builder or developer that paid property taxes on real property to both counties and subsequently sold said property or that, as part of an escrow agreement in which the buyer of such property paid taxes to one county and the builder or developer who sold the property, paid taxes on the same piece of property to the adjoining county.

“(d) The taxing authorities of Alamance County and Orange County shall notify property owners affected by this section of the terms of this section within 30 days of this act becoming law. Such notice shall be by United States mail at the mailing address to which any tax bills were previously submitted. No other notice is or shall be required.”

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 survey of 1974 case law on taxation of personal property owned by nonresidents, see 53 N.C.L. Rev. 1132 (1975).

For article, “State Jurisdiction To Tax Tangible Personal Property,” see 56 N.C.L. Rev. No. 807 (1978).

For survey of 1978 law on taxation, see 57 N.C.L. Rev. 1142 (1979).

For survey of 1979 tax law, see 58 N.C.L. Rev. 1548 (1980).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

Legislative Purpose. —

The legislature has decreed that all property, real and personal, within the jurisdiction of the State, is subject to taxation whether owned by a resident or a nonresident. The purpose of this strong decree is to treat all property owners equally so that the tax burden will be shared proportionately, and to gather in all the tax money to which the various counties and municipalities are entitled. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

All property privately owned within this State is subject to taxation unless exempt by strict construction of the pertinent statute. Bragg Inv. Co. v. Cumberland County, 245 N.C. 492 , 96 S.E.2d 341, 1957 N.C. LEXIS 585 (1957).

All personal property whatsoever within the jurisdiction of the State and not specifically exempted from taxation by law is subject to taxation in North Carolina. Davenport v. Ralph N. Peters & Co., 274 F. Supp. 99, 1966 U.S. Dist. LEXIS 10557 (W.D.N.C. 1966), rev'd, 386 F.2d 199, 1967 U.S. App. LEXIS 4877 (4th Cir. 1967).

All property, real and personal, within the jurisdiction of this State, whether owned by a foreign corporation or a domestic corporation, is subject to taxation unless specifically excluded or exempted from the tax base. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

All property in North Carolina, both real and personal, is subject to property tax unless it was excluded or exempted from taxation by statute or the Constitution. Edward Valves, Inc. v. Wake County, 117 N.C. App. 484, 451 S.E.2d 641, 1995 N.C. App. LEXIS 1 (1995), aff'd, modified, 343 N.C. 426 , 471 S.E.2d 342, 1996 N.C. LEXIS 323 (1996).

No state may tax anything not within her jurisdiction without violating U.S. Const., Amend. XIV. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

But interstate commerce can be required to pay its nondiscriminatory share of taxes which each state may impose on property within its borders. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

The ad valorem property tax may be levied by the proper taxing authority upon personal property of an individual or corporation engaged in interstate commerce the same as upon any other property so long as the effect of such taxation does not place interstate commerce at a competitive disadvantage with intrastate commerce. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Taxation of Personal Property of Corporation Involved in Interstate Commerce. —

Taxpayer’s continuous interstate use of its equipment could not exclude North Carolina from taxing its amusement ride equipment, especially when the taxpayer did not provide any evidence establishing that it paid ad valorem taxes on the equipment elsewhere. Thus, pursuant to G.S. 105-304(c)(2), the taxpayer was a resident of Pender County and it failed to establish that its tangible personal property had tax situs elsewhere. In re Appeal of Amusements of Rochester, Inc., 201 N.C. App. 419, 689 S.E.2d 451, 2009 N.C. App. LEXIS 2250 (2009).

Test of whether tax law violates due process is whether the taxing power exerted by the State bears fiscal relation to protection, opportunities and benefits given by the State. The simple but controlling question is whether the State has given anything for which it can ask return. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Taxation of Personal Property of Nonresidents Is Constitutional. —

The taxation of personal property of nonresidents by this State when such personal property has acquired a taxable situs here does not violate the provisions of U.S. Const., Amend. XIV, the rule that personal property follows the domicile of the owner being subject to an exception when such personalty is held in such a manner as to create a “business situs” for the purpose of taxation. County of Mecklenburg v. Sterchi Bros. Stores, 210 N.C. 79 , 185 S.E. 454, 1936 N.C. LEXIS 22 (1936).

When personal property belonging to a nonresident has acquired a taxable situs in this State, this State may tax that nonresident’s property without violating the provisions of U.S. Const., Amend. XIV. In re Bassett Furn. Indus., Inc., 79 N.C. App. 258, 339 S.E.2d 16, 1986 N.C. App. LEXIS 2025 (1986).

Situs Essential for Tax Exaction. —

Taxable tangible personal property must have acquired a tax situs in this State, for situs is an absolute essential for tax exaction. In re Bassett Furn. Indus., Inc., 79 N.C. App. 258, 339 S.E.2d 16, 1986 N.C. App. LEXIS 2025 (1986).

In a case in which a taxpayer appealed a judgment entered by the Property Tax Commission, the taxpayer argued unsuccessfully that the plane’s 2003 tax situs was Delaware, and, therefore, North Carolina could not levy a tax on it, and that it qualified for exception (f) of G.S. 105-304 . The plane was more or less permanently located in North Carolina for tax year 2003 because it was in Delaware only for maintenance or alterations, rather than for continued, actual use as an airplane; the taxpayer did not meet its burden of showing that it had qualified for an exemption under G.S. 105-304 (f), and it was required to pay ad valorem taxes on the plane consistent with its value on 1 January 2003. In re SAS Inst., Inc., 200 N.C. App. 238, 684 S.E.2d 444, 2009 N.C. App. LEXIS 1624 (2009).

Situs of personal property for tax purposes is determined by the legislature, and the legislature may provide different rules for different kinds of property and may change the rules from time to time. In re Bassett Furn. Indus., Inc., 79 N.C. App. 258, 339 S.E.2d 16, 1986 N.C. App. LEXIS 2025 (1986).

A jet aircraft hangared in Rockingham County, North Carolina for approximately one year by a nonresident corporation having no principal place of business in this State, under the stipulated facts and evidence, was “situated” or “more or less permanently located” in Rockingham County on January 1, 1984, and therefore had a tax situs in Rockingham County on that date. The fact that the airplane happened to be physically located at a Virginia airport on January 1, 1984, did not defeat taxation by Rockingham County. In re Bassett Furn. Indus., Inc., 79 N.C. App. 258, 339 S.E.2d 16, 1986 N.C. App. LEXIS 2025 (1986).

Inventories Owned by Manufacturers. —

In a tax dispute, aircraft tires were “inventories owned by manufacturers” under G.S. 105-274 and were excluded from taxation in North Carolina; “finished goods” was not modified by materials or supplies consumed in manufacturing. In re Michelin North Am., Inc., 246 N.C. App. 482, 783 S.E.2d 775, 2016 N.C. App. LEXIS 357 (2016).

Exemptions Strictly Construed. —

Exemption from taxation is exceptional. Such exemptions should be strictly construed. In re Notice of Attachment & Garnishment Issued by Catawba County Tax Collector, 59 N.C. App. 332, 296 S.E.2d 499, 1982 N.C. App. LEXIS 3100 (1982).

Inventory Exclusion Not Applicable to Rental Equipment. —

Taxpayer, by renting equipment to third parties, was not entitled to the inventory tax exclusion for the rented equipment. In re R.W. Moore Equip. Co., 115 N.C. App. 129, 443 S.E.2d 734, 1994 N.C. App. LEXIS 553 (1994).

Where defendant treated equipment as income producing property rather than inventory for financial reporting purposes, depreciating only that part of its inventory of new and used equipment that it used for rental purposes, this treatment rendered the equipment used for rental purposes ineligible for tax exclusion because its use and consumption as income producing property was incompatible with its character as inventory. In re R.W. Moore Equip. Co., 115 N.C. App. 129, 443 S.E.2d 734, 1994 N.C. App. LEXIS 553 (1994).

As to right of State to tax foreign corporations, see Commissioners of Beaufort County v. Old Dominion S.S. Co., 128 N.C. 558 , 39 S.E. 18, 1901 N.C. LEXIS 429 (1901).

When Lease Taxable to Lessee and When to Lessor. —

Leases are intangible personal property only when they are leases in “exempted real property.” Thus, the only leases taxable to the lessee are leases on fees exempt from taxation on the lessor. Where the fee is nonexempt, the lease is not intangible personal property and is taxable to the owner as is all real and personal property not exempt under this section. In re North Carolina Forestry Found., Inc., 35 N.C. App. 430, 242 S.E.2d 502, 1978 N.C. App. LEXIS 3004 (1978), aff'd, 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

Used Machinery and Equipment. —

Where taxpayer which acquired used machinery and equipment primarily for use in its manufacture of textiles and only held the goods for sale after the property was no longer useful in taxpayer’s textile business, the equipment and machinery at issue were not inventory held for sale in the regular course of business by a wholesale merchant. Consequently, the property was not excluded from ad valorem taxation. In re Cone Mills Corp., 112 N.C. App. 539, 435 S.E.2d 835, 1993 N.C. App. LEXIS 1126 (1993).

Educational Exemption Upheld. —

A seminary met its burden of proving that three parcels of its property were entitled to an exemption under G.S. 105-278.4 , although the land in question was undeveloped, the future planned use might not be exempt, and the seminary had sold some timber from the land to maintain a healthy forested state, to remove trees damaged by a hurricane, and to pay for other repairs caused by that hurricane. In re Southeastern Baptist Theological Seminary, Inc., 135 N.C. App. 247, 520 S.E.2d 302, 1999 N.C. App. LEXIS 1047 (1999).

Taxable Situs of Cottonseed Oil Stored at Refinery. —

See Davenport v. Ralph N. Peters & Co., 274 F. Supp. 99, 1966 U.S. Dist. LEXIS 10557 (W.D.N.C. 1966), rev'd, 386 F.2d 199, 1967 U.S. App. LEXIS 4877 (4th Cir. 1967).

Structures and improvements, together with stoves and refrigerators, placed by lessee on lands within a military reservation leased from the federal government are subject to taxation by the county in which the property is situated, the improvements as realty and the stoves and refrigerators as tangible personal property. Bragg Inv. Co. v. Cumberland County, 245 N.C. 492 , 96 S.E.2d 341, 1957 N.C. LEXIS 585 (1957).

Privilege “Belonging” or “Appertaining” to Real Property. —

Non-refundable membership fee in a continuing care retirement community was a right and privilege “belonging” or “appertaining to” the taxpayers’ real property and was properly included in its tax appraisal value. In re Appeal of Tillman, 187 N.C. App. 739, 653 S.E.2d 911, 2007 N.C. App. LEXIS 2563 (2007).

OPINIONS OF ATTORNEY GENERAL

EDITOR’S NOTE.— The opinions of the Attorney General cited below were rendered under former similar provisions.

Timberland owned by nonstock corporation and leased to paper company is subject to ad valorem taxation by county in which land is located. See opinion of Attorney General to Mr. James R. Hood, Jones County Attorney 40 N.C. Op. Att'y Gen. 786 (1969).

As to when personal property of nonresident stored in a warehouse in North Carolina is not subject to ad valorem taxes, see opinion of Attorney General to Mr. T.R. Holbrook, Administrative Officer, State Board of Assessment, 41 N.C. Op. Att'y Gen. 27 (1970).

§ 105-275. Property classified and excluded from the tax base.

The following classes of property are designated special classes under Article V, Sec. 2(2), of the North Carolina Constitution and are excluded from tax:

  1. Repealed by Session Laws 1987, c. 813, s. 5.
  2. Tangible personal property that has been imported from a foreign country through a North Carolina seaport terminal and which is stored at such a terminal while awaiting further shipment for the first 12 months of such storage. (The purpose of this classification is to encourage the development of the ports of this State.)
  3. Real and personal property owned by nonprofit water or nonprofit sewer associations or corporations.
  4. Repealed by Session Laws 1987, c. 813, s. 5.
  5. Vehicles that the United States government gives to veterans on account of disabilities they suffered in World War II, the Korean Conflict, or the Vietnam Era so long as they are owned by:
    1. A person to whom a vehicle has been given by the United States government or
    2. Another person who is entitled to receive such a gift under Title 38, section 252, United States Code Annotated.

      (5a) A motor vehicle owned by a disabled veteran that is altered with special equipment to accommodate a service-connected disability. As used in this section, disabled veteran means a person as defined in 38 U.S.C. § 101(2) who is entitled to special automotive equipment for a service-connected disability, as provided in 38 U.S.C. § 3901.

  6. Special nuclear materials held for or in the process of manufacture, processing, or delivery by the manufacturer or processor thereof, regardless whether the manufacturer or processor owns the special nuclear materials. The terms “manufacture” and “processing” do not include the use of special nuclear materials as fuel. The term “special nuclear materials” includes (i) uranium 233, uranium enriched in the isotope 233 or in the isotope 235; and (ii) any material artificially enriched by any of the foregoing, but not including source material. “Source material” means any material except special nuclear material which contains by weight one twentieth of one percent (0.05%) or more of (i) uranium, (ii) thorium, or (iii) any combination thereof. Provided however, that to qualify for this exemption no such nuclear materials shall be discharged into any river, creek or stream in North Carolina. The classification and exclusion provided for herein shall be denied to any manufacturer, fabricator or processor who permits burial of such material in North Carolina or who permits the discharge of such nuclear materials into the air or into any river, creek or stream in North Carolina if such discharge would contravene in any way the applicable health and safety standards established and enforced by the Department of Environmental Quality or the Nuclear Regulatory Commission. The most stringent of these standards shall govern.
  7. Real and personal property that is:
    1. Owned either by a nonprofit corporation formed under the provisions of Chapter 55A of the General Statutes or by a bona fide charitable organization, and either operated by such owning organization or leased to another such nonprofit corporation or charitable organization, and
    2. Appropriated exclusively for public parks and drives. (7a) (Expiring for taxes imposed for taxable years beginning on or after July 1, 2021) Real and personal property that meets each of the following requirements:

      a. It is a contiguous tract of land previously (i) used primarily for commercial or industrial purposes and (ii) damaged significantly as a result of a fire or explosion.

      b. It was donated to a nonprofit corporation formed under the provisions of Chapter 55A of the General Statutes by an entity other than an affiliate, as defined in G.S. 105-163.010 .

    3. No portion is or has been leased or sold by the nonprofit corporation.
    1. Real and personal property that is used or, if under construction, is to be used exclusively for air cleaning or waste disposal or to abate, reduce, or prevent the pollution of air or water (including, but not limited to, waste lagoons and facilities owned by public or private utilities built and installed primarily for the purpose of providing sewer service to areas that are predominantly residential in character or areas that lie outside territory already having sewer service), if the Department of Environmental Quality or 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 furnishes a certificate to the tax supervisor of the county in which the property is situated or to be situated stating that the Environmental Management Commission or local air pollution control program has found that the described property:
      1. Has been or will be constructed or installed;
      2. Complies with or that plans therefor which have been submitted to the Environmental Management Commission or local air pollution control program indicate that it will comply with the requirements of the Environmental Management Commission or local air pollution control program;
      3. Is being effectively operated or will, when completed, be required to operate in accordance with the terms and conditions of the permit, certificate of approval, or other document of approval issued by the Environmental Management Commission or local air pollution control program; and
      4. Has or, when completed, will have as its primary rather than incidental purpose the reduction of water pollution resulting from the discharge of sewage and waste or the reduction of air pollution resulting from the emission of air contaminants. a1. Sub-subdivision a. of this subdivision shall not apply to an animal waste management system, as defined in G.S. 143-215.10 B, unless the Environmental Management Commission determines that the animal waste management system will accomplish all of the following: 1. Eliminate the discharge of animal waste to surface waters and groundwater through direct discharge, seepage, or runoff.

        2. Substantially eliminate atmospheric emissions of ammonia.

        3. Substantially eliminate the emission of odor that is detectable beyond the boundaries of the parcel or tract of land on which the farm is located.

        4. Substantially eliminate the release of disease-transmitting vectors and airborne pathogens.

      5. Substantially eliminate nutrient and heavy metal contamination of soil and groundwater.

        a2. Notwithstanding sub-subdivision a1. of this subdivision, sub-subdivision a. of this subdivision applies to a farm digester system as defined in G.S. 143-213(12a).

    2. Real or personal property that is used or, if under construction, is to be used exclusively for recycling or resource recovering of or from solid waste, if the Department of Environmental Quality furnishes a certificate to the tax supervisor of the county in which the property is situated stating the Department of Environmental Quality has found that the described property has been or will be constructed or installed, complies or will comply with the rules of the Department of Environmental Quality, and has, or will have as its primary purpose recycling or resource recovering of or from solid waste.
    3. Tangible personal property that is used exclusively, or if being installed, is to be used exclusively, for the prevention or reduction of cotton dust inside a textile plant for the protection of the health of the employees of the plant, in accordance with occupational safety and health standards adopted by the State of North Carolina pursuant to Article 16 of G.S. Chapter 95. Notwithstanding the exclusive use requirement of this sub-subdivision, all parts of a ventilation or air conditioning system that are integrated into a system used for the prevention or reduction of cotton dust, except for chillers and cooling towers, are excluded from taxation under this sub-subdivision. The Department of Revenue shall adopt guidelines to assist the tax supervisors in administering this exclusion.
    4. Real or personal property that is used or, if under construction, is to be used by a major recycling facility as defined in G.S. 105-129.25 predominantly for recycling or resource recovering of or from solid waste, if the Department of Environmental Quality furnishes a certificate to the tax supervisor of the county in which the property is situated stating the Department of Environmental Quality has found that the described property has been or will be constructed or installed for use by a major recycling facility, complies or will comply with the rules of the Department of Environmental Quality, and has, or will have as a purpose recycling or resource recovering of or from solid waste.
  9. through (11) Repealed by Session Laws 1987, c. 813, s. 5. (12) Real property that (i) is owned by a nonprofit corporation or association organized to receive and administer lands for conservation purposes, (ii) is exclusively held and used for one or more of the purposes listed in this subdivision, and (iii) produces no income or produces income that is incidental to and not inconsistent with the purpose or purposes for which the land is held and used. The taxes that would otherwise be due on land classified under this subdivision shall be a lien on the real property of the taxpayer as provided in G.S. 105-355(a). The taxes shall be carried forward in the records of the taxing unit or units as deferred taxes. The deferred taxes for the preceding five fiscal years are due and payable in accordance with G.S. 105-277.1 F when the property loses its eligibility for deferral as a result of a disqualifying event. A disqualifying event occurs when the property (i) is no longer exclusively held and used for one or more of the purposes listed in this subdivision, (ii) produces income that is not incidental to and consistent with the purpose or purposes for which the land is held and used, or (iii) is sold or transferred without an easement recorded at the time of sale that requires perpetual use of the land for one or more of the purposes listed in this subdivision and that prohibits any use of the land that would generate income that is not incidental to and consistent with the purpose or purposes for which the land is held and used. In addition to the provisions in G.S. 105-277.1 F, all liens arising under this subdivision are extinguished upon the real property being sold or transferred to a local, state, or federal government unit for conservation purposes or subject to an easement recorded at the time of sale that requires perpetual use of the land for one or more of the purposes listed in this subdivision. The purposes allowed under this subdivision are any of the following:
    1. Used for an educational or scientific purpose as a nature reserve or park in which wild nature, flora and fauna, and biotic communities are preserved for observation and study. For purposes of this sub-subdivision, the terms “educational purpose” and “scientific purpose” are defined in G.S. 105-278.7(f).
    2. Managed under a written wildlife habitat conservation agreement with the North Carolina Wildlife Resources Commission.
    3. Managed under a forest stewardship plan developed by the Forest Stewardship Program.
    4. Used for public access to public waters or trails.
    5. Used for protection of water quality and subject to a conservation agreement under the provision of the Conservation and Historic Preservation Agreements Act, Article 4, Chapter 121 of the General Statutes.
    6. Held by a nonprofit land conservation organization for sale or transfer to a local, state, or federal government unit for conservation purposes.

      (13) Repealed by Session Laws 1973, c. 904.

      (14) Motor vehicles chassis belonging to nonresidents, which chassis temporarily enters the State for the purpose of having a body mounted thereon.

      (15) Upon the date on which each county’s next general reappraisal of real property under the provisions of G.S. 105-286(a) becomes effective, standing timber, pulpwood, seedlings, saplings, and other forest growth. (The purpose of this classification is to encourage proper forest management practices and to develop and maintain the forest resources of the State.)

      (16) Non-business Property. — As used in this subdivision, the term “non-business property” means personal property that is used by the owner of the property for a purpose other than the production of income and is not used in connection with a business. The term includes household furnishings, clothing, pets, lawn tools, and lawn equipment. The term does not include motor vehicles, mobile homes, aircraft, watercraft, or engines for watercraft.

      (17) Real and personal property belonging to the American Legion, Veterans of Foreign Wars, Disabled American Veterans, or to any similar veterans organizations chartered by the Congress of the United States or organized and operated on a statewide or nationwide basis, and any post or local organization thereof, when used exclusively for meeting or lodge purposes by said organization, together with such additional adjacent real property as may be necessary for the convenient and normal use of the buildings thereon. Notwithstanding the exclusive-use requirement hereinabove established, if a part of a property that otherwise meets this subdivision’s requirements is used for a purpose that would require that it not be listed, appraised, assessed or taxed if the entire property were so used, that part, according to its value, shall not be listed, appraised, assessed or taxed. The fact that a building or facility is incidentally available to and patronized by the general public, so far as there is no material amount of business or patronage with the general public, shall not defeat the classification granted by this section.

      (18) Real and personal property belonging to the Grand Lodge of Ancient, Free and Accepted Masons of North Carolina, the Prince Hall Masonic Grand Lodge of North Carolina, their subordinate lodges and appendant bodies including the Ancient and Arabic Order Nobles of the Mystic Shrine, and the Ancient Egyptian Order Nobles of the Mystic Shrine, when used exclusively for meeting or lodge purposes by said organization, together with such additional adjacent real property as may be necessary for the convenient normal use of the buildings thereon. Notwithstanding the exclusive-use requirement hereinabove established, if a part of a property that otherwise meets this subdivision’s requirements is used for a purpose that would require that it not be listed, appraised, assessed or taxed if the entire property were so used, that part, according to its value, shall not be listed, appraised, assessed or taxed. The fact that a building or facility is incidentally available to and patronized by the general public, so far as there is no material amount of business or patronage with the general public, shall not defeat the classification granted by this section.

      (19) Real and personal property belonging to the Loyal Order of Moose, the Benevolent and Protective Order of Elks, the Knights of Pythias, the Odd Fellows, the Woodmen of the World, and similar fraternal or civic orders and organizations operated for nonprofit benevolent, patriotic, historical, charitable, or civic purposes, when used exclusively for meeting or lodge purposes by the organization, together with as much additional adjacent real property as may be necessary for the convenient normal use of the buildings. Notwithstanding the exclusive-use requirement of this subdivision, if a part of a property that otherwise meets this subdivision’s requirements is used for a purpose that would require that it not be listed, appraised, assessed, or taxed if the entire property were so used, that part, according to its value, shall not be listed, appraised, assessed, or taxed. The fact that a building or facility is incidentally available to and patronized by the general public, so far as there is no material amount of business or patronage with the general public, shall not defeat the classification granted by this section. Nothing in this subdivision shall be construed so as to include social fraternities, sororities, and similar college, university, or high school organizations in the classification for exclusion from ad valorem taxes.

      (19a) Improvements to real property that are (i) owned by social fraternities, sororities, and similar college, university, or high school organizations and (ii) located on land owned by or allocated to The University of North Carolina or one if its constituent institutions.

      (20) Real and personal property belonging to Goodwill Industries and other charitable organizations organized for the training and rehabilitation of disabled persons when used exclusively for training and rehabilitation, including commercial activities directly related to such training and rehabilitation.

      (21) Repealed by Session Laws 2008-107, s. 28.11(a), effective for taxes imposed for taxable years beginning on or after July 1, 2009.

      (22) Repealed by Session Laws 1987, c. 813, s. 5.

      (23) Tangible personal property imported from outside the United States and held in a Foreign Trade Zone for the purpose of sale, manufacture, processing, assembly, grading, cleaning, mixing or display and tangible personal property produced in the United States and held in a Foreign Trade Zone for exportation, either in its original form or as altered by any of the above processes.

      (24) Cargo containers and container chassis used for the transportation of cargo by vessels in ocean commerce.The term “container” applies to those nondisposable receptacles of a permanent character and strong enough for repeated use and specially designed to facilitate the carriage of goods, by one or more modes of transport, one of which shall be by ocean vessels, without intermediate reloadings and fitted with devices permitting its ready handling particularly in the transfer from one transport mode to another.

      (24a) Aircraft that is owned or leased by an interstate air courier, is apportioned under G.S. 105-337 to the air courier’s hub in this State, and is used in the air courier’s operations in this State. For the purpose of this subdivision, the terms “interstate air courier” and “hub” have the meanings provided in G.S. 105-164.3 .

      (25) Tangible personal property shipped into this State for the purpose of repair, alteration, maintenance or servicing and reshipment to the owner outside this State.

      (26) For the tax year immediately following transfer of title, tangible personal property manufactured in this State for the account of a nonresident customer and held by the manufacturer for shipment. For the purpose of this subdivision, the term “nonresident” means a taxpayer having no place of business in North Carolina.

      (27), (28) Repealed by Session Laws 1983, c. 643, s. 1.

      (29) Real property and easements wholly and exclusively held and used for nonprofit historic preservation purposes by a nonprofit historical association or institution, including real property owned by a nonprofit corporation organized for historic preservation purposes and held by its owner exclusively for sale under an historic preservation agreement to be prepared and recorded, at the time of sale, under the provisions of the Conservation and Historic Preservation Agreements Act, Article 4, Chapter 121 of the General Statutes of North Carolina.

      (29a) Land that is within an historic district and is held by a nonprofit corporation organized for historic preservation purposes for use as a future site for an historic structure that is to be moved to the site from another location. Property may be classified under this subdivision for no more than five years. The taxes that would otherwise be due on land classified under this subdivision shall be a lien on the real property of the taxpayer as provided in G.S. 105-355(a). The taxes shall be carried forward in the records of the taxing unit or units as deferred taxes. The deferred taxes are due and payable in accordance with G.S. 105-277.1F when the property loses its eligibility for deferral as a result of a disqualifying event. A disqualifying event occurs when an historic structure is not moved to the property within five years from the first day of the fiscal year the property was classified under this subdivision. In addition to the provisions in G.S. 105-277.1F, all liens arising under this subdivision are extinguished upon the location of an historic structure on the site within the time period allowed under this subdivision.

      (30) Repealed by Session Laws 1987, c. 813, s. 5.

      (31) (Effective for taxes imposed for taxable years beginning before July 1, 2019) Intangible personal property other than a leasehold interest that is in exempted real property and is not excluded under subdivision (31e) of this section. This subdivision does not affect the taxation of software not otherwise excluded by subdivision (40) of this section.

      (31) (Effective for taxes imposed for taxable years beginning on or after July 1, 2019) Intangible personal property other than software not otherwise excluded by subdivision (40) of this section.

      (31a) through (31d) Repealed by Session Laws 1997-23, s. 3.

      (31e) (Repealed effective for taxes imposed taxable years beginning on or after July 1, 2019) A leasehold interest in real property that is exempt under G.S. 105-278.1 and is used to provide affordable housing for employees of the unit of government that owns the property.

      (32) Recodified as G.S. 105-278.6 A by Session Laws 1998-212, s. 29A.18(a), effective for taxes imposed for taxable years beginning on or after July 1, 1998.

      (32a) Inventories owned by contractors.

      (33) Inventories owned by manufacturers.

      (34) Inventories owned by retail and wholesale merchants.

      (35) Severable development rights, as defined in G.S. 136-66.11(a), when severed and evidenced by a deed recorded in the office of the register of deeds pursuant to G.S. 136-66.11(c).

      (36) Repealed by Session Laws 2001-474, s. 8, effective November 29, 2001.

      (37) Poultry and livestock and feed used in the production of poultry and livestock.

      (38) Repealed by Session Laws 2001-474, s. 8, effective November 29, 2001.

      (39) Real and personal property that is: (i) owned by a nonprofit corporation organized upon the request of a State or local government unit for the sole purpose of financing projects for public use, (ii) leased to a unit of State or local government whose property is exempt from taxation under G.S. 105-278.1 , and (iii) used in whole or in part for a public purpose by the unit of State or local government. If only part of the property is used for a public purpose, only that part is excluded from the tax. This subdivision does not apply if any distributions are made to members, officers, or directors of the nonprofit corporation.

      (39a) A correctional facility, including construction in progress, that is located on land owned by the State and is constructed pursuant to a contract with the State, and any leasehold interest in the land owned by the State upon which the correctional facility is located.

      (40) Computer software and any documentation related to the computer software. As used in this subdivision, the term “computer software” means any program or routine used to cause a computer to perform a specific task or set of tasks. The term includes system and application programs and database storage and management programs.The exclusion established by this subdivision does not apply to computer software and its related documentation if the computer software meets one or more of the following descriptions:

      a. It is embedded software. “Embedded software” means computer instructions, known as microcode, that reside permanently in the internal memory of a computer system or other equipment and are not intended to be removed without terminating the operation of the computer system or equipment and removing a computer chip, a circuit, or another mechanical device.

      b. It is purchased or licensed from a person who is unrelated to the taxpayer and it is capitalized on the books of the taxpayer in accordance with generally accepted accounting principles, including financial accounting standards issued by the Financial Accounting Standards Board. A person is unrelated to a taxpayer if (i) the taxpayer and the person are not subject to any common ownership, either directly or indirectly, and (ii) neither the taxpayer nor the person has any ownership interest, either directly or indirectly, in the other. The foregoing does not include development of software or any modifications to software, whether done internally by the taxpayer or externally by a third party, to meet the customer’s specified needs.This subdivision does not affect the value or taxable status of any property that is otherwise subject to taxation under this Subchapter.The provisions of the exclusion established by this subdivision are not severable. If any provision of this subdivision or its application is held invalid, the entire subdivision is repealed.

      (41) Repealed by Session Laws 2012-120, s. 1(a), effective October 1, 2012.

      (42) A vehicle that is offered at retail for short-term lease or rental and is owned or leased by an entity engaged in the business of leasing or renting vehicles to the general public for short-term lease or rental. For the purposes of this subdivision, the term “short-term lease or rental” shall have the same meaning as in G.S. 105-187.1 , and the term “vehicle” shall have the same meaning as in G.S. 153A-156 (e) and G.S. 160A-215.1 (e). A gross receipts tax as set forth by G.S. 153A-156 and G.S. 160A-215.1 is substituted for and replaces the ad valorem tax previously levied on these vehicles.

      (42a) Heavy equipment on which a gross receipts tax may be imposed under G.S. 153A-156.1 and G.S. 160A-215.2 .

      (43) Real or tangible personal property that is subject to a capital lease pursuant to G.S. 115C-531 .

      (44) Free samples of drugs that are required by federal law to be dispensed only on prescription and are given to physicians and other medical practitioners to dispense free of charge in the course of their practice.

      (44a) (Effective for taxes imposed for taxable years beginning on or after July 1, 2022) Vaccines.

      (45) Eighty percent (80%) of the appraised value of a solar energy electric system. For purposes of this subdivision, the term “solar energy electric system” means all equipment used directly and exclusively for the conversion of solar energy to electricity.

      (46) (Effective for taxes imposed for taxable years beginning before July 1, 2018) Real property that is occupied by a charter school and is wholly and exclusively used for educational purposes as defined in G.S. 105-278.4(f) regardless of the ownership of the property.

      (46) (Effective for taxes imposed for taxable years beginning on or after July 1, 2018) Real and personal property that is occupied by a charter school and is wholly and exclusively used for educational purposes as defined in G.S. 105-278.4(f), regardless of the ownership of the property.

      (47) Energy mineral interest in property for which a permit has not been issued under G.S. 113-395 . For the purposes of this subdivision, “energy mineral” has the same meaning as in G.S. 105-187.76 .

      (48) Real and personal property located on lands held in trust by the United States for the Eastern Band of Cherokee Indians, regardless of ownership.

      (49) (Effective for taxes imposed for taxable years beginning on or after July 1, 2018) A mobile classroom or modular unit that is occupied by a school and is wholly and exclusively used for educational purposes, as defined in G.S. 105-278.4(f), regardless of the ownership of the property. For the purposes of this subdivision, the term “school” means a public school, including any school operated by a local board of education in a local school administrative unit; a regional school; a nonprofit nonpublic school regulated under Article 39 of Chapter 115C of the General Statutes; or a community college established under Article 2 of Chapter 115D of the General Statutes.

History. 1939, c. 310, s. 303; 1961, c. 1169, s. 8; 1967, c. 1185; 1971, c. 806, s. 1; c. 1121, s. 3; 1973, cc. 290, 451; c. 476, s. 128; c. 484; c. 695, s. 1; c. 790, s. 1; cc. 904, 962, 1028, 1034, 1077; c. 1262, s. 23; c. 1264, s. 1; 1975, cc. 566, 755; c. 764, s. 6; 1977, c. 771, s. 4; c. 782, s. 2; c. 1001, ss. 1, 2; 1977, 2nd Sess., c. 1200, s. 4; 1979, c. 200, s. 1; 1979, 2nd Sess., c. 1092; 1981, c. 86, s. 1; 1981 (Reg. Sess., 1982), c. 1244, ss. 1, 2; 1983, c. 643, ss. 1, 2; c. 693; 1983 (Reg. Sess., 1984), c. 1060; 1985, c. 510, s. 1; c. 656, s. 37; 1985 (Reg. Sess., 1986), c. 982, s. 18; 1987, c. 356; c. 622, s. 2; c. 747, s. 8; c. 777, s. 6; c. 813, ss. 5, 6, 22; c. 850, s. 17; 1987 (Reg. Sess., 1988), c. 1041, s. 1.1; 1989, c. 148, s. 4; c. 168, s. 6; c. 705; c. 723, s. 1; c. 727, ss. 28, 29; 1991, c. 717, s. 1; 1991 (Reg. Sess., 1992), c. 975, s. 2; 1993, c. 459, s. 2; 1993 (Reg. Sess., 1994), c. 745, s. 39; 1995, c. 41, s. 2; c. 509, s. 51; 1995 (Reg. Sess., 1996), c. 646, s. 12; 1997-23, ss. 1, 3, 9; 1997-443, s. 11A.119(a); 1997-456, s. 27; 1998-55, ss. 10, 18; 1998-212, s. 29A.18(a); 1999-337, s. 35(a); 2000-2, s. 1; 2000-18, s. 1, 2000-140, ss. 71, 72(a); 2001-84, s. 3; 2001-427, s. 15(a); 2001-474, s. 8; 2002-104, s. 1; 2003-284, s. 43A.1; 2007-477, s. 1; 2007-527, s. 37; 2008-35, s. 2.1; 2008-107, s. 28.11(a); 2008-134, s. 72; 2008-144, s. 1; 2008-146, ss. 4.1, 5.1; 2008-171, ss. 7(a), (b); 2009-445, s. 21; 2010-95, s. 15; 2011-123, s. 1; 2011-274, s. 1; 2012-120, s. 1(a); 2013-259, s. 1; 2013-355, s. 3; 2013-375, s. 3(a); 2014-4, s. 18; 2015-241, s. 14.30(u); 2015-262, s. 1(a); 2016-94, s. 38.6(a); 2017-204, s. 5.4(a); 2018-98, s. 1(a); 2018-114, s. 25(a); 2021-78, s. 11(h); 2021-180, s. 42.12(c).

Subdivision (31) Set Out Twice.

The first version of subdivision (31) set out above is effective for taxes imposed for taxable years beginning before July 1, 2019. The second version of subdivision (31) set out above is effective for taxes imposed for taxable years beginning on or after July 1, 2019.

Subdivision (46) Set Out Twice.

The first version of subdivision (46) set out above is effective for taxes imposed for taxable years beginning before July 1, 2018. The second version of subdivision (46) set out above is effective for taxes imposed for taxable years beginning on or after July 1, 2018.

Editor’s Note.

Session Laws 2001-84, s. 2, provided: “This act, being necessary for the health and welfare of the people of the State, shall be liberally construed to effect its purposes.”

Session Laws 2008-107, s. 28.11(h), provides, in part, that the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of Session Laws 2008-35 that is recodified or amended by Session Laws 2008-107, s. 28.11(h) by deleting incorrect references and substituting correct references. The reference in subdivision (29a) to G.S. 105-277.1 C has been changed to G.S. 105-277.1 F.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2008-146, ss. 4.2 and 5.2, as amended by Session Laws 2009-445, s. 45(d) and (e), each, provide: “This Part [Parts IV and V, respectively, of Session Laws 2008-146] is effective for taxes imposed for taxable years beginning on or after July 1, 2008.”

Session Laws 2008-171, s. 8, provides, in part: “Notwithstanding G.S. 105-282.1 , an application for the exclusion in G.S. 105-275(31e), as enacted by this act, is timely if filed on or before September 1, 2008.”

Session Laws 2013-259, s. 2, provides: “Section 1 of this act shall not be construed to affect the interpretation of any statute that is the subject of litigation pending as of the effective date of this act in the General Court of Justice or to affect any other aspect of such pending litigation.”

Session Laws 2013-355, s. 8, provides in part: “Nothing in this act shall be construed to affect pending litigation.”

The reference to “ G.S. 105-187.71 ” in subdivision (47) was changed to “ G.S. 105-187.76 ” at the direction of the Revisor of Statutes.

Session Laws 2011-123, s. 2, as amended by Session Laws 2016-94, s. 38.6(a), provides: “This act is effective for taxes imposed for taxable years beginning on or after July 1, 2011, and expires for taxes imposed for taxable years beginning on or after July 1, 2021.” Session Laws 2011-123 added subdivision (7a) of this section.

Session Laws 2017-108, s. 1(a), (b), provides: “(a) The Agriculture and Forestry Awareness Study Commission shall study all of the following matters:

“(1) Any updates it deems advisable to Article 44 of Chapter 106 of the General Statutes governing unfair practices by handlers of fruits and vegetables, including applicable definitions and requirements under the Article.

“(2) The advisability of providing property tax abatement to aging farm machinery. In conducting this study, the Commission shall consider all of the following: (i) whether farm machinery 10 years or older, or other time period the Commission deems appropriate, should be designated as a special class under Section 2(2) of Article V of the North Carolina Constitution and be excluded from property tax; (ii) if such farm machinery should be excluded from property tax, whether an eighty percent (80%) property tax exclusion is an appropriate exclusion amount, or another amount the Commission deems appropriate; and (iii) the fiscal impact on local governments if such machinery were to be excluded from property tax. The Commission may request any information necessary to complete the study from any county tax office in this State and from the Department of Revenue.

“(3) The type of activities that constitute agritourism when conducted on a bona fide farm and other relevant matters relating to agritourism activities.

“(b) The Agriculture and Forestry Awareness Study Commission shall complete the studies required by subsection (a) of this section and report its findings and recommendations, including any legislative proposals, to the General Assembly by March 1, 2018.”

Session Laws 2017-108, s. 21, is a severability clause.

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

Sessions Laws 2018-114, s. 29, is a severability clause.

Session Laws 2021-78, s. 14(a), is a severability clause.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2003-284, s. 43A.1, effective June 30, 2003, inserted the second sentence in subdivision (8)c.

Session Laws 2007-477, s. 1, effective July 1, 2007, and applicable to taxes imposed for taxable years beginning on or after that date, added subdivision (43).

Session Laws 2007-527, s. 37, effective August 31, 2007, inserted “State” in subsection (41).

Session Laws 2008-35, s. 2.1, effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote subdivision (29a).

Session Laws 2008-107, s. 28.11(a), effective for taxes imposed for taxable years beginning on or after July 1, 2009, repealed subdivision (21), which read: “The first thirty-eight thousand dollars ($38,000) in assessed value of housing together with the necessary land therefor, owned and used as a residence by a disabled veteran who receives benefits under 38 U.S.C. § 2101. This exclusion shall be the total amount of the exclusion applicable to such property.”

Session Laws 2008-134, s. 72, effective July 28, 2008, substituted “to be prepared and recorded, at the time of sale” for “prepared and recorded” in subdivision (29).

Session Laws 2008-144, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2009, added subdivision (42a).

Session Laws 2008-146, ss. 4.1 and 5.1, effective for taxable years beginning on or after July 1, 2008, added subdivisions (44) and (45).

Session Laws 2008-171, ss. 7(a) and (b), effective for taxes imposed for taxable years beginning on or after July 1, 2008, in subdivision (31), substituted “a leasehold interest that is in exempted real property and is not excluded under subdivision (31e) of this section” for “leasehold interests in exempted real property”; and added subdivision (31e). See Editor’s note for applicability.

Session Laws 2009-445, s. 21, effective August 7, 2009, in the introductory language, deleted “hereby” preceding “designated” and “authority of” preceding “Article V” and substituted “are excluded from tax” for “shall not be listed, appraised, assessed, or taxed.”

Session Laws 2010-95, s. 15, effective July 17, 2010, added the last sentence in subdivision (29a).

Session Laws 2011-123, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2011, and expiring for taxes imposed for taxable years beginning on or after July 1, 2016, added subdivision (7a).

Session Laws 2011-274, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2011, rewrote subdivision (12).

Session Laws 2012-120, s. 1(a), effective October 1, 2012, repealed subdivision (41), which read: “Objects of art held by the North Carolina State Art Society, Incorporated.”

Session Laws 2013-259, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2014, added the last sentence in sub-subdivision (40)b.

Session Laws 2013-355, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2013, added subdivision (46).

Session Laws 2013-375, s. 3(a), effective for taxes imposed for taxable years beginning on or after July 1, 2013, added subdivision (19a).

Session Laws 2014-4, s. 18, effective for taxes imposed for taxable years beginning on or after July 1, 2015, added subdivision (47).

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 subdivision (6) and throughout subdivision (8).

Session Laws 2015-262, s. 1(a), effective July 1, 2016, added subdivision (48). For applicability, see editor’s note.

Session Laws 2017-204, s. 5.4(a), effective for taxes imposed for taxable years beginning on or after July 1, 2018, added subdivision (49).

Session Laws 2018-98, s. 1(a), effective for taxable years beginning on or after July 1, 2019, rewrote subdivision (31), and deleted subdivision (31e).

Session Laws 2018-114, s. 25(a), effective for taxable years beginning on or after July 1, 2018, in subdivision (46), substituted “Real and personal property” for “Real property”, and made a minor stylistic change; and in subdivision (49), deleted “a non-profit charter school;” preceding “a regional school;”.

Session Laws 2021-78, s. 11(h), effective July 2, 2021, added sub-subdivision (8)a2.

Session Laws 2021-180, s. 42.12(c), effective July 1, 2022, added subdivision (44a).

Legal Periodicals.

For survey of 1978 law on taxation, see 57 N.C.L. Rev. 1142 (1979).

For article discussing legal issues of historic preservation for local government in North Carolina, see 17 Wake Forest L. Rev. 707 (1981).

For survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

See legislative survey, 21 Campbell L. Rev. 323 (1999).

For article, “North Carolina’s Nonprofit Property Tax Exemption Conundrum,” see 96 N.C.L. Rev. 1769 (2018).

CASE NOTES

Analysis

I.General Consideration

County Precluded from Challenging Constitutionality of Former G.S. 105-281 . —

See In re Martin, 286 N.C. 66 , 209 S.E.2d 766, 1974 N.C. LEXIS 1179 (1974).

Application of North Carolina’s ad valorem property tax to imported tobacco destined for domestic markets does not violate the import-export clause or the due process clause of the federal Constitution. R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130, 107 S. Ct. 499, 93 L. Ed. 2d 449, 1986 U.S. LEXIS 22 (1986).

Consistent with the supremacy clause, a State may impose a nondiscriminatory ad valorem property tax on imported goods stored in a customs-bonded warehouse and destined for domestic manufacture and sale. R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130, 107 S. Ct. 499, 93 L. Ed. 2d 449, 1986 U.S. LEXIS 22 (1986).

Use, rather than ownership or objective, is the primary exempting characteristic of this Subchapter. In re North Carolina Forestry Found., Inc., 35 N.C. App. 414, 242 S.E.2d 492, 1978 N.C. App. LEXIS 3003 (1978), aff'd, 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

Not only the purpose for holding the real property but also its actual use determines whether it is to be excluded from or included in the tax base. In re North Carolina Forestry Found., Inc., 35 N.C. App. 414, 242 S.E.2d 492, 1978 N.C. App. LEXIS 3003 (1978), aff'd, 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

It is not the nature or characteristic of the owning entity which ultimately determines whether property shall be exempt from taxation, but it is the use to which the property is dedicated which controls. In re Wake Forest Uni, 51 N.C. App. 516, 277 S.E.2d 91, 1981 N.C. App. LEXIS 2276 , cert. denied, 303 N.C. 544 , 281 S.E.2d 391, 1981 N.C. LEXIS 1380 (1981).

Construction. —

This section provides an exemption from taxation and is strictly construed against the taxpayer and in favor of the State. In re R.J. Reynolds Tobacco Co., 52 N.C. App. 299, 278 S.E.2d 575, 1981 N.C. App. LEXIS 2431 (1981).

While the courts have consistently held that tax exemption statutes must be strictly construed against exemption, they have also held that such statutes should not be given a narrow or stingy construction. In re Wake Forest Uni, 51 N.C. App. 516, 277 S.E.2d 91, 1981 N.C. App. LEXIS 2276 , cert. denied, 303 N.C. 544 , 281 S.E.2d 391, 1981 N.C. LEXIS 1380 (1981).

This statute’s function is to describe a separate class of property for exclusion from the tax base, rather than to provide a tax exemption to religious organizations for property used for religious purposes. In re Springmoor, Inc., 348 N.C. 1 , 498 S.E.2d 177, 1998 N.C. LEXIS 153 (1998).

Uniformity in taxation relates to equality in the burden of the State’s taxpayers. In re Martin, 286 N.C. 66 , 209 S.E.2d 766, 1974 N.C. LEXIS 1179 (1974).

Burden is on the taxpayer to show that it comes within the exemption or exception. In re Martin, 286 N.C. 66 , 209 S.E.2d 766, 1974 N.C. LEXIS 1179 (1974).

Used Machinery Is Not Inventory. —

Where taxpayer which acquired used machinery and equipment primarily for use in its manufacture of textiles and only held the goods for sale after the property was no longer useful in taxpayer’s textile business, the equipment and machinery at issue were not inventory held for sale in the regular course of business by a wholesale merchant. Consequently, the property was not excluded from ad valorem taxation. In re Cone Mills Corp., 112 N.C. App. 539, 435 S.E.2d 835, 1993 N.C. App. LEXIS 1126 (1993).

Inventory Exclusion Not Applicable to Rental Equipment. —

Taxpayer, by renting equipment to third parties, was not entitled to the inventory tax exclusion for the rented equipment. In re R.W. Moore Equip. Co., 115 N.C. App. 129, 443 S.E.2d 734, 1994 N.C. App. LEXIS 553 (1994).

Where defendant treated equipment as income producing property rather than inventory for financial reporting purposes, depreciating only that part of its inventory of new and used equipment that it used for rental purposes, this treatment rendered the equipment used for rental purposes ineligible for tax exclusion because its use and consumption as income producing property was incompatible with its character as inventory. In re R.W. Moore Equip. Co., 115 N.C. App. 129, 443 S.E.2d 734, 1994 N.C. App. LEXIS 553 (1994).

Property Not Wholly and Exclusively Used for Educational or Scientific Purposes. —

North Carolina Property Tax Commission erred in granting a foundation exemption from property taxes because its property was not wholly and exclusively used for educational or scientific purposes; the foundation charged market-rate admission fees and operated to some extent as a for-profit tourist attraction, and located on the property were administrative offices from which the foundation managed retail and commercial services. In re Grandfather Mt. Stewardship Found., Inc., 235 N.C. App. 561, 762 S.E.2d 364, 2014 N.C. App. LEXIS 894 (2014).

Inventories Owned by Manufacturers. —

In a tax dispute, aircraft tires were “inventories owned by manufacturers” under G.S. 105-275 and were excluded from taxation in North Carolina; “finished goods” was not modified by materials or supplies consumed in manufacturing. In re Michelin North Am., Inc., 246 N.C. App. 482, 783 S.E.2d 775, 2016 N.C. App. LEXIS 357 (2016).

Property Subject to Lease Purchase Agreement is Not Inventory. —

North Carolina Property Tax Commission, sitting as the State Board of Equalization and Review, properly determined that property in the physical possession of a taxpayer’s customers pursuant to lease purchase agreements was subject to ad valorem taxation because such property did not fall within the class of exempt “inventories” inasmuch as the transfer of possession of property following the execution of the agreement was not properly categorized as a “sale” where the customers were under no obligation to purchase the property, and the substantial increase in cost by purchasing under the agreement rather than outright was consistent with the denomination of the transactions as a lease rather than a sale of the property. In re Aaron's, Inc., 264 N.C. App. 20, 824 S.E.2d 432, 2019 N.C. App. LEXIS 131 (2019).

II.Protected Natural Areas

Term “protected natural areas” in subdivision (12) of this section means property which, insofar as possible, is kept in a pristine state free from those interferences which any given generation may feel to be “improvements” on nature. The General Assembly intended the protection of such natural areas be of a passive nature designed to prevent manmade or natural disasters and not of an active nature envisioned as “improvements” of the areas. In re North Carolina Forestry Found., Inc., 35 N.C. App. 414, 242 S.E.2d 492, 1978 N.C. App. LEXIS 3003 (1978), aff'd, 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

A forest owned by a foundation did not come within the statutory definition of a “protected natural area” due to the extensive program of road building, construction of drainage ditches and fire lanes, site preparation, including disking and burning, leasing of hunting rights to local hunting clubs, and the cutting of timber and pulpwood. While such activities may well constitute prudent management techniques, they certainly do not result in the preservation of all types of wild nature, flora and fauna. In re North Carolina Forestry Found., Inc., 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

III.Decisions under Prior Law
A.In General

Editor’s Note. —

The cases in the annotations below were decided under former subdivisions of this section that have now been repealed or under prior provisions.

B.Farm Products Held for Shipment to Foreign Country

Classification of Tobacco Generally. —

The legislature plainly intended to establish two classes of property: (1) under former subdivision (1) of this section, if tobacco is held or stored for shipment to any foreign country, it is exempt; and (2) under former G.S. 105-277(a) , if tobacco (or other farm products) is held or stored for manufacture or processing, it is taxed at the preferential rate. In re R.J. Reynolds Tobacco Co., 52 N.C. App. 299, 278 S.E.2d 575, 1981 N.C. App. LEXIS 2431 (1981).

Raw Tobacco to Be Manufactured into Cigarettes and Then Shipped. —

Raw tobacco is not exempt from taxation as being held or stored for shipment to a foreign country within the meaning of former subdivision (1) of this section where the tobacco is to be manufactured into cigarettes and other tobacco products, and the cigarettes and other products will be shipped to a foreign country; rather, the tobacco is held or stored for processing or manufacture and is taxable at the preferential rate of 60 percent of value under former G.S. 105-277(a) . In re R.J. Reynolds Tobacco Co., 52 N.C. App. 299, 278 S.E.2d 575, 1981 N.C. App. LEXIS 2431 (1981).

C.Property Shipped into State and Warehoused for Transshipment

Exemption under former subdivision (10) applied only when, among other things, the goods moved into this State from some place without the State. Scovill Mfg. Co. v. County of Guilford, 28 N.C. App. 209, 220 S.E.2d 188, 1975 N.C. App. LEXIS 1717 (1975), cert. denied, 289 N.C. 452 , 223 S.E.2d 160, 1976 N.C. LEXIS 1304 (1976) (decided under subdivisions (10) and (11) as they stood before the 1977 amendment).

D.Property Warehoused for Transshipment Outside State

Assuming that goods are otherwise qualified for exemption under former subdivision (11), they must also be placed in a public warehouse for transshipment to an out-of-state destination. Scovill Mfg. Co. v. County of Guilford, 28 N.C. App. 209, 220 S.E.2d 188 (1975), cert. denied, 289 N.C. 452 , 223 S.E.2d 160 (1976) decided under subdivisions (10) and (11) as they stood before the 1977 amendment .

General Assembly intended to deny public warehouse status to owned or leased premises of ultimate consignee or its subsidiary. In re Martin, 286 N.C. 66 , 209 S.E.2d 766, 1974 N.C. LEXIS 1179 (1974).

“Transship”. —

There is nothing to indicate that the word “transship” has a special or technical meaning, therefore, the word is given its natural, approved and recognized meaning. In re Martin, 286 N.C. 66 , 209 S.E.2d 766, 1974 N.C. LEXIS 1179 (1974).

Goods Held for Transshipment to Taxpayer Stores. —

Warehoused goods held for transshipment to taxpayer’s customers are within the exempted class under former subdivision (10) of this section, but goods held for transshipment to taxpayer stores were outside the exempted class and were therefore subject to taxation. In re K-Mart Corp., 79 N.C. App. 725, 340 S.E.2d 752, 1986 N.C. App. LEXIS 2111 (1986), aff'd in part and rev'd in part, 319 N.C. 378 , 354 S.E.2d 468, 1987 N.C. LEXIS 1922 (1987).

Goods designated for transshipment “to an out-of-state or within the state destination” were not goods designated to an out-of-state destination within the meaning of former subdivision (11) as it stood before the 1977 amendment. Scovill Mfg. Co. v. County of Guilford, 28 N.C. App. 209, 220 S.E.2d 188, 1975 N.C. App. LEXIS 1717 (1975), cert. denied, 289 N.C. 452 , 223 S.E.2d 160, 1976 N.C. LEXIS 1304 (1976).

Evidence that most of the goods were eventually shipped to points without State was immaterial. Scovill Mfg. Co. v. County of Guilford, 28 N.C. App. 209, 220 S.E.2d 188, 1975 N.C. App. LEXIS 1717 (1975), cert. denied, 289 N.C. 452 , 223 S.E.2d 160, 1976 N.C. LEXIS 1304 (1976) (decided under former subdivisions (10) and (11) as they stood before the 1977 amendment).

No time limit on the act of transshipping. —

See In re Martin, 286 N.C. 66 , 209 S.E.2d 766, 1974 N.C. LEXIS 1179 (1974).

OPINIONS OF ATTORNEY GENERAL

Property of a labor union is not classified out of the ad valorem tax base by subdivision (19) of this section. See opinion of Attorney General to J. Bourke Bilisoly, Wake County Tax Attorney, 50 N.C. Op. Att'y Gen. 35 (1980).

Dining facilities located with the lodge structure of Elks Club come within the provisions of subdivision (19), but a swimming pool does not. See opinion of Attorney General to Mr. D.R. Holbrook, Ad Valorem Tax Division, Department of Revenue, 44 N.C. Op. Att'y Gen. 160 (1974).

§§ 105-275.1, 105-275.2. [Repealed]

Repealed by Session Laws 2001-424, s. 34.15, as amended by Session Laws 2002-126, 30A.1, effective July 1, 2002.

§ 105-276. Taxation of intangible personal property.

Intangible personal property that is not excluded from taxation under G.S. 105-275 is subject to this Subchapter. The exclusion of a class of intangible personal property from taxation under G.S. 105-275 does not affect the appraisal or assessment of real property and tangible personal property.

History. 1939, c. 310, s. 601; 1971, c. 806, s. 1; 1973, c. 1180; 1985, c. 656, s. 38; 1987, c. 813, s. 8; 1995, c. 41, s. 6; 1997-23, s. 2.

Legal Periodicals.

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

§ 105-277. Property classified for taxation at reduced rates; certain deductions.

  1. through (c) Repealed by Session Laws 1987, c. 813, s. 9, effective for taxable years beginning on or after January 1, 1988.

    (d) All bona fide indebtedness incurred in the purchase of fertilizer and fertilizer materials owing by a taxpayer as principal debtor may be deducted from the total value of all fertilizer and fertilizer materials as are held by such taxpayer for his own use in agriculture during the current year.

    (e) Repealed by Session Laws 1987, c. 813, s. 9, effective for taxable years beginning on or after January 1, 1988.

    (f) Repealed by Session Laws 1977, c. 869, s. 1.

    (g) Buildings equipped with a solar energy heating or cooling system, or both, are hereby designated a special class of property under authority of Article V, Sec. 2(2) of the North Carolina Constitution. Such buildings shall be assessed for taxation in accordance with each county’s schedules of value for buildings equipped with conventional heating or cooling systems and no additional value shall be assigned for the difference in cost between a solar energy heating or cooling system and a conventional system typically found in the county. As used in this classification, the term “system” includes all controls, tanks, pumps, heat exchangers and other equipment used directly and exclusively for the conversion of solar energy for heating or cooling. The term “system” does not include any land or structural elements of the building such as walls and roofs nor other equipment ordinarily contained in the structure.

    (h) Private Water Companies. — Contributions in aid of construction and acquisition adjustments. In assessing the property of any private water company, there shall be excluded that portion of the investment of the company represented by contributions in aid of construction and by acquisition adjustments which is designated a special class of property under Article V, Sec. 2(2) of the Constitution. “Investment,” “contributions in aid of construction” and “acquisition adjustment” shall have the meanings as those terms are defined in the Uniform System of Accounts specified by the North Carolina Utilities Commission for use by such private water company.

    (i) Repealed by Session Laws 1987, c. 622, s. 5.

History. 1947, c. 1026; 1955, c. 697, s. 1; 1961, c. 1169, ss. 6, 7, 71/2; 1963, c. 940; 1971, c. 806, s. 1; 1973, c. 511, s. 4; c. 695, s. 2; 1975, c. 578; 1977, c. 869, s. 1; c. 965; 1979, c. 605, s. 1; 1985, c. 440; c. 656, ss. 52, 52.1; 1985 (Reg. Sess., 1986), c. 947, s. 5; 1987, c. 622, s. 5; c. 813, s. 9; 2003-416, s. 20.

Cross References.

For present provisions covering subject matter of former subsection (f), see G.S. 105-278 .

Effect of Amendments.

Session Laws 2003-416, s. 20, effective August 14, 2003, deleted the former last sentence of subsection (d) which read “Provided, further, that from the total value of cotton stored in this State there may be deducted by the owner thereof all bona fide indebtedness incurred directly for the purchase of said cotton and for the payment of which the cotton so purchased is pledged as collateral.”

Legal Periodicals.

For survey of 1977 law on taxation, see 56 N.C.L. Rev. 1128 (1978).

CASE NOTES

Analysis

I.In General

A taxpayer does not have to cite or make reference to the applicable statute in order to claim the applicable exemption allowed by this section if the application shows facts which entitle the applicant to such exemption. In re R.J. Reynolds Tobacco Co., 74 N.C. App. 140, 327 S.E.2d 607, 1985 N.C. App. LEXIS 3360 (1985).

Solar Heating System. —

Solar heating and cooling systems are to be appraised with no additional value assigned for the difference in cost between a solar energy heating or cooling system and a conventional system typically found in the county; therefore, an appraisal of a solar heating system for ad valorem tax purposes was not upheld because a county used a press release from a website to determine the system’s value, failed to follow statutory guidelines for appraisal, and did not consider the obsolescence of the equipment due to the equipment being overbuilt, the income produced by the equipment, and the transfer of tax credits prior to valuation. Moreover, the county’s appraisal substantially exceeded the true value in money of the property. In re Appeal of: FLS Owner II, LLC, 244 N.C. App. 611, 781 S.E.2d 300, 2016 N.C. App. LEXIS 38 (2016).

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 N.C. App. LEXIS 38 (2016).

II.Decisions under Prior Law

Erroneous Denial of Conditional Use Permit. —

It was error to deny a conditional use permit (CUP) to build a solar farm on grounds children visiting a historic site might see the farm because (1) whether a proposed use could be seen from a particular location was irrelevant to whether the use was compatible with a neighborhood, and (2) North Carolina public policy encouraged solar equipment and facilities and the use of solar energy. Innovative 55, LLC v. Robeson Cty., 253 N.C. App. 714, 801 S.E.2d 671, 2017 N.C. App. LEXIS 433 (2017).

Editor’s Note. —

The cases below were decided under former subsections of this section.

Catchline of Former Subsection (a) Did Not Control over Body of Subsection. —

See In re Forsyth County, 285 N.C. 64 , 203 S.E.2d 51, 1974 N.C. LEXIS 900 (1974).

Assuming the catchline “(a) Agricultural Products in Storage” was inserted by the General Assembly and not by a compiler, nevertheless the body of former subsection (a) provided that the product be held for manufacturing and processing. In re Forsyth County, 285 N.C. 64 , 203 S.E.2d 51, 1974 N.C. LEXIS 900 (1974).

Former Subsection (a) Held to Discriminate Against Railroads. —

Former subsection (a) of this section, which required tobacco warehouses to pay tax on only 60% of their tobacco in storage, discriminated against railroads, whose property was assessed at 100% of market value, in violation of the Railroad Revitalization and Regulatory Reform Act, 49 U.S.C. § 11503. Clinchfield R.R. v. Lynch, 605 F. Supp. 1005, 1985 U.S. Dist. LEXIS 21496 (E.D.N.C. 1985), aff'd, 784 F.2d 545, 1986 U.S. App. LEXIS 22405 (4th Cir. 1986).

In suits alleging discriminatory taxation of real and personal property in violation of the Railroad Revitalization and Regulatory Reform Act of 1976 (the 4-R Act), codified at 49 U.S.C. § 11503 (1982), the trial court was correct in considering as a factor in its finding of tax discrimination the fact that under this section stored tobacco inventories were taxed at only 60% of fair market value. Clinchfield R.R. v. Lynch, 784 F.2d 545, 1986 U.S. App. LEXIS 22405 (4th Cir. 1986).

Application of North Carolina’s ad valorem property tax to imported tobacco destined for domestic markets did not violate the import-export clause or the due process clause of the federal Constitution. R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130, 107 S. Ct. 499, 93 L. Ed. 2d 449, 1986 U.S. LEXIS 22 (1986).

Consistent with the supremacy clause, a State may impose a nondiscriminatory ad valorem property tax on imported goods stored in a customs-bonded warehouse and destined for domestic manufacture and sale. R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130, 107 S. Ct. 499, 93 L. Ed. 2d 449, 1986 U.S. LEXIS 22 (1986).

Classification of Tobacco Generally. —

The legislature plainly intended to establish two classes of property: (1) under former G.S. 105-275(1), if tobacco was held or stored for shipment to any foreign country, it was exempt; and (2) under former subsection (a) of this section, if tobacco (or other farm products) was held or stored for manufacture or processing, it was taxed at the preferential rate. In re R.J. Reynolds Tobacco Co., 52 N.C. App. 299, 278 S.E.2d 575, 1981 N.C. App. LEXIS 2431 (1981).

Tobacco was an agricultural product under this section until it was manufactured into the finished product. In re R.J. Reynolds Tobacco Co., 52 N.C. App. 299, 278 S.E.2d 575, 1981 N.C. App. LEXIS 2431 (1981).

When Tobacco Taxed Pursuant to Former Subsection (a). —

Tobacco that is being held or stored to be manufactured or processed is taxed pursuant to this section, where it is given a preferential rate of 60 percent of value for tax purposes. In re R.J. Reynolds Tobacco Co., 52 N.C. App. 299, 278 S.E.2d 575, 1981 N.C. App. LEXIS 2431 (1981).

Tobacco removed from shed where hogsheads were stored during early part of aging process was still an agricultural product and retained its preferred status. In re Forsyth County, 285 N.C. 64 , 203 S.E.2d 51, 1974 N.C. LEXIS 900 (1974).

Raw tobacco was not exempt from taxation as being held or stored for shipment to foreign country within the meaning of former G.S. 105-275(1) where the tobacco was to be manufactured into cigarettes and other tobacco products, and the cigarettes and other products would be shipped to a foreign country; rather, the tobacco was held or stored for processing or manufacture and was taxable at the preferential rate of 60 percent of value under former subsection (a) of this section. In re R.J. Reynolds Tobacco Co., 52 N.C. App. 299, 278 S.E.2d 575, 1981 N.C. App. LEXIS 2431 (1981).

§ 105-277.001. [Repealed]

Repealed by Session Laws 2001-424, s. 34.15, as amended by Session Laws 2002-126, 30A.1, effective July 1, 2002.

§ 105-277.01. Certain farm products classified for taxation at reduced valuation.

Farm products (including crops but excluding poultry and other livestock) held by or for a cooperative stabilization or marketing association or corporation to which they have been delivered, conveyed, or assigned by the original producer for the purpose of sale are hereby designated a special class of property under authority of Article V, Sec. 2(2), of the North Carolina Constitution. Before being assessed for taxation the appraised valuation of farm products so classified shall be reduced by the amount of any unpaid loan or advance made or granted thereon by the United States government, an agency of the United States government, or a cooperative stabilization or marketing association or corporation.

History. 1973, c. 695, s. 3.

§ 105-277.02. Certain real property held for sale classified for taxation at reduced valuation.

  1. (Effective for taxes imposed for taxable years beginning before July 1, 2022) Residential Real Property. —  Residential real property held for sale by a builder is designated a special class of property under authority of Article V, Sec. 2(2) of the North Carolina Constitution. For purposes of this subsection, “residential real property” is real property that is intended to be sold and used as an individual’s residence immediately or after construction of a residence, and the term excludes property that is either occupied by a tenant or used for commercial purposes such as residences shown to prospective buyers as models. Any increase in value of this classified property attributable to subdivision of, improvements other than buildings, or the construction of either a new single-family residence or a duplex on the property by the builder is excluded from taxation under this Subchapter as long as the builder continues to hold the property for sale. In no event shall this exclusion extend for more than three years from the time the improved property was first subject to being listed for taxation by the builder.

    (a) (Effective for taxes imposed for taxable years beginning on or after July 1, 2022) Residential Real Property. — Residential real property held for sale by a builder is designated a special class of property under authority of Article V, Sec. 2(2) of the North Carolina Constitution. For purposes of this subsection, “residential real property” is real property that is intended to be sold and used as an individual’s residence immediately or after construction of a residence, and the term excludes property that is either occupied by a tenant or used for commercial purposes such as residences shown to prospective buyers as models. Any increase in value of this classified property attributable to subdivision of the property, improvements other than buildings made on the property, or the construction of a new single-family residence, a townhouse, or a duplex on the property by the builder is excluded from taxation under this Subchapter as long as the builder continues to hold the property for sale. In no event shall this exclusion extend for more than three years from the time the improved property was first subject to being listed for taxation by the builder.

  2. Commercial Property. —  Commercial real property held for sale by a builder is designated a special class of property under authority of Article V, Sec. 2(2) of the North Carolina Constitution. For purposes of this subsection, “commercial real property” is real property that is intended to be sold and used for commercial purposes immediately or after improvement. Any increase in value of this classified property attributable to subdivision of or other improvements made to the property, by the builder, is excluded from taxation under this Subchapter as long as the builder continues to hold the property for sale. The exclusion authorized by this subsection ends at the earlier of the following:
    1. Five years from the time the improved property was first subject to being listed for taxation by the builder.
    2. Issuance of a building permit.
    3. Sale of the property.
  3. (Effective for taxes imposed for taxable years beginning before July 1, 2019)  The builder must apply for any exclusion under this section annually as provided in G.S. 105-282.1 . (c) (Effective for taxes imposed for taxable years beginning on or after July 1, 2019) The builder must apply for any exclusion under this section as provided in G.S. 105-282.1 .
  4. In appraising property classified under this section, the assessor shall specify what portion of the value is an increase attributable to subdivision or other improvement by the builder.

History. 2015-223, s. 2; 2019-123, s. 2; 2021-113, s. 1.

Subsection (c) Set Out Twice.

The first version of subsection (c) set out above is effective for taxable years beginning before July 1, 2019. The second version of subsection (c) set out above is effective for taxable years beginning on or after July 1, 2019.

Subsection (a) Set Out Twice.

The first version of subsection (a) set out above is effective for taxable years beginning before July 1, 2022. The second version of subsection (a) set out above is effective for taxable years beginning on or after July 1, 2022.

Editor’s Note.

Session Laws 2015-223, s. 3 made this section effective for taxes imposed for taxable years beginning on or after July 1, 2016, and applicable to subdivision of or other improvements made on or after July 1, 2015.

Effect of Amendments.

Session Laws 2019-123, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2019, deleted “annually” preceding “as provided in” in subsection (c).

Session Laws 2021-113, s. 1, effective July 1, 2022, substituted “subdivision of the property, improvements other than buildings made on the property, or the construction of a new single-family residence, a townhouse, or” for “subdivision of, improvements other than buildings, or the construction of either a new single-family residence or” in subsection (a).

§ 105-277.1. Elderly or disabled property tax homestead exclusion.

  1. Exclusion. —  A permanent residence owned and occupied by a qualifying owner is designated a special class of property under Article V, Sec. 2(2) of the North Carolina Constitution and is taxable in accordance with this section. The amount of the appraised value of the residence equal to the exclusion amount is excluded from taxation. The exclusion amount is the greater of twenty five thousand dollars ($25,000) or fifty percent (50%) of the appraised value of the residence. An owner who receives an exclusion under this section may not receive other property tax relief.A qualifying owner is an owner who meets all of the following requirements as of January 1 preceding the taxable year for which the benefit is claimed:
    1. Is at least 65 years of age or totally and permanently disabled.
    2. Has an income for the preceding calendar year of not more than the income eligibility limit.
    3. Is a North Carolina resident.

      (a1) Temporary Absence. — An otherwise qualifying owner does not lose the benefit of this exclusion because of a temporary absence from his or her permanent residence for reasons of health, or because of an extended absence while confined to a rest home or nursing home, so long as the residence is unoccupied or occupied by the owner’s spouse or other dependent.

      (a2) Income Eligibility Limit. — For the taxable year beginning on July 1, 2008, the income eligibility limit is twenty-five thousand dollars ($25,000). For taxable years beginning on or after July 1, 2009, the income eligibility limit is the amount for the preceding year, adjusted by the same percentage of this amount as the percentage of any cost-of-living adjustment made to the benefits under Titles II and XVI of the Social Security Act for the preceding calendar year, rounded to the nearest one hundred dollars ($100.00). On or before July 1 of each year, the Department of Revenue must determine the income eligibility amount to be in effect for the taxable year beginning the following July 1 and must notify the assessor of each county of the amount to be in effect for that taxable year.

  2. Definitions. —  The following definitions apply in this section:
    1. Code. — The Internal Revenue Code, as defined in G.S. 105-228.90 . (1a) Income. — All moneys received from every source other than gifts or inheritances received from a spouse, lineal ancestor, or lineal descendant. For married applicants residing with their spouses, the income of both spouses must be included, whether or not the property is in both names.

      (1b) Owner. — A person who holds legal or equitable title, whether individually, as a tenant by the entirety, a joint tenant, or a tenant in common, or as the holder of a life estate or an estate for the life of another. A manufactured home jointly owned by husband and wife is considered property held by the entirety.

    2. Repealed by Session Laws 1993, c. 360, s. 1.

      (2a) Repealed by Session Laws 1985 (Reg. Sess., 1986), c. 982, s. 20.

    3. Permanent residence. — A person’s legal residence. It includes the dwelling, the dwelling site, not to exceed one acre, and related improvements. The dwelling may be a single family residence, a unit in a multi-family residential complex, or a manufactured home.

      (3a) Property tax relief. — The property tax homestead exclusion provided in this section, the property tax homestead circuit breaker provided in G.S. 105-277.1 B, or the disabled veteran property tax homestead exclusion provided in G.S. 105-277.1 C.

    4. Totally and permanently disabled. — A person is totally and permanently disabled if the person has a physical or mental impairment that substantially precludes him or her from obtaining gainful employment and appears reasonably certain to continue without substantial improvement throughout his or her life.
  3. Application. —  An application for the exclusion provided by this section should be filed during the regular listing period, but may be filed and must be accepted at any time up to and through June 1 preceding the tax year for which the exclusion is claimed. When property is owned by two or more persons other than husband and wife and one or more of them qualifies for this exclusion, each owner must apply separately for his or her proportionate share of the exclusion.
    1. Elderly Applicants. —  Persons 65 years of age or older may apply for this exclusion by entering the appropriate information on a form made available by the assessor under G.S. 105-282.1 .
    2. Disabled Applicants. —  Persons who are totally and permanently disabled may apply for this exclusion by (i) entering the appropriate information on a form made available by the assessor under G.S. 105-282.1 and (ii) furnishing acceptable proof of their disability. The proof must be in the form of a certificate from a physician licensed to practice medicine in North Carolina or from a governmental agency authorized to determine qualification for disability benefits. After a disabled applicant has qualified for this classification, the applicant is not required to furnish an additional certificate unless the applicant’s disability is reduced to the extent that the applicant could no longer be certified for the taxation at reduced valuation.
  4. Ownership by Spouses. —  A permanent residence owned and occupied by husband and wife is entitled to the full benefit of this exclusion notwithstanding that only one of them meets the age or disability requirements of this section.
  5. Other Multiple Owners. —  This subsection applies to co-owners who are not husband and wife. Each co-owner of a permanent residence must apply separately for the exclusion allowed under this section.When one or more co-owners of a permanent residence qualify for the exclusion allowed under this section and none of the co-owners qualifies for the exclusion allowed under G.S. 105-277.1 C, each co-owner is entitled to the full amount of the exclusion allowed under this section. The exclusion allowed to one co-owner may not exceed the co-owner’s proportionate share of the valuation of the property, and the amount of the exclusion allowed to all the co-owners may not exceed the exclusion allowed under this section.When one or more co-owners of a permanent residence qualify for the exclusion allowed under this section and one or more of the co-owners qualify for the exclusion allowed under G.S. 105-277.1 C, each co-owner who qualifies for the exclusion under this section is entitled to the full amount of the exclusion. The exclusion allowed to one co-owner may not exceed the co-owner’s proportionate share of the valuation of the property, and the amount of the exclusion allowed to all the co-owners may not exceed the greater of the exclusion allowed under this section and the exclusion allowed under G.S. 105-277.1C.

History. 1971, c. 932, s. 1; 1973, c. 448, s. 1; 1975, c. 881, s. 2; 1977, c. 666, s. 1; 1979, c. 356, s. 1; c. 846, s. 1; 1981, c. 54, s. 1; c. 1052, s. 1; 1985, c. 656, ss. 44, 45; 1985 (Reg. Sess., 1986), c. 982, ss. 19, 20; 1987, c. 45, s. 1; 1993, c. 360, s. 1; 1996, 2nd Ex. Sess., c. 18, s. 15.1(a); 2001-308, s. 1; 2007-484, s. 43.7T(a), (b); 2007-497, ss. 1.1, 2.1, 2.2; 2008-35, s. 3; 2008-107, s. 28.11(c)-(f), (i); 2009-445, s. 22(a).

Editor’s Note.

Session Laws 2007-497, s. 1.2, provides: “The Revenue Laws Study Committee may study the issue of whether to index the minimum excluded appraised value limit in the property tax homestead exclusion in G.S. 105-277.1 and, if so, which index to use.”

Session Laws 2008-146, s. 6, provides: “The Revenue Laws Study Committee must study the following:

“(1) the effect of PART I of this act and determine whether new positions are needed to perform sales assessment ratio studies in additional counties each year and to perform other functions related to this act.

“(2) The definition of income as it applies to the homestead exclusion.”

Session Laws 2021-16, s. 1.1, provides: “For purposes of determining a person’s eligibility under the elderly or disabled property tax homestead exclusion, G.S. 105-277.1 , and the property tax homestead circuit breaker, G.S. 105-277.1 B, Extra Credit Grants and COVID-19 Recovery Rebates are not considered income. For purposes of this section, COVID-19 Recovery Rebates are the following:

“(1) Payments received under section 6428 of the Internal Revenue Code.

“(2) Payments received under section 6428A of the Internal Revenue Code.

“(3) Any similar relief payments to those listed in subdivisions (1) and (2) of this section received by an individual from the federal government due to the COVID-19 pandemic.”

Effect of Amendments.

Session Laws 2007-497, s. 1.1, as amended by Session Laws 2007-484, s. 43.7T(a), effective for taxes imposed for taxable years beginning on or after July 1, 2008, substituted “twenty-five thousand dollars ($25,000)” for “twenty-thousand dollars ($20,000)” in subsection (a); in subsection (a2), substituted “July 1, 2008” for “July 1, 2003”, twice and “twenty-five thousand dollars ($25,000)” for “eighteen-thousand dollars ($18,000)”; and in subdivision (b)(1a), substituted “All” for “Adjusted gross income, as defined in section 62 of the Code, plus all other.”

Session Laws 2007-497, ss. 2.1 and 2.2, as amended by Session Laws 2007-484, s. 43.7T(b), effective for taxes imposed for taxable years beginning on or after July 1, 2009, added subdivision (b)(3a) and subsection (e).

Session Laws 2008-35, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2008, in subsection (a2), substituted “For the taxable year beginning on July 1, 2008” for “Until July 1, 2008” in the first sentence, and substituted “July 1, 2009” for “July 1, 2008” in the second sentence.

Session Laws 2008-107, s. 28.11(c)-(f) and (i), effective for taxes imposed for taxable years beginning on or after July 1, 2009, substituted “Elderly of disabled property” for “Property” in the section heading; in subsection (a), added the last sentence of the first paragraph; in subdivision (b)(3a), substituted “section, the property tax homestead circuit breaker provided in G.S. 105-277.1 B, or the disabled veteran property tax homestead exclusion provided in G.S. 105-277.1 ” for “section or the property tax homestead circuit breaker provided in G.S. 105-277.1B”; and rewrote subsections (d) and (e).

Session Laws 2009-445, s. 22(a), effective for taxes imposed for taxable years beginning on or after July 1, 2009, deleted “as tenants by the entirety” following “husband and wife” in subsection (d).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. D.R. Holbrook, State Board of Assessment, 42 N.C. Op. Att'y Gen. 198 (1973).

See opinion of Attorney General to Mr. John R. Milliken, 41 N.C. Op. Att'y Gen. 725 (1972).

See opinion of Attorney General to Mr. John R. Milliken, 41 N.C. Op. Att'y Gen. 725 (1972).

§ 105-277.1A. [Repealed]

Repealed by Session Laws 2001-424, s. 34.15, as amended by Session Laws 2002-126, 30A.1, effective July 1, 2002.

§ 105-277.1B. Property tax homestead circuit breaker.

  1. Classification. —  A permanent residence owned and occupied by a qualifying owner is designated a special class of property under Article V, Section 2(2) of the North Carolina Constitution and is taxable in accordance with this section.
  2. Definitions. —  The definitions provided in G.S. 105-277.1 apply to this section.
  3. Income Eligibility Limit. —  The income eligibility limit provided in G.S. 105-277.1(a2) applies to this section.
  4. Qualifying Owner. —  For the purpose of qualifying for the property tax homestead circuit breaker under this section, a qualifying owner is an owner who meets all of the following requirements as of January 1 preceding the taxable year for which the benefit is claimed:
    1. The owner has an income for the preceding calendar year of not more than one hundred fifty percent (150%) of the income eligibility limit specified in subsection (c) of this section.
    2. The owner has owned the property as a permanent residence for at least five consecutive years and has occupied the property as a permanent residence for at least five years.
    3. The owner is at least 65 years of age or totally and permanently disabled.
    4. The owner is a North Carolina resident.
  5. Multiple Owners. —  A permanent residence owned and occupied by husband and wife is entitled to the full benefit of the property tax homestead circuit breaker notwithstanding that only one of them meets the length of occupancy and ownership requirements and the age or disability requirement of this section. When a permanent residence is owned and occupied by two or more persons other than husband and wife, no property tax homestead circuit breaker is allowed unless all of the owners qualify and elect to defer taxes under this section.
  6. Tax Limitation. —

    A qualifying owner may defer the portion of the principal amount of tax that is imposed for the current tax year on his or her permanent residence and exceeds the percentage of the qualifying owner’s income set out in the table in this subsection. If a permanent residence is subject to tax by more than one taxing unit and the total tax liability exceeds the tax limit imposed by this section, then both the taxes due under this section and the taxes deferred under this section must be apportioned among the taxing units based upon the ratio each taxing unit’s tax rate bears to the total tax rate of all units.

    Income Over Income Up To Percentage

    -0- Income Eligibility Limit 4.0%

    Income Eligibility Limit 150% of Income Eligibility Limit 5.0%

  7. Temporary Absence. —  An otherwise qualifying owner does not lose the benefit of this circuit breaker because of a temporary absence from his or her permanent residence for reasons of health, or because of an extended absence while confined to a rest home or nursing home, so long as the residence is unoccupied or occupied by the owner’s spouse or other dependent.
  8. Deferred Taxes. —  The difference between the taxes due under this section and the taxes that would have been payable in the absence of this section are a lien on the real property of the taxpayer as provided in G.S. 105-355(a). The difference in taxes must be carried forward in the records of each taxing unit as deferred taxes. The deferred taxes for the preceding three fiscal years are due and payable in accordance with G.S. 105-277.1 F when the property loses its eligibility for deferral as a result of a disqualifying event described in subsection (i) of this section. On or before September 1 of each year, the collector must send to the mailing address of a residence on which taxes have been deferred a notice stating the amount of deferred taxes and interest that would be due and payable upon the occurrence of a disqualifying event.
  9. Disqualifying Events. —  Each of the following constitutes a disqualifying event:
    1. The owner transfers the residence. Transfer of the residence is not a disqualifying event if (i) the owner transfers the residence to a co-owner of the residence or, as part of a divorce proceeding, to his or her spouse and (ii) that individual occupies or continues to occupy the property as his or her permanent residence.
    2. The owner dies. Death of the owner is not a disqualifying event if (i) the owner’s share passes to a co-owner of the residence or to his or her spouse and (ii) that individual occupies or continues to occupy the property as his or her permanent residence.
    3. The owner ceases to use the property as a permanent residence.
  10. Gap in Deferral. —  If an owner of a residence on which taxes have been deferred under this section is not eligible for continued deferral for a tax year, the deferred taxes are carried forward and are not due and payable until a disqualifying event occurs. If the owner of the residence qualifies for deferral after one or more years in which he or she did not qualify for deferral and a disqualifying event occurs, the years in which the owner did not qualify are disregarded in determining the preceding three years for which the deferred taxes are due and payable.
  11. Repealed by Session Laws 2008-35, s. 1.2, effective July 1, 2008.
  12. Creditor Limitations. —  A mortgagee or trustee that elects to pay any tax deferred by the owner of a residence subject to a mortgage or deed of trust does not acquire a right to foreclose as a result of the election. Except for requirements dictated by federal law or regulation, any provision in a mortgage, deed of trust, or other agreement that prohibits the owner from deferring taxes on property under this section is void.
  13. Construction. —  This section does not affect the attachment of a lien for personal property taxes against a tax-deferred residence.
  14. Application. —  An application for property tax relief provided by this section should be filed during the regular listing period, but may be filed and must be accepted at any time up to and through June 1 preceding the tax year for which the relief is claimed. Persons may apply for this property tax relief by entering the appropriate information on a form made available by the assessor under G.S. 105-282.1 .

History. 2007-484, s. 43.7T(b); 2007-497, s. 2.3; 2008-35, s. 1.2; 2009-445, s. 22(b).

Editor’s Note.

Session Laws 2007-497, s. 2.6, as amended by Session Laws 2007-484, s. 43.7T(b), made this section effective for taxes imposed for taxable years beginning on or after July 1, 2009.

This section was amended by Session Laws 2008-35 in the coded bill drafting format set out in G.S. 120-20.1 . In subdivision (i)(2), in the second numbered clause, the word “residence” was apparently inadvertently reinserted. The error was corrected by Session Laws 2009-445, s. 22(b).

Session Laws 2008-107, s. 28.11(h), provides, in part, that the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of Session Laws 2008-35 that is recodified or amended by Session Laws 2008-107, s. 28.11(h) by deleting incorrect references and substituting correct references. The reference in subsection (h) to G.S. 105-277.1 C has been changed to G.S. 105-277.1 F.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008 2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008 2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2021-16, s. 1.1, provides: “For purposes of determining a person’s eligibility under the elderly or disabled property tax homestead exclusion, G.S. 105-277.1 , and the property tax homestead circuit breaker, G.S. 105-277.1 B, Extra Credit Grants and COVID-19 Recovery Rebates are not considered income. For purposes of this section, COVID-19 Recovery Rebates are the following:

“(1) Payments received under section 6428 of the Internal Revenue Code.

“(2) Payments received under section 6428A of the Internal Revenue Code.

“(3) Any similar relief payments to those listed in subdivisions (1) and (2) of this section received by an individual from the federal government due to the COVID-19 pandemic.”

Effect of Amendments.

Session Laws 2008-35, s. 1.2, effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote the section.

Session Laws 2009-445, s. 22(b), effective for taxes imposed for taxable years beginning on or after July 1, 2009, in subdivision (d)(2), deleted “and occupied” following “owner has owned” and substituted “five consecutive years and has occupied the property as a permanent residence for at least five years” for “five years”; in subsection (e), in the first sentence, deleted “as tenants by the entirety” following “husband and wife” and substituted “length of occupancy and ownership requirements” for “occupation requirement”; in subsection (f), substituted “the principal amount of tax that is imposed for the current tax year on his or her permanent residence and” for “tax imposed on his or her permanent residence if it”; rewrote subsection (h); in subdivision (i)(2), deleted “residence” following “his or her spouse”; and rewrote subsection (j).

§ 105-277.1C. Disabled veteran property tax homestead exclusion.

  1. Classification. —  A permanent residence owned and occupied by a qualifying owner is designated a special class of property under Article V, Section 2(2) of the North Carolina Constitution and is taxable in accordance with this section. The first forty-five thousand dollars ($45,000) of appraised value of the residence is excluded from taxation. A qualifying owner who receives an exclusion under this section may not receive other property tax relief.
  2. Definitions. —  The following definitions apply in this section:
    1. Disabled veteran. — A veteran of any branch of the Armed Forces of the United States whose character of service at separation was honorable or under honorable conditions and who satisfies one of the following requirements:
      1. As of January 1 preceding the taxable year for which the exclusion allowed by this section is claimed, the veteran had received benefits under 38 U.S.C. § 2101.
      2. The veteran has received a certification by the United States Department of Veterans Affairs or another federal agency indicating that, as of January 1 preceding the taxable year for which the exclusion allowed by this section is claimed, he or she has a service-connected, permanent, and total disability.
      3. The veteran is deceased and the United States Department of Veterans Affairs or another federal agency has certified that, as of January 1 preceding the taxable year for which the exclusion allowed by this section is claimed, the veteran’s death was the result of a service-connected condition.
    2. Repealed by Session Laws 2009-445, s. 22(c), effective for taxes imposed for taxable years beginning on or after July 1, 2009.
    3. Permanent residence. — Defined in G.S. 105-277.1 .
    4. Property tax relief. — Defined in G.S. 105-277.1 . (4a) Qualifying owner. — An owner, as defined in G.S. 105-277.1, who is a North Carolina resident and one of the following:
      1. A disabled veteran.
      2. The surviving spouse of a disabled veteran who has not remarried.
    5. , (6) Repealed by Session Laws 2009-445, s. 22(c), effective for taxes imposed for taxable years beginning on or after July 1, 2009.

      (7) Service-connected. — Defined in 38 U.S.C. § 101.

  3. Temporary Absence. —  An owner does not lose the benefit of this exclusion because of a temporary absence from his or her permanent residence for reasons of health or because of an extended absence while confined to a rest home or nursing home, so long as the residence is unoccupied or occupied by the owner’s spouse or other dependent.
  4. Ownership by Spouses —  A permanent residence owned and occupied by husband and wife is entitled to the full benefit of this exclusion notwithstanding that only one of them meets the requirements of this section.
  5. Other Multiple Owners. —  This subsection applies to co-owners who are not husband and wife. Each co-owner of a permanent residence must apply separately for the exclusion allowed under this section.When one or more co-owners of a permanent residence qualify for the exclusion allowed under this section and none of the co-owners qualifies for the exclusion allowed under G.S. 105-277.1 , each co-owner is entitled to the full amount of the exclusion allowed under this section. The exclusion allowed to one co-owner may not exceed the co-owner’s proportionate share of the valuation of the property, and the amount of the exclusion allowed to all the co-owners may not exceed the exclusion allowed under this section.When one or more co-owners of a permanent residence qualify for the exclusion allowed under this section and one or more of the co-owners qualify for the exclusion allowed under G.S. 105-277.1 , each co-owner who qualifies for the exclusion allowed under this section is entitled to the full amount of the exclusion. The exclusion allowed to one co-owner may not exceed the co-owner’s proportionate share of the valuation of the property, and the amount of the exclusion allowed to all the co-owners may not exceed the greater of the exclusion allowed under this section and the exclusion allowed under G.S. 105-277.1.
  6. Application. —  An application for the exclusion allowed under this section should be filed during the regular listing period, but may be filed and must be accepted at any time up to and through June 1 preceding the tax year for which the exclusion is claimed. An applicant for an exclusion under this section must establish eligibility for the exclusion by providing a copy of the veteran’s disability certification or evidence of benefits received under 38 U.S.C. § 2101.

History. 2008-107, s. 28.11(b); 2009-445, s. 22(c); 2010-95, s. 16; 2010-96, s. 41.

Effect of Amendments.

Session Laws 2009-445, s. 22(c), effective for taxes imposed for taxable years beginning on or after July 1, 2009, in subsection (a), substituted “Classification” for “Exclusion” in the subsection heading, in the first sentence, substituted “a qualifying owner” for “an owner who is a North Carolina resident and who is an honorably discharged disabled veteran or the unmarried surviving spouse of an honorably discharged disabled veteran” and substituted “A qualifying owner” for “An owner” at the beginning of the last sentence; rewrote subdivision (b)(1); deleted subdivision (b)(2), which read: “Owner. — Defined in G.S. 105-277.1 ”; added subdivision (b)(4a); deleted subdivisions (b)(5) and (b)(6); and in subsection (d), deleted “as tenants by the entirety” following “husband and wife” near the middle.

Session Laws 2010-95, s. 16, as amended by Session Laws 2010-96, s. 41, effective July 17, 2010, deleted the last sentence in sub-subdivision (b)(1)b., which read: “If the veteran is deceased, the certificate must indicate that he or she had the disability prior to the date of death or that the death was the result of a service-connected condition”; and added sub-subdivision (b)(1)c. and subdivision (b)(7).

§ 105-277.1D. [Repealed]

Repealed by Session Laws 2009-308, s. 4, as amended by Session Laws 2010-95, s. 21, effective for taxes imposed for taxable years beginning on or after July 1, 2013.

History. 2009-308, s. 2; 2010-95, s. 21; 2010-140, s. 1; repealed by 2009-308, s. 4, as amended by 2010-95, s. 21, effective for taxes imposed for taxable years beginning on or after July 1, 2013.

Editor’s Note.

Former G.S. 105-277.1 D pertained to inventory property tax deferal.

Session Laws 2009-308, s. 4, as amended by Session Laws 2010-95, s. 21, provides: “This act [which added this section] is effective for taxes imposed for taxable years beginning on or after July 1, 2010. This act is repealed effective for taxes imposed for taxable years beginning on or after July 1, 2013. Notwithstanding the repeal of this act, residences that are receiving the property tax benefit provided by this act in the year immediately prior to the repeal are not affected by the repeal of this act and remain eligible for approval of this benefit for subsequent taxable years until the occurrence of a disqualifying event.”

Effect of Amendments.

Session Laws 2010-140, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2010, in the first sentence of subsection (a), deleted “owned and” following “residence,” and inserted “and owned by the builder or a business entity of which the builder is a member, as defined in G.S. 105-277.2 ”; and substituted “owner” for “builder,” or similar language throughout subsection (b) and twice in subsection (c).

§ 105-277.1E.

Reserved for future codification purposes.

§ 105-277.1F. Uniform provisions for payment of deferred taxes.

  1. Scope. —  This section applies to the following deferred tax programs:
    1. G.S. 105-275(12), real property owned by a nonprofit corporation held as a protected natural area. (1a) G.S. 105-275(29a), historic district property held as future site of historic structure.
    2. G.S. 105-277.1 B, the property tax homestead circuit breaker.

      (2a) Repealed by Session Laws 2009-308, s. 4, as amended by Session Laws 2010-95, s. 21, effective for taxes imposed for taxable years beginning on or after July 1, 2013.

    3. G.S. 105-277.4(c), present-use value property.
    4. G.S. 105-277.14 , working waterfront property.

      (4a) G.S. 105-277.1 5, wildlife conservation land.

      (4b) G.S. 105-277.15 A, site infrastructure land.

    5. G.S. 105-278(b), historic property.
    6. G.S. 105-278.6(e), nonprofit property held as future site of low- or moderate-income housing.
  2. Payment. —  Taxes deferred on property under a deferral program listed in subsection (a) of this section are due and payable on the day the property loses its eligibility for the deferral program as a result of a disqualifying event. If only a part of property for which taxes are deferred loses its eligibility for deferral, the assessor must determine the amount of deferred taxes that apply to that part and that amount is due and payable. Interest accrues on deferred taxes as if they had been payable on the dates on which they would have originally become due.The tax for the fiscal year that begins in the calendar year in which the deferred taxes are due and payable is computed as if the property had not been classified for that year. A lien for deferred taxes is extinguished when the taxes are paid.All or part of the deferred taxes that are not due and payable may be paid to the tax collector at any time without affecting the property’s eligibility for deferral. A partial payment is applied first to accrued interest.

History. 2008-35, s. 2.2; 2008-107, s. 28.11(h); 2008-171, s. 2; 2009-308, s. 3; 2010-95, s. 21; 2011-274, s. 2; 2012-79, s. 1.9; 2013-130, s. 3.

Editor’s Note.

Session Laws 2008-35, s. 4, made this section effective for taxes imposed for taxable years beginning on or after July 1, 2008.

This section was enacted as G.S. 105-277.1 C by Session Laws 2008-35, s. 2.2, recodified as G.S. 105-277.1 D by Session Laws 2008-107, s. 28.11(h), and subsequently codified as G.S. 105-277.1F at the direction of the Revisor of Statutes.

Subdivision (a)(5), as added by Session Laws 2008-171, s. 2, has been redesignated as subdivision (a)(4a), and subsection (a) is set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2008-107, s. 28.11(h), provides, in part, that the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of Session Laws 2008-35 that is recodified or amended by Session Laws 2008-107, s. 28.11(h) by deleting incorrect references and substituting correct references.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2009-308, s. 4, as amended by Session Laws 2010-95, s. 21, provides, in part: “This act [which added subdivision (a)(2a)] is repealed effective for taxes imposed for taxable years beginning on or after July 1, 2013. Notwithstanding the repeal of this act, residences that are receiving the property tax benefit provided by this act in the year immediately prior to the repeal are not affected by the repeal of this act and remain eligible for approval of this benefit for subsequent taxable years until the occurrence of a disqualifying event.”

Effect of Amendments.

Session Laws 2008-171, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2010, redesignated former subdivisions (a)(5) and (a)(6) as present subdivisions (a)(6) and (a)(7), respectively; and added subdivision (a)(5). See Editor’s note.

Session Laws 2009-308, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2010, added subdivision (a)(2a). See Editor’s note for repeal.

Session Laws 2011-274, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2011, added subdivision (a)(1); and redesignated former subdivision (a)(1) as present subdivision (a)(1a).

Session Laws 2012-79, s. 1.9, effective June 26, 2012, rewrote subdivision (a)(1), which formerly read: “G.S. 105-275(12)f., real property held for future transfer to government unit for conservation purposes.”

Session Laws 2013-130, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2013, added subdivision (a)(4b).

§ 105-277.2. Agricultural, horticultural, and forestland — Definitions.

The following definitions apply in G.S. 105-277.3 through G.S. 105-277.7 :

  1. Agricultural land. — Land that is a part of a farm unit that is actively engaged in the commercial production or growing of crops, plants, or animals under a sound management program. For purposes of this definition, the commercial production or growing of animals includes the rearing, feeding, training, caring, and managing of horses. Agricultural land includes woodland and wasteland that is a part of the farm unit, but the woodland and wasteland included in the unit must be appraised under the use-value schedules as woodland or wasteland. A farm unit may consist of more than one tract of agricultural land, but at least one of the tracts must meet the requirements in G.S. 105-277.3(a)(1), and each tract must be under a sound management program. If the agricultural land includes less than 20 acres of woodland, then the woodland portion is not required to be under a sound management program. Also, woodland is not required to be under a sound management program if it is determined that the highest and best use of the woodland is to diminish wind erosion of adjacent agricultural land, protect water quality of adjacent agricultural land, or serve as buffers for adjacent livestock or poultry operations.

    (1a) Business entity. — A corporation, a general partnership, a limited partnership, or a limited liability company.

  2. Forestland. — Land that is a part of a forest unit that is actively engaged in the commercial growing of trees under a sound management program. Forestland includes wasteland that is a part of the forest unit, but the wasteland included in the unit must be appraised under the use-value schedules as wasteland. A forest unit may consist of more than one tract of forestland, but at least one of the tracts must meet the requirements in G.S. 105-277.3(a)(3), and each tract must be under a sound management program.
  3. Horticultural land. — Land that is a part of a horticultural unit that is actively engaged in the commercial production or growing of fruits or vegetables or nursery or floral products under a sound management program. Horticultural land includes woodland and wasteland that is a part of the horticultural unit, but the woodland and wasteland included in the unit must be appraised under the use-value schedules as woodland or wasteland. A horticultural unit may consist of more than one tract of horticultural land, but at least one of the tracts must meet the requirements in G.S. 105-277.3(a)(2), and each tract must be under a sound management program. If the horticultural land includes less than 20 acres of woodland, then the woodland portion is not required to be under a sound management program. Also, woodland is not required to be under a sound management program if it is determined that the highest and best use of the woodland is to diminish wind erosion of adjacent horticultural land or protect water quality of adjacent horticultural land. Land used to grow horticultural and agricultural crops on a rotating basis or where the horticultural crop is set out or planted and harvested within one growing season, may be treated as agricultural land as described in subdivision (1) of this section when there is determined to be no significant difference in the cash rental rates for the land.
  4. Individually owned. — Owned by one of the following:
    1. An individual.
    2. A business entity that meets all of the following conditions:
      1. Its principal business is farming agricultural land, horticultural land, or forestland. When determining whether an applicant under G.S. 105-277.4 has as its principal business farming agricultural land, horticultural land, or forestland, the assessor shall presume the applicant’s principal business to be farming agricultural land, horticultural land, or forestland if the applicant has been approved by another county for present-use value taxation for a qualifying property located within the other county; provided, however, the presumption afforded the applicant may be rebutted by the assessor and shall have no bearing on the determination of whether the individual parcel of land meets one or more of the classes defined in G.S. 105-277.3(a) . If the assessor is able to rebut the presumption, this shall not invalidate the determination that the applicant’s principal business is farming agricultural land, horticultural land, or forestland in the other county.
      2. All of its members are, directly or indirectly, individuals who are actively engaged in farming agricultural land, horticultural land, or forestland or a relative of one of the individuals who is actively engaged. An individual is indirectly a member of a business entity that owns the land if the individual is a member of a business entity or a beneficiary of a trust that is part of the ownership structure of the business entity that owns the land.
      3. It is not a corporation whose shares are publicly traded, and none of its members are corporations whose shares are publicly traded.
      4. If it leases the land, all of its members are individuals and are relatives. Under this condition, “principal business” and “actively engaged” include leasing.
    3. A trust that meets all of the following conditions:
      1. It was created by an individual who owned the land and transferred the land to the trust.
      2. All of its beneficiaries are, directly or indirectly, individuals who are the creator of the trust or a relative of the creator. An individual is indirectly a beneficiary of a trust that owns the land if the individual is a beneficiary of another trust or a member of a business entity that has a beneficial interest in the trust that owns the land.
    4. A testamentary trust that meets all of the following conditions:
      1. It was created by an individual who transferred to the trust land that qualified in that individual’s hands for classification under G.S. 105-277.3 .
      2. At the date of the creator’s death, the creator had no relatives.
      3. The trust income, less reasonable administrative expenses, is used exclusively for educational, scientific, literary, cultural, charitable, or religious purposes as defined in G.S. 105-278.3(d).
    5. Tenants in common, if each tenant would qualify as an owner if the tenant were the sole owner. Tenants in common may elect to treat their individual shares as owned by them individually in accordance with G.S. 105-302(c)(9). The ownership requirements of G.S. 105-277.3(b) apply to each tenant in common who is an individual, and the ownership requirements of G.S. 105-277.3(b1) apply to each tenant in common who is a business entity or a trust. (4a) Member. — A shareholder of a corporation, a partner of a general or limited partnership, or a member of a limited liability company.
  5. Present-use value. — The value of land in its current use as agricultural land, horticultural land, or forestland, based solely on its ability to produce income and assuming an average level of management. A rate of nine percent (9%) shall be used to capitalize the expected net income of forestland. The capitalization rate for agricultural land and horticultural land is to be determined by the Use-Value Advisory Board as provided in G.S. 105-277.7 . (5a) Relative. — Any of the following:
    1. A spouse or the spouse’s lineal ancestor or descendant.
    2. A lineal ancestor or a lineal descendant.
    3. A brother or sister, or the lineal descendant of a brother or sister. For the purposes of this sub-subdivision, the term brother or sister includes stepbrother or stepsister.
    4. An aunt or an uncle.
    5. A spouse of an individual listed in paragraphs a. through d. For the purpose of this subdivision, an adoptive or adopted relative is a relative and the term “spouse” includes a surviving spouse.
  6. Sound management program. — A program of production designed to obtain the greatest net return from the land consistent with its conservation and long-term improvement.
  7. Unit. — One or more tracts of agricultural land, horticultural land, or forestland. Multiple tracts must be under the same ownership and be of the same type of classification. If the multiple tracts are located within different counties, they must be within 50 miles of a tract qualifying under G.S. 105-277.3(a) .

History. 1973, c. 709, s. 1; 1975, c. 746, s. 1; 1985, c. 628, s. 1; c. 667, ss. 1, 4; 1987, c. 698, s. 1; 1995, c. 454, s. 1; 1995 (Reg. Sess., 1996), c. 646, s. 17; 1998-98, s. 24; 2002-184, s. 1; 2004-8, s. 1; 2005-313, ss. 1, 2; 2008-146, s. 2.1; 2015-263, s. 12(a).

Editor’s Note.

Session Laws 2006-106, s. 9, provides: “The Revenue Laws Study Committee shall study and recommend any changes to the special class of property taxed on the basis of the value of the property at its present use. The study shall include an evaluation of the following:

“(1) Expanding the present-use value system to include wildlife land and other conservation land.

“(2) Adding more specific land resource management criteria to the sound management programs required for lands enrolled in the present-use value system.

“The Committee shall make a report of its findings and recommendations to the 2007 General Assembly.”

Session Laws 2008-146, s. 2.3, as amended by Session Laws 2009-445, s. 45(b), provides: “This Part [Part II of Session Laws 2008-146] is effective for taxes imposed for taxable years beginning on or after July 1, 2008.”

Effect of Amendments.

Session Laws 2002-184, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2003, added the last two sentences in subdivisions (1) and (3); added paragraph (4)e; rewrote subdivision (5); added subdivision (7); and substituted “must” for “shall” in subdivisions (1), (2), and (3).

Session Laws 2004-8, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2004, substituted “one or more of the conditions listed in this sub-subdivision. For the purpose of this sub-subdivision, the terms ‘having as its principal business’ and ‘actively engaged in the business of the entity’ include the leasing of the land for one of the activities described in subdivisions (1), (2), and (3) only if all members of the business entity are relatives” for “one or more of the following conditions:” in paragraph (4)b.

Session Laws 2005-313, ss. 1 and 2, effective for taxes imposed for taxable years beginning on or after July 1, 2005, added the last sentence of subdivision (3); and in subdivision (7), added “and be of the same type of classification” at the end of the first sentence, and in the second sentence, deleted the language following “105-277.3(a),” which read: “and share one of the following characteristics: a. Type of classification. b. Use of the same equipment or labor force.”

Session Laws 2008-146, s. 2.1, effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote subdivision (4); and in subdivision (5a)e, substituted “an individual” for “a person.”

Session Laws 2015-263, s. 12(a), effective July 1, 2015, inserted the second sentence in subdivision (1); and added the last two sentences in sub-sub-subdivision (4)b.1. For applicability, see editor’s note.

Legal Periodicals.

For survey of 1980 tax law, see 59 N.C.L. Rev. 1233 (1981).

CASE NOTES

Ownership distinctions of subdivision (4)b and (5a) of this section satisfy equal protection requirements of state and federal constitutions. In re Consol. Appeals of Certain Timber Cos., 98 N.C. App. 412, 391 S.E.2d 503, 1990 N.C. App. LEXIS 422 (1990).

Statutory Scheme Is Tax Deferment. —

The statutory scheme for taxation of property qualifying for present use value treatment as defined in this section and (former) G.S. 105-277.3 is a tax deferment. In re Parker, 76 N.C. App. 447, 333 S.E.2d 749, 1985 N.C. App. LEXIS 3911 (1985).

Principal Business of a Corporation. —

Factors which should be looked at in determining the principal business of a corporation for present use valuation other than gross income are net income or profit and its source, annual receipts and disbursement, the purpose of the corporation as stated in its corporate charter and the actual corporate function in relation to its stated corporate purpose. W.R. Co. v. North Carolina Property Tax Comm'n, 48 N.C. App. 245, 269 S.E.2d 636, 1980 N.C. App. LEXIS 3227 (1980), cert. denied, 301 N.C. 727 , 276 S.E.2d 287, 1981 N.C. LEXIS 1148 (1981).

Property to Be Valued on Ability to Produce Income in Present Use. —

Clear legislative intent under this section is that property be valued on the basis of its ability to produce income in the manner of its present use; all other uses for which the property might be employed, and the many factors enunciated in G.S. 105-317(a), are irrelevant and immaterial. In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

Commonality Among Land Tracts Is Required To Be Part of a Farm Unit. —

In complying with the statutory requirements of G.S. 105-277.2 , 105-277.3(a)(1) of the North Carolina Machinery Act, G.S. 105-277.2 et seq., for qualifying as agricultural land for taxing purposes, land tracts should at least have a rational relationship with each other in order to comprise a tract within a farm unit; there must be a reasonable amount of commonality so as to qualify a land tract as being a part of the whole. In re Frizzelle, 151 N.C. App. 552, 566 S.E.2d 506, 2002 N.C. App. LEXIS 770 (2002).

Taxpayer Had Standing to Appeal to County. —

Where taxpayer complained that the property of a real estate corporation was undervalued, with the result that other property owners in the county would bear a disproportionate share of the tax burden, taxpayer was adversely affected by the alleged undervaluation of the corporation’s property and had standing to appeal to the county for a revaluation of the corporate property. North Carolina Prop. Tax Comm'n, 136 N.C. App. 360, 525 S.E.2d 196, 2000 N.C. App. LEXIS 64 , cert. denied, 351 N.C. 473 , 543 S.E.2d 511, 2000 N.C. LEXIS 264 (2000).

Commercial production. —

Taxpayers’ production of hay from their former dairy farm was sufficient to meet the statutory requirement for an agricultural land present-use classification that the land was actively engaged in the commercial production of crops during the tax year. In re Appeal of Briarfield Farms, 147 N.C. App. 208, 555 S.E.2d 621, 2001 N.C. App. LEXIS 1132 (2001).

Sound management program. —

Taxpayers were not required to have experience in the operation of a farm, to have training in agricultural science, or to seek advice from the county extension office before they could be considered to be operating their property under a sound management program. In re Appeal of Briarfield Farms, 147 N.C. App. 208, 555 S.E.2d 621, 2001 N.C. App. LEXIS 1132 (2001).

Corporation Not Growing Trees Under a “Sound Management Program.” —

The Commission’s findings of fact were supported by competent, material, and substantial evidence that the property of the family corporation was not actively engaged in the commercial growing of trees under a sound management program, and therefore, not eligible for taxation at present-use value. North Carolina Prop. Tax Comm'n, 136 N.C. App. 360, 525 S.E.2d 196, 2000 N.C. App. LEXIS 64 , cert. denied, 351 N.C. 473 , 543 S.E.2d 511, 2000 N.C. LEXIS 264 (2000).

Agricultural Classification Was Properly Denied. —

Although appellant taxpayer asserted that the taxpayer’s 7.66-acre land tract should have been given the present-use value classification, agricultural, under G.S. 105-277.3(a)(1) of the North Carolina Machinery Act, G.S. 105-277.2 et seq., because it was allegedly part of a farm unit involving over 100 acres in another county, the Property Tax Commission reasonably concluded that the land tract was not part of a farm unit for purposes of G.S. 105-277.2 and refused to apply the agricultural classification where the tract was over 100 miles from the taxpayer’s farm land in the other county and only a fraction of the 7.66-acre tract was used for growing crops. In re Frizzelle, 151 N.C. App. 552, 566 S.E.2d 506, 2002 N.C. App. LEXIS 770 (2002).

County’s Present-Use Schedule of Values Was Not Illegal. —

Landowner did not show a county’s present-use schedule of values (SOV), as applied in determining the value of the landowner’s property, was illegal for not considering soil quality, under G.S. 105-317(a), because (1) G.S. 105-317(a) did not apply when determining present-use valuation, and (2) the landowner did not claim the SOV did not comply with the applicable requirements of G.S. 105.277.2(5) or G.S. 105-317(b)(1), so the landowner did not rebut a presumption that the county’s SOV was proper. In re Appeal McLamb, 218 N.C. App. 485, 721 S.E.2d 285, 2012 N.C. App. LEXIS 223 (2012).

Market-Value Assessment Upheld. —

Assessment of the market value of a taxpayer’s forestland was upheld, despite the taxpayer’s claim that the assessment did not sufficiently account for the land’s (1) wetland restrictions, (2) frequent flooding, (3) topography and tract size, or (4) wasteland because the taxpayer’s forest management plan did not support these alleged factors, and the taxpayer did not otherwise submit supporting evidence. In re Appeal of Family Tree Farm, LLC, 218 N.C. App. 577, 721 S.E.2d 387, 2012 N.C. App. LEXIS 215 (2012).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General of Honorable B.D. Schwartz, N.C. House of Representatives, 43 N.C. Op. Att'y Gen. 64 (1973).

§ 105-277.3. Agricultural, horticultural, and forestland — Classifications.

  1. Classes Defined. —  The following classes of property are designated special classes of property under authority of Section 2(2) of Article V of the North Carolina Constitution and must be appraised, assessed, and taxed as provided in G.S. 105-277.2 through G.S. 105-277.7 .
    1. Agricultural land. —  Individually owned agricultural land consisting of one or more tracts, one of which satisfies the requirements of this subdivision. For agricultural land used as a farm for aquatic species, as defined in G.S. 106-758 , the tract must meet the income requirement for agricultural land and must consist of at least five acres in actual production or produce at least 20,000 pounds of aquatic species for commercial sale annually, regardless of acreage. For all other agricultural land, the tract must meet the income requirement for agricultural land and must consist of at least 10 acres that are in actual production. Land in actual production includes land under improvements used in the commercial production or growing of crops, plants, or animals.To meet the income requirement, agricultural land must, for the three years preceding January 1 of the year for which the benefit of this section is claimed, have produced an average gross income of at least one thousand dollars ($1,000). Gross income includes income from the sale of the agricultural products produced from the land, grazing fees for livestock, the sale of bees or products derived from beehives other than honey, any payments received under a governmental soil conservation or land retirement program, and the amount paid to the taxpayer during the taxable year pursuant to P.L. 108-357, Title VI, Fair and Equitable Tobacco Reform Act of 2004.
    2. Horticultural land. —  Individually owned horticultural land consisting of one or more tracts, one of which consists of at least five acres that are in actual production and that, for the three years preceding January 1 of the year for which the benefit of this section is claimed, have met the applicable minimum gross income requirement. Land in actual production includes land under improvements used in the commercial production or growing of fruits or vegetables or nursery or floral products. Land that has been used to produce evergreens intended for use as Christmas trees must have met the minimum gross income requirements established by the Department of Revenue for the land. All other horticultural land must have produced an average gross income of at least one thousand dollars ($1,000). Gross income includes income from the sale of the horticultural products produced from the land and any payments received under a governmental soil conservation or land retirement program.
    3. Forestland. —  Individually owned forestland consisting of one or more tracts, one of which consists of at least 20 acres that are in actual production and are not included in a farm unit.
  2. Individual Ownership Requirements. —  In order to come within a classification described in subsection (a) of this section, land owned by an individual must also satisfy one of the following conditions:
    1. It is the owner’s place of residence.
    2. It has been owned by the current owner or a relative of the current owner for the four years preceding January 1 of the year for which the benefit of this section is claimed.
    3. At the time of transfer to the current owner, it qualified for classification in the hands of a business entity or trust that transferred the land to the current owner who was a member of the business entity or a beneficiary of the trust, as appropriate.

      (b1) Entity Ownership Requirements. — In order to come within a classification described in subsection (a) of this section, land owned by a business entity must meet the requirements of subdivision (1) of this subsection and land owned by a trust must meet the requirements of subdivision (2) of this subsection.

      (1) Land owned by a business entity must have been owned by one or more of the following for the four years immediately preceding January 1 of the year for which the benefit of this section is claimed:

      1. The business entity.
      2. A member of the business entity.
      3. Another business entity whose members include a member of the business entity that currently owns the land.

        (2) Land owned by a trust must have been owned by the trust or by one or more of its creators for the four years immediately preceding January 1 of the year for which the benefit of this section is claimed.

        (b2) Exceptions to Ownership Requirements. — Notwithstanding the provisions of subsections (b) and (b1) of this section, land may qualify for classification in the hands of the new owner if all of the conditions listed in either subdivision of this subsection are met, even if the new owner does not meet all of the ownership requirements of subsections (b) and (b1) of this section with respect to the land.

        (1) Continued use. — If the land qualifies for classification in the hands of the new owner under the provisions of this subdivision, then any deferred taxes remain a lien on the land under G.S. 105-277.4(c), the new owner becomes liable for the deferred taxes, and the deferred taxes become payable if the land fails to meet any other condition or requirement for classification. Land qualifies for classification in the hands of the new owner if all of the following conditions are met:

        a. The land was appraised at its present use value at the time title to the land passed to the new owner.

        b. The new owner acquires the land and continues to use the land for the purpose for which it was classified under subsection (a) of this section while under previous ownership.

        c. The new owner has timely filed an application as required by G.S. 105-277.4(a) and has certified that the new owner accepts liability for any deferred taxes and intends to continue the present use of the land.

        (2) Expansion of existing unit. — Land qualifies for classification in the hands of the new owner if, at the time title passed to the new owner, the land was not appraised at its present-use value but was being used for the same purpose and was eligible for appraisal at its present-use value as other land already owned by the new owner and classified under subsection (a) of this section. The new owner must timely file an application as required by G.S. 105-277.4(a).

  3. Repealed by Session Laws 1995, c. 454, s. 2.
  4. Exception for Conservation Reserve Program. —  Land enrolled in the federal Conservation Reserve Program authorized by 16 U.S.C. Chapter 58 is considered to be in actual production, and income derived from participation in the federal Conservation Reserve Program may be used in meeting the minimum gross income requirements of this section either separately or in combination with income from actual production. Land enrolled in the federal Conservation Reserve Program must be assessed as agricultural land if it is planted in vegetation other than trees, or as forestland if it is planted in trees. (d1) Conservation Exception. — Property that is appraised at its present-use value under G.S. 105-277.4(b) shall continue to qualify for appraisal, assessment, and taxation as provided in G.S. 105-277.2 through G.S. 105-277.7 as long as (i) the property is subject to a qualifying conservation easement that meets the requirements of G.S. 113A-232 , without regard to actual production or income requirements of this section; and (ii) the taxpayer received no more than seventy-five percent (75%) of the fair market value of the donated property interest in compensation. Notwithstanding G.S. 105-277.3(b) and (b1), subsequent transfer of the property does not extinguish its present-use value eligibility as long as the property remains subject to a qualifying conservation easement. The exception provided in this subsection applies only to that part of the property that is subject to the easement.

    (d2) Wildlife Exception. — When an owner of land classified under this section does not transfer the land and the land becomes eligible for classification under G.S. 105-277.15 , no deferred taxes are due. The deferred taxes remain a lien on the land and are payable in accordance with G.S. 105-277.15 .

    (d3) Site Infrastructure Exception. — When an owner of land classified under this section (i) does not transfer the land and the land becomes eligible for classification under G.S. 105-277.15A or (ii) does transfer the land but the land becomes eligible for classification under G.S. 105-277.15A within six months of the transfer, no deferred taxes are due. The deferred taxes remain a lien on the land and are payable in accordance with G.S. 105-277.15A.

  5. Exception for Turkey Disease. —  Agricultural land that meets all of the following conditions is considered to be in actual production and to meet the minimum gross income requirements:
    1. The land was in actual production in turkey growing within the preceding two years and qualified for present use value treatment while it was in actual production.
    2. The land was taken out of actual production in turkey growing solely for health and safety considerations due to the presence of Poult Enteritis Mortality Syndrome among turkeys in the same county or a neighboring county.
    3. The land is otherwise eligible for present use value treatment.
  6. Sound Management Program for Agricultural Land and Horticultural Land. —  If the property owner demonstrates any one of the following factors with respect to agricultural land or horticultural land, then the land is operated under a sound management program:
    1. Enrollment in and compliance with an agency-administered and approved farm management plan.
    2. Compliance with a set of best management practices.
    3. Compliance with a minimum gross income per acre test.
    4. Evidence of net income from the farm operation.
    5. Evidence that farming is the farm operator’s principal source of income.
    6. Certification by a recognized agricultural or horticultural agency within the county that the land is operated under a sound management program.

      Operation under a sound management program may also be demonstrated by evidence of other similar factors. As long as a farm operator meets the sound management requirements, it is irrelevant whether the property owner received income or rent from the farm operator.

  7. Sound Management Program for Forestland. —  If the owner of forestland demonstrates that the forestland complies with a written sound forest management plan for the production and sale of forest products, then the forestland is operated under a sound management program.

History. 1973, c. 709, s. 1; 1975, c. 746, s. 2; 1983, c. 821; c. 826; 1985, c. 667, ss. 2, 3, 6.1; 1987, c. 698, ss. 2-5; 1987 (Reg. Sess., 1988), c. 1044, s. 13.1; 1989, cc. 99, 736, s. 1; 1989 (Reg. Sess., 1990), c. 814, s. 29; 1995, c. 454, s. 2; 1997-272, s. 1; 1998-98, s. 22; 2001-499, s. 1; 2002-184, s. 2; 2005-293, s. 1; 2005-313, s. 3; 2007-484, s. 43.7T(c); 2007-497, s. 3.1; 2008-146, s. 2.2; 2008-171, ss. 4, 5; 2011-9, s. 1; 2013-130, s. 2; 2014-3, s. 14.14(a); 2017-108, s. 3(a).

Cross References.

As to taxation of lessees and users of tax-exempt cropland or forestland, see G.S. 105-282.7 .

Editor’s Note.

Session Laws 2008-146, s. 2.3, as amended by Session Laws 2009-445, s. 45(b), provides: “This Part [Part II of Session Laws 2008-146] is effective for taxes imposed for taxable years beginning on or after July 1, 2008.”

Session Laws 2011-9, s. 2, provides, in part: “An application for property tax relief provided by this act may be filed and must be accepted at any time up to and through September 1 for the July 1, 2011, taxable year.”

Section 105-130.34, referred to in this section, was repealed by Session Laws 2013-316, s. 2.1(b), effective January 1, 2014.

Section 105-151.12, referred to in subsection (d1), was repealed by Session Laws 2013-316, s. 1.1(b), effective January 1, 2014.

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.

Session Laws 2017-108, s. 21, is a severability clause.

Effect of Amendments.

Session Laws 2002-184, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2003, substituted “must” for “shall” in the introductory paragraph of subsection (a); rewrote the first paragraph in subsection (b2); added subdivision (b2)(3); and added subsections (d1), (f), and (g).

Session Laws 2005-293, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2005, substituted “program, and the amount paid to the taxpayer during the taxable year pursuant to P.L. 108-357, Title VI, Fair and Equitable Tobacco Reform Act of 2004” for “program” in the next-to-last sentence of subdivision (a)(1).

Session Laws 2005-313, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2005, in subsection (b2), divided the former first paragraph into the introductory paragraph and subdivision (1), redesignated former subdivisions (1) through (3) as present subdivisions a through c, and inserted subdivision (2), inserted “either subdivision of” in the present introductory paragraph, added the catchline and last sentence of subdivision (1), substituted “subdivision” for “subsection” in subdivision (1), and deleted “or was eligible for appraisal at its present use value” following “present use value” in subdivision a.

Session Laws 2007-497, s. 3.1, as amended by Session Laws 2007-484, s. 43.7T(c), effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote subdivision (a)(1).

Session Laws 2008-146, s. 2.2, effective for taxes imposed for taxable years beginning on or after July 1, 2008, in subsection (b), substituted “land owned by a business entity or trust must” for “the land must, if owned by a business entity or trust”; in subsection (b2), substituted “Exceptions” for “Exception”; in subdivision (b2)(1), substituted “Continued use” for “Exception for assumption of deferred liability” and “then any deferred” for “then the deferred”; rewrote subdivision (b2)(1)b; in subdivision (b2)(1)c, substituted “any deferred” for “the deferred”; and in subdivision (b2)(2), substituted “Expansion of existing unit” for “Exception for expansion of existing unit,” substituted “Land qualifies” for “If deferred liability is not assumed under subdivision (1) of this subsection, the land qualifies,” and inserted “not appraised at its present-use value but was.”

Session Laws 2008-171, ss. 4 and 5, effective for taxes imposed for taxable years beginning on or after July 1, 2010, in subsection (d1), added the clause (i) designator, and added clause (ii); and added subsection (d2).

Session Laws 2011-9, s. 1, effective for taxable years beginning on or after July 1, 2011, in subsection (b1), substituted “a business entity must meet the requirements of subdivision (1) of this subsection and land owned by a trust must meet the requirements of subdivision (2) of this subsection” for “a business entity or trust must have been owned by the business entity or trust or by one or more of its members or creators, respectively, for the four years immediately preceding January 1 of the year for which the benefit of this section is claimed”; and added subdivisions (b1)(1) and (b1)(2).

Session Laws 2013-130, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2013, added subsection (d3).

Session Laws 2014-3, s. 14.14(a), effective May 29, 2014, rewrote subsection (d1).

Session Laws 2017-108, s. 3(a), effective July 12, 2017, inserted “grazing fees for livestock, the sale of bees or products derived from beehives other than honey,” in the last sentence of the second paragraph of subdivision (a)(1).

Legal Periodicals.

For survey of 1980 tax law, see 59 N.C.L. Rev. 1233 (1981).

CASE NOTES

This section expressly indicates the constitutional base found in N.C. Const., Art. V, § 2(2) upon which special classification is made and permitted. W.R. Co. v. North Carolina Property Tax Comm'n, 48 N.C. App. 245, 269 S.E.2d 636, 1980 N.C. App. LEXIS 3227 (1980), cert. denied, 301 N.C. 727 , 276 S.E.2d 287, 1981 N.C. LEXIS 1148 (1981).

Statutory Scheme Is Tax Deferment. —

The statutory scheme for taxation of property qualifying for present use value treatment as defined in G.S. 105-277.2 and this section is a tax deferment. In re Parker, 76 N.C. App. 447, 333 S.E.2d 749, 1985 N.C. App. LEXIS 3911 (1985).

The word “passed” in context of subsection (c) means that the transference or conveyance has already occurred and that for purposes of this portion of the statute, the property should be viewed in the hands of the grantee. In re Davis, 113 N.C. App. 743, 440 S.E.2d 307, 1994 N.C. App. LEXIS 214 (1994).

Commonality Among Land Tracts Is Required To Be Part of a Farm Unit. —

In complying with the statutory requirements of G.S. 105-277.2 , 105-277.3(a)(1) of the North Carolina Machinery Act, G.S. 105-277.2 et seq., for qualifying as agricultural land for taxing purposes, land tracts should at least have a rational relationship with each other in order to comprise a tract within a farm unit; there must be a reasonable amount of commonality so as to qualify a land tract as being a part of the whole. In re Frizzelle, 151 N.C. App. 552, 566 S.E.2d 506, 2002 N.C. App. LEXIS 770 (2002).

Present Use Violation. —

Where the property met all of the requirements of subsection (c), the Property Tax Commission did not err in concluding that the property qualified for present use valuation. In re Davis, 113 N.C. App. 743, 440 S.E.2d 307, 1994 N.C. App. LEXIS 214 (1994).

Agricultural Classification Was Properly Denied. —

Although appellant taxpayer asserted that the taxpayer’s 7.66-acre land tract should have been given the present-use value classification, agricultural, under G.S. 105-277.3(a)(1) of the North Carolina Machinery Act, G.S. 105-277.2 et seq., because it was allegedly part of a farm unit involving over 100 acres in another county, the Property Tax Commission reasonably concluded that the land tract was not part of a farm unit for purposes of G.S. 105-277.2 and refused to apply the agricultural classification where the tract was over 100 miles from the taxpayer’s farm land in the other county and only a fraction of the 7.66-acre tract was used for growing crops. In re Frizzelle, 151 N.C. App. 552, 566 S.E.2d 506, 2002 N.C. App. LEXIS 770 (2002).

Income requirement. —

Requirement that property produce at least $1,000 in income in a tax year in order to qualify for a farm-use classification applied to the entire property, and not to each 10-acre division of the property. In re Appeal of Briarfield Farms, 147 N.C. App. 208, 555 S.E.2d 621, 2001 N.C. App. LEXIS 1132 (2001).

Subsection (b) does not apply to subsection (c). In re Davis, 113 N.C. App. 743, 440 S.E.2d 307, 1994 N.C. App. LEXIS 214 (1994).

§ 105-277.4. Agricultural, horticultural and forestland — Application; appraisal at use value; notice and appeal; deferred taxes.

  1. Application. —  Property coming within one of the classes defined in G.S. 105-277.3 is eligible for taxation on the basis of the value of the property in its present use if a timely and proper application is filed with the assessor of the county in which the property is located. The application must clearly show that the property comes within one of the classes and must also contain any other relevant information required by the assessor to properly appraise the property at its present-use value. An initial application must be filed during the regular listing period of the year for which the benefit of this classification is first claimed, or within 30 days of the date shown on a notice of a change in valuation made pursuant to G.S. 105-286 or G.S. 105-287 . A new application is not required to be submitted unless the property is transferred or becomes ineligible for use-value appraisal because of a change in use or acreage. An application required due to transfer of the land may be submitted at any time during the calendar year but must be submitted within 60 days of the date of the property’s transfer. (a1) Late Application. — Upon a showing of good cause by the applicant for failure to make a timely application as required by subsection (a) of this section, an application may be approved by the board of equalization and review or, if that board is not in session, by the board of county commissioners. An untimely application approved under this subsection applies only to property taxes levied by the county or municipality in the calendar year in which the untimely application is filed. Decisions of the county board may be appealed to the Property Tax Commission.
  2. Appraisal at Present-use Value. —  Upon receipt of a properly executed application, the assessor must appraise the property at its present-use value as established in the schedule prepared pursuant to G.S. 105-317 . In appraising the property at its present-use value, the assessor must appraise the improvements located on qualifying land according to the schedules and standards used in appraising other similar improvements in the county. If all or any part of a qualifying tract of land is located within the limits of an incorporated city or town, or is property annexed subject to G.S. 160A-37(f1) or G.S. 160A-49(f1), the assessor must furnish a copy of the property record showing both the present-use appraisal and the valuation upon which the property would have been taxed in the absence of this classification to the collector of the city or town. The assessor must also notify the tax collector of any changes in the appraisals or in the eligibility of the property for the benefit of this classification. Upon a request for a certification pursuant to G.S. 160A-37(f1) or G.S.160A-49(f1), or any change in the certification, the assessor for the county where the land subject to the annexation is located must, within 30 days, determine if the land meets the requirements of G.S. 160A-37(f1)(2) or G.S. 160A-49(f1)(2) and report the results of its findings to the city. (b1) Notice and Appeal. — If the assessor determines that the property loses its eligibility for present-use value classification for a reason other than failure to file a timely application required due to transfer of the land, the assessor shall provide written notice of the decision as required by G.S. 105-296(i). The notice shall include the property’s tax identification number, the specific reason for the disqualification, and the date of the decision. Decisions of the assessor regarding the qualification or appraisal of property under this section may be appealed to the county board of equalization and review or, if that board is not in session, to the board of county commissioners. An appeal must be made within 60 days after date of the written notice of the decision of the assessor. If an owner submits additional information to the assessor pursuant to G.S. 105-296(j), the appeal must be made within 60 days after the assessor’s decision based on the additional information. Decisions of the county board may be appealed to the Property Tax Commission.A new appeal to a decision of the assessor regarding the disqualification of property for which notice was received is not required to be submitted for subsequent tax years while the appeal of that disqualifying event is outstanding. When a property’s present-use value classification is reinstated upon appeal of the disqualifying event, it is reinstated retroactive to the date the classification was revoked, as provided under G.S. 105-296(j).If, while an assessor’s decision that a property has lost its eligibility for present-use value classification is under appeal to the county board or to the Property Tax Commission, the assessor determines that the property is no longer eligible for present-use value classification because of an additional disqualifying event independent of the one that is the basis of the disqualification under appeal, the assessor shall follow the notice and appeal procedure set forth in this subsection with regard to the subsequent disqualification.
  3. Deferred Taxes. —  Land meeting the conditions for classification under G.S. 105-277.3 must be taxed on the basis of the value of the land for its present use. The difference between the taxes due on the present-use basis and the taxes that would have been payable in the absence of this classification, together with any interest, penalties, or costs that may accrue thereon, are a lien on the real property of the taxpayer as provided in G.S. 105-355(a). The difference in taxes must be carried forward in the records of the taxing unit or units as deferred taxes. The deferred taxes for the preceding three fiscal years are due and payable in accordance with G.S. 105-277.1 F when the property loses its eligibility for deferral as a result of a disqualifying event. A disqualifying event occurs when the land fails to meet any condition or requirement for classification or when an application is not approved.
  4. Set Exception. —  Notwithstanding the provisions of subsection (c) of this section, if property loses its eligibility for present use value classification solely due to a change in income caused by enrollment of the property in the federal conservation reserve program established under 16 U.S.C. Chapter 58, then no deferred taxes are due and the lien for the deferred taxes is extinguished. (d1) Variable Exception. — Notwithstanding the provisions of subsection (c) of this section, if property loses its eligibility for present-use value classification because the property is conveyed to a nonprofit organization and qualifies for exclusion from the tax base pursuant to G.S. 105-275(12) or G.S. 105-275(29) or to the State, a political subdivision of the State, or the United States, then deferred taxes are due as follows:
    1. If the property is conveyed at or below present-use value, then no deferred taxes are due, and the lien for the deferred taxes is extinguished.
    2. If the property is conveyed for more than present-use value, then a portion of the deferred taxes for the preceding three fiscal years is due and payable in accordance with G.S. 105-277.1 F. The portion due is equal to the lesser of the amount of the deferred taxes or the deferred taxes multiplied by a fraction, the numerator of which is the sale price of the property minus the present-use value of the property and the denominator of which is the true value of the property minus the present-use value of the property.
  5. Repealed by Session Laws 1997-270, s. 3, effective July 3, 1997.
  6. The Department shall publish a present-use value program guide annually and make the guide available electronically on its Web site. When making decisions regarding the qualifications or appraisal of property under this section, the assessor shall adhere to the Department’s present-use value program guide.

History. 1973, c. 709, s. 1; c. 905; c. 906, ss. 1, 2; 1975, c. 62; c. 746, ss. 3-7; 1981, c. 835; 1985, c. 518, s. 1; c. 667, ss. 5, 6; 1987, c. 45, s. 1; c. 295, s. 5; c. 698, s. 6; 1987 (Reg. Sess., 1988), c. 1044, s. 13.2; 1995, c. 443, s. 4; c. 454, s. 3; 1997-270, s. 3; 1998-98, s. 23; 1998-150, s. 1; 2001-499, s. 2; 2002-184, s. 3; 2005-313, s. 4; 2006-30, s. 4; 2008-35, s. 2.3; 2015-263, s. 12(b); 2016-76, s. 1; 2020-18, s. 8.

Editor’s Note.

G.S. 160A-37 and 160A-49, referred to in subsection (b), have been repealed. Former G.S. 160A-33 through 160A-42, repealed by Session Laws 2011-396, s. 1, pertained to annexation by cities having a population of less than 5,000 persons. Former Part 3 of Article 4A of Chapter 160A, which was repealed by Session Laws 2011-396, s. 7, pertained to annexation by cities having a population of 5,000 or more persons. For current provisions, see G.S. 160A-58.50 et seq.

Session Laws 2008-107, s. 28.11(h), provides, in part, that the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of Session Laws 2008-35 that is recodified or amended by Session Laws 2008-107, s. 28.11(h) by deleting incorrect references and substituting correct references. The reference to G.S. 105-277.1 C in subsection (c) has been changed to G.S. 105-277.1 F.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2020-18, s. 16(a), is a severability clause.

Effect of Amendments.

Session Laws 2002-184, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2003, in subsection (a), substituted “is” for “shall be” and added the last sentence; added the fifth sentence in subsection (c); substituted “must” for “shall” and made related changes throughout; and substituted gender-neutral terms.

Session Laws 2005-313, s. 4, effective for taxes imposed for taxable years beginning on or after July 1, 2005, inserted the present second and third sentences in subsection (b1).

Session Laws 2006-30, s. 4, effective June 29, 2006, added subsection (a1).

Session Laws 2008-35, s. 2.3, effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote subsection (c).

Session Laws 2015-263, s. 12(b), effective September 30, 2015, added subsection (f).

Session Laws 2016-76, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2016, rewrote subsection (d); and added subsection (d1).

Session Laws 2020-18, s. 8, effective June 12, 2020, added “notice and” to the section heading; and, in subsection (b1), added “Notice and” to the subsection heading, added the first sentence, added “date of the written notice of” in the third sentence, and added the last two paragraphs.

CASE NOTES

Burden on the Taxpayer. —

Burden was on the taxpayer under G.S. 105-277.4(a) to show the class of agricultural, horticultural, or forested land in which the taxpayer’s property fit, and to obtain the soil values for the taxpayer’s particular land from the North Carolina Department of Agriculture. In re Appeal of Parker, 191 N.C. App. 313, 664 S.E.2d 1, 2008 N.C. App. LEXIS 1338 (2008).

County’s Present-Use Schedule of Values Was Not Illegal. —

Landowner did not show a county’s present-use schedule of values (SOV), as applied in determining the value of the landowner’s property, was illegal for not considering soil quality, under G.S. 105-317(a), because (1) G.S. 105-317(a) did not apply when determining present-use valuation, and (2) the landowner did not claim the SOV did not comply with the applicable requirements of G.S. 105.277.2(5) or G.S. 105-317(b)(1), so the landowner did not rebut a presumption that the county’s SOV was proper. In re Appeal McLamb, 218 N.C. App. 485, 721 S.E.2d 285, 2012 N.C. App. LEXIS 223 (2012).

OPINIONS OF ATTORNEY GENERAL

Applying this section sequentially, current taxes for the fiscal year payable in the calendar year in which eligibility is lost are computed without benefit of the preferential classification; then, any liens carried forward from previous tax years for which present use status was allowed, not to exceed three years, become immediately collectible. See opinion of Attorney General to Representative Julia C. Howard, 2000 N.C. AG LEXIS 36 (3/22/2000).

§ 105-277.5. Agricultural, horticultural and forestland — Notice of change in use.

Not later than the close of the listing period following a change which could disqualify all or a part of a tract of land receiving the benefit of this classification, the property owner shall furnish the assessor with complete information regarding such change. Any property owner who fails to notify the assessor of changes as aforesaid regarding land receiving the benefit of this classification shall be subject to a penalty of ten percent (10%) of the total amount of the deferred taxes and interest thereon for each listing period for which the failure to report continues.

History. 1973, c. 709, s. 1; 1975, c. 746, s. 8; 1987, c. 45, s. 1.

CASE NOTES

Notice of change in use not required. —

When the taxpayers transitioned the use of their property from a dairy farm to the cultivation of ground crops, they were not required to notify the county of this change, as both uses qualified their property as agricultural land farm-use property; so the property’s status never changed. In re Appeal of Briarfield Farms, 147 N.C. App. 208, 555 S.E.2d 621, 2001 N.C. App. LEXIS 1132 (2001).

§ 105-277.6. Agricultural, horticultural and forestland — Appraisal; computation of deferred tax.

  1. In determining the amount of the deferred taxes herein provided, the assessor shall use the appraised valuation established in the county’s last general revaluation except for any changes made under the provisions of G.S. 105-287 .
  2. In revaluation years, as provided in G.S. 105-286 , all property entitled to classification under G.S. 105-277.3 shall be reappraised at its true value in money and at its present use value as of the effective date of the revaluation. The two valuations shall continue in effect and shall provide the basis for deferred taxes until a change in one or both of the appraisals is required by law. The present use-value schedule, standards, and rules shall be used by the tax assessor to appraise property receiving the benefit of this classification until the next general revaluation of real property in the county as required by G.S. 105-286 .
  3. Repealed by Session Laws 1987, c. 295, s. 2.

History. 1973, c. 709, s. 1; 1975, c. 746, ss. 9, 10; 1987, c. 45, s. 1; c. 295, s. 2.

CASE NOTES

This section mandates that true value schedule and use value schedule be determined separately. In re Parker, 76 N.C. App. 447, 333 S.E.2d 749, 1985 N.C. App. LEXIS 3911 (1985) (decided prior to the 1987 amendments) .

Under the plain language of this section, the board of county commissioners was required to adopt a separate market value schedule and use value schedule. In re Parker, 76 N.C. App. 447, 333 S.E.2d 749, 1985 N.C. App. LEXIS 3911 (1985).

§ 105-277.7. Use-Value Advisory Board.

  1. Creation and Membership. —  The Use-Value Advisory Board is established under the supervision of the Agricultural Extension Service of North Carolina State University. The Director of the Agricultural Extension Service of North Carolina State University shall serve as the chair of the Board. The Board shall consist of the following additional members, to serve ex officio:
    1. A representative of the Department of Agriculture and Consumer Services, designated by the Commissioner of Agriculture.
    2. A representative of the North Carolina Forest Service of the Department of Agriculture and Consumer Services, designated by the Director of that Division.
    3. A representative of the Agricultural Extension Service at North Carolina Agricultural and Technical State University, designated by the Director of the Extension Service.
    4. A representative of the North Carolina Farm Bureau Federation, Inc., designated by the President of the Bureau.
    5. A representative of the North Carolina Association of Assessing Officers, designated by the President of the Association.
    6. The Director of the Property Tax Division of the North Carolina Department of Revenue or the Director’s designee.
    7. A representative of the North Carolina Association of County Commissioners, designated by the President of the Association.
    8. A representative of the North Carolina Forestry Association, designated by the President of the Association.
  2. Staff. —  The Agricultural Extension Service at North Carolina State University must provide clerical assistance to the Board.
  3. Duties. —  The Board must annually submit to the Department of Revenue a recommended use-value manual. In developing the manual, the Board may consult with federal and State agencies as needed. The manual must contain all of the following:
    1. The estimated cash rental rates for agricultural lands and horticultural lands for the various classes of soils found in the State. The rental rates must recognize the productivity levels by class of soil or geographic area, and the crop as either agricultural or horticultural. The rental rates must be based on the rental value of the land to be used for agricultural or horticultural purposes when those uses are presumed to be the highest and best use of the land. The recommended rental rates may be established from individual county studies or from contracts with federal or State agencies as needed.
    2. The recommended net income ranges for forestland furnished to the Board by the Forestry Section of the North Carolina Cooperative Extension Service. These net income ranges may be based on up to six classes of land within each Major Land Resource Area designated by the United States Soil Conservation Service. In developing these ranges, the Forestry Section must consider the soil productivity and indicator tree species or stand type, the average stand establishment and annual management costs, the average rotation length and timber yield, and the average timber stumpage prices.
    3. The capitalization rates adopted by the Board prior to February 1 for use in capitalizing incomes into values. The capitalization rate for forestland shall be nine percent (9%). The capitalization rate for agricultural land and horticultural land must be no less than six percent (6%) and no more than seven percent (7%). The incomes must be in the form of cash rents for agricultural lands and horticultural lands and net incomes for forestlands.
    4. The value per acre adopted by the Board for the best agricultural land. The value may not exceed one thousand two hundred dollars ($1,200).
    5. Recommendations concerning any changes to the capitalization rate for agricultural land and horticultural land and to the maximum value per acre for the best agricultural land and horticultural land based on a calculation to be determined by the Board. The Board shall annually report these recommendations to the Revenue Laws Study Committee and to the President Pro Tempore of the Senate and the Speaker of the House of Representatives.
    6. Recommendations concerning requirements for horticultural land used to produce evergreens intended for use as Christmas trees when requested to do so by the Department.

History. 1973, c. 709, s. 1; 1975, c. 746, s. 11; 1985, c. 628, s. 2; 1989, c. 727, s. 218(44); c. 736, s. 2; 1997-261, s. 109; 1997-443, s. 11A.119(a); 2002-184, s. 4; 2005-313, s. 5; 2005-386, s. 1.3; 2011-145, s. 13.25(oo); 2013-155, s. 7.

Effect of Amendments.

Session Laws 2002-184, s. 4, effective for taxes imposed for taxable years beginning on or after July 1, 2003, rewrote the section, adding subsection designations, adding members to the Board, and expanding the duties with regard to developing the recommended use-value manual.

Session Laws 2005-313, s. 5, effective for taxes imposed for taxable years beginning on or after July 1, 2005, in subsection (c), added “and the crop as either agricultural or horticultural” at the end of the second sentence of subdivision (1), and inserted “and horticultural land” preceding “based on a calculation” in the first sentence of subdivision (5).

Session Laws 2005-386, s. 1.3, effective September 13, 2005, substituted “Division of Forest Resources” for “Forest Resources Division” in subdivision (a)(2); and substituted “Farm Bureau Federation, Inc.” for “Farm Bureau” in subdivision (a)(4).

Session Laws 2011-145, s. 13.25(oo), effective July 1, 2011, substituted “Department of Agriculture and Consumer Services” for “Department of Environment and Natural Resources” in subdivision (a)(2).

Session Laws 2013-155, s. 7, effective July 1, 2013, substituted “North Carolina Forest Service” for “Division of Forest Resources” in subdivision (a)(2).

CASE NOTES

County’s Present-Use Schedule of Values Was Not Illegal. —

Landowner did not show a county’s present-use schedule of values (SOV), as applied in determining the value of the landowner’s property, was illegal for not considering soil quality, pursuant to the 2011 Use-Value Manual for Agricultural, Horticultural and Forest Land (manual) because (1) the manual merely gave “recommendations” to counties regarding the counties’ present-use valuation, and (2) nothing in the manual and no statute required the county to follow the manual in the county’s evaluation. In re Appeal McLamb, 218 N.C. App. 485, 721 S.E.2d 285, 2012 N.C. App. LEXIS 223 (2012).

§ 105-277.8. Taxation of property of nonprofit homeowners’ association.

  1. Except as provided in subsection (a1) of this section, the value of real and personal property owned by a nonprofit homeowners’ association shall be included in the appraisals of property owned by members of the association and shall not be assessed against the association if each of the following requirements is met:
    1. All property owned by the association is held for the use, benefit, and enjoyment of all members of the association equally.
    2. Each member of the association has an irrevocable right to use and enjoy, on an equal basis, all property owned by the association, subject to any restrictions imposed by the instruments conveying the right or the rules, regulations, or bylaws of the association.
    3. Each irrevocable right to use and enjoy all property owned by the association is appurtenant to taxable real property owned by a member of the association.

      The assessor may allocate the value of the association’s property among the property of the association’s members on any fair and reasonable basis.

      (a1) The value of extraterritorial common property shall be subject to taxation only in the jurisdiction in which it is entirely contained and only in the amount of the local tax of the jurisdiction in which it is entirely contained. The value of any property taxed pursuant to this subsection, as determined by the latest schedule of values, shall not be included in the appraisals of property owned by members of the association that are referenced in subsection (a) of this section or otherwise subject to taxation. The assessor for the jurisdiction that imposes a tax pursuant to this subsection shall provide notice of the property, the value, and any other information to the assessor of any other jurisdiction so that the real properties owned by the members of the association are not subject to taxation for that value. The governing board of a nonprofit homeowners’ association with property subject to taxation under this subsection shall provide annually to each member of the association the amount of tax due on the property, the value of the property, and, if applicable, the means by which the association will recover the tax due on the property from the members.

  2. As used in this section, “nonprofit homeowners’ association” means a homeowners’ association as defined in § 528(c) of the Internal Revenue Code, and “extraterritorial common property” means real property that is (i) owned by a nonprofit homeowners association that meets the requirements of subdivisions (1) through (3) of subsection (a) of this section and (ii) entirely contained within a taxing jurisdiction that is different from that of the taxable real property owned by members of the association and providing the appurtenant rights to use and enjoy the association property.

History. 1979, c. 686, s. 1; 1987, c. 130; 2012-157, s. 1.

Effect of Amendments.

Session Laws 2012-157, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2012, in the introductory paragraph of subsection (a), added the exception at the beginning, and added “each of the following requirements is met” at the end; added subsection (a1), and made related punctuation changes; and, in subsection (b), added “and ‘extraterritorial common property’ means real property that is (i) owned by a nonprofit homeowners association that meets the requirements of subdivisions (1) through (3) of subsection (a) of this section and (ii) entirely contained within a taxing jurisdiction that is different from that of the taxable real property owned by members of the association and providing the appurtenant rights to use and enjoy the association property.”

Legal Periodicals.

For survey of 1979 tax law, see 58 N.C.L. Rev. 1548 (1980).

§ 105-277.9. Taxation of property inside certain roadway corridors.

Real property that lies within a transportation corridor marked on an official map filed under Article 2E of Chapter 136 of the General Statutes is designated a special class of property under Article V, Sec. 2(2) of the North Carolina Constitution and is taxable at twenty percent (20%) of the appraised value of the property if each of the following requirements is met:

  1. As of January 1, no building or other structure is located on the property.
  2. The property has not been subdivided, as defined in G.S. 153A-335 or G.S. 160A-376, since it was included in the corridor.

History. 1987, c. 747, s. 22; 1998-184, s. 2; 2011-30, s. 1.

Effect of Amendments.

Session Laws 2011-30, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2011, substituted “appraised value of the property if each of the following requirements is met” for “general tax rate levied on real property by the taxing unit in which the property is situated if” in the introductory paragraph; and substituted “located on the property” for “located on the property; and” in subdivision (1).

CASE NOTES

Reduced Taxes Proper Consideration. —

Where the property essentially had no fair market value once the 1992 corridor map was recorded, and there was no other evidence of the value of the property using a cost approach or an income capitalization approach, the owners were effectively paying taxes on property that had no value; thus, it was appropriate for the trial court to take into account the effect of the reduced ad valorem taxes and compensate the owners for the actual taxes they paid at a time when their property had virtually no fair market value. Chappell v. N.C. DOT, 374 N.C. 273 , 841 S.E.2d 513, 2020 N.C. LEXIS 367 (2020).

§ 105-277.9A. (See note for delayed repeal.) Taxation of improved property inside certain roadway corridors

  1. Reduced Assessment. —  Real property on which a building or other structure is located and that lies within a transportation corridor marked on an official map filed under Article 2E of Chapter 136 of the General Statutes is designated a special class of property under Section 2(2) of Article V of the North Carolina Constitution and is taxable at fifty percent (50%) of the appraised value of the property if the property has not been subdivided, as defined in G.S. 153A-335 or G.S. 160A-376, since it was included in the corridor.
  2. Sunset. —  This section is repealed effective for taxes imposed for taxable years beginning on or after July 1, 2021.

History. 2011-30, s. 2.

Delayed Repeal of Section.

This section is repealed effective for taxes imposed for taxable years beginning on or after July 1, 2021, pursuant to the sunset provision in G.S. 105-277.9 A(b).

Editor’s Note.

Session Laws 2011-30, s. 2, made this section effective for taxes imposed for taxable years beginning on or after July 1, 2011.

§ 105-277.10. Taxation of precious metals used or held for use directly in manufacturing or processing by a manufacturer.

Precious metals, including rhodium and platinum, used or held for use directly in manufacturing or processing by a manufacturer as part of industrial machinery is designated a special class of property under Article V, Sec. 2(2) of the North Carolina Constitution and shall be assessed for taxation in accordance with this section. The classified property shall be assessed at the lower of its true value or the manufacturer’s original cost less depreciation. The original cost of the classified property shall be adjusted by the index factor, if any, that applies in assessing the industrial machinery with which the property is used, and the depreciable life of the classified property shall be the life assigned to the industrial machinery with which the property is used. The residual value of the classified property may not exceed twenty-five percent (25%) of the manufacturer’s original cost.

History. 1989, c. 674.

§ 105-277.11. Taxation of property subject to a development financing district agreement.

Property that is in a development financing district established pursuant to G.S. 160A-515.1 or G.S. 158-7.3 and that is subject to an agreement entered into pursuant to G.S. 159-108 , shall, pursuant to Article V, Section 14 of the North Carolina Constitution, be assessed for taxation at the greater of its true value or the minimum value established in the agreement.

History. 2003-403, s. 21.

Editor’s Note.

A G.S. 105-277.11 was enacted by Session Laws 1993, c. 497, s. 21, but was made effective upon certification of approval of an amendment to Article V of the Constitution of North Carolina relating to the authority of any county, city or town to borrow money, without the need of voter approval, and issue financing bonds to be used to finance public activities associated with private economic development projects. This amendment was submitted to the people on November 2, 1993 and was defeated. The section, therefore, never took effect.

Session Laws 2003-403, s. 25, made this section effective upon certification of approval of amendment to Article V, § 14 of the Constitution of North Carolina, as proposed in Session Laws 2003-403, s. 1.

Session Laws 2003-403, ss. 24 and 25, provide: “The amendment set out in Section 1 of this act shall be submitted to the qualified voters of the State at the statewide general election in November 2004, which election shall be conducted under the laws then governing elections in the State. Ballots, voting systems, or both may be used in accordance with Chapter 163 of the General Statutes. The question to be used in the voting systems and ballots shall be:

“[ ] FOR [ ] AGAINST

“Constitutional amendment to promote local economic and community development projects by (i) permitting the General Assembly to enact general laws giving counties, cities, and towns the power to finance public improvements associated with qualified private economic and community improvements within development districts, as long as the financing is secured by the additional tax revenues resulting from the enhanced property value within the development district and is not secured by a pledge of the local government’s faith and credit or general taxing authority, which financing is not subject to a referendum; and (ii) permitting the owners of property in the development district to agree to a minimum tax value for their property, which is binding on future owners as long as the development district is in existence.

“If a majority of votes cast on the question are in favor of the amendment set out in Section 1 of this act, the State Board of Elections shall certify the amendment to the Secretary of State. The amendment set out in Section 1 of this act and the amendments set out in Sections 2 through 21 of this act become effective upon this certification. The Secretary of State shall enroll the amendment so certified among the permanent records of that office. If a majority of votes cast on the question are not in favor of the amendment set out in Section 1 of this act, that amendment and the amendments set out in Sections 2 through 21 of this act do not go into effect.”

The constitutional amendment adding N.C. Const., Art. 5, § 14, as proposed in Session Laws 2003-403, s. 1, was adopted by vote of the people at the general election held on November 2, 2004.

Session Laws 2003-403, s. 22, provides that the act [Session Laws 2003-403], being necessary for the prosperity and welfare of the State and its inhabitants, shall be liberally construed to effect these purposes.

Session Laws 2003-403, s. 23, is a severability clause.

Legal Periodicals.

For note, “Tax Increment Financing in North Carolina: The Myth of the Countermajoritarian Difficulty,” see 83 N.C. L. Rev. 1526 (2005).

§ 105-277.12. Antique airplanes.

  1. For the purpose of this section, the term “antique airplane” means an airplane that meets all of the following conditions:
    1. It is registered with the Federal Aviation Administration and is a model year 1954 or older.
    2. It is maintained primarily for use in exhibitions, club activities, air shows, and other public interest functions.
    3. It is used only occasionally for other purposes.
    4. It is used by the owner for a purpose other than the production of income.
  2. Antique airplanes are designated a special class of property under Article V, Sec. 2(2) of the North Carolina Constitution and shall be assessed for taxation in accordance with this section. An antique airplane shall be assessed at the lower of its true value or five thousand dollars ($5,000).

History. 1997-355, s. 1.

§ 105-277.13. Taxation of improvements on brownfields.

  1. Qualifying improvements on brownfields properties are designated a special class of property under Article V, Sec. 2(2) of the North Carolina Constitution and shall be appraised, assessed, and taxed in accordance with this section. An owner of land is entitled to the partial exclusion provided by this section for the first five taxable years beginning after completion of qualifying improvements made after the later of July 1, 2000, or the date of the brownfields agreement. After property has qualified for the exclusion provided by this section, the assessor for the county in which the property is located shall annually appraise the improvements made to the property during the period of time that the owner is entitled to the exclusion.
  2. For the purposes of this section, the terms “qualifying improvements on brownfields properties” and “qualifying improvements” mean improvements made to real property that is subject to a brownfields agreement entered into by the Department of Environmental Quality and the owner pursuant to G.S. 130A-310.32 .
  3. The following table establishes the percentage of the appraised value of the qualified improvements that is excluded based on the taxable year:

    Click to view

Year Percent of Appraised Value Excluded Year 1 90% Year 2 75% Year 3 50% Year 4 30% Year 5 10%.

History. 2000-158, s. 1; 2015-241, s. 14.30(u).

Editor’s Note.

Session Laws 2000-158, s. 3, made this section effective for taxes imposed for taxable years beginning on or after July 1, 2001.

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 subsection (b).

§ 105-277.14. Taxation of working waterfront property.

  1. Definitions. —  The following definitions apply in this section:
    1. Coastal fishing waters. — Defined in G.S. 113-129 .
    2. Commercial fishing operation. — Defined in G.S. 113-168 .
    3. Fish processing. — Processing fish, as defined in G.S. 113-129 , for sale.
    4. Working waterfront property. — Any of the following property that has, for the most recent three-year period, produced an average gross income of at least one thousand dollars ($1,000):
      1. A pier that extends into coastal fishing waters and limits access to those who pay a fee.
      2. Real property that is adjacent to coastal fishing waters and is primarily used for a commercial fishing operation or fish processing, including adjacent land that is under improvements used for one of these purposes.
  2. Classification. —  Working waterfront property is designated a special class of property under Section 2(2) of Article V of the North Carolina Constitution and must be appraised, assessed, and taxed on the basis of the value of the property in its present use rather than on its true value. Working waterfront property includes land reasonably necessary for the convenient use of the property.
  3. Deferred Taxes. —  The difference between the taxes that are due on working waterfront property taxed on the basis of its present use and that would be due if the property were taxed on the basis of its true value is a lien on the property. The difference in taxes must be carried forward in the records of each taxing unit as deferred taxes. The deferred taxes for the preceding three fiscal years are due and payable in accordance with G.S. 105-277.1 F when the property loses its eligibility for deferral as a result of a disqualifying event. A disqualifying event occurs when the property no longer qualifies as working waterfront property.
  4. Repealed by Session Laws 2009-445, s. 23(b), effective August 7, 2009.

History. 2007-485, s. 1; 2008-35, s. 2.4; 2009-445, s. 23(b).

Editor’s Note.

Session Laws 2007-485, s. 7, made this section effective for taxes imposed for taxable years beginning on or after July 1, 2009.

Session Laws 2008-107, s. 28.11(h), provides, in part, that the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of Session Laws 2008-35 that is recodified or amended by Session Laws 2008-107, s. 28.11(h) by deleting incorrect references and substituting correct references. The reference to G.S. 105-277.1 C in subsection (c) has been changed to G.S. 105-277.1 F.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Effect of Amendments.

Session Laws 2008-35, s. 2.4, effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote subsection (c).

Session Laws 2009-445, s. 23(b), effective August 7, 2009, deleted subsection (d), which read: “Application. — To obtain the benefit of this section, the owner of working waterfront property must submit an application for classification and exclusion to the assessor of the county in which the property is located, and the assessor must approve the application. An application must contain the information and be in the form required by the assessor. An initial application must be filed during the regular listing period of the year for which the benefit of this classification is first claimed or within 30 days of the date shown on a notice of change in valuation made pursuant to G.S. 105-286 or G.S. 105-287 . A new application is not required to be submitted unless the property is transferred or becomes ineligible for classification under this section.”

§ 105-277.15. Taxation of wildlife conservation land.

  1. Definitions. —  The following definitions apply in this section:
    1. Business entity. — Defined in G.S. 105-277.2 .
    2. Family business entity. — A business entity whose members are, directly or indirectly, individuals and are relatives. An individual is indirectly a member of a business entity if the individual is a member of a business entity or a beneficiary of a trust that is part of the ownership structure of the business entity.
    3. Family trust. — A trust that was created by an individual and whose beneficiaries are, directly or indirectly, individuals who are the creator of the trust or a relative of the creator. An individual is indirectly a beneficiary of a trust if the individual is a beneficiary of another trust or a member of a business entity that has a beneficial interest in the trust.
    4. Member. — Defined in G.S. 105-277.2 .
    5. Relative. — Defined in G.S. 105-277.2.
  2. Classification. —  Wildlife conservation land is designated a special class of property under Article V, Section 2(2) of the North Carolina Constitution and must be appraised, assessed, and taxed in accordance with this section. Wildlife conservation land classified under this section must be appraised and assessed as if it were classified under G.S. 105-277.3 as agricultural land.
  3. Requirements. —  Land qualifies as wildlife conservation land if it meets the following size, ownership, and use requirements:
    1. Size. —  The land must consist of at least 20 contiguous acres.
    2. Ownership. —  The land must be owned by an individual, a family business entity, or a family trust and must have been owned by the same owner for the previous five years, except as follows:
      1. If the land is owned by a family business entity, the land meets the ownership requirement if the land was owned by one or more members of the family business entity for the required time.
      2. If the land is owned by a family trust, the land meets the ownership requirement if the land was owned by one or more beneficiaries of the family trust for the required time.
      3. If an owner acquires land that was classified as wildlife conservation land under this section when it was acquired and the owner continues to use the land as wildlife conservation land, then the land meets the ownership requirement if the new owner files an application and signs the wildlife habitat conservation agreement in effect for the property within 60 days after acquiring the property.
    3. (Effective for taxes imposed for taxable years beginning before July 1, 2019) Use. —  The land must meet all of the following requirements:
      1. The land must be managed under a written wildlife habitat conservation agreement with the North Carolina Wildlife Resources Commission that is in effect as of January 1 of the year for which the benefit of this section is claimed and that requires the owner to do one or more of the following:
        1. Protect an animal species that lives on the land and, as of January 1 of the year for which the benefit of this section is claimed, is on a North Carolina protected animal list published by the Commission under G.S. 113-333 .
        2. Conserve any of the following priority animal wildlife habitats: longleaf pine forest, early successional habitat, small wetland community, stream and riparian zone, rock outcrop, or bat cave.
      2. It must have been classified under G.S. 105-277.3 when the wildlife habitat conservation agreement was signed or the owner must demonstrate to both the Wildlife Resources Commission and the assessor that the owner used the land for a purpose specified in the signed wildlife habitat conservation agreement for three years preceding the January 1 of the year for which the benefit of this section is claimed. (3) (Effective for taxes imposed for taxable years beginning on or after July 1, 2019) Use. — The land must meet all of the following requirements:

        a. The land must be managed under a written wildlife habitat conservation agreement with the North Carolina Wildlife Resources Commission that is in effect as of January 1 of the year for which the benefit of this section is claimed and that requires the owner to do one or more of the following:

        1. Protect an animal species that lives on the land and, as of January 1 of the year for which the benefit of this section is claimed, is on a North Carolina protected animal list published by the Commission under G.S. 113-333 .
        2. Conserve any of the following priority animal wildlife habitats: longleaf pine forest, early successional habitat, small wetland community, stream and riparian zone, rock outcrop, or bat cave.
        3. Create and actively and regularly use as a reserve for hunting, fishing, shooting, wildlife observation, or wildlife activities, provided that the land is inspected by a certified wildlife biologist at least quintennially to ensure that at least three of the seven activities listed in this sub-sub-subdivision are maintained to propagate a sustaining breeding, migrating, or wintering population of indigenous wild animals for human use, including food, medicine, or recreation. The Commission shall adopt rules needed to administer the inspection requirements of and activities mandated by this sub-sub-subdivision. [The activities are as follows:]
          1. Supplemental food.
          2. Supplemental water.
          3. Supplemental shelter.
          4. Habitat control.
          5. Erosion control.
          6. Predator control.
          7. Census of animal population on the land.

            b. For land used pursuant to sub-sub-subdivisions 1. or 2. of sub-subdivision a. of this subdivision, it must have been classified under G.S. 105-277.3 when the wildlife habitat conservation agreement was signed or the owner must demonstrate to both the Wildlife Resources Commission and the assessor that the owner used the land for a purpose specified in the signed wildlife habitat conservation agreement for three years preceding the January 1 of the year for which the benefit of this section is claimed.

  4. (Effective for taxes imposed for taxable years beginning before July 1, 2019) Restrictions. —  The following restrictions apply to the classification allowed under this section:
    1. No more than 100 acres of an owner’s land in a county may be classified under this section.
    2. Land owned by a business entity is not eligible for classification under this section if the business entity is a corporation whose shares are publicly traded or one of its members is a corporation whose shares are publicly traded.

      (d) (Effective for taxes imposed for taxable years beginning on or after July 1, 2019) Restrictions. — The following restrictions apply to the classification allowed under this section:

      (1) For land used pursuant to sub-sub-subdivision 3. of sub-subdivision a. of subdivision (3) of subsection (c) of this section, no more than 800 acres of an owner’s land in a county may be classified under this section. For all other land classified under this section, no more than 100 acres of an owner’s land in a county may be classified under this section.

      (2) Land owned by a business entity is not eligible for classification under this section if the business entity is a corporation whose shares are publicly traded or one of its members is a corporation whose shares are publicly traded.

  5. Deferred Taxes. —  The difference between the taxes that are due on wildlife conservation land classified under this section and that would be due if the land were taxed on the basis of its true value is a lien on the property. The difference in taxes must be carried forward in the records of each taxing unit as deferred taxes. The deferred taxes for the preceding three fiscal years are due and payable in accordance with G.S. 105-277.1 F when the land loses its eligibility for deferral as a result of a disqualifying event. A disqualifying event occurs when the property no longer qualifies as wildlife conservation land.
  6. Exceptions to Payment. —  No deferred taxes are due in the following circumstances and the deferred taxes remain a lien on the land:
    1. When the owner of wildlife conservation land that was previously classified under G.S. 105-277.3 before the wildlife habitat conservation agreement was signed does not transfer the land and the land again becomes eligible for classification under G.S. 105-277.3 . In this circumstance, the deferred taxes are payable in accordance with G.S. 105-277.3.
    2. When land that is classified under this section is transferred to an owner who signed the wildlife habitat conservation agreement in effect for the land at the time of the transfer and the land remains classified under this section. In this circumstance, the deferred taxes are payable in accordance with this section.
  7. Exceptions to Payment and Lien. —  Notwithstanding subsection (e) of this section, if land loses its eligibility for deferral solely due to one of the following reasons, no deferred taxes are due and the lien for the deferred taxes is extinguished:
    1. The property is conveyed by gift to a nonprofit organization and qualifies for exclusion from the tax base under G.S. 105-275(12) or G.S. 105-275(29).
    2. The property is conveyed by gift to the State, a political subdivision of the State, or the United States.
  8. Administration. —  An owner who applies for the classification allowed under this section must attach a copy of the owner’s written wildlife habitat agreement required under subsection (c) of this section. An owner who fails to notify the county assessor when land classified under this section loses its eligibility for classification is subject to a penalty in the amount set in G.S. 105-277.5 .

History. 2008-171, s. 1; 2018-95, s. 1.

Subdivision (c)(3) and Subsection (d) Set Out Twice.

The first versions of subdivision (c)(3) and subsection (d) set out above are effective for taxes imposed for taxable years beginning before July 1, 2019. The second versions of subdivision (c)(3) and subsection (d) set out above are effective for taxes imposed for taxable years beginning on or after July 1, 2019.

Editor’s Note.

Session Laws 2008-171, s. 8, makes this section effective for taxes imposed for taxable years beginning on or after July 1, 2010.

Session Laws 2008-107, s. 28.11(h), provides, in part, that the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of Session Laws 2008-35 that is recodified or amended by Session Laws 2008-107, s. 28.11(h) by deleting incorrect references and substituting correct references. The reference to G.S. 105-277.1 D in subsection (e) has been changed to G.S. 105-277.1 F.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2008-171, s. 6, provides: “The Revenue Laws Study Committee is directed to study the three-year impact of classifying land as wildlife conservation land for property tax purposes. The study must include a review of the amount of property classified as wildlife conservation land, the fiscal impact on local governments, and any other impact.

“The Revenue Laws Study Committee must include its findings in the 2015 report.”

Effect of Amendments.

Session Laws 2018-95, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2019, added sub-sub-subdivision (c)(3)a.3.; substituted “For land used pursuant to sub-sub-subdivisions 1. or 2. of sub-subdivision a. of this subdivision, it must” for “It must” in sub-subdivision (c)(3)b.; and rewrote subdivision (d)(1).

§ 105-277.15A. Taxation of site infrastructure land.

  1. Classification. —  Site infrastructure land is designated a special class of property under Section 2(2) of Article V of the North Carolina Constitution and must be appraised, assessed, and taxed in accordance with this section.
  2. Requirements. —  Land qualifies as site infrastructure land if it meets the following size and use requirements:
    1. Size. —  The land must consist of at least 100 contiguous acres.
    2. Use. —  The land must meet all of the following requirements:
      1. It must be zoned for industrial use, office use, or both.
      2. A building permit for a primary building or structure must not have been issued for the land, and there is no primary building or structure on the land.
  3. Deferred Taxes. —  An owner may defer a portion of tax imposed on site infrastructure land that represents the sum of the following: (i) the increase in value of the property attributable solely to improvements made to the site infrastructure land, if any, and (ii) the difference between the true value of the site infrastructure land as it is currently zoned and the value of the site infrastructure land as if it were zoned the same as it was in the calendar year prior to the time the application for property tax relief under this section was filed.The difference between the taxes due under this section and the taxes that would have been payable in the absence of this section is a lien on the site infrastructure land as provided in G.S. 105-355(a). The difference in taxes must be carried forward in the records of each taxing unit as deferred taxes. The deferred taxes are due and payable in accordance with G.S. 105-277.1 F when the site infrastructure land loses its eligibility for deferral because of the occurrence of a disqualifying event as follows:
    1. The deferred taxes for the preceding five fiscal years are due and payable when an amount equal to the deferred taxes is not invested in improvements to make the land suitable for industrial use, office use, or both within five years from the first day of the fiscal year the property was classified under this section.
    2. The deferred taxes for the preceding five fiscal years are due and payable when the minimum investment required by subdivision (1) of this subsection is timely made, but the land has been classified under this section for 10 years.
    3. All deferred taxes are due and payable when some or all of the site infrastructure land is rezoned for a use other than for industrial use, office use, or both.
    4. The deferred taxes for the preceding year are due and payable when the land is transferred or when a building permit for a primary building or structure for the land is issued.
  4. Notice. —  On or before September 1 of each year, the collector shall notify each owner to whom a tax deferral has previously been granted of the accumulated sum of deferred taxes and interest. An owner who fails to notify the county assessor when land classified under this section loses its eligibility for classification is subject to a penalty in the amount set in G.S. 105-277.5 .
  5. Exception to Payment. —  No deferred taxes are due in the following circumstances, and the deferred taxes remain a lien on the land:
    1. When the owner of site infrastructure land that was previously classified under G.S. 105-277.3 does not transfer the land, and the land again becomes eligible for classification under G.S. 105-277.3 . In this circumstance, the deferred taxes are payable in accordance with G.S. 105-277.3.
    2. When a portion of the site infrastructure land is transferred for industrial use, office use, or both or has issued for the land a building permit for a primary building or structure for industrial use, office use, or both, and the remainder of the site infrastructure land no longer meets the size requirement of this section. In this circumstance, the deferred taxes for the remainder are payable in accordance with this section without application of the size requirement of subdivision (b)(1) of this section.
  6. Application. —  An application for property tax relief provided by this section should be filed during the regular listing period but may be filed after the regular listing period upon a showing of good cause by the applicant for failure to make a timely application, as determined and approved by the board of equalization and review or, if that board is not in session, by the board of county commissioners. An untimely application approved under this subsection applies only to property taxes levied by the county or municipality in the calendar year in which the untimely application is filed. Decisions of the county board may be appealed to the Property Tax Commission. Persons may apply for this property tax relief by entering the appropriate information on a form made available by the assessor under G.S. 105-282.1 . An application for property tax relief provided by this section may not be approved for any portion of site infrastructure land which has previously lost eligibility for the program.
  7. Report. —  On August 1 of each year, the Secretary shall report to the Department of Commerce the number and location of site infrastructure lands qualified under this section.

History. 2013-130, s. 1; 2014-39, s. 2(a).

Editor’s Note.

Session Laws 2013-130, s. 5, made this section effective for taxes imposed for taxable years beginning on or after July 1, 2013.

Effect of Amendments.

Session Laws 2014-39, s. 2.(a), effective for taxes imposed for taxable years beginning on or after July 1, 2015, deleted sub-subdivision (b)(2)c., which read: “It must be classified under G.S. 105-277.3 or have been classified under G.S. 105-277.3 within the previous six months.”; and, in subsection (c), rewrote the introductory paragraph as the present first two paragraphs.

§ 105-277.16. Taxation of low-income housing property.

A North Carolina low-income housing development to which the North Carolina Housing Finance Agency allocated a federal tax credit under section 42 of the Code is designated a special class of property under Article V, Section 2(2) of the North Carolina Constitution and must be appraised, assessed, and taxed in accordance with this section. The assessor must use the income approach as the method of valuation for property classified under this section and must take rent restrictions that apply to the property into consideration in determining the income attributable to the property. The assessor may not consider income tax credits received under section 42 of the Code or under G.S. 105-129.42 in determining the income attributable to the property.

History. 2008-146, s. 3.1; 2008-187, s. 47.6.

Editor’s Note.

Session Laws 2008-146, s. 3.2, as amended by Session Laws 2009-445, s. 45(c), provides: “This Part [Part III of Session Laws 2008-146] is effective for taxes imposed for taxable years beginning on or after July 1, 2009.”

This section was enacted by Session Laws 2008-146, s. 3.1 as G.S. 105-277.15 . It was recodified as G.S. 105-277.16 by Session Laws 2008-187, s. 47.6.

Session Laws 2008-187, s. 47.6, provides: “If House Bill 1889 and Senate Bill 1878, 2007 Regular Session, both become law, then G.S. 105-277.15 as enacted by Senate Bill 1878 is recodified as G.S. 105-277.16 .” House Bill 1889 was enacted as Session Laws 2008-171, and Senate Bill 1878 was enacted as Session Laws 2008-146.

§ 105-277.17. Taxation of community land trust property.

  1. Classification. —  Community land trust property is designated a special class of property under Section 2(2) of Article V of the North Carolina Constitution and must be appraised, assessed, and taxed in accordance with this section.
  2. Definitions. —  The following definitions apply in this section:
    1. Community land trust developer. — A nonprofit housing development entity that is an exempt organization under section 501(c)(3) of the Code and that transfers community land trust property to a qualifying owner.
    2. Community land trust property. — Improvements to real property that meet all of the following conditions:
      1. A fee or leasehold interest in the improvements is transferred subject to resale restrictions contained in a long-term ground lease of not less than 99 years.
      2. The community land trust developer retains an interest in the property pursuant to the deed of conveyance or the long-term ground lease.
    3. Ground lease. — A lease between the community land trust developer of a dwelling site, as landlord, and the owner or lessee of a permanent residence constructed on the dwelling site, as tenant. The leasehold interest of the tenant in the dwelling site includes an undivided interest and nonexclusive easement for ingress and egress to the dwelling site and for the use and enjoyment of the common areas and community facilities, if any.
    4. Income. — Defined in G.S. 105-277.1(b).
    5. Initial investment basis. — The most recent sales price, excluding any silent mortgage amount, of community land trust property.
    6. Qualifying owner. — A North Carolina resident who (i) occupies, as owner or lessee, community land trust property as a permanent residence and (ii) is part of a household, the annual income of which at the time of transfer and adjusted for family size is not more than one hundred percent (100%) of the local area median family income as defined by the most recent figures published by the U.S. Department of Housing and Urban Development.
    7. Resale restrictions. — Binding restrictions that affect the price at which a qualifying owner’s interest in community land trust property can be transferred for value to a subsequent qualifying owner or the community land trust developer.
    8. Silent mortgage amount. — The amount of debt incurred by a qualifying owner that is represented by a deed of trust or leasehold deed of trust on community land trust property and that earns no interest and requires no repayment prior to satisfaction of any interest-earning mortgage or a subsequent transfer of the property, whichever occurs first.
    9. Transfer. — Any method of disposing of an interest in real property.
  3. Valuation. —  The initial appraised value of community land trust property in the year the property first qualifies for classification under this section is the initial investment basis. In subsequent general reappraisals, the value of the community land trust property shall not exceed the sum of the restricted capital gain amount and the initial investment basis. The restricted capital gain amount is the market value of the community land trust property that would be established for the current general reappraisal if not for this classification (i) adjusted to the maximum sales price permitted pursuant to the resale restrictions effective for a hypothetical sale occurring on the date of reappraisal, if less, and (ii) subtracting the initial investment basis and any silent mortgage amount.

History. 2009-481, s. 1.

Editor’s Note.

Session Laws 2009-481, s. 4, makes this section effective for taxes imposed for taxable years beginning on or after July 1, 2010.

§ 105-278. Historic properties.

  1. Real property designated as a historic property by a local ordinance adopted pursuant to former G.S. 160A-399.4 or designated as a historic landmark by a local ordinance adopted pursuant to G.S. 160D-945 or former G.S. 160A-400.5 is designated a special class of property under authority of Article V, Sec. 2(2) of the North Carolina Constitution. Property so classified shall be taxed uniformly as a class in each local taxing unit on the basis of fifty percent (50%) of the true value of the property as determined pursuant to G.S. 105-285 and 105-286, or 105-287.
  2. The difference between the taxes due on the basis of fifty percent (50%) of the true value of the property and the taxes that would have been payable in the absence of the classification provided for in subsection (a) shall be a lien on the property of the taxpayer as provided in G.S. 105-355(a). The taxes shall be carried forward in the records of the taxing unit or units as deferred taxes. The deferred taxes for the preceding three fiscal years are due and payable in accordance with G.S. 105-277.1 F when the property loses the benefit of this classification as a result of a disqualifying event. A disqualifying event occurs when there is a change in an ordinance designating a historic property or a change in the property, other than by fire or other natural disaster, that causes the property’s historical significance to be lost or substantially impaired. In addition to the provisions in G.S. 105-277.1 F, no deferred taxes are due and all liens arising under this subsection are extinguished when the property’s historical significance is lost or substantially impaired due to fire or other natural disaster.

History. 1977, c. 869, s. 2; 1981, c. 501; 1989, c. 706, s. 3.1; 2005-435, s. 38; 2006-162, s. 28; 2008-35, s. 2.5; 2010-95, s. 17; 2021-180, s. 42.13F(a).

Editor’s Note.

Section 160A-399.4, referred to in subsection (a) of this section, was repealed by Session Laws 1989, c. 706, s. 1. See now G.S. 160A-400.5.

Session Laws 2008-107, s. 28.11(h), provides, in part, that the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of Session Laws 2008-35 that is recodified or amended by Session Laws 2008-107, s. 28.11(h) by deleting incorrect references and substituting correct references. The reference to G.S. 105-277.1 C in subsection (b) has been changed to G.S. 105-277.1 F.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2005-435, s. 38, effective January 1, 2006, substituted “G.S. 160A-400.7” for “G.S. 160A-399.4” in the introductory language of subsection (a) and made a minor stylistic change.

Session Laws 2006-162, s. 28, effective July 24, 2006, in the first sentence of subsection (a), substituted “property” for “structure or site” near the beginning and substituted “former G.S. 160A-399.4” for “G.S. 160A-400.7” near the middle.

Session Laws 2008-35, s. 2.5, effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote subsection (b).

Session Laws 2010-95, s. 17, effective July 17, 2010, added the last sentence in subsection (b).

Session Laws 2021-180, s. 42.13F(a), effective retroactively to June 19, 2020, in subsection (a), added “G.S. 160D-945 or former” after “pursuant to.”

Legal Periodicals.

For article, “A Decade of Preservation and Preservation Law,” see 11 N.C. Cent. L.J. 214 (1980).

§ 105-278.1. Exemption of real and personal property owned by units of government.

  1. Real and personal property owned by the United States and, by virtue of federal law, not subject to State and local taxes shall be exempted from taxation.
  2. Real and personal property belonging to the State, counties, and municipalities is exempt from taxation.
  3. For purposes of this section:
    1. A specified unit of government (federal, State, or local) includes its departments, institutions, and agencies.
    2. By way of illustration but not by way of limitation, the following boards, commissions, authorities, and institutions are units of State government:
      1. Repealed by Session Laws 2021-90, s. 25(b), effective July 22, 2021.
      2. The Board of Governors of the University of North Carolina incorporated under the provisions of G.S. 116-3 and known as “The University of North Carolina.
      3. The North Carolina Museum of Art made an agency of the State under G.S. 140-5.12 .
    3. By way of illustration but not by way of limitation, the following boards, commissions, authorities, and institutions are units of local government of this State:
      1. An airport authority, board, or commission created as a separate and independent body corporate and politic by an act of the General Assembly.
      2. An airport authority, board, or commission created as a separate and independent body corporate and politic by one or more counties or municipalities or combinations thereof under the authority of an act of the General Assembly.
      3. A hospital authority created under G.S. 131E-17 .
      4. A housing authority created under G.S. 157-4 or G.S. 157- 4.1.
      5. A municipal parking authority created under G.S. 160-477.
      6. A veterans’ recreation authority created under G.S. 165-26.

History. 1973, c. 695, s. 4; 1987, c. 777, s. 1; 2005-435, s. 39; 2021-90, s. 25(b).

Editor’s Note.

Section 160-477, referred to in subdivision (c)(3)e, has been transferred to G.S. 160A-552 .

Effect of Amendments.

Session Laws 2005-435, s. 39, effective January 1, 2006, substituted “G.S. 140-5.12” for “G.S. 140-1” in subdivision (c)(2)c.; and substituted “G.S. 131E-17” for “G.S. 131-93” in subdivision (c)(3)c.

Session Laws 2021-90, s. 25(b), effective July 22, 2021, deleted sub-subdivision (c)(2)a., which read: “The State Marketing Authority established by G.S. 106 529.”

Legal Periodicals.

For survey of 1978 law on taxation, see 57 N.C.L. Rev. 1142 (1979).

For survey of 1980 tax law, see 59 N.C.L. Rev. 1233 (1981).

For note on the rejection of the “public purpose” requirement for state tax exemption, see 17 Wake Forest L. Rev. 293 (1981).

For article, “North Carolina’s Nonprofit Property Tax Exemption Conundrum,” see 96 N.C.L. Rev. 1769 (2018).

CASE NOTES

Constitutionality. —

Property owned by the State is exempt from ad valorem taxation by N.C. Const., Art. V, § 2(3) solely by reason of State ownership, and this section as it read prior to amendment in 1987, requiring property owned by the State to be held exclusively for a public purpose in order to be exempt from taxation, was unconstitutional. Therefore, the Towns of Chapel Hill and Carrboro and the County of Orange may not assess ad valorem taxes against any property owned by The University of North Carolina, an agency of the State, regardless of the purpose for which the property is held. In re Uni v. of N.C. 300 N.C. 563 , 268 S.E.2d 472, 1980 N.C. LEXIS 1121 (1980).

The holdings of cases misapplying the holding of Atlantic & N.C.R.R. v. Board of Comm’rs, 75 N.C. 474 (1876), as mandating a “public purpose” requirement for the exemption of State-owned property under the North Carolina Constitution: Board of Fin. Control v. County of Henderson, 208 N.C. 569 , 181 S.E. 636 (1935); Town of Bensen v. County of Johnston, 209 N.C. 751 , 185 S.E. 6 (1936); Town of Warrenton v. Warren County, 215 N.C. 342 , 2 S.E.2d 463 (1939); and City of Winston-Salem v. Forsyth County, 217 N.C. 704 , 9 S.E.2d 381 (1940), must be considered not in keeping with the rationale expressed in the present case and in other opinions of the Court of Appeals. In re Uni v. of N.C. 300 N.C. 563 , 268 S.E.2d 472, 1980 N.C. LEXIS 1121 (1980).

Property Found to be Exempt. —

Because a limited liability company was wholly controlled by subsidiary corporations of a Housing Authority, the property belonged to the Housing Authority for the purposes of G.S. 105-278.1 (b); therefore, the property was exempted from ad valorem taxation according to N.C. Const., Art. V, § 2(3) and G.S. 105-278.1 . In re Appeal of Fayette Place LLC, 193 N.C. App. 744, 668 S.E.2d 354, 2008 N.C. App. LEXIS 2027 (2008).

North Carolina Property Tax Commission’s (PTC) did not err in denying a county’s motion to dismiss a taxpayer’s appeal and in granting the taxpayer an exemption from ad valorem taxes under G.S. 105-278.1 because the PTC appropriately reviewed the materials presented by both parties prior to the hearing and based on competent evidence denied the motion while entering a final decision in favor of the taxpayer; the county was not prejudiced through the holding of one hearing to address all matters, as the evidence was clearly in the taxpayer’s favor. In re David H. Murdock Research Inst., 220 N.C. App. 377, 725 S.E.2d 619, 2012 N.C. App. LEXIS 595 (2012).

OPINIONS OF ATTORNEY GENERAL

Real estate leased by a town was not exempt as property belonging to a municipality. See opinion of Attorney General to Huey Marshall, County Attorney, 2000 N.C. AG LEXIS 1 (3/28/2000).

§ 105-278.2. Burial property. [Effective for taxes imposed for taxable years beginning before July 1, 2022]

  1. Real property set apart for burial purposes shall be exempted from taxation unless it is owned and held for purposes of (i) sale or rental or (ii) sale of burial rights therein. No application is required under G.S. 105-282.1 for property exempt under this subsection. A county cannot deny the exemption provided under this subsection to a taxpayer that lacks a survey or plat detailing the exempt property.
  2. Taxable real property set apart for human burial purposes is hereby designated a special class of property under authority of Article V, Section 2(2) of the North Carolina Constitution, and it shall be assessed for taxation taking into consideration the following:
    1. The effect on its value by division and development into burial plots;
    2. Whether it is irrevocably dedicated for human burial purposes by plat recorded with the Register of Deeds in the county in which the land is located; and
    3. Whether the owner is prohibited or restricted by law or otherwise from selling, mortgaging, leasing or encumbering the same.
  3. For purposes of this section, the term “real property” includes land, tombs, vaults, monuments, and mausoleums, and the term “burial” includes entombment.

History. 1973, c. 695, s. 4; 1987, c. 724; 2018-113, s. 15.

Section Set Out Twice.

The section above is in effect for taxes imposed for taxable years beginning before July 1, 2022. For this section as in effect for taxes imposed for taxable years beginning on or after July 1, 2022, see the following section, also numbered G.S. 105-278.2 .

Effect of Amendments.

Session Laws 2018-113, s. 15, effective June 27, 2018, added the last two sentences in subsection (a).

Legal Periodicals.

For article, “North Carolina’s Nonprofit Property Tax Exemption Conundrum,” see 96 N.C.L. Rev. 1769 (2018).

CASE NOTES

Property Not Exempted. —

Where taxpayer corporation owned undeveloped, unmapped land as part of a tract of land set apart as a cemetery, which land was irrevocably dedicated for use exclusively as a cemetery under the North Carolina Cemetery Act, and where the taxpayer was not holding undeveloped land for its own burial, because the undeveloped land was irrevocably dedicated for use exclusively as a cemetery, the taxpayer could only have been holding it for the purpose of sale to others as burial sites, and as such the land did not fall under the exemption of this section as tax-exempt property. In re Lee Memory Gardens, Inc., 110 N.C. App. 541, 430 S.E.2d 451, 1993 N.C. App. LEXIS 577 (1993).

§ 105-278.2. Burial property. [Effective for taxes imposed for taxable years beginning on or after July 1, 2022]

  1. Commercial Property. —   Real property set apart for burial purposes that is owned and held for purposes of (i) sale or rental or (ii) sale of burial rights therein is exempt from taxation. A single application is required under G.S. 105-282.1 for property exempt under this subsection.
  2. Other Property. —   Real property set apart for burial purposes not owned and held for a purpose listed in subsection (a) of this section is exempt from taxation. No application is required under G.S. 105-282.1 for property exempt under this subsection. A local government cannot deny the exemption provided under this subsection to a taxpayer that lacks a survey or plat detailing the exempt property.
  3. Terms. —   For purposes of this section, the term “real property” includes land, tombs, vaults, monuments, and mausoleums, and the term “burial” includes entombment.

History. 1973, c. 695, s. 4; 1987, c. 724; 2018-113, s. 15; 2021-180, s. 42.12(a).

Section Set Out Twice.

The section above is in effect for taxable years beginning on or after July 1, 2022. For this section as in effect for taxable years beginning before July 1, 2022, see the preceding section, also numbered G.S. 105-278.2 .

The section above is in effect for taxes imposed for taxable years beginning on or after July 1, 2022. For this section as in effect for taxes imposed for taxable years beginning before July 1, 2022, see the main volume.

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2018-113, s. 15, effective June 27, 2018, added the last two sentences in subsection (a).

Session Laws, 2021-180, s. 42.12(a), effective for taxes imposed for taxable years beginning on or after July 1, 2022, rewrote the section.

Legal Periodicals.

For article, “North Carolina’s Nonprofit Property Tax Exemption Conundrum,” see 96 N.C.L. Rev. 1769 (2018).

CASE NOTES

Property Not Exempted. —

Where taxpayer corporation owned undeveloped, unmapped land as part of a tract of land set apart as a cemetery, which land was irrevocably dedicated for use exclusively as a cemetery under the North Carolina Cemetery Act, and where the taxpayer was not holding undeveloped land for its own burial, because the undeveloped land was irrevocably dedicated for use exclusively as a cemetery, the taxpayer could only have been holding it for the purpose of sale to others as burial sites, and as such the land did not fall under the exemption of this section as tax-exempt property. In re Lee Memory Gardens, Inc., 110 N.C. App. 541, 430 S.E.2d 451, 1993 N.C. App. LEXIS 577 (1993).

§ 105-278.3. Real and personal property used for religious purposes.

  1. Buildings, the land they actually occupy, and additional adjacent land reasonably necessary for the convenient use of any such building shall be exempted from taxation if wholly owned by an agency listed in subsection (c), below, and if:
    1. Wholly and exclusively used by its owner for religious purposes as defined in subsection (d)(1), below; or
    2. Occupied gratuitously by one other than the owner and wholly and exclusively used by the occupant for religious, charitable, or nonprofit educational, literary, scientific, or cultural purposes.
  2. Personal property shall be exempted from taxation if wholly owned by an agency listed in subsection (c), below, and if:
    1. Wholly and exclusively used by its owner for religious purposes; or
    2. Gratuitously made available to one other than the owner and wholly and exclusively used by the possessor for religious, charitable, or nonprofit educational, literary, scientific, or cultural purposes.
  3. The following agencies, when the other requirements of this section are met, may obtain exemption for their properties:
    1. A congregation, parish, mission, or similar local unit of a church or religious body; or
    2. A conference, association, presbytery, diocese, district, synod, or similar unit comprising local units of a church or religious body.
  4. Within the meaning of this section:
    1. A religious purpose is one that pertains to practicing, teaching, and setting forth a religion. Although worship is the most common religious purpose, the term encompasses other activities that demonstrate and further the beliefs and objectives of a given church or religious body. Within the meaning of this section, the ownership and maintenance of a general or promotional office or headquarters by an owner listed in subdivision (2) of subsection (c), above, is a religious purpose and the ownership and maintenance of residences for clergy, rabbis, priests or nuns assigned to or serving a congregation, parish, mission or similar local unit, or a conference, association, presbytery, diocese, district, synod, province or similar unit of a church or religious body or residences for clergy on furlough or unassigned, is also a religious purpose. However, the ownership and maintenance of residences for other employees is not a religious purpose for either a local unit of a church or a religious body or a conference, association, presbytery, diocese, district, synod, or similar unit of a church or religious body. Provided, however, that where part of property which otherwise qualifies for the exemption provided herein is made available as a residence for an individual who provides guardian, janitorial and custodial services for such property, or who oversees and supervises qualifying activities upon and in connection with said property, the entire property shall be considered as wholly and exclusively used for a religious purpose.
    2. A charitable purpose is one that has humane and philanthropic objectives; it is an activity that benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward. The humane treatment of animals is also a charitable purpose.
    3. An educational purpose is one that has as its objective the education or instruction of human beings; it comprehends the transmission of information and the training or development of the knowledge or skills of individual persons.
    4. A literary purpose is one that pertains to letters or literature, especially writing, publishing, and the study of literature. It includes the literature of the stage and screen as well as the performance or exhibition of works based on literature.
    5. A cultural purpose is one that is conducive to the enlightenment and refinement of taste acquired through intellectual and aesthetic training, education, and discipline.
    6. A scientific purpose is one that yields knowledge systematically through research, experimentation or other work done in one or more of the natural sciences.
  5. Repealed by Session Laws 2015-185, s. 1(a), effective for taxes imposed for taxable years beginning on or after July 1, 2015.
  6. The fact that a building or facility is incidentally available to and patronized by the general public, so long as there is no material amount of business or patronage with the general public, shall not defeat the exemption granted by this section.
  7. The following exceptions apply to the exclusive-use requirement of subsection (a) of this section:
    1. If part, but not all, of a property meets the requirements of subsection (a) of this section, the valuation of the part so used is exempt from taxation.
    2. Any parking lot wholly owned by an agency listed in subsection (c) of this section may be used for parking without removing the tax exemption granted in this section if the total charge for parking uses does not exceed that portion of the actual maintenance expenditures for the parking lot reasonably estimated to have been made on account of parking uses. This subsection shall apply beginning with the taxable year that commences on January 1, 1978.
    3. A building and the land occupied by the building is exempt from taxation if it is under construction and intended to be wholly and exclusively used by its owner for religious purposes upon completion. For purposes of this subdivision, a building is under construction starting when a building permit is issued and ending at the earlier of (i) 90 days after a certificate of occupancy is issued or (ii) 180 days after the end of active construction.

History. 1973, c. 695, s. 4; c. 1421; 1975, c. 848; 1977, c. 867; 2005-435, s. 59(a); 2015-185, s. 1(a).

Effect of Amendments.

Session Laws 2005-435, s. 59.(a), effective January 1, 2006, rewrote subdivision (d)(4).

Session Laws 2015-185, s. 1(a), effective for taxes imposed for taxable years beginning on or after July 1, 2015, deleted former subsection (e); and rewrote subsection (g).

Legal Periodicals.

For symposium on historic preservation which includes a discussion of relevant North Carolina law, see 12 Wake Forest L. Rev. 9 (1976).

For article on mail-order ministries under the section 170 charitable contribution deduction, see 11 Campbell L. Rev. 1 (1988).

CASE NOTES

Exclusively Used for Religious Purposes. —

In a case in which appellant church appealed a decision of the North Carolina Property Tax Commission denying appellant’s request for a tax exemption pursuant to G.S. 105-278.3 , the property at issue did not qualify for the tax exemption. There was no building on the property that was being wholly and exclusively used for religious purposes. In re Vienna Baptist Church, 241 N.C. App. 268, 773 S.E.2d 97, 2015 N.C. App. LEXIS 443 (2015).

Property Must Be Presently Used for Exempt Purposes. —

The rule in North Carolina is that unless property is presently used for tax exempt purposes, it is not tax exempt; because no public purpose is served by permitting land to lie unused and untaxed, present use, not intended use, controls. In re Worley, 93 N.C. App. 191, 377 S.E.2d 270, 1989 N.C. App. LEXIS 157 (1989).

It was undisputed that the church youth groups used the property in question for recreational church-related activities; therefore, the use was present and for religious purposes. In re Worley, 93 N.C. App. 191, 377 S.E.2d 270, 1989 N.C. App. LEXIS 157 (1989).

Property Held for Present and Future Use Still Exempt. —

Property which was being used for religious purposes was not removed from the operation of this section simply because it was also being held for future use. In re Worley, 93 N.C. App. 191, 377 S.E.2d 270, 1989 N.C. App. LEXIS 157 (1989).

Natural areas reserved and used as a spiritual retreat should be exempt from ad valorem taxation on “religious purposes” grounds. In re Worley, 93 N.C. App. 191, 377 S.E.2d 270, 1989 N.C. App. LEXIS 157 (1989).

Property Used as a Buffer Zone. —

Use of church-owned property as a buffer zone to screen the church from industrial exposure was an exempt use under this section. In re Worley, 93 N.C. App. 191, 377 S.E.2d 270, 1989 N.C. App. LEXIS 157 (1989).

Use of adjacent undeveloped land as a buffer zone was reasonably necessary for the convenient use of [church] buildings and the use of the property as a buffer zone to protect the sanctity and serenity of the church from encroaching industrial development was a permissible religious purpose and present use entitling the property to exemption. In re Worley, 93 N.C. App. 191, 377 S.E.2d 270, 1989 N.C. App. LEXIS 157 (1989).

Church Camp. —

Where there was substantial evidence that the primary purpose of camp was to serve the religious and spiritual needs of the members of church, the fact that others were permitted to use the camp and that some were charged a fee was not determinative. In re Mount Shepherd Methodist Camp, 120 N.C. App. 388, 462 S.E.2d 229, 1995 N.C. App. LEXIS 824 (1995).

Natural Areas of Church Camp. —

Property Tax Commission did not err as a matter of law in concluding that the natural areas of Church Camp, where no improvements were located, were properly within the scope of this section. In re Mount Shepherd Methodist Camp, 120 N.C. App. 388, 462 S.E.2d 229, 1995 N.C. App. LEXIS 824 (1995).

§ 105-278.4. Real and personal property used for educational purposes.

  1. Buildings. —  Buildings, the land they actually occupy, and additional land reasonably necessary for the convenient use of any such building shall be exempted from taxation if all of the following requirements are met:
    1. Owned by either of the following:
      1. An educational institution; or
      2. A nonprofit entity for the sole benefit of a constituent or affiliated institution of The University of North Carolina, a nonprofit postsecondary educational institution as described in G.S. 116-280 , a North Carolina community college, or a combination of these;
    2. The owner is not organized or operated for profit and no officer, shareholder, member, or employee of the owner or any other person is entitled to receive pecuniary profit from the owner’s operations except reasonable compensation for services;
    3. Of a kind commonly employed in the performance of those activities naturally and properly incident to the operation of an educational institution such as the owner; and
    4. Wholly and exclusively used for educational purposes by the owner or occupied gratuitously by another nonprofit educational institution and wholly and exclusively used by the occupant for nonprofit educational purposes.
  2. Land. —  Land (exclusive of improvements); and improvements other than buildings, the land actually occupied by such improvements, and additional land reasonably necessary for the convenient use of any such improvement shall be exempted from taxation if:
    1. Owned by an educational institution that owns real property entitled to exemption under the provisions of subsection (a), above;
    2. Of a kind commonly employed in the performance of those activities naturally and properly incident to the operation of an educational institution such as the owner; and
    3. Wholly and exclusively used for educational purposes by the owner or occupied gratuitously by another nonprofit educational institution (as defined herein) and wholly and exclusively used by the occupant for nonprofit educational purposes.
  3. Partial Exemption. —  Notwithstanding the exclusive-use requirements of subsections (a) and (b), above, if part of a property that otherwise meets the requirements of one of those subsections is used for a purpose that would require exemption if the entire property were so used, the valuation of the part so used shall be exempted from taxation.
  4. Public Use. —  The fact that a building or facility is incidentally available to and patronized by the general public, so long as there is no material amount of business or patronage with the general public, does not defeat the exemption granted by this section.
  5. Personal Property. —  Personal property owned by a church, a religious body, or an educational institution shall be exempted from taxation if:
    1. The owner is not organized or operated for profit, and no officer, shareholder, member, or employee of the owner, or any other person is entitled to receive pecuniary profit from the owner’s operations except reasonable compensation for services; and
    2. Used wholly and exclusively for educational purposes by the owner or held gratuitously by a church, religious body, or nonprofit educational institution other than the owner, and wholly and exclusively used for nonprofit educational purposes by the possessor.
  6. Definitions. —  The following definitions apply in this section:
    1. Educational institution. — The term includes a university, a college, a school, a seminary, an academy, an industrial school, a public library, a museum, and similar institutions.
    2. Educational purpose. — A purpose that has as its objective the education or instruction of human beings; it comprehends the transmission of information and the training or development of the knowledge or skills of individual persons. The operation of a student housing facility, a student dining facility, a golf course, a tennis court, a sports arena, a similar sport property, or a similar recreational sport property for the use of students or faculty is also an educational purpose, regardless of the extent to which the property is also available to and patronized by the general public.

History. 1973, c. 695, s. 4; 1991 (Reg. Sess., 1992), c. 926, s. 1; 2004-173, s. 1; 2011-145, s. 9.18(f).

Effect of Amendments.

Session Laws 2004-173, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2004, added subheadings to subsections (a) through (f); in subsection (a), added “all of the following requirements are met:” following “from taxation if,” rewrote subdivision (a)(1), inserted subdivisions (a)(1)a and (a)(1)b, deleted “(as defined herein)” following “educational institution” in subdivision (a)(4); substituted “does” for “shall” following “public,” in subsection (d); rewrote subsection (e); deleted “(as defined herein)” following “educational institution” in subdivision (e)(2); added “The following definitions apply in this section:” at the beginning of subsection (f); inserted subdivision (f)(1); redesignated former subsection (f) as subdivision (f)(2); in subdivision (f)(2), substituted “A purpose” for “An educational purpose within the meaning of this section is one,” and inserted “a student housing facility, a student dining facility,” following “The operation of.”

Session Laws 2011-145, s. 9.18(f), effective July 1, 2012, substituted “a nonprofit postsecondary educational institution as described in G.S. 116-280 ” for “an institution as defined in G.S. 116-22 ” in sub-subdivision (a)(1)b.

Legal Periodicals.

For symposium on historic preservation which includes a discussion of relevant North Carolina law, see 12 Wake Forest L. Rev. 9 (1976).

CASE NOTES

Constitutionality. —

The court upheld this section in spite of a challenge on the constitutional grounds that it applied unequally to various property tracts and violated the rule of uniformity; the four requirements of the section were reasonably objective and did not result in any hostile or systematic discrimination and, further, the exemption requirements were sufficiently enumerated. In re Southeastern Baptist Theological Seminary, Inc., 135 N.C. App. 247, 520 S.E.2d 302, 1999 N.C. App. LEXIS 1047 (1999).

The Atlantic Coast Conference was not a separate entity from its constituent schools and since each member was an educational institution, exempt from taxation, then the ownership requirement of this section was met. In re Atl. Coast Conference, 112 N.C. App. 1, 434 S.E.2d 865, 1993 N.C. App. LEXIS 1020 (1993), aff'd, 336 N.C. 69 , 441 S.E.2d 550, 1994 N.C. LEXIS 171 (1994).

Exemption of Portion of Property. —

Where Wake Forest University granted a corporation an easement to use a football stadium parking lot for employee and visitor parking and general access to the corporation’s headquarters building, the Property Tax Commission properly determined that a portion of the parking lot not regularly used by the corporation is wholly and exclusively used by Wake Forest University for educational purposes and is exempt from ad valorem taxation under subsection (c) of this section. In re Wake Forest Uni, 51 N.C. App. 516, 277 S.E.2d 91, 1981 N.C. App. LEXIS 2276 , cert. denied, 303 N.C. 544 , 281 S.E.2d 391, 1981 N.C. LEXIS 1380 (1981).

Exemption Upheld. —

A seminary met its burden of proving that three parcels of its property were entitled to an exemption under this section, although the land in question was undeveloped, the future planned use might not be exempt, and the seminary had sold some timber from the land to maintain a healthy forested state, to remove trees damaged by a hurricane, and to pay for other repairs caused by that hurricane. In re Southeastern Baptist Theological Seminary, Inc., 135 N.C. App. 247, 520 S.E.2d 302, 1999 N.C. App. LEXIS 1047 (1999).

North Carolina Tax Commission’s decision that spiritual center where meditation was taught and practiced was not entitled to a tax exemption on property it owned, pursuant to G.S. 105-278.4 , was not supported by substantial evidence in view of the entire record. In re Maharishi Spiritual Ctr. of Am., 152 N.C. App. 269, 569 S.E.2d 3, 2002 N.C. App. LEXIS 918 (2002), rev'd, 357 N.C. 152 , 579 S.E.2d 249, 2003 N.C. LEXIS 424 (2003).

Exemption Denied. —

Day care center was denied a tax exemption because, while some of its activities educated the children enrolled there, substantial evidence supported the tax commission’s decision that its property was not wholly and exclusively used for educational purposes, as required by G.S. 105-278.4(a)(4). In re Chapel Hill Day Care Ctr., Inc., 144 N.C. App. 649, 551 S.E.2d 172, 2001 N.C. App. LEXIS 565 (2001).

Taxpayer that sent missionaries to different parts of the world did not prove entitlement to additional tax exemption where buildings were used to house owner, for guest lodging, and for storage, as the buildings were not used wholly and exclusively for educational purposes; the taxpayer bore the burden of proving that its property was entitled to an exemption under the law, which it failed to do. In re Master's Mission, 152 N.C. App. 640, 568 S.E.2d 208, 2002 N.C. App. LEXIS 964 (2002).

North Carolina Property Tax Commission’s decision to deny a taxpayer, a non-accredited university, a tax exemption for a property that was renovated and operated as a restaurant by the taxpayer and its students was affirmed as substantial evidence showed that the property was not used wholly and exclusively for an educational purpose by the taxpayer. In re Uni v. for the Study of Human Goodness & Creative Group Work, 159 N.C. App. 85, 582 S.E.2d 645, 2003 N.C. App. LEXIS 1423 (2003).

Nonprofit foundation, which operated a summer camp and a winter school on real property owned by the foundation, was not entitled to a property tax exemption under G.S. 105-278.4 because substantial evidence showed that the foundation’s property was not wholly and exclusively used for educational purposes. During the summer months when the foundation operated the summer camp, the foundation’s property was primarily used for recreational purposes, and any educational aspect of these activities was incidental to the activities’ recreational purposes. In re Eagle's Nest Found., 194 N.C. App. 770, 671 S.E.2d 366, 2009 N.C. App. LEXIS 5 (2009).

§ 105-278.5. Real and personal property of religious educational assemblies used for religious and educational purposes.

  1. Buildings, the land they actually occupy, and additional adjacent land reasonably necessary for the convenient use of any such building or for the religious educational programs of the owner, shall be exempted from taxation if:
    1. Owned by a religious educational assembly, retreat, or similar organization;
    2. No officer, shareholder, member, or employee of the owner, or any other person is entitled to receive pecuniary profit from the owner’s operations except reasonable compensation for services; and
    3. Of a kind commonly employed in those activities naturally and properly incident to the operation of a religious educational assembly such as the owner; and
    4. Wholly and exclusively used for
      1. Religious worship or
      2. Purposes of instruction in religious education.
  2. Notwithstanding the exclusive-use requirement of subsection (a), above, if part of a property that otherwise meets the subsection’s requirements is used for a purpose that would require exemption if the entire property were so used, the valuation of the part so used shall be exempted from taxation.
  3. The fact that a building or facility is incidentally available to and patronized by the general public, so long as there is no material amount of business or patronage with the general public, shall not defeat the exemption granted by this section.
  4. Personal property owned by a religious educational assembly, retreat, or similar organization shall be exempted from taxation if it is exclusively maintained and used in connection with real property granted exemption under the provisions of subsection (a) or (b), above.

History. 1973, c. 695, s. 4.

Legal Periodicals.

For article on mail-order ministries under the section 170 charitable contribution deduction, see 11 Campbell L. Rev. 1 (1988).

§ 105-278.6. Real and personal property used for charitable purposes.

  1. Real and personal property owned by:
    1. A Young Men’s Christian Association or similar organization;
    2. A home for the aged, sick, or infirm;
    3. An orphanage or similar home;
    4. A Society for the Prevention of Cruelty to Animals;
    5. A reformatory or correctional institution;
    6. A monastery, convent, or nunnery;
    7. A nonprofit, life-saving, first aid, or rescue squad organization;
    8. A nonprofit organization providing housing for individuals or families with low or moderate incomes

      shall be exempted from taxation if: (i) As to real property, it is actually and exclusively occupied and used, and as to personal property, it is entirely and completely used, by the owner for charitable purposes; and (ii) the owner is not organized or operated for profit.

  2. A charitable purpose within the meaning of this section is one that has humane and philanthropic objectives; it is an activity that benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward. The humane treatment of animals is also a charitable purpose.
  3. The fact that a building or facility is incidentally available to and patronized by the general public, so long as there is no material amount of business or patronage with the general public, shall not defeat the exemption granted by this section.
  4. Notwithstanding the exclusive-use requirements of this section, if part of a property that otherwise meets the section’s requirements is used for a purpose that would require exemption under subsection (a), above, if the entire property were so used, the valuation of the part so used shall be exempted from taxation.
  5. Real property held by an organization described in subdivision (a)(8) for a charitable purpose under this section as a future site for housing for individuals or families with low or moderate incomes may be classified under this section for no more than 10 years. The taxes that would otherwise be due on real property exempt under this subsection shall be a lien on the property as provided in G.S. 105-355(a). The taxes shall be carried forward in the records of the taxing unit as deferred taxes. The deferred taxes are due and payable in accordance with G.S. 105-277.1 F when the property loses its eligibility for deferral as a result of a disqualifying event. A disqualifying event occurs when the property was not used for low- or moderate-income housing within 10 years from the first day of the fiscal year the property was classified under this subsection. In addition to the provisions in G.S. 105-277.1 F, all liens arising under this subdivision are extinguished when the property is used for low- or moderate-income housing within the time period allowed under this subsection.

History. 1973, c. 695, s. 4; 1975, c. 808; 1993, c. 230, s. 1; 2008-35, s. 2.6; 2009-481, s. 2; 2010-95, s. 18; 2011-368, s. 1.

Editor’s Note.

Session Laws 2008-107, s. 28.11(h), provides, in part, that the Revisor of Statutes is authorized to correct any reference or citation in the General Statutes to any portion of Session Laws 2008-35 that is recodified or amended by Session Laws 2008-107, s. 28.11(h) by deleting incorrect references and substituting correct references. The reference to G.S. 105-277.1 C in subsection (e) has been changed to G.S. 105-277.1 F.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Effect of Amendments.

Session Laws 2008-35, s. 2.6, effective for taxes imposed for taxable years beginning on or after July 1, 2008, rewrote subsection (e).

Session Laws 2009-481, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2010, substituted “when the property was not used for low- or moderate-income housing within” for “when the organization fails to construct low- or moderate-income housing on the site within” in the last sentence of subsection (e).

Session Laws 2010-95, s. 18, effective July 17, 2010, added the last sentence in subsection (e).

Session Laws 2011-368, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2011, twice substituted “10 years” for “five years” in subsection (e).

Legal Periodicals.

For a symposium on historic preservation which includes a discussion of relevant North Carolina law, see 12 Wake Forest L. Rev. 9 (1976).

CASE NOTES

Constitutionality. —

That the North Carolina Property Tax Commission granted an ad valorem tax exemption under G.S. 105-278.6(a)(8) to a taxpayer with a 0.1 percent ownership in the property, but the taxpayer was denied the exemption for similar projects by other counties, did not equate to a violation of the Equal Protection Clause of U.S. Const. amend. XIV or the Uniformity Clause of N.C. Const., Art. V, § 2(2), as (1) there was no evidence of “hostile discrimination” in the application of G.S. 105-278.6(a)(8); and (2) the evidence indicated that all the counties applied a uniform rule. In re Appeal of Blue Ridge Hous. of Bakersville LLC, 226 N.C. App. 42, 738 S.E.2d 802, 2013 N.C. App. LEXIS 283 (2013).

In General. —

When an otherwise-qualifying entity has an ownership interest in less than 100 percent of the property, to determine if it can claim an ad valorem tax exemption, the court balances the actual ownership interest with other factors indicative of ownership, including (i) the entity’s control of the venture’s operations; (ii) the entity’s status as trustee of limited liability company property; (iii) the possibility of future increased actual ownership interest; and (iv) the intent of the participating parties. In re Appeal of Blue Ridge Hous. of Bakersville LLC, 226 N.C. App. 42, 738 S.E.2d 802, 2013 N.C. App. LEXIS 283 (2013).

“Nonprofit” is limited to “life-saving, first aid, or rescue squad organizations.” In re North Carolina Forestry Found., Inc., 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

Exemption Allowed. —

That a taxpayer had only a 0.1 percent ownership interest in property did not preclude it from receiving an ad valorem tax exemption under G.S. 105-278.6(a)(8), as it managed the property’s operations as an active trustee; it had the right of first refusal to buy the property from the other owner; and it intended to use the property for the charitable purpose of providing low-income housing. In re Appeal of Blue Ridge Hous. of Bakersville LLC, 226 N.C. App. 42, 738 S.E.2d 802, 2013 N.C. App. LEXIS 283 (2013).

§ 105-278.6A. Qualified retirement facility.

  1. Classification. —  Buildings, the land they actually occupy, additional adjacent land reasonably necessary for the convenient use of the buildings, and personal property owned by a qualified retirement facility and used in the operation of that facility are designated a special class of property under Section 2(2) of Article V of the North Carolina Constitution and are excluded from taxation to the extent provided in this section.
  2. Definitions. —  The following definitions apply in section:
    1. Charity care. — The unreimbursed costs to the facility of providing health care, housing, or other services to a resident who is uninsured, underinsured, or otherwise unable to pay for all or part of the services rendered.
    2. Community benefits. — The unreimbursed costs to the facility of providing the following:
      1. Services, including health, recreation, community research, and education activities provided to the community at large, including the elderly.
      2. Charitable donations.
      3. Donated volunteer services.
      4. Donations and voluntary payments to government agencies.
    3. Financial reporting period. — The calendar year or tax year ending prior to the date the retirement facility applies for an exclusion under this section.
    4. Resident revenue. — Annual revenue paid by a resident for goods and services and one year’s share of the initial resident fee amortized in accordance with generally accepted accounting principles.
    5. Retirement facility. — A community that meets all of the following conditions:
      1. It is licensed under Article 64 of Chapter 58 of the General Statutes.
      2. It is designed for elderly residents.
      3. It includes independent living units for elderly residents.
      4. It includes a skilled nursing facility or an adult care facility.
    6. Unreimbursed costs. — The costs a facility incurs for providing charity care or community benefits after subtracting payment or reimbursement received from any source for the care or benefits. Unreimbursed costs include costs paid from funds generated by a program described in subdivision (c)(5) of this section.
  3. Total Exclusion. —  A retirement facility qualifies for total exclusion under this section if it meets all of the following conditions:
    1. It is exempt from tax under Article 4 of this Chapter and private shareholders do not benefit from its operations.
    2. All of its revenues, less operating and capital expenses, are applied to providing uncompensated goods and services to the elderly and to the local community, or are applied to an endowment or a reserve for these purposes.
    3. Its charter provides that in the event of dissolution, its assets will revert or be conveyed to an entity that is organized exclusively for charitable, educational, scientific, or religious purposes, and is an exempt organization under section 501(c)(3) of the Code.
    4. Repealed by Session Laws 2001-17, s. 1, effective July 1, 2001.
    5. It has an active program to generate funds through one or more sources, such as gifts, grants, trusts, devises, endowment, or an annual giving program, to assist the retirement facility in serving persons who might not be able to reside there without financial assistance or subsidy.
    6. It meets at least one of the following conditions:
      1. The facility serves all residents without regard to the residents’ ability to pay.
      2. At least five percent (5%) of the facility’s resident revenue for the financial reporting period is provided in charity care to its residents, in community benefits, or in both.
  4. Partial Exclusion. —  A retirement facility qualifies for a partial exclusion under this subsection if it meets conditions under subdivisions (c) (1) through (c)(5) of this section and at least one percent (1%) of the facility’s resident revenue for the financial reporting period is provided in charity care to its residents, in community benefits, or in both. The percentage of the retirement facility’s assessed value that is excluded from taxation is the applicable percentage provided in the following table, based on the minimum percentage of the facility’s resident revenue that it provides in charity care to its residents, in community benefits, or in both:

    Click to view

  5. Application for Exclusion. —  The application requirements of G.S. 105-282.1 apply to this section.

Minimum Percentage of Partial Exclusion Resident Revenue 80% 4% 60% 3% 40% 2% 20% 1%

History. 1939, c. 310, s. 303; 1961, c. 1169, s. 8; 1967, c. 1185; 1971, c. 806, s. 1; c. 1121, s. 3; 1973, cc. 290, 451; c. 476, s. 128; c. 484; c. 695, s. 1; c. 790, s. 1; cc. 904, 962, 1028, 1034, 1077; c. 1262, s. 23; c. 1264, s. 1; 1975, cc. 566, 755; c. 764, s. 6; 1977, c. 771, s. 4; c. 782, s. 2; c. 1001, ss. 1, 2; 1977, 2nd Sess., c. 1200, s. 4; 1979, c. 200, s. 1; 1979, 2nd Sess., c. 1092; 1981, c. 86, s. 1; 1981 (Reg. Sess., 1982), c. 1244, ss. 1, 2; 1983, c. 643, ss. 1, 2; c. 693; 1983 (Reg. Sess., 1984), c. 1060; 1985, c. 510, s. 1; c. 656, s. 37; 1985 (Reg. Sess., 1986), c. 982, s. 18; 1987, c. 356; c. 622, s. 2; c. 747, s. 8; c. 777, s. 6; c. 813, ss. 5, 6, 22; c. 850, s. 17; 1987 (Reg. Sess., 1988), c. 1041, s. 1.1; 1989, c. 148, s. 4; c. 168, s. 6; c. 705; c. 723, s. 1; c. 727, ss. 28, 29; 1991, c. 717, s. 1; 1991 (Reg. Sess., 1992), c. 975, s. 2; 1993, c. 459, s. 2; 1993 (Reg. Sess., 1994), c. 745, s. 39; 1995, c. 41, s. 2; c. 509, s. 51; 1995 (Reg. Sess., 1996), c. 646, s. 12; 1997-23, ss. 1, 3, 9; 1997-443, s. 11A.119(a); 1997-456, s. 27; 1998-55, ss. 10, 18; 1998-212, s. 29A.18(a); 1999-191, s. 1; 2000-20, s. 2; 2001-17, s. 1; 2011-284, s. 70.

Editor’s Note.

Session Laws 1998-212, s. 29A.18(a) recodified former G.S. 105-275(32) as this section.

Session Laws 1998-212, s. 29A.18(e), as amended by Session Laws 2000-20, s. 2, and by Session Laws 2001-17, s. 2, provides in part that s. 29A.18(a) of the act, which recodified subdivision (32) of G.S. 105-275 as G.S. 105-278.6 A, is effective for taxes imposed for taxable years begining on or after July 1, 1998. Session Laws 2001-17, s. 2, deleted the former provision that G.S. 105-278.6 A would be repealed effective for taxes imposed for taxable years beginning on or after July 1, 2001.

Session Laws 1998-212, s. 30.2 provides “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 1998-99 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 1998-99 fiscal year.”

Session Laws 1998-212, s. 1.1 provides: “This act shall be known as the ‘Current Operations Appropriations and Capital Improvement Appropriations Act of 1998’.”

Session Laws 1998-212, s. 29A.3 contains a savings clause.

Session Laws 1998-212, s. 30.5 contains a severability clause.

Effect of Amendments.

Session Laws 2011-284, s. 70, effective June 24, 2011, substituted “devises” for “bequests” in subdivision (c)(5).

CASE NOTES

Editor’s Note. —

The cases cited below were decided under former G.S. 105-275(32).

Former subdivision (32)(v) Held Unconstitutional. —

Subdivision (32)(v) (now 105-278.6A) of this section is unconstitutional, as violative of the prohibition against the establishment of religion as found in N.C. Const., Art. I, § 13 because it (now 105-278.6A) distinguishes between homes that are religiously affiliated and those that perform essentially the same functions but lack any religious affiliation. In re Springmoor, Inc., 125 N.C. App. 184, 479 S.E.2d 795, 1997 N.C. App. LEXIS 75 (1997), aff'd in part and rev'd in part, 348 N.C. 1 , 498 S.E.2d 177, 1998 N.C. LEXIS 153 (1998).

Because former subdivision (32) (now G.S. 105-278.6 A) excludes only those homes for the elderly that are owned and operated by religious or Masonic entities, it has the principal or primary effect of advancing religion in violation of the Lemon (Lemon v. Kurtzman, 1971 U.S. LEXIS 19, 403 U.S. 602, 91 S. Ct. 2105, 29 L. Ed. 2d 745 (1971)). In re Springmoor, Inc., 348 N.C. 1 , 498 S.E.2d 177, 1998 N.C. LEXIS 153 (1998).

Former subdivision (32)(v) (now G.S. 105-278.6 A) violates the constitutional prohibition against the establishment of religion as found in both the federal and state constitutions. In re Springmoor, Inc., 348 N.C. 1 , 498 S.E.2d 177, 1998 N.C. LEXIS 153 (1998).

Severability of Subpart. —

Former subpart (v) of subdivision (32) (now G.S. 105-278.6 A), may not be severed from the subdivision; thus, the whole subsection must be held unconstitutional. In re Springmoor, Inc., 348 N.C. 1 , 498 S.E.2d 177, 1998 N.C. LEXIS 153 (1998).

County Precluded from Challenging Constitutionality of Subdivision (32) (now G.S. 105-278.6 A). —

County, which argued that subdivision (32) (now G.S. 105-278.6 A) was unconstitutional on its face because it violated the establishment clause of U.S. Const., Amend. I, did not have standing to raise such constitutional issue, as county was not a member of the class subject to the alleged discrimination, and there were other taxpayers within the State who were members of the affected class subject to the alleged discrimination who still could question the statute’s validity. In re Moravian Home, Inc., 95 N.C. App. 324, 382 S.E.2d 772, 1989 N.C. App. LEXIS 772 (1989).

Exclusion of Home from Taxation Under Subdivision (32) (now G.S. 105-278.6 A). —

Property tax commission’s ruling that home’s property should have been excluded from ad valorem taxation was correct; sufficient evidence was presented to establish that home had an active program to generate funds to assist those who could not pay the fees charged by the home where the home’s chairman of the board testified that the home had established an endowment fund to assist the indigent and where he further claimed that the home actively solicited contributions for the fund. In re Moravian Home, Inc., 95 N.C. App. 324, 382 S.E.2d 772, 1989 N.C. App. LEXIS 772 (1989).

Constitutionality of Subdivision (32) (now G.S. 105-278.6 A). —

Subdivision (32) (now 105-278.6A) of this section does not discriminate against individual property owners who own their property for residential purposes in violation of the rule of uniformity in taxation established under N.C. Const., Art. V, § 2. In re Barbour, 112 N.C. App. 368, 436 S.E.2d 169, 1993 N.C. App. LEXIS 1120 (1993).

The distinction between “homes for the aged, sick, or infirm” and individual residential property owners under subdivision (32) (now G.S. 105-278.6 A) of this section is not unconstitutional under the equal protection clause of N.C. Const., Art. I, § 19. In re Barbour, 112 N.C. App. 368, 436 S.E.2d 169, 1993 N.C. App. LEXIS 1120 (1993).

Subdivision (32) (now G.S. 105-278.6 A) Has Legitimate Purpose. —

Promoting the safety and welfare of the aged and infirm is a legitimate, secular legislative purpose. In re Springmoor, Inc., 348 N.C. 1 , 498 S.E.2d 177, 1998 N.C. LEXIS 153 (1998).

Standing to Challenge Constitutionality. —

Non-profit corporation which ran a retirement community for the aged, sick and infirm, and which sought a personal property tax exemption on certain items owned by it and used in the operation of the home, had standing to challenge the constitutionality of subdivision (32) (now G.S. 105-278.6 A) of this section. In re Springmoor, Inc., 125 N.C. App. 184, 479 S.E.2d 795, 1997 N.C. App. LEXIS 75 (1997), aff'd in part and rev'd in part, 348 N.C. 1 , 498 S.E.2d 177, 1998 N.C. LEXIS 153 (1998).

§ 105-278.7. Real and personal property used for educational, scientific, literary, or charitable purposes.

  1. Buildings, the land they actually occupy, and additional adjacent land necessary for the convenient use of any such building shall be exempted from taxation if wholly owned by an agency listed in subsection (c), below, and if:
    1. Wholly and exclusively used by its owner for nonprofit educational, scientific, literary, or charitable purposes as defined in subsection (f), below; or
    2. Occupied gratuitously by an agency listed in subsection (c), below, other than the owner, and wholly and exclusively used by the occupant for nonprofit educational, scientific, literary, charitable, or cultural purposes.
  2. Personal property shall be exempted from taxation if wholly owned by an agency listed in subsection (c), below, and if:
    1. Wholly and exclusively used by its owner for nonprofit educational, scientific, literary, or charitable purposes; or
    2. Gratuitously made available to an agency listed in subsection (c), below, other than the owner, and wholly and exclusively used by the possessor for nonprofit educational, scientific, literary, or charitable purposes.
  3. The following agencies, when the other requirements of this section are met, may obtain property tax exemption under this section:
    1. A charitable association or institution,
    2. An historical association or institution,
    3. A veterans’ organization or association,
    4. A scientific association or institution,
    5. A literary association or institution,
    6. A benevolent association or institution, or
    7. A nonprofit community or neighborhood organization.
  4. Notwithstanding the exclusive-use requirements of subsection (a), above, if part of a property that otherwise meets the subsection’s requirements is used for a purpose that would require exemption if the entire property were so used, the valuation of the part so used shall be exempted from taxation.
  5. The fact that a building or facility is incidentally available to and patronized by the general public, so long as there is no material amount of business or patronage with the general public, shall not defeat the exemption granted by this section.
  6. Within the meaning of this section:
    1. An educational purpose is one that has as its objective the education or instruction of human beings; it comprehends the transmission of information and the training or development of the knowledge or skills of individual persons.
    2. A scientific purpose is one that yields knowledge systematically through research, experimentation, or other work done in one or more of the natural sciences.
    3. A literary purpose is one that pertains to letters or literature, especially writing, publishing, and the study of literature. It includes the literature of the stage and screen as well as the performance or exhibition of works based on literature.
    4. A charitable purpose is one that has humane and philanthropic objectives; it is an activity that benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward. The humane treatment of animals is also a charitable purpose.
    5. A cultural purpose is one that is conducive to the enlightenment and refinement of taste acquired through intellectual and aesthetic training, education, and discipline.

History. 1973, c. 695, s. 4; 1995 (Reg. Sess., 1996), c. 646, s. 15; 2005-435, ss. 59(b), 59(c).

Effect of Amendments.

Session Laws 2005-435, ss. 59.(b) and 59.(c), effective January 1, 2006, substituted “charitable, or cultural” for “or charitable” at the end of subdivision (a)(2); rewrote subdivision (f)(3) and added subdivision (f)(5).

Legal Periodicals.

For article, “North Carolina’s Nonprofit Property Tax Exemption Conundrum,” see 96 N.C.L. Rev. 1769 (2018).

CASE NOTES

Concept of charity is not confined to the relief of the needy and destitute. Aged people require care and attention apart from financial assistance, and the supply of this care and attention is as much a charitable and benevolent purpose as the relief of their financial wants. In re Chapel Hill Residential Retirement Center, Inc., 60 N.C. App. 294, 299 S.E.2d 782, 1983 N.C. App. LEXIS 2436 (1983).

Property Occupied Gratuitously for Charitable Purpose. —

Where a religious association made a loan to respondent nursing home, with which the association was affiliated, to expand its facilities, the nursing home’s payment of an amount equivalent to the interest on the loan and the depreciation on the property did not prevent the nursing home from occupying the property gratuitously, and the property in question was exempt from ad valorem taxation in that it was being used for a charitable purpose by a charitable institution within the meaning of subdivisions (f)(4), (a)(2) and (c)(1) of this section. In re Taxable Status of Property, 45 N.C. App. 632, 263 S.E.2d 838, 1980 N.C. App. LEXIS 2704 (1980).

Property Was Not Entitled to Charitable Exemption. —

Nonprofit foundation, which operated a summer camp and a winter school on real property owned by the foundation, was not entitled to a property tax exemption under G.S. 105-278.7 because substantial evidence showed that the foundation did not meet its burden of proving that it was a charitable association or institution as the foundation charged the select number of attendees for almost all of the associated costs for the camp and the school. In re Eagle's Nest Found., 194 N.C. App. 770, 671 S.E.2d 366, 2009 N.C. App. LEXIS 5 (2009).

Corporation Was Entitled to Tax Exemption. —

Finding that a corporation was entitled to a tax exemption under G.S. 105-278.7 was supported by substantial evidence, including the fact that 90 percent of the corporation’s income was provided by government funding, and that the corporation was recognized as a nonprofit organization by both the state and federal governments. In re Totsland Preschool, Inc., 180 N.C. App. 160, 636 S.E.2d 292, 2006 N.C. App. LEXIS 2249 (2006).

North Carolina Property Tax Commission erred in concluding that property was eligible for tax exemption as it applied to a buffer tract because that tract’s status was a tax-exempt property was dependent upon the status of the main tract, which was not eligible for exemption due to its dependent status. In re Grandfather Mt. Stewardship Found., Inc., 235 N.C. App. 561, 762 S.E.2d 364, 2014 N.C. App. LEXIS 894 (2014).

North Carolina Property Tax Commission erred in granting a foundation exemption from property taxes because its property was not wholly and exclusively used for educational or scientific purposes; the foundation charged market-rate admission fees and operated to some extent as a for-profit tourist attraction, and located on the property were administrative offices from which the foundation managed retail and commercial services. In re Grandfather Mt. Stewardship Found., Inc., 235 N.C. App. 561, 762 S.E.2d 364, 2014 N.C. App. LEXIS 894 (2014).

OPINIONS OF ATTORNEY GENERAL

Property of a labor union is not exempt from ad valorem taxation pursuant to this section. See opinion of Attorney General to J. Bourke Bilisoly, Wake County Tax Attorney, 50 N.C. Op. Att'y Gen. 35 (1980).

Property owned by the Charlotte/Mecklenburg Development Corporation was not entitled to a charitable exemption pursuant to the statute where the corporation’s goal was to demolish the buildings on the property, to undertake environmental clean up and site development for commercial purposes and to then sell parcels of the property to at least 10 businesses. See opinion of Attorney General to Mr. Hamlin L. Wade, Mecklenburg County Tax Attorney, 2002 N.C. AG LEXIS 1 (2/5/02).

§ 105-278.8. Real and personal property used for charitable hospital purposes.

  1. Real and personal property held for or owned by a hospital organized and operated as a nonstock, nonprofit, charitable institution (without profit to members or their successors) shall be exempted from taxation if actually and exclusively used for charitable hospital purposes.
  2. Notwithstanding the exclusive-use requirements of subsection (a), above, if part of a property that otherwise meets that subsection’s requirements is used for a purpose that would require exemption under that subsection if the entire property were so used, the valuation of the part so used shall be exempted from taxation.
  3. Within the meaning of this section, a charitable hospital purpose is a hospital purpose that has humane and philanthropic objectives; it is a hospital activity that benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward. However, the fact that a qualifying hospital charges patients who are able to pay for services rendered does not defeat the exemption granted by this section.

History. 1973, c. 695, s. 4.

CASE NOTES

Test for Exemption. —

Pursuant to the language of this section, the test to determine whether an exemption may be granted is: (1) Whether the applicant is a hospital organized and operated without profit to members, (2) exclusively used for humane and philanthropic objectives which benefit a significant segment of the community, and (3) without expectation of reward or profit. An applicant which meets the requirements of this test will not be rejected simply because it charges those patients who are able to pay for their services. In re Found. Health Sys. Corp., 96 N.C. App. 571, 386 S.E.2d 588, 1989 N.C. App. LEXIS 1113 (1989).

Nonprofit outpatient surgical center with operating rooms designed to render related services was a “hospital” operated without profit to its members within the meaning of this section. In re Found. Health Sys. Corp., 96 N.C. App. 571, 386 S.E.2d 588, 1989 N.C. App. LEXIS 1113 (1989).

And Was Entitled to Tax Exemption. —

Nonprofit outpatient surgical center which provided facilities for the treatment of emergency or urgent care patients without regard for their ability to pay and charged fees which were lower than those of county hospital was wholly and exclusively used for a charitable purpose or purposes within the meaning of this section, and was entitled to a property tax exemption. In re Found. Health Sys. Corp., 96 N.C. App. 571, 386 S.E.2d 588, 1989 N.C. App. LEXIS 1113 (1989).

Hospital Day Care Center. —

Hospital’s Child care center which was open seven days a week, including holidays, from 6:00 a.m. to 12:00 midnight and aided hospital in the recruitment and retention of hospital employees was actually and exclusively used for a charitable hospital purpose as required by this section and accordingly, hospital was entitled to an exemption from ad valorem taxes for its child care center. In re Moses H. Cone Mem. Hosp., 113 N.C. App. 562, 439 S.E.2d 778, 1994 N.C. App. LEXIS 157 (1994), aff'd in part, 340 N.C. 93 , 455 S.E.2d 431, 1995 N.C. LEXIS 153 (1995).

There was no direct commercial competition between hospital’s child care center and other area commercial child care centers where it did not compete directly with other commercial child care centers for patrons from the general public as it was open only to hospital employees and the center met a need of its employees that was not fulfilled by other commercial child care centers by being open seven days a week, and on holidays from 6:00 a.m. to 12:00 midnight. In re Moses H. Cone Mem. Hosp., 113 N.C. App. 562, 439 S.E.2d 778, 1994 N.C. App. LEXIS 157 (1994), aff'd in part, 340 N.C. 93 , 455 S.E.2d 431, 1995 N.C. LEXIS 153 (1995).

§ 105-278.9. [Repealed]

Repealed by Session Laws 1985 (Regular Session, 1986), c. 982, s. 21.

§ 105-279. [Repealed]

Repealed by Session Laws 1981, c. 819, s. 2.

§ 105-280. [Repealed]

Repealed by Session Laws 1973, c. 695, s. 4.

Cross References.

For present provisions covering the subject matter of the repealed section, see G.S. 105-278.1 through 105-278.8.

§ 105-281. [Repealed]

Repealed by Session Laws 1973, c. 695, s. 10.

Cross References.

For present provisions covering the subject matter of the repealed section, see G.S. 105-278.8 .

§ 105-282. [Repealed]

Repealed by Session Laws 1973, c. 695, s. 8.

§ 105-282.1. Applications for property tax exemption or exclusion; annual review of property exempted or excluded from property tax.

  1. Application. —  Every owner of property claiming exemption or exclusion from property taxes under the provisions of this Subchapter has the burden of establishing that the property is entitled to it. If the property for which the exemption or exclusion is claimed is appraised by the Department of Revenue, the application shall be filed with the Department. Otherwise, the application shall be filed with the assessor of the county in which the property is situated. An application must contain a complete and accurate statement of the facts that entitle the property to the exemption or exclusion and must indicate the municipality, if any, in which the property is located. Each application filed with the Department of Revenue or an assessor shall be submitted on a form approved by the Department. Application forms shall be made available by the assessor and the Department, as appropriate.Except as provided below, an owner claiming an exemption or exclusion from property taxes must file an application for the exemption or exclusion annually during the listing period:
    1. No application required. —  Owners of the following exempt or excluded property do not need to file an application for the exemption or exclusion to be entitled to receive it:
      1. (Effective for taxes imposed for taxable years beginning before July 1, 2022)   Property exempt from taxation under G.S. 105-278.1 or G.S. 105-278.2 . a. (Effective for taxes imposed for taxable years beginning on or after July 1, 2022) Property exempt from taxation under G.S. 105-278.1 or G.S. 105-278.2 (b).
      2. Special classes of property excluded from taxation under G.S. 105-275(15), (16), (26), (31), (32a), (33), (34), (37), (40), (42), or (44).
      3. Property classified for taxation at a reduced valuation under G.S. 105-277(g) or G.S. 105-277.9 .
    2. Single application required. —  An owner of one or more of the following properties eligible for a property tax benefit must file an application for the benefit to receive it. Once the application has been approved, the owner does not need to file an application in subsequent years unless new or additional property is acquired or improvements are added or removed, necessitating a change in the valuation of the property, or there is a change in the use of the property or the qualifications or eligibility of the taxpayer necessitating a review of the benefit. The properties are as follows:
      1. (Effective for taxes imposed for taxable years beginning before July 1, 2022)   Property exempted from taxation under G.S. 105-278.3 , 105-278.4, 105-278.5, 105-278.6, 105-278.7, or 105-278.8.

        a. (Effective for taxes imposed for taxable years beginning on or after July 1, 2022) Property exempted from taxation under G.S. 105-278.2(a), 105-278.3, 105-278.4, 105-278.5, 105-278.6, 105-278.7, or 105-278.8.

      2. Special classes of property excluded from taxation under G.S. 105-275(3), (7), (8), (12), (17), (18), (19), (20), (21), (31e), (35), (36), (38), (39), (41), (45), (46), (47), (48), or (49) or under G.S. 131A-21 .
      3. (Effective for taxable years imposed for taxable years beginning before July 1, 2019)  Special classes of property classified for taxation at a reduced valuation under G.S. 105-277(h), 105-277.1, 105-277.1C, 105-277.10, 105-277.13, 105-277.14, 105-277.15, 105-277.17, or 105-278.

        c. (Effective for taxable years imposed for taxable years beginning on or after July 1, 2019) Special classes of property classified for taxation at a reduced valuation under G.S. 105-277(h), 105-277.02, 105-277.1, 105-277.1C, 105-277.10, 105-277.13, 105-277.14, 105-277.15, 105-277.17, or 105-278.

      4. Property owned by a nonprofit homeowners’ association but where the value of the property is included in the appraisals of property owned by members of the association under G.S. 105-277.8 .
      5. Repealed by Session Laws 2008-35, s. 1.2, effective for taxes imposed for taxable years beginning on or after July 1, 2008.

        (a1) Late Application. — Upon a showing of good cause by the applicant for failure to make a timely application, an application for exemption or exclusion filed after the close of the listing period may be approved by the Department of Revenue, the board of equalization and review, the board of county commissioners, or the governing body of a municipality, as appropriate. An untimely application for exemption or exclusion approved under this subsection applies only to property taxes levied by the county or municipality in the calendar year in which the untimely application is filed.

  2. Approval and Appeal Process. —  The Department of Revenue or the assessor to whom an application for exemption or exclusion is submitted must review the application and either approve or deny the application. Approved applications shall be filed and made available to all taxing units in which the exempted or excluded property is situated. If the Department denies an application for exemption or exclusion, it shall notify the taxpayer, who may appeal the denial to the Property Tax Commission.If an assessor denies an application for exemption or exclusion, the assessor must notify the owner of the decision and the owner may appeal the decision to the board of equalization and review or the board of county commissioners, as appropriate, and from the county board to the Property Tax Commission. If the notice of denial covers property located within a municipality, the assessor shall send a copy of the notice and a copy of the application to the governing body of the municipality. The municipal governing body shall then advise the owner whether it will adopt the decision of the county board or require the owner to file a separate appeal with the municipal governing body. In the event the owner is required to appeal to the municipal governing body and that body renders an adverse decision, the owner may appeal to the Property Tax Commission. Nothing in this subsection shall prevent the governing body of a municipality from denying an application which has been approved by the assessor or by the county board provided the owner’s rights to notice and hearing are not abridged. Applications handled separately by a municipality shall be filed in the office of the person designated by the governing body, or in the absence of such designation, in the office of the chief fiscal officer of the municipality.
  3. Discovery of Property. —  When an owner of property that may be eligible for exemption or exclusion neither lists the property nor files an application for exemption or exclusion, the assessor or the Department of Revenue, as appropriate, shall proceed to discover the property. If, upon appeal, the owner demonstrates that the property meets the conditions for exemption or exclusion, the body hearing the appeal may approve the exemption or exclusion. Discovery of the property by the Department or the county shall automatically constitute a discovery by any taxing unit in which the property has a taxable situs.
  4. Roster of Exempted and Excluded Property. —  The assessor shall prepare and maintain a roster of all property in the county that is granted tax relief through classification or exemption. On or before November 1 of each year, the assessor must send a report to the Department of Revenue summarizing the information contained in the roster. The report must be in the format required by the Department. The assessor must also send the Department a copy of the roster upon the request of the Department. As to affected real and personal property, the roster shall set forth:
    1. The name of the owner of the property.
    2. A brief description of the property.
    3. A statement of the use to which the property is put.
    4. A statement of the value of the property.
    5. The total value of exempt property in the county and in each municipality therein.
  5. Annual Review of Exempted or Excluded Property. —  Pursuant to G.S. 105-296(l), the assessor must annually review at least one-eighth of the parcels in the county exempted or excluded from taxation to verify that the parcels qualify for the exemption or exclusion.

History. 1973, c. 695, s. 8; c. 1252; 1981, c. 54, ss. 2, 3; c. 86, s. 2; c. 915; 1985 (Reg. Sess., 1986), c. 982, s. 22; 1987, c. 45, s. 1; c. 295, ss. 5, 6; c. 680, ss. 1-3; c. 813, s. 13; 1989, c. 674, s. 2; c. 723, s. 2; 1991, c. 34, s. 1; 1991 (Reg. Sess., 1992), c. 975, s. 3; 1993, c. 459, s. 3; 1995, c. 41, s. 7; 1995 (Reg. Sess., 1996), c. 646, s. 16; 1997-23, s. 4; 2000-140, s. 72(b); 2001-139, s. 1; 2007-484, s. 43.7T(b); 2007-497, s. 2.4; 2008-35, s. 1.3; 2008-107, s. 28.11(g); 2008-171, ss. 3, 7(c); 2009-445, s. 23(a), (c)-(e); 2009-481, s. 3; 2018-5, s. 38.10(d); 2019-123, s. 1; 2019-177, s. 9(c); 2021-180, s. 42.12(b).

Subdivision (a)(1)a. Set Out Twice.

The first version of subdivision (a)(1)a. set out above is effective for taxable years beginning before July 1, 2022. The second version of subdivision (a)(1)a. set out above is effective for taxes imposed for taxable years beginning on or after July 1, 2022.

Subdivision (a)(2)a. Set Out Twice.

The first version of subdivision (a)(2)a. set out above is effective for taxable years beginning before July 1, 2022. The second version of subdivision (a)(2)a. set out above is effective for taxes imposed for taxable years beginning on or after July 1, 2022.

Subdivision (a)(2)c. Set Out Twice.

The first version of subdivision (a)(2)c. set out above is effective for taxable years beginning before July 1, 2019. The second version of subdivision (a)(2)c. set out above is effective for taxes imposed for taxable years beginning on or after July 1, 2019.

Editor’s Note.

Session Laws 2001-17, which rewrote G.S. 105-278.6 A, in s. 3, provides that, notwithstanding the provisions of G.S. 105-282.1(a), an application for the benefit provided in the act for the 2001-2002 tax year is timely if it is filed on or before September 1, 2001.

Session Laws 2008-107, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2008’.”

Session Laws 2008-107, s. 30.5 is a severability clause.

Session Laws 2008-171, s. 8, provides in part: “Notwithstanding G.S. 105-282.1 , an application for the exclusion in G.S. 105-275(31e), as enacted by this act, is timely if filed on or before September 1, 2008.”

Session Laws 2009-445, s. 23(a), repealed Session Laws 2008-171, s. 3, which added “or 105-277.15” at the end of subdivision (a)(2)c. as effective for taxes imposed for taxable years beginning on or after July 1, 2010.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2007-497, s. 2.4, as amended by Session Laws 2007-484, s. 43.7T(b), effective for taxes imposed for taxable years beginning on or after July 1, 2009, in the introductory language of subdivision (a)(2), substituted “for a property tax benefit” for “to be exempted or excluded from taxation” and “the benefit” for “exemption or exclusion” in the first sentence, and substituted “benefit” for “exemption or exclusion” at the end of the last sentence; and added subdivision (a)(2)e.

Session Laws 2008-35, s. 1.3, effective for taxes imposed for taxable years beginning on or after July 1, 2008, deleted subdivision (a)(2)e.

Session Laws 2008-107, s. 28.11(g), effective for taxes imposed for taxable years beginning on or after July 1, 2009, inserted “105-277.1C” in subdivision (a)(2)c.

Session Laws 2008-171, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2010, added “or 105-277.15” at the end of subdivision (a)(2)c.

Session Laws 2008-171, s. 7(c), effective for taxes imposed for taxable years beginning on or after July 1, 2008, inserted “(31e)” in subdivision (a)(2)b. See Editor’s note for applicability.

Session Laws 2009-445, s. 23(c), effective for taxes imposed for taxable years beginning on or after July 1, 2008, in subdivision (a)(1)b., substituted “(40), (42), or (44)”, for “(40), or (42)”; in subdivision (a)(2)b., substituted “(39), (41), or (45)” for “(39), or (41)”; and in subdivision (a)(2)c., inserted “or” near the end.

Session Laws 2009-445, s. 23(d), effective for taxes imposed for taxable years beginning on or after July 1, 2009, inserted “105-277.14” in subdivision (a)(2)c.

Session Laws 2009-445, s. 23(e), effective for taxes imposed for taxable years beginning on or after July 1, 2010, inserted “105-277.15” in subdivision (a)(2)c.

Session Laws 2009-481, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2010, substituted “105-277.15, 105-277.17, or 105-278” for “105-278, or 105-277.15” at the end of subdivision (a)(2)c.

Session Laws 2018-5, s. 38.10(d), effective June 12, 2018, substituted “(45), (46), (47), (48), or (49)” for “or (45)” in sub-subdivision (a)(2)b.

Session Laws 2019-123, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2019, inserted “105-277.02,” preceding “105-277.1” in sub-subdivision (a)(2)c.

Session Laws 2019-177, s. 9(c), effective July 26, 2019, substituted “The properties are as follows:” for the bracketed phrase at the end of the introductory paragraph of subdivision (a)(2).

Session Laws 2021-180, s. 42.12(b), effective for taxes imposed for taxable years beginning on or after July 1, 2022, in sub-subdivision (a)(1)a., substituted “G.S. 105-278.2(b)” for “G.S. 105-278.2”; and, in sub-subdivision (a)(2)a., inserted “105-278.2(a).”

Legal Periodicals.

For article, “North Carolina’s Nonprofit Property Tax Exemption Conundrum,” see 96 N.C.L. Rev. 1769 (2018).

CASE NOTES

Purpose. —

The purpose of this section is to establish a uniform method of informing a county of a property owner’s intent to claim a tax exemption. In re Valley Proteins, Inc., 128 N.C. App. 151, 494 S.E.2d 111, 1997 N.C. App. LEXIS 1285 (1997).

A taxpayer does not have to cite or make reference to the applicable statute in order to claim the applicable exemption allowed by the section if the application shows facts which entitle the applicant to the exemption. In re R.J. Reynolds Tobacco Co., 74 N.C. App. 140, 327 S.E.2d 607, 1985 N.C. App. LEXIS 3360 (1985).

Failure of a county to respond to an application for exemption does not require that it be deemed accepted for that year and the failure to respond to the application for exemption does not establish a presumption, rebuttable or otherwise, that the application for exemption has been granted. In re North Carolina Forestry Found., Inc., 35 N.C. App. 414, 242 S.E.2d 492, 1978 N.C. App. LEXIS 3003 (1978), aff'd, 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

Notification of Challenge to Existing Exemption. —

A county assessor has the power to challenge an exemption once granted by requiring the taxpayer to file a new application if he or she perceives that one of the changes in the property listed in subdivision (a)(3) has occurred. Under the plain language of this section, the application for the exemption must be made during the listing period; the county therefore is required to notify the taxpayer before the listing period that such an application will be required for the coming tax year. In re Church of Creator, 102 N.C. App. 507, 402 S.E.2d 874, 1991 N.C. App. LEXIS 454 (1991).

Substantial Compliance Found Where Exemption Filed on Wrong Form. —

Where county was clearly aware of taxpayer’s intent and received all of the relevant information it needed, taxpayer’s application was timely filed in substantial compliance with the statute even though he did not file exemption on the proper form. In re Valley Proteins, Inc., 128 N.C. App. 151, 494 S.E.2d 111, 1997 N.C. App. LEXIS 1285 (1997).

Right to Appeal. —

The plain intent and thrust of subsection (b) of this section and G.S. 105-322 and former G.S. 105-324 is to permit a property owner, as a matter of right, to appeal to the Property Tax Commission upon a county or municipal board denying its application for an exemption. In re K-Mart Corp., 79 N.C. App. 725, 340 S.E.2d 752, 1986 N.C. App. LEXIS 2111 (1986), aff'd in part and rev'd in part, 319 N.C. 378 , 354 S.E.2d 468, 1987 N.C. LEXIS 1922 (1987).

Although the decision of the county board to grant or deny an exemption is a discretionary one, it is reviewable by the Property Tax Commission. In re K-mart Corp., 319 N.C. 378 , 354 S.E.2d 468, 1987 N.C. LEXIS 1922 (1987).

While it is true that the 1987 amendment to subsection (c) made the decisions of the county boards discretionary, it did not make those decisions unreviewable. Rather, the legislature has placed the duty upon the Property Tax Commission to hear appeals from decisions of the county boards arising under the provisions of G.S. 105-312 and other sections of Chapter 105. In re K-mart Corp., 319 N.C. 378 , 354 S.E.2d 468, 1987 N.C. LEXIS 1922 (1987).

Taxpayer Has the Burden of Proof. —

North Carolina Property Tax Commission’s decision to deny a taxpayer, a non-accredited university, a tax exemption for a property that was renovated and operated as a restaurant by the taxpayer and its students was affirmed as the taxpayer failed to demonstrate that the property was used wholly and exclusively for an educational purpose by the taxpayer. In re Uni v. for the Study of Human Goodness & Creative Group Work, 159 N.C. App. 85, 582 S.E.2d 645, 2003 N.C. App. LEXIS 1423 (2003).

Exemption Properly Granted. —

North Carolina Property Tax Commission’s (PTC) did not err in denying a county’s motion to dismiss a taxpayer’s appeal and in granting the taxpayer an exemption from ad valorem taxes under G.S. 105-278.1 because the PTC appropriately reviewed the materials presented by both parties prior to the hearing and based on competent evidence denied the motion while entering a final decision in favor of the taxpayer; the county was not prejudiced through the holding of one hearing to address all matters, as the evidence was clearly in the taxpayer’s favor. In re David H. Murdock Research Inst., 220 N.C. App. 377, 725 S.E.2d 619, 2012 N.C. App. LEXIS 595 (2012).

§§ 105-282.2 through 105-282.6.

Reserved for future codification purposes.

Article 12A. Taxation of Lessees and Users of Tax-Exempt Cropland or Forestland.

§ 105-282.7. Taxation of lessees and users of tax-exempt cropland or forestland.

  1. When any cropland or forestland owned by the United States, the State, a county or a municipal corporation is leased, loaned or otherwise made available to and used by a person, as defined in G.S. 105-273(12), in connection with a business conducted for profit, the lessee or user of the property is subject to taxation to the same extent as if the lessee or user owned the property. As used in this section, “forestland” has the same meaning as in G.S. 105-277.2(2), and “cropland” means agricultural land and horticultural land as defined in G.S. 105-277.2(1) and (3) respectively.
  2. This section does not apply to cropland or forestland for which payments in lieu of taxes are made in amounts equivalent to the amount of tax that could otherwise be lawfully assessed.
  3. Taxes levied pursuant to this Article are levied on the privilege of leasing or otherwise using tax-exempt cropland or forestland in connection with a business conducted for profit. The purpose of these taxes is to eliminate the competitive advantage accruing to profit-making enterprises from the use of tax-exempt property.

History. 1981, c. 819, s. 1.

CASE NOTES

Constitutionality. —

Contention that as to appellant this section was a retrospective tax in violation of N.C. Const., Art. I, § 16 was without merit, where the statute was ratified in 1981, and did not become effective until January 1, 1982, and appellant was not taxed under it for any period prior to the enactment. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, 1985 N.C. App. LEXIS 3556 (1985).

N.C. Const., Art. V, § 2(1) and 2(2), which require that taxation be done in a just and equitable manner and that no class of property be taxed except by uniform rule and that every classification be made by general law, are no bar to taxing lessee and users in forestlands owned by the State under this section “to the same extent as if the lessee or user owned the property,” while other leasehold interests are taxed at true value. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, 1985 N.C. App. LEXIS 3556 (1985).

Taxing pursuant to this section of the interest of a corporation using forestlands owned by this State under leases granting user the right to cut timber therein until the year 2044 held not unconstitutional under N.C. Const., Art. V, § 2(3). In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, 1985 N.C. App. LEXIS 3556 (1985).

Contention that this section was invalid because its effect was to tax only the appellant was without merit, as on its face the section uniformly operates without discrimination or distinction upon all persons composing the described class, and as even appellant’s own evidence did not show that the law applied only to it, but established only that no one knew whether the statute had been applied to other taxpayers during the one year it had been in effect. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, 1985 N.C. App. LEXIS 3556 (1985).

Classifying for taxation under this section leasehold interests in government owned croplands and forestlands that are used in connection with a business conducted for profit seems eminently reasonable. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, 1985 N.C. App. LEXIS 3556 (1985).

This section is not unconstitutionally vague in taxing the “user of the property.” In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, 1985 N.C. App. LEXIS 3556 (1985).

Applicability. —

This section applies to every party in the State that uses the property designated in connection with a business conducted for profit. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, 1985 N.C. App. LEXIS 3556 (1985).

§ 105-282.8. Assessment and collection.

The taxes levied under this Article shall be assessed to the lessee or user of the exempt property and shall be collected in the same manner and to the extent as if the lessee or user owned the property. The taxes are a debt due from the lessee or user to the taxing unit in which the property is located and are recoverable as other actions to collect a debt.

History. 1981, c. 819, s. 1.

Article 13. Standards for Appraisal and Assessment.

§ 105-283. Uniform appraisal standards.

All property, real and personal, shall as far as practicable be appraised or valued at its true value in money. When used in this Subchapter, the words “true value” shall be interpreted as meaning market value, that is, the price estimated in terms of money at which the property would change hands between a willing and financially able buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of all the uses to which the property is adapted and for which it is capable of being used. For the purposes of this section, the acquisition of an interest in land by an entity having the power of eminent domain with respect to the interest acquired shall not be considered competent evidence of the true value in money of comparable land.

History. 1939, c. 310, s. 500; 1953, c. 970, s. 5; 1955, c. 1100, s. 2; 1959, c. 682; 1967, c. 892, s. 7; 1969, c. 945, s. 1; 1971, c. 806, s. 1; 1973, c. 695, s. 11; 1977, 2nd Sess., c. 1297.

Legal Periodicals.

For survey of 1978 law on taxation, see 57 N.C.L. Rev. 1142 (1979).

For survey of 1979 tax law, see 58 N.C.L. Rev. 1548 (1980).

For article on the need to reform North Carolina property tax law, see 59 N.C.L. Rev. 675 (1981).

CASE NOTES

Determination by General Assembly. —

The North Carolina General Assembly, and no one else, determines how property in this State should be valued for purposes of ad valorem taxation. In re Appeal of Amp, Inc., 287 N.C. 547 , 215 S.E.2d 752, 1975 N.C. LEXIS 1166 (1975).

Property Appraised at Market Value. —

In substance this section and G.S. 105-317.1 provide that all property shall be appraised at market value, and that all the various factors which enter into the market value of property are to be considered by the assessors in determining this market value for tax purposes. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

Valuation by Property Tax Commission. —

The record supported the Property Tax Commission’s valuation of taxpayer’s plant, where the county conceded that its valuation method was arbitrary, and therefore, the Commission properly accorded no presumption of correctness to county’s figures, but heard evidence and arrived at a value between those offered by the county and the taxpayer. In re Philip Morris U.S.A., 130 N.C. App. 529, 503 S.E.2d 679, 1998 N.C. App. LEXIS 1006 (1998).

North Carolina Property Tax Commission properly employed an income approach to a business property in reducing the appraised value that was assigned to the business property by a county that used a cost approach, as the decision had a rational basis in the evidence. In re Weaver In v. Co., 165 N.C. App. 198, 598 S.E.2d 591, 2004 N.C. App. LEXIS 1150 (2004).

Taxpayer did not show that county used an arbitrary and illegal valuation method or that the assessment of its personal property for a prior, six-year period substantially exceeded that property’s true value in money; thus, the assessment was upheld because the taxpayer failed to meet its initial burden of presenting material, competent, and substantial evidence that the assessment was arbitrary and illegal. In re Appeal of Westmoreland-LG&E, 174 N.C. App. 692, 622 S.E.2d 124, 2005 N.C. App. LEXIS 2611 (2005).

If an appraiser instead applies a Schedule of Values in a manner which results in uneven, inconsistent, and inaccurate tax values, the North Carolina Court of Appeals holds that the appraiser has misapplied the schedule, causing an appraisal error which can, in turn, be corrected as provided for in G.S. 105-287(a)(2). In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

Mere differences of opinion among appraisers about the exact true value of property are to be expected and do not constitute a misapplication of a county’s schedule of values; however, the use of procedures permitted by a schedule of values in a manner which results in lots being valued far below or far above their true values and in a manner inconsistent with the valuation of other lots in the same county is a misapplication of the schedule as a county’s schedules, rules, and standards for tax revaluations must be applied in a uniform and equitable manner that determines the true value of property. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

North Carolina Property Tax Commission properly revalued parcels that a county had arbitrarily assessed because expert testimony established that 50 to 60 percent of the parcels were unsuitable for septic service, so it was reasonable to decrease the county’s valuation by 50 percent. In re Pace/Dowd Props. Ltd., 233 N.C. App. 7, 755 S.E.2d 401, 2014 N.C. App. LEXIS 267 (2014).

North Carolina Property Tax Commission did not err by finding that functional and economic obsolescence did not affect a taxpayer’s property and were inappropriate to apply in any downward adjustment of the values because the findings of fact were supported by competent evidence, adequately explained why additional downward adjustment of values to reflect functional and economic obsolescence was inappropriate, and supported the conclusion that the county showed its appraisal produced true value. In re Harris Teeter, LLC, 271 N.C. App. 589, 845 S.E.2d 131, 2020 N.C. App. LEXIS 435 (2020), cert. denied, 376 N.C. 544 , 851 S.E.2d 49, 2020 N.C. LEXIS 1160 (2020), aff'd, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

North Carolina Property Tax Commission did not err in finding that property’s apparent capacity to generate income greater than the industry standard was not an indication of economic obsolescence because the Commission gave weight to evidence tending to show that a taxpayer’s equipment performed well compared to that of the industry as a whole, an appropriate indication that functional obsolescence did not affect the equipment. In re Harris Teeter, LLC, 271 N.C. App. 589, 845 S.E.2d 131, 2020 N.C. App. LEXIS 435 (2020), cert. denied, 376 N.C. 544 , 851 S.E.2d 49, 2020 N.C. LEXIS 1160 (2020), aff'd, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

North Carolina Property Tax Commission properly determined that the county met its burden to prove that its assessment did not substantially exceed true value of the property because it heard competent testimony supporting that secondary market sales of used grocery store equipment were inappropriate for consideration in downward adjustment the appraisal value of the taxpayer’s equipment; competent evidence also supported the Commission’s findings that functional obsolescence did not affect the property. In re Harris Teeter, LLC, 271 N.C. App. 589, 845 S.E.2d 131, 2020 N.C. App. LEXIS 435 (2020), cert. denied, 376 N.C. 544 , 851 S.E.2d 49, 2020 N.C. LEXIS 1160 (2020), aff'd, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

Court properly found that the business personal property owned by grocery store chain reflected the “true value” of that property because the record supported the determination that the prices received for the sales of comparable items of used grocery store equipment in the secondary marketplace upon which the appraiser relied did not provide reliable evidence of economic obsolescence and did not compel a conclusion to the contrary; the record was totally devoid of any evidence that the taxpayer usually and freely bought or sold used equipment in the marketplace and did not require the Commission to value the used equipment at its secondary market price. In re Harris Teeter, LLC, 2021-NCSC-80, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

Fundamental rule of valuation is actual market or fair cash value. Albemarle Elec. Membership Corp. v. Alexander, 282 N.C. 402 , 192 S.E.2d 811, 1972 N.C. LEXIS 969 (1972).

There may be reasonable variations from market value in appraisals of property for tax purposes if these variations are uniform. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

The fair market value of real property for tax purposes is the same as that for condemnation purposes. In re Parsons, 123 N.C. App. 32, 472 S.E.2d 182, 1996 N.C. App. LEXIS 584 (1996).

Use of “Book Value”. —

There is no statutory authority that permits the county tax supervisor, as a per se rule, to equate “book value” with true value in money as a uniform measure of assessment for purposes of ad valorem tax valuation. In re Appeal of Amp, Inc., 287 N.C. 547 , 215 S.E.2d 752, 1975 N.C. LEXIS 1166 (1975).

The North Carolina General Assembly has specifically rejected a per se rule that would equate inventory value as reported on State tax returns with the value of such inventory as reported for purposes of ad valorem taxation. Hence, in requiring the taxpayers of a county to list their property at the value reported on State tax returns (i.e., “book value”), a county tax supervisor acts contrary to the mandate of the North Carolina Machinery Act. In re Appeal of Amp, Inc., 287 N.C. 547 , 215 S.E.2d 752, 1975 N.C. LEXIS 1166 (1975).

Use of Sales Price. —

Neither this section nor G.S. 105-317(a) requires the commission to value property according to its sales price in a recent arm’s length transaction when competent evidence of a different value is presented. In re Greensboro Office Partnership, 72 N.C. App. 635, 325 S.E.2d 24, 1985 N.C. App. LEXIS 3143 (1985).

Where sale was not between a willing buyer and a willing seller, as contemplated by this section, sales price was not indicative of property’s true value. In re Phoenix Ltd. Partnership, 134 N.C. App. 474, 517 S.E.2d 903, 1999 N.C. App. LEXIS 810 (1999).

Property Tax Commission was reasonable in concluding that the cost approach could not be used as a test of reasonableness and that the sales approach was the most likely to produce the true value of the property because a county did not offer evidence that the cost approach was more appropriate; the county’s expert testified that neither the cost approach or sales comparison approach would be appropriate. In re Unifi Mfg. (Apr. 20, 2021).

Past and Future Income. —

G.S. 105-317(a), in fixing the guide which assessors must use in valuing property for taxes, includes as a factor the past income therefrom, and its probable future income. But the income referred to is not necessarily actual income. The language is sufficient to include the income which could be obtained by the proper and efficient use of the property. To hold otherwise would be to penalize the competent and diligent and to reward the incompetent or indolent. In re Greensboro Office Partnership, 72 N.C. App. 635, 325 S.E.2d 24, 1985 N.C. App. LEXIS 3143 (1985).

Property’s Income Producing Ability. —

The Machinery Act does not provide for consideration of property’s income producing ability nor for the cost to conduct environmental remediation on the property in determining property value, although, a buyer would take them into account when deciding upon a price to offer for the property. In re Camel City Laundry Co., 115 N.C. App. 469, 444 S.E.2d 689, 1994 N.C. App. LEXIS 681 (1994).

Extrapolation Method. —

The extrapolation method of valuation was appropriate, where the Property Tax Commission calculated the actual cost per square foot of the expansion, and then multiplied the square footage of the main building by that figure to estimate the cost of that building. In re Philip Morris U.S.A., 130 N.C. App. 529, 503 S.E.2d 679, 1998 N.C. App. LEXIS 1006 (1998).

Cost Approach. —

The county appraiser applied an appropriate version of the generally accepted cost method of appraisal in appraising the taxpayer’s plant, where he used the actual cost of the plant expansion to estimate the cost of the main building, adjusted to remove personal property and excess costs, and added the results to determine the plant’s total value. In re Philip Morris U.S.A., 130 N.C. App. 529, 503 S.E.2d 679, 1998 N.C. App. LEXIS 1006 (1998).

Taxpayer’s contention, that cost approach method of appraisal was not legal because it did not consider the 26 U.S.C.S. § 42 rent restrictions on the property, was insufficient to rebut the presumption that the appraisal was properly administered; the intermediate appellate court’s ruling reversing a decision of the North Carolina Property Tax Commission was itself reversed. In re Greens of Pine Glen Ltd., 356 N.C. 642 , 576 S.E.2d 316, 2003 N.C. LEXIS 27 (2003).

Income Approach. —

The income approach should have been the primary method used to reach a value for the anchor store in a shopping mall; while the income approach is preferential, a combination of approaches may be used because of the inherent weaknesses in each approach, so long as the income approach is given greatest weight. In re Belk-Broome Co., 119 N.C. App. 470, 458 S.E.2d 921, 1995 N.C. App. LEXIS 528 (1995), aff'd, 342 N.C. 890 , 467 S.E.2d 242, 1996 N.C. LEXIS 137 (1996).

Taxation to Be in Proportion to True Value of Property. —

The purpose of the statutory requirement that all property be appraised at its true value in money is to assure, as far as practicable, a distribution of the burden of taxation in proportion to the true values of the respective taxpayers’ property holdings, whether they be rural or urban. In re King, 281 N.C. 533 , 189 S.E.2d 158, 1972 N.C. LEXIS 1106 (1972).

State Property Tax Commission erred in affirming a county board of equalization and review’s ad valorem tax assessment of a taxpayer’s real property because the taxpayer’s evidence was sufficient to rebut the presumption of correctness for the county’s assessment where the taxpayer’s property was held to facilitate the production of income, which was the property’s highest and best use, produced a true value of that property, the county relied solely on the cost approach, which resulted in arbitrary and illegal valuations that were more than double the valuation determined, and substantiated, by the taxpayer. In re Lowe's Home Ctrs., 257 N.C. App. 610, 810 S.E.2d 713, 2018 N.C. App. LEXIS 124 (2018).

Personal Property Expenses. —

In arriving at the true value of corporate real property, the Property Tax Commission did not err by including personal property expenses as a portion of excess costs, which it then deducted from total cost figures. In re Philip Morris U.S.A., 130 N.C. App. 529, 503 S.E.2d 679, 1998 N.C. App. LEXIS 1006 (1998).

Charitable Trusts. —

Because of the valid and enforceable restraint on alienation, property of a charitable trust itself is unmarketable; therefore, to tax the property according to normal market assumptions would be unfair to the charitable trust, and in doing so, would seriously erode and ultimately defeat the public policy of this State in favor of charitable trusts. In re Perry-Griffin Found., 108 N.C. App. 383, 424 S.E.2d 212, 1993 N.C. App. LEXIS 90 (1993).

There is no distinction between owners of real and personal property as to their right to insist upon equality of valuation or as to their standing to pursue the remedies provided in the Machinery Act for error in the valuation of properties. In re Valuation of Property Located at 411-417 W. Fourth St., 282 N.C. 71 , 191 S.E.2d 692, 1972 N.C. LEXIS 887 (1972).

Ad valorem tax assessments are presumed to be correct, and when such assessments are challenged, the burden of proof is on the taxpayer to show that the assessment was erroneous. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

Ad valorem tax assessments are presumed correct. In order to rebut this presumption, the taxpayer must present evidence to show that an arbitrary method of valuation was used, or that an illegal method of valuation was used, and that the assessment substantially exceeded the true value in money of the property. In re Interstate Income Fund I, 126 N.C. App. 162, 484 S.E.2d 450, 1997 N.C. App. LEXIS 330 (1997).

Ad valorem tax value assessed by a county is allowed as evidence of the value of real property. Clay v. Monroe, 189 N.C. App. 482, 658 S.E.2d 532, 2008 N.C. App. LEXIS 645 (2008).

County tax assessment valuation method held not arbitrary. See In re Wagstaff, 42 N.C. App. 47, 255 S.E.2d 754, 1979 N.C. App. LEXIS 2753 (1979).

Landowner did not show a county’s present-use schedule of values (SOV), as applied in determining the value of the landowner’s property, was illegal for not considering soil quality, under G.S. 105-317(a), because (1) G.S. 105-317(a) did not apply when determining present-use valuation, and (2) the landowner did not claim the SOV did not comply with the applicable requirements of G.S. 105.277.2(5) or G.S. 105-317(b)(1), so the landowner did not rebut a presumption that the county’s SOV was proper. In re Appeal McLamb, 218 N.C. App. 485, 721 S.E.2d 285, 2012 N.C. App. LEXIS 223 (2012).

Actual value of a note, bond, or other evidence of debt is the price estimated in terms of money at which the property would change hands between a willing and financially able buyer and a willing seller, neither being under any compulsion to buy or to sell; it is synonymous with the “market value,” or the “true value.” In re Alamance Mem. Park, 41 N.C. App. 278, 254 S.E.2d 671, 1979 N.C. App. LEXIS 2421 (1979).

Economic Blight of Downtown Area to Be Considered in Revaluation. —

The policy of equality in valuations compels the assessors and, upon an appeal, the State Board of Assessment to take economic blight of a downtown area into account when revaluing property for tax purposes. In re Valuation of Property Located at 411-417 W. Fourth St., 282 N.C. 71 , 191 S.E.2d 692, 1972 N.C. LEXIS 887 (1972).

To find the true value of property subject to conservation easements, the Commission must determine the market value prior to the granting of the easements and then reduce that value by applying a damage factor caused by the granting of the conservation easements. Determining the highest and best use of the property prior to the granting of the easement is a critical part of the appraisal process. Rainbow Springs Partnership v. County of Macon, 79 N.C. App. 335, 339 S.E.2d 681, 1986 N.C. App. LEXIS 2065 (1986).

Privilege “Belonging” or “Appertaining” to Real Property. —

Non-refundable membership fee in a continuing care retirement community was a right and privilege “belonging” or “appertaining to” the taxpayers’ real property and was properly included in its tax appraisal value; the estimated amount of money, which would change hands between the taxpayers and a subsequent purchaser, was directly tied to the purchase price of the unit and included the value of the non-refundable membership fee. In re Appeal of Tillman, 187 N.C. App. 739, 653 S.E.2d 911, 2007 N.C. App. LEXIS 2563 (2007).

In order to obtain relief from valuations upon their property by the State Board of Assessment, appellant electric membership corporations must show that the methods used in determining true value were illegal and arbitrary, and that appellants were substantially injured by a resulting excessive valuation of their property. Albemarle Elec. Membership Corp. v. Alexander, 282 N.C. 402 , 192 S.E.2d 811, 1972 N.C. LEXIS 969 (1972).

Failure to Make Factor Affecting True Value Known to County. —

The Property Tax Commission did not err as a matter of law by not considering evidence of a factor allegedly affecting the “true value” of taxpayer’s property for a given year where taxpayer failed to make the factor known to the County. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

Assessment of the market value of a taxpayer’s forestland was upheld, despite the taxpayer’s claim that the assessment did not sufficiently account for the land’s (1) wetland restrictions, (2) frequent flooding, (3) topography and tract size, or (4) wasteland because the taxpayer’s forest management plan did not support these alleged factors, and the taxpayer did not otherwise submit supporting evidence. In re Appeal of Family Tree Farm, LLC, 218 N.C. App. 577, 721 S.E.2d 387, 2012 N.C. App. LEXIS 215 (2012).

Burden of Proof. —

Pursuant to the appellate court’s remand order, the burden of proof shifted to the board of county commissioners to establish that its valuation was the “true value” of a taxpayer’s personal property; as the board failed to meet that burden, the property had to be valued at the value listed by the taxpayer. In re IBM Credit Corp., 222 N.C. App. 418, 731 S.E.2d 444, 2012 N.C. App. LEXIS 1015 (2012).

Appraisal Rebutted. —

Taxpayers presented substantial evidence to rebut the presumption of correctness of county’s appraisal of land; thus, the Property Tax Commission properly granted the taxpayers relief. In re Parsons, 123 N.C. App. 32, 472 S.E.2d 182, 1996 N.C. App. LEXIS 584 (1996).

Where the county’s valuation of the taxpayer’s property was significantly greater than the valuation offered by the taxpayer’s expert witness, the tax commission did not err by failing to afford a presumption of correctness to the county’s valuation using the comparable sales method of assessment, as the county did not offer additional evidence to meet its burden to show that its valuation was the true value. In re Lane Company-Hickory Chair Di, 153 N.C. App. 119, 571 S.E.2d 224, 2002 N.C. App. LEXIS 1083 (2002).

County’s appraisal of a manufactured home did not arrive at its “true value” because the home was personal property located on leased land but was valued as if it had been real property, and the appraisal assigned a valuation to the home that was 90 percent higher than the previous year. In re Murray, 179 N.C. App. 780, 635 S.E.2d 477, 2006 N.C. App. LEXIS 2157 (2006).

Although a county argued the use of its schedule of values, as required by G.S. 105-317 , necessitated the conclusion that a taxpayer failed to rebut the presumption of correctness, the taxpayer offered competent, material, and substantial evidence through the appraisal by its expert tending to show the county’s assessment was substantially in excess of the property’s “true value,” as defined in G.S. 105-283 ; the county appraised the property’s value at $11,696,700 and the taxpayer’s expert appraised the value at $7,735,000. In re Blue Ridge Mall LLC, 214 N.C. App. 263, 713 S.E.2d 779, 2011 N.C. App. LEXIS 1641 (2011).

Solar heating and cooling systems are to be appraised with no additional value assigned for the difference in cost between a solar energy heating or cooling system and a conventional system typically found in the county; therefore, an appraisal of a solar heating system for ad valorem tax purposes was not upheld because a county used a press release from a website to determine the system’s value, failed to follow statutory guidelines for appraisal, and did not consider the obsolescence of the equipment due to the equipment being overbuilt, the income produced by the equipment, and the transfer of tax credits prior to valuation. Moreover, the county’s appraisal substantially exceeded the true value in money of the property. In re Appeal of: FLS Owner II, LLC, 244 N.C. App. 611, 781 S.E.2d 300, 2016 N.C. App. LEXIS 38 (2016).

Competent evidence supported the Property Tax Commission’s determination that a taxpayer met its burden to produce evidence that a county’s appraisal methodology did not produce true value, and shifted the burden to the county to show otherwise, because the taxpayer’s appraiser stated that the county’s failure to account for additional observed depreciation after inputting the property’s original cost into the depreciation schedules resulted in a valuation that did not reflect true value. In re Harris Teeter, LLC, 271 N.C. App. 589, 845 S.E.2d 131, 2020 N.C. App. LEXIS 435 (2020), cert. denied, 376 N.C. 544 , 851 S.E.2d 49, 2020 N.C. LEXIS 1160 (2020), aff'd, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

Assuming that a taxpayer’s evidence was insufficient to shift the evidentiary burden to the county, it was not prejudiced thereby because the North Carolina Property Tax Commission ultimately concluded that the county met its shifted burden by showing why its application of the cost approach resulted in an appraisal reflecting true value. In re Harris Teeter, LLC, 271 N.C. App. 589, 845 S.E.2d 131, 2020 N.C. App. LEXIS 435 (2020), cert. denied, 376 N.C. 544 , 851 S.E.2d 49, 2020 N.C. LEXIS 1160 (2020), aff'd, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

Property Tax Commission properly reversed a county’s ad valorem property tax valuation of a taxpayer’s textile manufacturing facility because the county’s limited evidence failed to show that its appraisal methodology was proper or produced the “true value” of the subject property; the taxpayer rebutted the presumption of correctness of the county’s valuation because it presented evidence from three expert witnesses who provided evidence why the value of the property was lower than assessed. In re Unifi Mfg. (Apr. 20, 2021).

Value Improperly Determined by Subjective Value to Taxpayer. —

North Carolina Property Tax Commission’s findings emphasizing the fact that a taxpayer used two textile mills industrially to produce yarn 24-hours a day implicitly allowed the county to measure the value of the properties as their subjective worth to the taxpayer and was not the same as adequately determining the objective value of the properties to another willing buyer as dictated by G.S. 105-283 . In re Parkdale Mills & Parkdale Am., 225 N.C. App. 713, 741 S.E.2d 416, 2013 N.C. App. LEXIS 222 (2013).

Failure to Meet Statutory Standards. —

Decision to uphold a county’s valuation of a corporation’s computer equipment for business personal property taxes was unsupported by substantial evidence because in appraising the corporation’s property, the county did not meet the statutory standards required of G.S. 105-283 when the county did not make adequate deductions for depreciation by applying the schedule and its transmittal instructions; while the Commission found that the county met its burden, its final decision failed to adequately address key issues necessary to arrive at the ultimate decision of what was the market value of the property being appraised, and those omissions resulted in conclusions that lacked evidentiary support and were arbitrary and capricious. In re Appeal of IBM Credit Corp., 201 N.C. App. 343, 689 S.E.2d 487, 2009 N.C. App. LEXIS 2201 (2009).

Summary Judgment Improperly Granted. —

North Carolina Property Tax Commission erred in granting summary judgment to the property owners because there were disputed issues of fact about whether the application of the condition factor in 2007 to undeveloped lots that had been sold resulted in uniform, consistent, and accurate assessments of the lots’ true values. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

Reassessment In Non-Reappraisal Year Held Improper. —

Court of appeals erred in reversing the North Carolina Property Tax Commission’s order granting a taxpayer summary judgment in its action disputing the tax values of its property because the county’s reassessment of the property in a non-reappraisal year constituted an improper reappraisal in violation of G.S. 105-287(a)(2), and the alteration of the taxable value of the taxpayer’s property under the 2008 reassessment was unlawful; when no timely change to the schedule of values was made, the county could not retroactively label as error an historically approved methodology endorsed by the schedule. In re Ocean Isle Palms, LLC, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

§ 105-284. Uniform assessment standard.

  1. Except as otherwise provided in this section, all property, real and personal, shall be assessed for taxation at its true value or use value as determined under G.S. 105-283 or G.S. 105-277.6 , and taxes levied by all counties and municipalities shall be levied uniformly on assessments determined in accordance with this section.
  2. The assessed value of public service company system property subject to appraisal by the Department of Revenue under G.S. 105-335(b)(1) shall be determined by applying to the allocation of such value to each county a percentage to be established by the Department of Revenue. The percentage to be applied shall be either:
    1. The median ratio established in sales assessment ratio studies of real property conducted by the Department of Revenue in the county in the year the county conducts a reappraisal of real property and in the fourth and seventh years thereafter; or
    2. A weighted average percentage based on the median ratio for real property established by the Department of Revenue as provided in subdivision (1) and a one hundred percent (100%) ratio for personal property. No percentage shall be applied in a year in which the median ratio for real property is ninety percent (90%) or greater.If the median ratio for real property in any county is below ninety percent (90%) and if the county assessor has provided information satisfactory to the Department of Revenue that the county follows accepted guidelines and practices in the assessment of business personal property, the weighted average percentage shall be applied to public service company property. In calculating the weighted average percentage, the Department shall use the assessed value figures for real and personal property reported by the county to the Local Government Commission for the preceding year. In any county which fails to demonstrate that it follows accepted guidelines and practices, the percentage to be applied shall be the median ratio for real property. The percentage established in a year in which a sales assessment ratio study is conducted shall continue to be applied until another study is conducted by the Department of Revenue.
  3. Notice of the median ratio and the percentage to be applied for each county shall be given by the Department of Revenue to the chairman of the board of commissioners not later than April 15 of the year for which it is to be effective. Notice shall also be given at the same time to the public service companies whose property values are subject to adjustment under this section. Either the county or an affected public service company may challenge the real property ratio or the percentage established by the Department of Revenue by giving notice of exception within 30 days after the mailing of the Department’s notice. Upon receipt of such notice of exception, the Department shall arrange a conference with the challenging party or parties to review the matter. Following the conference, the Department shall notify the challenging party or parties of its final determination in the matter. Either party may appeal the Department’s determination to the Property Tax Commission by giving notice of appeal within 30 days after the mailing of the Department’s decision.
  4. Property that is in a development financing district and that is subject to an agreement entered into pursuant to G.S. 159-108 shall be assessed at its true value or at the minimum value set out in the agreement, whichever is greater.

History. 1939, c. 310, s. 500; 1953, c. 970, s. 5; 1955, c. 1100, s. 2; 1959, c. 682; 1967, c. 892, s. 7; 1969, c. 945, s. 1; 1971, c. 806, s. 1; 1973, c. 695, s. 12; 1985, c. 601, s. 1; 1987 (Reg. Sess., 1988), c. 1052, s. 1; 2003-403, s. 20.

Editor’s Note.

An amendment to this section, which would have added a new subsection (d), by Session Laws 1993, c. 497, s. 20, was made effective upon certification of approval of an amendment to Article V of the Constitution of North Carolina relating to the authority of any county, city or town to borrow money, without the need of voter approval, and issue financing bonds to be used to finance public activities associated with private economic development projects. This amendment was submitted to the people on November 2, 1993 and was defeated. The amendment to this section, therefore, never took effect.

Session Laws 2003-403, s. 25, made subsection (d), as added by Session Laws 2003-403, s. 20, effective upon certification of approval of the amendment to Article V, § 14 of the Constitution of North Carolina as proposed in Session Laws 2003-403, s. 1.

Session Laws 2003-403, ss. 24 and 25, provide: “The amendment set out in Section 1 of this act shall be submitted to the qualified voters of the State at the statewide general election in November 2004, which election shall be conducted under the laws then governing elections in the State. Ballots, voting systems, or both may be used in accordance with Chapter 163 of the General Statutes. The question to be used in the voting systems and ballots shall be:

“[ ] FOR [ ] AGAINST

“Constitutional amendment to promote local economic and community development projects by (i) permitting the General Assembly to enact general laws giving counties, cities, and towns the power to finance public improvements associated with qualified private economic and community improvements within development districts, as long as the financing is secured by the additional tax revenues resulting from the enhanced property value within the development district and is not secured by a pledge of the local government’s faith and credit or general taxing authority, which financing is not subject to a referendum; and (ii) permitting the owners of property in the development district to agree to a minimum tax value for their property, which is binding on future owners as long as the development district is in existence.

“If a majority of votes cast on the question are in favor of the amendment set out in Section 1 of this act, the State Board of Elections shall certify the amendment to the Secretary of State. The amendment set out in Section 1 of this act and the amendments set out in Sections 2 through 21 of this act become effective upon this certification. The Secretary of State shall enroll the amendment so certified among the permanent records of that office. If a majority of votes cast on the question are not in favor of the amendment set out in Section 1 of this act, that amendment and the amendments set out in Sections 2 through 21 of this act do not go into effect.”

The constitutional amendment adding N.C. Const., Art. 5, § 14, as proposed in Session Laws 2003-403, s. 1, was adopted by vote of the people at the general election held on November 2, 2004.

Session Laws 2003-403, s. 22, provides that the act [Session Laws 2003-403], being necessary for the prosperity and welfare of the State and its inhabitants, shall be liberally construed to effect these purposes.

Session Laws 2003-403, s. 23, is a severability clause.

Effect of Amendments.

Session Laws 2003-403, s. 20, added subsection (d). For effective date, see Editor’s note.

CASE NOTES

N.C. Const., Art. II, § 23 Not Applicable to Session Laws 1987 (Reg. Sess., 1988), Chapter 1052. —

North Carolina Const., Art. II, § 23 applies, inter alia, to laws enacted for the purpose of imposing a tax. Chapter 1052 of Session Laws 1987 (Reg. Sess., 1988) neither imposes a tax nor authorizes its imposition, and therefore, N.C. Const., Art. II, § 23 does not apply. North Carolina E. Mun. Power v. Wake County, 100 N.C. App. 693, 398 S.E.2d 486, 1990 N.C. App. LEXIS 1163 (1990).

There is no doubt that the effect of Chapter 1052 of Session Laws 1987 (Reg. Sess., 1988) imposed a greater tax burden on plaintiff for 1988. However, N.C. Const., Art. II, § 23 focuses on the purpose of the statute (to impose a tax) and not the result of the statute (an increased tax burden). North Carolina E. Mun. Power v. Wake County, 100 N.C. App. 693, 398 S.E.2d 486, 1990 N.C. App. LEXIS 1163 (1990).

Generally, property in this State is assessed at 100% of its appraised (true) value. Some statutes, however, provide for assessment at different rates for special classes of property. North Carolina E. Mun. Power v. Wake County, 100 N.C. App. 693, 398 S.E.2d 486, 1990 N.C. App. LEXIS 1163 (1990).

Rebuttable Presumption of Correctness. —

Ad valorem tax assessments are presumed correct. However, this presumption of correctness is only one of fact and is therefore rebuttable. In re Duke Power Co., 82 N.C. App. 492, 347 S.E.2d 54, 1986 N.C. App. LEXIS 2517 (1986).

Taxpayer’s contention, that cost approach method of appraisal was not legal because it did not consider the 26 U.S.C.S. § 42 rent restrictions on the property, was insufficient to rebut the presumption that the appraisal was properly administered; the intermediate appellate court’s ruling reversing a decision of the North Carolina Property Tax Commission was itself reversed. In re Greens of Pine Glen Ltd., 356 N.C. 642 , 576 S.E.2d 316, 2003 N.C. LEXIS 27 (2003).

Reassessment In Non-Reappraisal Year Held Improper. —

Court of appeals erred in reversing the North Carolina Property Tax Commission’s order granting a taxpayer summary judgment in its action disputing the tax values of its property because the county’s reassessment of the property in a non-reappraisal year constituted an improper reappraisal in violation of G.S. 105-287(a)(2), and the alteration of the taxable value of the taxpayer’s property under the 2008 reassessment was unlawful; when no timely change to the schedule of values was made, the county could not retroactively label as error an historically approved methodology endorsed by the schedule. In re Ocean Isle Palms, LLC, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

Article 14. Time for Listing and Appraising Property for Taxation.

§ 105-285. Date as of which property is to be listed and appraised.

  1. Annual Listing Required. —  All property subject to ad valorem taxation shall be listed annually.
  2. Personal Property; General Rule. —  Except as otherwise provided in this Chapter, the value, ownership, and place of taxation of personal property, both tangible and intangible, shall be determined annually as of January 1.
  3. Repealed by Session Laws 1987, c. 813, s. 12.
  4. Real Property. —  The value of real property shall be determined as of January 1 of the years prescribed by G.S. 105-286 and G.S. 105-287 . The ownership of real property shall be determined annually as of January 1, except in the following situation: When any real property is acquired after January 1, but prior to July 1, and the property was not subject to taxation on January 1 on account of its exempt status, it shall be listed for taxation by the transferee as of the date of acquisition and shall be appraised in accordance with its true value as of January 1 preceding the date of acquisition; and the property shall be taxed for the fiscal year of the taxing unit beginning on July 1 of the year in which it is acquired. The person in whose name such property is listed shall have the right to appeal the listing, appraisal, and assessment of the property in the same manner as that provided for listings made as of January 1.In the event real property exempt as of January 1 is, prior to July 1, acquired from a governmental unit that by contract is making payments in lieu of taxes to the taxing unit for the fiscal period beginning July 1 of the year in which the property is acquired, the tax on such property for the fiscal period beginning on July 1 immediately following acquisition shall be one half of the amount of the tax that would have been imposed if the property had been listed for taxation as of January 1.

History. 1939, c. 310, s. 302; 1945, c. 973; 1971, c. 806, s. 1; 1973, c. 735; 1985, c. 656, s. 21; 1987, c. 813, s. 12; 1993, c. 485, s. 17.

Editor’s Note.

Session Laws 2009-180, s. 1, provides: “Notwithstanding G.S. 105-285 and G.S. 105-317 , a county may change the value of real property after January 1, 2009, effective for the taxable year beginning July 1, 2009, based upon the schedule of values used to appraise real property in the county for its last reappraisal if the county adopted a resolution to postpone a 2009 reappraisal between January 1, 2009, and June 30, 2009. This authorization does not affect the requirement in G.S. 105-286 to reappraise property at least once every eight years. If a county changes its values of real property pursuant to this section, the schedule of values adopted by the board of county commissioners and used to appraise real property in the county for its last reappraisal will remain the schedule of values to be used to appraise real property until the county reappraises all real property in accordance with G.S. 105-286 .”

Legal Periodicals.

For comment, “Offer to Purchase and Contract: Buyer Beware,” see 8 Campbell L. Rev. 473 (1986).

For article, “North Carolina’s Nonprofit Property Tax Exemption Conundrum,” see 96 N.C.L. Rev. 1769 (2018).

CASE NOTES

Presumption Created. —

G.S. 105-312 created a presumption that newly discovered property should have been listed by the taxpayer for the preceding five years unless the taxpayer showed otherwise. In re Precision Concepts, Inc., 305 B.R. 438, 2004 Bankr. LEXIS 325 (Bankr. M.D.N.C. 2004).

Legislature inadvertently omitted a comma between the words “mercantile” and “manufacturing” in former subsection (c) of this section when the statute was revised. In re Mitchell-Carolina Corp., 67 N.C. App. 450, 313 S.E.2d 816, 1984 N.C. App. LEXIS 3069 (1984).

Discriminatory taxation of railroads by State held unlawful. Clinchfield R.R. v. Lynch, 700 F.2d 126, 1983 U.S. App. LEXIS 30796 (4th Cir. 1983).

Right to Appeal. —

Superior court did not err in dismissing a taxpayer’s petition for writ of mandamus directing a county tax administrator to report the facts to the board of county commissioners in order that the board could make a decision as to whether the taxpayer received notice of changes in the valuation of its property because the county tax assessor did not believe that there were any errors that had to be brought to the attention of the county commissioners, but it was the taxpayer who sought redress, and the taxpayer missed its opportunity to seek relief in its own right by failing to timely challenge the change in valuation of the property before the county board of equalization and review and could not compel the county tax assessor to act on its behalf; plain language of G.S. 105-325(a)(6) suggests that it is intended to provide a route for a county tax assessor to seek correction based on errors it has discovered. Villages at Red Bridge, LLC v. Weisner, 209 N.C. App. 604, 704 S.E.2d 925, 2011 N.C. App. LEXIS 209 (2011).

Application of North Carolina’s ad valorem property tax to imported tobacco destined for domestic markets does not violate the import-export clause or the due process clause of the federal Constitution. R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130, 107 S. Ct. 499, 93 L. Ed. 2d 449, 1986 U.S. LEXIS 22 (1986).

Consistent with the supremacy clause, a State may impose a nondiscriminatory ad valorem property tax on imported goods stored in a customs-bonded warehouse and destined for domestic manufacture and sale. R.J. Reynolds Tobacco Co. v. Durham County, 479 U.S. 130, 107 S. Ct. 499, 93 L. Ed. 2d 449, 1986 U.S. LEXIS 22 (1986).

Effect of Listing on Ad Valorem Taxation. —

The pivotal event in determining when a tax is incurred is the date that the property is listed by the owner thereof; the obligation to pay ad valorem property taxes in the State of North Carolina attaches at the time the property is listed, even though the amount of the tax has not yet been determined. Burns v. City of Winston-Salem, 991 F.2d 116, 1993 U.S. App. LEXIS 8372 (4th Cir. 1993).

Right to Appeal Change in Valuation. —

Superior court did not err in dismissing a taxpayer’s petition for writ of mandamus directing a county tax administrator to report the facts to the board of county commissioners in order that the board could make a decision as to whether the taxpayer received notice of changes in the valuation of its property because the taxpayer failed to timely challenge the change in valuation of the property before the county board of equalization and review, and thus lost its right to appeal; taxpayer also chose not to pursue the second means of redress available to it by paying the taxes and then bringing a suit in the trial court for its recovery under G.S. 105-381 , but instead the taxpayer filed a petition for writ of mandamus in the superior court. Villages at Red Bridge, LLC v. Weisner, 209 N.C. App. 604, 704 S.E.2d 925, 2011 N.C. App. LEXIS 209 (2011).

Priority in Bankruptcy. —

When the Chapter 11 debtor failed to list its business personal property for taxation as required by G.S. 105-285 , then the property taxes for the two years in issue were entitled to priority under 11 U.S.C.S. § 507(a)(8)(B). In re Precision Concepts, Inc., 305 B.R. 438, 2004 Bankr. LEXIS 325 (Bankr. M.D.N.C. 2004).

§ 105-286. Time for general reappraisal of real property.

  1. Octennial Cycle. —  Each county must reappraise all real property in accordance with the provisions of G.S. 105-283 and G.S. 105-317 as of January 1 of the year set out in the following schedule and every eighth year thereafter, unless the county is required to advance the date under subdivision (2) of this section or chooses to advance the date under subdivision (3) of this section.
    1. Schedule of Initial Reappraisals.Division One — 1972: Avery, Camden, Cherokee, Cleveland, Cumberland, Guilford, Harnett, Haywood, Lee, Montgomery, Northampton, and Robeson.Division Two — 1973: Caldwell, Carteret, Columbus, Currituck, Davidson, Gaston, Greene, Hyde, Lenoir, Madison, Orange, Pamlico, Pitt, Richmond, Swain, Transylvania, and Washington.Division Three — 1974: Ashe, Buncombe, Chowan, Franklin, Henderson, Hoke, Jones, Pasquotank, Rowan, and Stokes.Division Four — 1975: Alleghany, Bladen, Brunswick, Cabarrus, Catawba, Dare, Halifax, Macon, New Hanover, Surry, Tyrrell, and Yadkin.Division Five — 1976: Bertie, Caswell, Forsyth, Iredell, Jackson, Lincoln, Onslow, Person, Perquimans, Rutherford, Union, Vance, Wake, Wilson, and Yancey.Division Six — 1977: Alamance, Durham, Edgecombe, Gates, Martin, Mitchell, Nash, Polk, Randolph, Stanly, Warren, and Wilkes.Division Seven — 1978: Alexander, Anson, Beaufort, Clay, Craven, Davie, Duplin, and Granville.Division Eight — 1979: Burke, Chatham, Graham, Hertford, Johnston, McDowell, Mecklenburg, Moore, Pender, Rockingham, Sampson, Scotland, Watauga, and Wayne.
    2. Mandatory Advancement. —  A county whose population is 75,000 or greater according to the most recent annual population estimates certified to the Secretary by the State Budget Officer must conduct a reappraisal of real property when the county’s sales assessment ratio determined under G.S. 105-289(h) is less than .85 or greater than 1.15, as indicated on the notice the county receives under G.S. 105-284 . A reappraisal required under this subdivision must become effective no later than January 1 of the earlier of the following years:
      1. The third year following the year the county received the notice.
      2. The eighth year following the year of the county’s last reappraisal.
    3. Optional Advancement. —  A county may conduct a reappraisal of real property earlier than required by subdivision (1) or (2) of this subsection if the board of county commissioners adopts a resolution providing for advancement of the reappraisal. The resolution must designate the effective date of the advanced reappraisal and may designate a new reappraisal cycle that is more frequent than the octennial cycle set in subdivision (1) of this subsection. The board of county commissioners must promptly forward a copy of the resolution adopted under this subdivision to the Department of Revenue. A more frequent reappraisal cycle designated in a resolution adopted under this subdivision continues in effect after a mandatory reappraisal required under subdivision (2) of this subsection unless the board of county commissioners adopts another resolution that designates a different date for the county’s next reappraisal.
  2. ,  (c) Repealed by Session Laws 2008-146, s. 1.1, effective July 1, 2009.

History. 1939, c. 310, s. 300; 1941, c. 282, ss. 1, 11/2; 1943, c. 634, s. 1; 1945, c. 5; 1947, c. 50; 1949, c. 109; 1951, c. 847; 1953, c. 395; 1955, c. 1273; 1957, c. 1453, s. 1; 1959, c. 704, s. 1; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1987, c. 45, s. 1; 2008-146, s. 1.1.

Local Modification.

Robeson: 2003-201, s. 1.

Editor’s Note.

Session Laws 2008-146, s. 1.1, deleted the subsection (a) designation. The subsection (a) designation has been re-inserted and the section set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2008-146, s. 1.4, as amended by Session Laws 2009-445, s. 45(a), provides: “This Part [Part I of Session Laws 2008-146] becomes effective July 1, 2009, and mandatory advancements in G.S. 105-286(a)(2), as amended by Section 1.1 of this Part, apply to notices sent under G.S. 105-284(c) on or after that date.”

Session Laws 2008-146, s. 6, provides: “The Revenue Laws Study Committee must study the following:

“(1) the effect of PART I of this act and determine whether new positions are needed to perform sales assessment ratio studies in additional counties each year and to perform other functions related to this act.

“(2) The definition of income as it applies to the homestead exclusion.”

Session Laws 2009-180, s. 1, provides: “Notwithstanding G.S. 105-285 and G.S. 105-317 , a county may change the value of real property after January 1, 2009, effective for the taxable year beginning July 1, 2009, based upon the schedule of values used to appraise real property in the county for its last reappraisal if the county adopted a resolution to postpone a 2009 reappraisal between January 1, 2009, and June 30, 2009. This authorization does not affect the requirement in G.S. 105-286 to reappraise property at least once every eight years. If a county changes its values of real property pursuant to this section, the schedule of values adopted by the board of county commissioners and used to appraise real property in the county for its last reappraisal will remain the schedule of values to be used to appraise real property until the county reappraises all real property in accordance with G.S. 105-286 .”

Session Laws 2013-362, s. 1, provides: “Notwithstanding G.S. 105-287 , 105-325, 105-380, any provision of law restricting the time for which a change in appraisal or valuation may be made, or any other provision of Subchapter II of Chapter 105 of the General Statutes inconsistent with the provisions of this act, a board of county commissioners shall undertake the measures required by this act if all of the following conditions are met:

“(1) The county has independent evidence that the majority of commercial neighborhoods in the county reviewed by a qualified appraisal company possess significant issues of inequity.

“(2) The county has independent evidence that for residential neighborhoods instances of inequity or erroneous data had an impact on the valuation of the neighborhood as a whole.

“(3) The county’s last general reappraisal was performed for the 2008 tax year, 2009 tax year, 2010 tax year, 2011 tax year, or 2012 tax year.

“(4) The independent evidence resulted from a review performed by a qualified appraisal company selected and retained by the county and registered with the Department of Revenue and had a sample size of no less than 375 properties, the relevant characteristics of which were reviewed on location at the property.”

Session Laws 2013-362, s. 2, provides: “If all of the conditions of Section 1 of this act are met, a board of county commissioners shall either (i) conduct a reappraisal, using no less than one person certified by the Department of Revenue for mass valuations per 4,250 parcels, pursuant to G.S. 105-286 within 18 months, applicable to all tax years from and including the tax year when the last general reappraisal was performed pursuant to G.S. 105-286 or (ii) have a qualified appraisal company, which may be the same company that provides the evidence in Section 1 of this act, conduct a review of all the values in the county by neighborhoods and make recommendations as to the true value of the properties as of January 1 of the year of the last general reappraisal performed pursuant to G.S. 105-286. After the reappraisal or after each neighborhood review required by this section is complete, the board of county commissioners shall make any change on the abstracts and tax records to ensure that the assessed values of incorrectly appraised properties in the county reflect the true values of those properties effective for the year of the last general reappraisal performed pursuant to G.S. 105-286 and shall apply the adjusted values for those properties for each tax year until the next general reappraisal for real property is performed by the county pursuant to G.S. 105-286 unless those adjusted values are changed in accordance with G.S. 105-287 . In making changes to the abstracts and tax records mandated by this act, the board of county commissioners shall make adjustments for previous errors prioritized as follows:

“(1) Adjustments to parcels with errors that resulted in the parcels having a significantly overstated value.

“(2) Adjustments to parcels with errors that resulted in the parcels having a significantly understated value.

“(3) Adjustments to parcels with errors that resulted in the parcels having an overstated value.

“(4) Adjustments to parcels with errors that resulted in the parcels having an understated value.

“In instances of parcels with errors that resulted in an overpayment of taxes, the governing board shall require that notice of refund and the refund amount be sent to the owner of record as of the date the payment was made. The provisions of G.S. 105-380 do not apply to the issuance of any refund under the provisions of this act.”

Session Laws 2013-362, s. 3, as amended by Session Laws 2015-266, s. 1, provides: “Interest on taxes paid on parcels with errors that resulted in the parcels having an overstated value shall be calculated at a rate of five percent (5%) per annum. Additional taxes levied on parcels as a result of errors causing the parcels to have an understated value (i) shall be treated as taxes on discovered property pursuant to G.S. 105-312 , except that the discovery penalties set forth in subsection (h) of G.S. 105-312 shall not apply, (ii) are due and payable on September 1 of the fiscal year for which the taxes are levied, but not earlier than four years from the last general reappraisal date, and (iii) shall be payable, at the taxpayer’s option, by means of an agreement over a period of not more than 36 months, in equal monthly installments, if the total of the additional taxes levied is greater than one thousand dollars ($1,000). Interest shall not accrue for the period a taxpayer is making timely payments under a payment plan. The tax collector is authorized to issue forms and develop procedures to implement a payment plan authorized under this section. Notwithstanding G.S. 105-365.1(b), for parcels that have been transferred in a tax year for which errors requiring reappraisals under this act resulted in an underpayment of taxes, the following apply:

“(1) The taxes for each tax year prior to and in the fiscal year in which the transfer occurred shall be collected from the owner of record as of January 1 of each tax year for which unpaid taxes exist. Only the remedies available in G.S. 105-367 and G.S. 105-368 may be used to collect against the owner of record as of January 1 of each tax year for which unpaid taxes exist.

“(2) Notwithstanding G.S. 105-355(a), there shall be no lien on the real property for underpaid taxes that arose in a year in which the property is owned by a person other than the current owner as of January 1 of that year. The current owner shall not be held personally responsible for such underpaid taxes.

“(3) If an owner not responsible for underpaid taxes pursuant to this section paid the underpaid taxes, the owner may assert a valid defense for a refund pursuant to G.S. 105-381 , as a tax imposed through clerical error. Interest on the refund shall be calculated at a rate of five percent (5%) per annum from the date the owner asserting the defense paid the underpaid taxes until the date the refund is issued.”

Effect of Amendments.

Session Laws 2008-146, s. 1.1, rewrote the section. For effective date and applicability, see Editor’s note.

CASE NOTES

Burden of Proof on Taxpayer. —

While there is an affirmative duty upon the taxing authority to reappraise property if statutorily enumerated circumstances exist, the burden of proof is on the taxpayer to establish the presence of such conditions. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

Failure of Taxpayer to Make Factor Affecting Value Known to County. —

The Property Tax Commission did not err as a matter of law by not considering evidence of a factor allegedly affecting the “true value” of taxpayer’s property for a given year where taxpayer failed to make the factor known to the County. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

A post-octennial valuation sale is not a statutorily permissive basis for adjusting a property’s tax valuation. In re Allred, 351 N.C. 1 , 519 S.E.2d 52, 1999 N.C. LEXIS 1010 (1999).

Appeal Not Lost After Waiting for Value to be Carried Forward. —

Taxpayer who does not appeal the valuation in the year when it took place, but rather waits until that value had been carried forward to a subsequent tax year does not lose the right to appeal the tax value that had been carried forward. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

Reassessment In Non-Reappraisal Year Held Improper. —

Court of appeals erred in reversing the North Carolina Property Tax Commission’s order granting a taxpayer summary judgment in its action disputing the tax values of its property because the county’s reassessment of the property in a non-reappraisal year constituted an improper reappraisal in violation of G.S. 105-287(a)(2), and the alteration of the taxable value of the taxpayer’s property under the 2008 reassessment was unlawful. In re Ocean Isle Palms, LLC, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

G.S. 105-394 did not let a county recover taxes on a parcel’s corrected value for certain years because (1) the county arbitrarily appraised the parcel for those years, so G.S. 105-287 applied, since the county tried to change a parcel’s value in a year in which a general reappraisal was not made and improperly “discovered” the parcel for those years, and (2) G.S. 105-287 (c) said an increase in value was not retroactive. In re Pace/Dowd Props. Ltd., 233 N.C. App. 7, 755 S.E.2d 401, 2014 N.C. App. LEXIS 267 (2014).

Property Tax Division properly concluded that a second revaluation of a taxpayer’s property in a non-revaluation year was improper and ordered the county board of equalization and review to restore the accepted appraised values set out in the first revaluation because the second revaluation did not correct a misapplication of the schedule of values and was not statutorily authorized since it was not implemented to correct a misapplication, but, rather, was a proper application of the schedule of values to the newly discovered poorly-selected comparison properties. In re Lowe's Home Ctrs. LLC, 269 N.C. App. 221, 837 S.E.2d 575, 2020 N.C. App. LEXIS 13 (2020).

§ 105-287. Changing appraised value of real property in years in which general reappraisal is not made.

  1. In a year in which a general reappraisal of real property in the county is not made under G.S. 105-286 , the property shall be listed at the value assigned when last appraised unless the value is changed in accordance with this section.  The assessor shall increase or decrease the appraised value of real property, as determined under G.S. 105-286 , to recognize a change in the property’s value resulting from one or more of the following reasons:
    1. Correct a clerical or mathematical error.
    2. Correct an appraisal error resulting from a misapplication of the schedules, standards, and rules used in the county’s most recent general reappraisal. (2a) Recognize an increase or decrease in the value of the property resulting from a conservation or preservation agreement subject to Article 4 of Chapter 121 of the General Statutes, the Conservation and Historic Preservation Agreements Act.

      (2b) Recognize an increase or decrease in the value of the property resulting from a physical change to the land or to the improvements on the land, other than a change listed in subsection (b) of this section.

      (2c) Recognize an increase or decrease in the value of the property resulting from a change in the legally permitted use of the property.

    3. Recognize an increase or decrease in the value of the property resulting from a factor other than one listed in subsection (b).
  2. In a year in which a general reappraisal of real property in the county is not made, the assessor may not increase or decrease the appraised value of real property, as determined under G.S. 105-286 , to recognize a change in value caused by:
    1. Normal, physical depreciation of improvements;
    2. Inflation, deflation, or other economic changes affecting the county in general; or
    3. Betterments to the property made by:
      1. Repainting buildings or other structures;
      2. Terracing or other methods of soil conservation;
      3. Landscape gardening;
      4. Protecting forests against fire; or
      5. Impounding water on marshland for non-commercial purposes to preserve or enhance the natural habitat of wildlife.
  3. An increase or decrease in the appraised value of real property authorized by this section shall be made in accordance with the schedules, standards, and rules used in the county’s most recent general reappraisal. An increase or decrease in appraised value made under this section is effective as of January 1 of the year in which it is made and is not retroactive. The reason for an increase or decrease in appraised value made under this section need not be under the control of or at the request of the owner of the affected property. This section does not modify or restrict the provisions of G.S. 105-312 concerning the appraisal of discovered property.
  4. Notwithstanding subsection (a), if a tract of land has been subdivided into lots and more than five acres of the tract remain unsold by the owner of the tract, the assessor may appraise the unsold portion as land acreage rather than as lots. A tract is considered subdivided into lots when the lots are located on streets laid out and open for travel and the lots have been sold or offered for sale as lots since the last appraisal of the property.

History. 1939, c. 310, ss. 301, 500; 1953, c. 970, s. 5; 1955, c. 901; c. 1100, s. 2; 1959, c. 682; c. 704, s. 2; 1963, c. 414; 1967, c. 892, s. 7; 1969, c. 945, s. 1; 1971, c. 806, s. 1; 1973, c. 695, s. 10; c. 790, s. 2; 1987, c. 655; 1997-226, s. 4; 2001-139, s. 2; 2008-146, s. 1.2.

Editor’s Note.

Session Laws 2008-146, s. 1.4, as amended by Session Laws 2009-445, s. 45(a), provides: “This Part [Part I of Session Laws 2008-146] becomes effective July 1, 2009, and mandatory advancements in G.S. 105-286(a)(2), as amended by Section 1.1 of this Part, apply to notices sent under G.S. 105-284(c) on or after that date.”

Session Laws 2008-146, s. 6, provides: “The Revenue Laws Study Committee must study the following:

“(1) the effect of PART I of this act and determine whether new positions are needed to perform sales assessment ratio studies in additional counties each year and to perform other functions related to this act.

“(2) The definition of income as it applies to the homestead exclusion.”

Session Laws 2013-362, s. 1, provides: “Notwithstanding G.S. 105-287 , 105-325, 105-380, any provision of law restricting the time for which a change in appraisal or valuation may be made, or any other provision of Subchapter II of Chapter 105 of the General Statutes inconsistent with the provisions of this act, a board of county commissioners shall undertake the measures required by this act if all of the following conditions are met:

“(1) The county has independent evidence that the majority of commercial neighborhoods in the county reviewed by a qualified appraisal company possess significant issues of inequity.

“(2) The county has independent evidence that for residential neighborhoods instances of inequity or erroneous data had an impact on the valuation of the neighborhood as a whole.

“(3) The county’s last general reappraisal was performed for the 2008 tax year, 2009 tax year, 2010 tax year, 2011 tax year, or 2012 tax year.

“(4) The independent evidence resulted from a review performed by a qualified appraisal company selected and retained by the county and registered with the Department of Revenue and had a sample size of no less than 375 properties, the relevant characteristics of which were reviewed on location at the property.”

Session Laws 2013-362, s. 2, provides: “If all of the conditions of Section 1 of this act are met, a board of county commissioners shall either (i) conduct a reappraisal, using no less than one person certified by the Department of Revenue for mass valuations per 4,250 parcels, pursuant to G.S. 105-286 within 18 months, applicable to all tax years from and including the tax year when the last general reappraisal was performed pursuant to G.S. 105-286 or (ii) have a qualified appraisal company, which may be the same company that provides the evidence in Section 1 of this act, conduct a review of all the values in the county by neighborhoods and make recommendations as to the true value of the properties as of January 1 of the year of the last general reappraisal performed pursuant to G.S. 105-286. After the reappraisal or after each neighborhood review required by this section is complete, the board of county commissioners shall make any change on the abstracts and tax records to ensure that the assessed values of incorrectly appraised properties in the county reflect the true values of those properties effective for the year of the last general reappraisal performed pursuant to G.S. 105-286 and shall apply the adjusted values for those properties for each tax year until the next general reappraisal for real property is performed by the county pursuant to G.S. 105-286 unless those adjusted values are changed in accordance with G.S. 105-287 . In making changes to the abstracts and tax records mandated by this act, the board of county commissioners shall make adjustments for previous errors prioritized as follows:

“(1) Adjustments to parcels with errors that resulted in the parcels having a significantly overstated value.

“(2) Adjustments to parcels with errors that resulted in the parcels having a significantly understated value.

“(3) Adjustments to parcels with errors that resulted in the parcels having an overstated value.

“(4) Adjustments to parcels with errors that resulted in the parcels having an understated value.

“In instances of parcels with errors that resulted in an overpayment of taxes, the governing board shall require that notice of refund and the refund amount be sent to the owner of record as of the date the payment was made. The provisions of G.S. 105-380 do not apply to the issuance of any refund under the provisions of this act.”

Session Laws 2013-362, s. 3, as amended by Session Laws 2015-266, s. 1, provides: “Interest on taxes paid on parcels with errors that resulted in the parcels having an overstated value shall be calculated at a rate of five percent (5%) per annum. Additional taxes levied on parcels as a result of errors causing the parcels to have an understated value (i) shall be treated as taxes on discovered property pursuant to G.S. 105-312 , except that the discovery penalties set forth in subsection (h) of G.S. 105-312 shall not apply, (ii) are due and payable on September 1 of the fiscal year for which the taxes are levied, but not earlier than four years from the last general reappraisal date, and (iii) shall be payable, at the taxpayer’s option, by means of an agreement over a period of not more than 36 months, in equal monthly installments, if the total of the additional taxes levied is greater than one thousand dollars ($1,000). Interest shall not accrue for the period a taxpayer is making timely payments under a payment plan. The tax collector is authorized to issue forms and develop procedures to implement a payment plan authorized under this section. Notwithstanding G.S. 105-365.1(b), for parcels that have been transferred in a tax year for which errors requiring reappraisals under this act resulted in an underpayment of taxes, the following apply:

“(1) The taxes for each tax year prior to and in the fiscal year in which the transfer occurred shall be collected from the owner of record as of January 1 of each tax year for which unpaid taxes exist. Only the remedies available in G.S. 105-367 and G.S. 105-368 may be used to collect against the owner of record as of January 1 of each tax year for which unpaid taxes exist.

“(2) Notwithstanding G.S. 105-355(a), there shall be no lien on the real property for underpaid taxes that arose in a year in which the property is owned by a person other than the current owner as of January 1 of that year. The current owner shall not be held personally responsible for such underpaid taxes.

“(3) If an owner not responsible for underpaid taxes pursuant to this section paid the underpaid taxes, the owner may assert a valid defense for a refund pursuant to G.S. 105-381 , as a tax imposed through clerical error. Interest on the refund shall be calculated at a rate of five percent (5%) per annum from the date the owner asserting the defense paid the underpaid taxes until the date the refund is issued.”

Effect of Amendments.

Session Laws 2008-146, s. 1.2, effective July 1, 2009, deleted “or horizontal adjustment” following “reappraisal” in the section catchline; in subsection (a), rewrote the introductory paragraph, and deleted “or horizontal adjustment” following “reappraisal” in subdivision (a)(2); in subsection (b), deleted “or horizontal adjustment” following “reappraisal”; and in subsection (c), deleted “or horizontal adjustment” following “reappraisal” in the first sentence, and inserted the third sentence.

CASE NOTES

Purpose of Section. —

The obvious purpose of the procedure in this section is to provide opportunity at the local level to deal with taxpayer-presented information and to modify appraisals as such information requires before any appeal need be heard by the Property Tax Commission. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

This section imposes upon the county an affirmative duty to reappraise property in a non-appraisal year whenever it determines that any of the enumerated circumstances exists. In re Butler, 84 N.C. App. 213, 352 S.E.2d 232, 1987 N.C. App. LEXIS 2490 (1987).

Economic Changes. —

A decline in the value of downtown property and a change in federal tax laws are economic changes affecting the county in general. In re Hotel L'Europe, 116 N.C. App. 651, 448 S.E.2d 865, 1994 N.C. App. LEXIS 1084 (1994).

Permissible Method of Valuation. —

Where provisions of this section were triggered, it necessarily followed that the only statutorily permissible method of valuation was through the application of the county’s schedules, standards and rules. In re Corbett, 355 N.C. 181 , 558 S.E.2d 82, 2002 N.C. LEXIS 20 (2002).

If an appraiser instead applies a Schedule of Values in a manner which results in uneven, inconsistent, and inaccurate tax values, the North Carolina Court of Appeals holds that the appraiser has misapplied the schedule, causing an appraisal error which can, in turn, be corrected as provided for in G.S. 105-287(a)(2). In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

Mere differences of opinion among appraisers about the exact true value of property are to be expected and do not constitute a misapplication of a county’s schedule of values; however, the use of procedures permitted by a schedule of values in a manner which results in lots being valued far below or far above their true values and in a manner inconsistent with the valuation of other lots in the same county is a misapplication of the schedule as a county’s schedules, rules, and standards for tax revaluations must be applied in a uniform and equitable manner that determines the true value of property. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

A post-octennial valuation sale is not a statutorily permissive basis for adjusting a property’s tax valuation. In re Allred, 351 N.C. 1 , 519 S.E.2d 52, 1999 N.C. LEXIS 1010 (1999).

State Tax Commission’s reliance upon an independent appraiser’s collateral determination of petitioners’ property value, without challenge or correlation to the county’s schedules of value or the application of those schedules to the property, was in violation of the statutory requirement of this section that any permissible increase or decrease in the appraised value of real property be calculated using the schedules and standards established by the county. In re Allred, 351 N.C. 1 , 519 S.E.2d 52, 1999 N.C. LEXIS 1010 (1999).

Correction of Unjust and Inequitable Assessment. —

It is apparent that the legislature intended to authorize a county board of equalization and review, when requested so to do, to correct any unjust and inequitable assessment. In re Property of Pine Raleigh Corp., 258 N.C. 398 , 128 S.E.2d 855, 1963 N.C. LEXIS 430 (1963) (decided under former similar provisions) .

Only one of the nine grounds for reappraisal enumerated in this section need exist in order for a county to lawfully conduct a reappraisal in a non-appraisal year. In re Butler, 84 N.C. App. 213, 352 S.E.2d 232, 1987 N.C. App. LEXIS 2490 (1987).

Burden of Proof on Taxpayer. —

While there is an affirmative duty upon the taxing authority to reappraise property if statutorily enumerated circumstances exist, the burden of proof is on the taxpayer to establish the presence of such conditions. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

Burden on Taxpayer to Prove Lack of Authority. —

A county is not required to bear a particular burden of establishing its authority to reappraise in off years. To the contrary, the burden of proof is on the taxpayer. In re Butler, 84 N.C. App. 213, 352 S.E.2d 232, 1987 N.C. App. LEXIS 2490 (1987).

There was a statutory mandate for an assessor to reappraise the property where circumstances caused an increase or decrease in valuation that was not specifically excluded from reappraisal as a result of being listed in this section. In re Corbett, 355 N.C. 181 , 558 S.E.2d 82, 2002 N.C. LEXIS 20 (2002).

Taxpayer adequately stated a claim in asserting that assessment was erroneous because it substantially exceeded true value, failed to address factors impacting the value of real property under G.S. 105-317 , was premised on certain clerical, mathematical and/or appraisal errors, and failed to properly adjust value of property based on its physical condition, layout and economic and functional obsolescence. In re Sterling Diagnostic Imaging, Inc., 132 N.C. App. 393, 511 S.E.2d 682, 1999 N.C. App. LEXIS 113 (1999).

Summary Judgment Improperly Granted. —

North Carolina Property Tax Commission erred in granting summary judgment to the property owners because there were disputed issues of fact about whether the application of the condition factor in 2007 to undeveloped lots that had been sold resulted in uniform, consistent, and accurate assessments of the lots’ true values. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

Due Process Requirements Regarding Notice to Taxpayer. —

Due process merely requires that notice to a taxpayer whose property is reappraised pursuant to this section, considering the time, the general wording, and the method of publication, be reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and to afford them an opportunity to present their objections. In re Butler, 84 N.C. App. 213, 352 S.E.2d 232, 1987 N.C. App. LEXIS 2490 (1987).

Failure of Taxpayer to Notify County. —

The Property Tax Commission did not err as a matter of law by not considering evidence of a factor allegedly affecting the “true value” of taxpayer’s property for a given year where taxpayer failed to make the factor known to the County. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

Adjustment for Inflationary Increases. —

The taxpayer failed to show that the Property Tax Commission erred by not adjusting its expansion costs to the most recent reevaluation year, where witnesses for both parties agreed that total costs should be adjusted downward to account for inflation, and it was reasonable to assume that, in arriving at the value of the expansion, the Commission contemplated this necessity and included price escalations in its reduction of the expansion cost figure by fifty percent to reflect excess costs. In re Philip Morris U.S.A., 130 N.C. App. 529, 503 S.E.2d 679, 1998 N.C. App. LEXIS 1006 (1998).

Notification by Taxpayer of Asbestos Contamination Untimely. —

Statement regarding contamination given to the County’s appraiser nearly sixteen months after the effective date of appraisal and almost four months following conclusion of the tax year in question, as well as the proffer of asbestos contamination evidence at hearing before the Property Tax Commission, came too late to qualify as proper and timely notification. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

If county board of equalization and review refuses to act, the taxpayer may appeal to the State Board of Assessment. In re Property of Pine Raleigh Corp., 258 N.C. 398 , 128 S.E.2d 855, 1963 N.C. LEXIS 430 (1963).

Legislature never contemplated that injustice done a taxpayer must continue for a period of years merely because he failed at the first opportunity to bring the injustice to the attention of the authority having the power to correct. In re Property of Pine Raleigh Corp., 258 N.C. 398 , 128 S.E.2d 855, 1963 N.C. LEXIS 430 (1963).

Reappraisal Supported By Substantial Evidence. —

Under the “whole record” test, land pricing maps and other exhibits and the expert testimony of the appraisal supervisor provided competent, material, and substantial evidence in support of the commission’s conclusion that county’s reappraisal was lawful because a clerical error caused an undervaluation. In re Butler, 84 N.C. App. 213, 352 S.E.2d 232, 1987 N.C. App. LEXIS 2490 (1987).

No Revaluation After Transfer. —

The Property Tax Commission was without statutory authority to revalue a piece of land after the owners/tax payers gave a part of it to a third party. Although the division of the 1.91 acre tract into two tracts and the conveyance of one of the tracts “directly affected” the property, the division and transfer was within the sole authority of the taxpayers and, therefore, not a “factor” within the meaning of this section. In re Corbett, 138 N.C. App. 534, 530 S.E.2d 90, 2000 N.C. App. LEXIS 617 (2000), rev'd, 355 N.C. 181 , 558 S.E.2d 82, 2002 N.C. LEXIS 20 (2002).

Failure to Appraise Property or to Bill Owners. —

This section, prohibiting retroactive increases in appraised property values, did not operate to preclude county tax assessor from levying challenged tax in 1990 (based on property tax commission finding that assessor appraised the house at $0 in 1989), where the assessor, due to an administrative error, simply failed to appraise the house or to bill the owners in 1989 for the taxes owned thereon. In re Dickey, 110 N.C. App. 823, 431 S.E.2d 203, 1993 N.C. App. LEXIS 692 (1993).

Nothing in this section’s language made a distinction between an occurrence within the control of the owner and an occurrence outside the control of the owner; therefore, factors which allowed for an increase or decrease in the appraised value of real property in non-general reappraisal or horizontal adjustment years were not limited to occurrences affecting the specific property which fell outside the control of the owner. In re Corbett, 355 N.C. 181 , 558 S.E.2d 82, 2002 N.C. LEXIS 20 (2002).

Appeal Not Lost After Waiting for Value to be Carried Forward. —

Taxpayer who does not appeal the valuation in the year when it took place, but rather waits until that value had been carried forward to a subsequent tax year does not lose the right to appeal the tax value that had been carried forward. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

Reassessment In Non-Reappraisal Year Held Improper. —

Court of appeals erred in reversing the North Carolina Property Tax Commission’s order granting a taxpayer summary judgment in its action disputing the tax values of its property because the county’s reassessment of the property in a non-reappraisal year constituted an improper reappraisal in violation of G.S. 105-287(a)(2), and the alteration of the taxable value of the taxpayer’s property under the 2008 reassessment was unlawful. In re Ocean Isle Palms, LLC, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

G.S. 105-394 did not let a county recover taxes on a parcel’s corrected value for certain years because (1) the county arbitrarily appraised the parcel for those years, so G.S. 105-287 applied, since the county tried to change a parcel’s value in a year in which a general reappraisal was not made and improperly “discovered” the parcel for those years, and (2) G.S. 105-287 (c) said an increase in value was not retroactive. In re Pace/Dowd Props. Ltd., 233 N.C. App. 7, 755 S.E.2d 401, 2014 N.C. App. LEXIS 267 (2014).

Property Tax Division properly concluded that a second revaluation of a taxpayer’s property in a non-revaluation year was improper and ordered the county board of equalization and review to restore the accepted appraised values set out in the first revaluation because the second revaluation did not correct a misapplication of the schedule of values and was not statutorily authorized since it was not implemented to correct a misapplication, but, rather, was a proper application of the schedule of values to the newly discovered poorly-selected comparison properties. In re Lowe's Home Ctrs. LLC, 269 N.C. App. 221, 837 S.E.2d 575, 2020 N.C. App. LEXIS 13 (2020).

Article 15. Duties of Department and Property Tax Commission as to Assessments.

§ 105-288. Property Tax Commission.

  1. Creation and Membership. —  The Property Tax Commission is created. It consists of five members, three of whom are appointed by the Governor and two of whom are appointed by the General Assembly. Of the two appointments by the General Assembly, one shall be made upon the recommendation of the Speaker of the House of Representatives and the other shall be made upon the recommendation of the President Pro Tempore of the Senate. The terms of the members are for four years and expire on June 30. The General Assembly shall make its appointments in accordance with G.S. 120-121 and shall fill a vacancy in accordance with G.S. 120-122 . A vacancy occurs on the Commission when a member resigns, is removed, or dies. The person appointed to fill a vacancy shall serve for the balance of the unexpired term. The Governor may remove any member for misfeasance, malfeasance, or nonfeasance.The Commission shall have a chair and a vice-chair. The Governor shall designate one of the Commission members as the chair, to serve at the pleasure of the Governor. The members of the Commission shall elect a vice-chair from among its membership. The vice-chair serves until the member’s regularly appointed term expires.
  2. Duties. —  The Property Tax Commission constitutes the State Board of Equalization and Review for the valuation and taxation of property in the State. It shall hear appeals from the appraisal and assessment of the property of public service companies as defined in G.S. 105-333 . The Commission may adopt rules needed to fulfill its duties.
  3. Oath. —  Each member of the Property Tax Commission, as the appointed holder of an office, shall take the oath required by Article VI, § 7 of the North Carolina Constitution with the following phrase added to it: “that I will not allow my actions as a member of the Property Tax Commission to be influenced by personal or political friendships or obligations,”.
  4. Expenses. —  The members of the Property Tax Commission shall receive travel and subsistence expenses in accordance with G.S. 138-5 and a salary as provided for by the Commission when hearing cases, meeting to decide cases, and attending training or continuing education classes on property taxes or judicial procedure. The members of the Property Tax Commission whose salaries or any portion of whose salaries are paid from State funds shall not receive travel and subsistence expenses, in accordance with G.S. 138-5 (f), but shall receive a salary as provided for by the Commission under this subsection. The Secretary of Revenue shall supply all the clerical and other services required by the Commission. All expenses of the Commission and the Department of Revenue in performing the duties enumerated in this Article shall be paid as provided in G.S. 105-501 .
  5. Meetings. —  The Property Tax Commission shall meet at least once in each quarter and may hold special meetings at any time and place within the State at the call of the Chair or upon the written request of at least three members. At least 15 days’ notice shall be given to each member with respect to each special meeting. A majority of the Commission members constitutes a quorum for the transaction of business.

History. 1939, c. 310, ss. 200, 201; 1941, c. 327, s. 6; 1947, c. 184; 1961, c. 547, s. 1; 1967, c. 1196, ss. 1, 2; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1991, c. 110, s. 1; 1991 (Reg. Sess., 1992), c. 1007, s. 20; c. 1016, s. 2; 1995, c. 41, s. 5; 2000-67, s. 7.11; 2005-276, s. 22.5(a); 2007-308, s. 1; 2017-206, s. 2(a).

Editor’s Note.

Session Laws 2017-206, s. 2(b), made the second sentence of subsection (d) of this section, as added by Session Laws 2017-206, s. 2(a), effective August 30, 2017, and applicable retroactively to expenses of the Property Tax Commission incurred on or after April 1, 2017.

Effect of Amendments.

Session Laws 2005-276, s. 22.5(a), effective September 1, 2005, substituted “as provided for by the Commission” for “of two hundred dollars ($200.00) a day” in subsection (d).

Session Laws 2007-308, s. 1, effective July 28, 2007, and applicable to appointments made after July 1, 2007, substituted “The terms of the members are for four years and expire on June 30” for “The terms of the members appointed by the Governor and of the member appointed upon the recommendation of the President Pro Tempore of the Senate are for four years. Of the members appointed for four-year terms, two expire on June 30 of each odd-numbered year. The term of the member appointed upon the recommendation of the Speaker of the House of Representatives is for two years and it expires on June 30 of each odd-numbered year” in the first paragraph of subsection (a).

Session Laws 2017-206, s. 2(a), added the second sentence in subsection (d). For effective date and applicability, see editor’s note.

CASE NOTES

Duty to Weigh and Appraise Evidence. —

The function of the Property Tax commission is to determine the weight and sufficiency of the evidence and the credibility of the witnesses, to draw inferences from the facts and to appraise conflicting and circumstantial evidence. In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Discriminatory taxation of railroads by State held unlawful. Clinchfield R.R. v. Lynch, 700 F.2d 126, 1983 U.S. App. LEXIS 30796 (4th Cir. 1983).

Function of the Property Tax Commission is to determine the weight and sufficiency of the evidence and the credibility of the witnesses, to draw inferences from the facts and to appraise conflicting and circumstantial evidence. In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985) (decided under former G.S. 143B-222 ).

Sanctions for Failure to Follow Commission’s Rules. —

Dismissal of an appeal to the commission for failure to follow the rules of the commission for filing the appeal is an appropriate sanction. Without the implicit authority to enforce its rules by dismissal, the commission’s effectiveness as a quasi-judicial body would be fatally compromised. In re Fayetteville Hotel Assocs., 117 N.C. App. 285, 450 S.E.2d 568, 1994 N.C. App. LEXIS 1215 (1994), aff'd, 342 N.C. 405 , 464 S.E.2d 298, 1995 N.C. LEXIS 694 (1995).

Order Entered After Expiration of Chairman’s Term. —

Order entered on November 4, 1991 by chairman of county tax commission after his term had expired as a commissioner on the property tax commission and his successor to the commission had been appointed was not a valid and binding order because the chairman did not have the authority to enter an order after the expiration of his term on the commission. In re N. Telecom, Inc., 112 N.C. App. 215, 435 S.E.2d 367, 1993 N.C. App. LEXIS 1056 (1993).

§ 105-289. Duties of Department of Revenue.

  1. It is the duty of the Department of Revenue:
    1. To discharge the duties prescribed by law and to enforce the provisions of this Subchapter.
    2. To exercise general and specific supervision over the valuation and taxation of property by taxing units throughout the State.
    3. To appraise the property of public service companies.
    4. To keep full and accurate records of the Commission’s official proceedings.
    5. To prepare and distribute annually to each assessor the manual developed by the Use-Value Advisory Board under G.S. 105-277.7 that establishes the cash rental rates for agricultural lands and horticultural lands and the net income ranges for forestland.
    6. To establish requirements for horticultural land, used to produce evergreens intended for use as Christmas trees, in lieu of a gross income requirement until evergreens are harvested from the land, and to establish a gross income requirement for this type horticultural land, that differs from the income requirement for other horticultural land, when evergreens are harvested from the land.
    7. To conduct studies of the cash rents for agricultural and horticultural lands on a county or a regional basis, such as the Major Land Resource Area map designated and developed by the U.S. Department of Agriculture. The results of the studies must be furnished to the North Carolina Use-Value Advisory Board. The studies may be conducted on any reasonable basis and timetable that will be reflective of rents and values for each local area based on the productivity of the land.
  2. , (c) Repealed by Session Laws 1973, c. 476, s. 193. (d) In exercising general and specific supervision over the valuation and taxation of property, the Department shall provide the following:
    1. A continuing program of education and training for local tax officials in the conduct of their duties;
    2. A program for testing the qualifications of an assessor and other persons engaged in the appraisal of property for a county or municipality;
    3. A certification program for an assessor and other persons engaged in the appraisal of property for a county or municipality; and
    4. Assistance to the county and/or the county attorney in developing the specifications for the proposed contract sent to the Department for review pursuant to G.S. 105-299 .The Department shall promulgate regulations to carry out its duties under this subsection.

      (e) The Department of Revenue may furnish the following information to a local tax official:

      (1) Information contained in a report to it or to any other State department; and

      (2) Information the Department has in its possession that may assist a local tax official in securing complete tax listings, appraising or assessing taxable property, collecting taxes, or presenting information in administrative or judicial proceedings involving the listing, appraisal, or assessment of property.A local tax official may use information obtained from the Department under this subsection only for the purposes stated in subdivision (2). A local tax official may not divulge or make public this information except as required in administrative or judicial proceedings under this Subchapter. A local tax official who makes improper use of or discloses information obtained from the Department under this subsection is punishable as provided in G.S. 153A-148.1 or G.S. 160A-208.1 , as appropriate.The Department may not furnish information to a local tax official pursuant to this subsection unless it has obtained a written certification from the official stating that the official is familiar with the provisions of this subsection and G.S. 153A-148.1 or G.S. 160A-208.1 , as appropriate, and that information obtained from the Department under this subsection will be used only for the purposes stated in subdivision (2).

      (f) To advise local tax officials of their duties concerning the listing, appraisal, and assessment of property and the levy and collection of property taxes.

      (g) To see that proper proceedings are brought to enforce the statutes pertaining to taxation and the collection of penalties and liabilities imposed by law upon public officers, officers of corporations, and individuals who fail, refuse, or neglect to comply with the provisions of this Subchapter and other laws with respect to the taxation of property, and to call upon the Attorney General of this State or any prosecuting attorney of this State to assist in the execution of the powers conferred by the laws of this State with respect to the taxation of property.

      (h) To make annual studies of the ratio of the appraised value of real property to its true value and to establish for each county the median ratio as determined by the studies for each calendar year. The studies for each calendar year shall be completed by April 15 of the following calendar year. The studies shall be conducted in accordance with generally accepted principles and procedures for sales assessment ratio studies.

      (i) To maintain a register of appraisal firms, mapping firms and other persons or firms having expertise in one or more of the duties of the assessor; to review the qualifications and work of such persons or firms; and to advise county officials as to the professional and financial capabilities of such persons or firms to assist the assessor in carrying out his duties under this Subchapter. The register shall include a copy of the report filed by the counties pursuant to G.S. 105-322(g)(4). It shall also include the average median sales assessment ratio and the coefficient of dispersion achieved in each county for the first two years following the county’s effective date of revaluation. To be registered with the Department of Revenue, such persons or firms shall annually file a report with the Department setting forth the following information:

      (1) A statement of the firm’s ownership,

      (2) A statement of the firm’s financial condition,

      (3) A list of the firm’s principal officers with a statement of their qualifications and experience,

      (4) A list of the firm’s employees with a statement of their education, training and experience, and

    5. A full and complete resume of each employee which the firm proposes to place in a supervisory position in any mapping or revaluation project for a county in this State.

History. 1939, c. 310, s. 202; 1955, c. 1350, s. 10; 1967, c. 1196, s. 3; 1969, c. 7, s. 1; 1971, c. 806, s. 1; 1973, c. 47, s. 2; c. 476, s. 193; 1975, c. 275, s. 9; c. 508, s. 1; 1981, c. 387, ss. 1, 2; 1983, c. 813, s. 1; 1985, c. 601, s. 3; c. 628, s. 3; 1987, c. 45, s. 1; c. 46, s. 1; c. 440, s. 1; c. 830, s. 84(a); 1987 (Reg. Sess., 1988), c. 1052, s. 1; 1989, c. 79, ss. 2, 4; c. 736, s. 3; 1991, c. 110, s. 2; 1993, c. 485, s. 35; 2002-184, s. 5; 2005-313, s. 6.

Editor’s Note.

Session Laws 2003-284, s. 7.6(j), provides: “Department of Revenue Reports. — The Department of Revenue shall provide to the Department of Public Instruction a preliminary report for the current fiscal year of the assessed value of the property tax base for each county prior to March 1 of each year and a final report prior to May 1 of each year. The reports shall include for each county the annual sales assessment ratio and the taxable values of (i) total real property, (ii) the portion of total real property represented by the present-use value of agricultural land, horticultural land, and forestland as defined in G.S. 105-277.2 , (iii) property of public service companies determined in accordance with Article 23 of Chapter 105 of the General Statutes, and (iv) personal property.”

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.

Effect of Amendments.

Session Laws 2002-184, s. 5, effective for taxes imposed for taxable years beginning on or after July 1, 2003, rewrote subdivision (a)(5), added subdivision (a)(7), and substituted “is” for “shall be” in the introductory language of subsection (a).

Session Laws 2005-313, s. 6, effective for taxes imposed for taxable years beginning on or after July 1, 2005, inserted “and horticultural” near the beginning of the first sentence of subdivision (a)(7).

CASE NOTES

North Carolina Const., Art. II. § 23 Not Applicable to Session Laws 1987 (Reg. Sess., 1988), Chapter 1052. —

North Carolina Const., Art. II, § 23 applies, inter alia, to laws enacted for the purpose of imposing a tax. Session Laws 1987 (Reg. Sess., 1988), c. 1052 neither imposes a tax nor authorizes its imposition, and therefore, N.C. Const., Art. II, § 23 does not apply. North Carolina E. Mun. Power v. Wake County, 100 N.C. App. 693, 398 S.E.2d 486, 1990 N.C. App. LEXIS 1163 (1990).

There is no doubt that the effect of Session Laws 1987 (Reg. Sess., 1988), c. 1052 imposed a greater tax burden on plaintiff for 1988. However, N.C. Const., Art. II, § 23 focuses on the purpose of the statute (to impose a tax) and not the result of the statute (an increased tax burden). North Carolina E. Mun. Power v. Wake County, 100 N.C. App. 693, 398 S.E.2d 486, 1990 N.C. App. LEXIS 1163 (1990).

Department of Revenue is given general supervisory power over the valuation and taxation of property throughout the State and authority to correct improper assessments. In re King, 281 N.C. 533 , 189 S.E.2d 158, 1972 N.C. LEXIS 1106 (1972).

§ 105-289.1. [Repealed]

Repealed by Session Laws 1987, c. 813, s. 12.

§ 105-290. Appeals to Property Tax Commission.

  1. Duty to Hear Appeals. —  In its capacity as the State board of equalization and review, the Property Tax Commission shall hear and adjudicate appeals from boards of county commissioners and from county boards of equalization and review as provided in this section.
  2. Appeals from Appraisal and Listing Decisions. —  The Property Tax Commission shall hear and decide appeals from decisions concerning the listing, appraisal, or assessment of property made by county boards of equalization and review and boards of county commissioners. Any property owner of the county may except to an order of the county board of equalization and review or the board of county commissioners concerning the listing, appraisal, or assessment of property and appeal the order to the Property Tax Commission.
    1. In these cases, taxpayers and persons having ownership interests in the property subject to taxation may file separate appeals or joint appeals at the election of one or more of the taxpayers. It is the intent of this provision that all owners of a single item of personal property or tract or parcel of real property be allowed to join in one appeal and also that any taxpayer be allowed to include in one appeal all objections timely presented regardless of the fact that the listing or valuation of more than one item of personal property or tract or parcel of real property is the subject of the appeal.
    2. When an appeal is filed, the Property Tax Commission shall provide a hearing before representatives of the Commission or the full Commission as specified in this subdivision.
      1. Hearing by Commission Representatives. —  The Commission may authorize one or more members of the Commission or employees of the Department of Revenue to hear an appeal, to make examinations and investigations, to have made from stenographic notes a full and complete record of the evidence offered at the hearing, and to make recommended findings of fact and conclusions of law. Should the Commission elect to follow this procedure, it shall fix the time and place at which its representatives will hear the appeal and, at least 10 days before the hearing, give written notice of the hearing to the appellant and to the clerk of the board of commissioners of the county from which the appeal is taken. At the hearing the Commission’s representatives shall hear all evidence and affidavits offered by the appellant and appellee county and may exercise the authority granted by subsection (d), below, to obtain information pertinent to decision of the appeal. The representatives conducting the hearing shall submit to the Commission and to the appellant and appellee their recommended findings of fact and conclusions of law. Upon the request of any party, the representatives conducting the hearing shall also submit to the Commission and to the appellant and appellee a full record of the proceeding. The cost of providing the full record of the proceeding shall be borne by the party requesting it, unless the Commission determines for good cause that the cost should be borne by the Commission. The Commission shall review the record, the recommended findings of fact and conclusions of law, and any written arguments that may be submitted to the Commission by the appellant or appellee within 15 days following the date on which the findings and conclusions were submitted to the parties and shall take one of the following actions:
        1. Accept the recommended findings of fact and conclusions of law and issue an appropriate order as provided in subdivision (b)(3), below.
        2. Make new findings of fact or conclusions of law based upon the materials submitted by the Commission’s representatives and issue an appropriate order as provided in subdivision (b)(3), below.
        3. Rehear the appeal under the procedure provided in subdivision (b)(2)b, below, with respect to any portion of the record or recommended findings of fact or conclusions of law.
      2. Hearing by Full Commission. —  Should the Commission elect not to employ the procedure provided in subdivision (b)(2)a, above, it shall fix a time and place at which the Commission shall hear the appeal and, at least 10 days before the hearing, give written notice of the hearing to the appellant and to the clerk of the board of commissioners of the county from which the appeal is taken. At the hearing the Commission shall hear all evidence and affidavits offered by the appellant and appellee county and may exercise the authority granted by subsection (d), below, to obtain information pertinent to decision of the appeal. The Commission shall make findings of fact and conclusions of law and issue an appropriate order as provided in subdivision (b)(3), below.
    3. On the basis of the findings of fact and conclusions of law made after any hearing provided for by this subsection (b), the Property Tax Commission shall enter an order (incorporating the findings and conclusions) reducing, increasing, or confirming the valuation or valuations appealed or listing or removing from the tax lists the property whose listing has been appealed. A certified copy of the order shall be delivered to the appellant and to the clerk of the board of commissioners of the county from which the appeal was taken, and the abstracts and tax records of the county shall be corrected to reflect the Commission’s order.
    4. Interest on Overpayments. —  When an order of the Property Tax Commission reduces the valuation of property or removes the property from the tax lists and, based on the order, the taxpayer has paid more tax than is due on the property, the taxpayer is entitled to receive interest on the overpayment in accordance with this subdivision. An overpayment of tax bears interest at the rate set under G.S. 105-241.21 from the date the interest begins to accrue until a refund is paid. Interest accrues from the later of the date the tax was paid and the date the tax would have been considered delinquent under G.S. 105-360 . A refund is considered paid on a date determined by the governing body of the taxing unit that is no sooner than five days after a refund check is mailed.
  3. Appeals from Adoption of Schedules, Standards, and Rules. —  It shall be the duty of the Property Tax Commission to hear and to adjudicate appeals from orders of boards of county commissioners adopting schedules of values, standards, and rules under the provisions of G.S. 105-317 as prescribed in this subsection (c), and the adoption of such schedules, standards, and rules shall not be subject to appeal under any other provision of this Subchapter.
    1. A property owner of the county who, either separately or in conjunction with other property owners of the county, asserts that the schedules of values, standards, and rules adopted by order of the board of county commissioners do not meet the true value or present-use value appraisal standards established by G.S. 105-283 and G.S. 105-277.2(5), respectively, may appeal the order to the Property Tax Commission within 30 days of the date when the order adopting the schedules, standards, and rules was first published, as required by G.S. 105-317 (c).
    2. Upon such an appeal the Property Tax Commission shall proceed to hear the appeal in accordance with the procedures provided in subdivisions (b)(1) and (b)(2), above, and in scheduling the hearing upon such an appeal, the Commission shall give it priority over appeals that may be pending before the Commission under the provisions of subsection (b), above. The decision of the Commission upon such an appeal shall be embodied in an order as provided in subdivision (c)(3), below.
    3. On the basis of the findings of fact and conclusions of law made after any hearing provided for by this subsection (c), the Property Tax Commission shall enter an order (incorporating the findings and conclusions):
      1. Modifying or confirming the order adopting the schedules, standards, and rules challenged, or
      2. Requiring the board of county commissioners to revise or modify its order of adoption in accordance with the instructions of the Commission and to present the order as thus revised or modified for approval by the Commission under rules and regulations prescribed by the Commission.
  4. Witnesses and Documents. —  Upon its own motion or upon the request of any party to an appeal, the Property Tax Commission, or any member of the Commission, or any employee of the Department of Revenue so authorized by the Commission shall examine witnesses under oath administered by any member of the Commission or any employee of the Department so authorized by the Commission, and examine the documents of any person if there is ground for believing that information contained in such documents is pertinent to the decision of any appeal pending before the Commission, regardless of whether such person is a party to the proceeding before the Commission. Witnesses and documents examined under the authority of this subsection (d) shall be examined only after service of a subpoena as provided in subdivision (d)(1), below. The travel expenses of any witness subpoenaed and the cost of serving any subpoena shall be borne by the party that requested the subpoena.
    1. The Property Tax Commission, a member of the Commission, or any employee of the Department of Revenue authorized by the Commission, is authorized and empowered to subpoena witnesses and to subpoena documents upon a subpoena to be signed by the chairman of the Commission directed to the witness or witnesses or to the person or persons having custody of the documents sought. Subpoenas issued under this subdivision may be served by any officer authorized to serve subpoenas.
    2. Any person who shall willfully fail or refuse to appear, to produce subpoenaed documents in response to a subpoena, or to testify as provided in this subsection (d) shall be guilty of a Class 1 misdemeanor.
    3. Upon a motion, the Property Tax Commission, or a member of the Commission may quash a subpoena if, after a hearing, the Commission finds any of the following:
      1. The subpoena requires the production of evidence that does not relate to a matter in issue.
      2. The subpoena fails to describe with sufficient particularity the evidence required to be produced.
      3. The subpoena is subject to being quashed for any other reason sufficient in law.

        (d1) Hearing on Motion to Quash Subpoena; Appeal. — A hearing on a motion to quash a subpoena pursuant to subdivision (d)(3) of this section shall be heard at least 10 days prior to the hearing for which the subpoena was issued. The denial of a motion to quash a subpoena is subject to immediate judicial review in the Superior Court of Wake County or in the superior court of the county where the person subject to the subpoena resides.

        (d2) Business Entity Representation. — If a property owner is a business entity, the business entity may represent itself using a nonattorney representative who is one or more of the following of the business entity: (i) officer, (ii) manager or member-manager, if the business entity is a limited liability company, (iii) employee whose income is reported on IRS Form W-2, if the business entity authorizes the representation in writing, or (iv) owner of the business entity, if the business entity authorizes the representation in writing and if the owner’s interest in the business entity is at least twenty-five percent (25%). Authority for and prior notice of nonattorney representation shall be made in writing, under penalty of perjury, to the Commission on a form provided by the Commission.

  5. Time Limits for Appeals. —  A notice of appeal from an order of a board of county commissioners, other than an order adopting a uniform schedule of values, or from a board of equalization and review shall be filed with the Property Tax Commission within 30 days after the date the board mailed a notice of its decision to the property owner. A notice of appeal from an order adopting a schedule of values shall be filed within the time set in subsection (c).
  6. Notice of Appeal. —  A notice of appeal filed with the Property Tax Commission shall be in writing and shall state the grounds for the appeal. A property owner who files a notice of appeal shall send a copy of the notice to the appropriate county assessor.
  7. What Constitutes Filing. —  A notice of appeal submitted to the Property Tax Commission by a means other than United States mail is considered to be filed on the date it is received in the office of the Commission. A notice of appeal submitted to the Property Tax Commission by United States mail is considered to be filed on the date shown on the postmark stamped by the United States Postal Service. If an appeal submitted by United States mail is not postmarked or the postmark does not show the date of mailing, the appeal is considered to be filed on the date it is received in the office of the Commission. A property owner who files an appeal with the Commission has the burden of proving that the appeal is timely.

History. 1939, c. 310, ss. 202, 1107, 1109; 1955, c. 1350, s. 10; 1967, c. 1196, s. 3; 1969, c. 7, ss. 1, 2; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1987, c. 295, ss. 3, 9; c. 680, ss. 4, 5; 1989 (Reg. Sess., 1990), c. 1005, ss. 1, 2; 1991 (Reg. Sess., 1992), c. 1016, s. 1; 1993, c. 539, s. 713; 1994, Ex. Sess., c. 24, s. 14(c); 1997-205, s. 1; 2007-251, ss. 3, 4; 2007-491, s. 44(1)a; 2014-120, s. 7(b).

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 2007-251, ss. 3 and 4, effective July 20, 2007, added subdivision (d)(3) and subsection (d1).

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 subdivision (b)(4). For applicability, see Editor’s note.

Session Laws 2014-120, s. 7(b), effective September 18, 2014, added subsection (d2). See Editor’s note for applicability.

Legal Periodicals.

For article on the need to reform North Carolina Property tax law, see 59 N.C.L. Rev. 675 (1981).

For 1997 legislative survey, see 20 Campbell L. Rev. 481.

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

Legislative Intent. —

The Legislature intended the right of appeal in these cases to extend only to taxpayers or those persons who have ownership interests in the property subject to taxation. In re Appeal of Forsyth County, 104 N.C. App. 635, 410 S.E.2d 533, 1991 N.C. App. LEXIS 1098 (1991).

Filing of Notice of Appeal. —

A notice of appeal submitted to the Commission via the Postal Service, but which does not bear a postmark stamped by the Service, is considered filed only upon receipt by the Commission. In re Bass Income Fund, 115 N.C. App. 703, 446 S.E.2d 594, 1994 N.C. App. LEXIS 759 (1994).

Filing the notice of appeal form constitutes neither an “appearance” before the North Carolina Property Tax Commission nor the practice of law; filing the Notice of Appeal and Application for Hearing does not constitute an appearance or legal representation requiring notice under (d2), and it does not violate the general purpose of North Carolina’s prohibition on the corporate practice of law. In re Harris Teeter, LLC, 271 N.C. App. 589, 845 S.E.2d 131, 2020 N.C. App. LEXIS 435 (2020), cert. denied, 376 N.C. 544 , 851 S.E.2d 49, 2020 N.C. LEXIS 1160 (2020), aff'd, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

Scrivener’s exception to the practice of law applied because a taxpayer’s director of financial support filled out blanks on a standardized, fill-in-the-blank appeal form and filed it with the North Carolina Property Tax Commission, which required no exercise of legal judgment; therefore, the taxpayer did not avail itself of nonattorney representation before the Commission requiring notice, and the Commission did not err in denying the county’s motion to dismiss. In re Harris Teeter, LLC, 271 N.C. App. 589, 845 S.E.2d 131, 2020 N.C. App. LEXIS 435 (2020), cert. denied, 376 N.C. 544 , 851 S.E.2d 49, 2020 N.C. LEXIS 1160 (2020), aff'd, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

Because the notices of decisions were valid, even though the Mecklenburg County Board of Equalization and Review allowed the Assessor’s Office to conduct its mailings and the Office hired a private third party to mail the notices, and the taxpayers’ appeals were not timely, the Property Tax Commission correctly determined that it did not have jurisdiction of hear the taxpayer’s appeals. N.C. Gen. Stat. § 105-322(g) left flexible what procedure the Board had to follow when it conducting its mailings. In re Appeals of POP Capitol Towers, LP, 2022-NCCOA-205, 2022 N.C. App. LEXIS 234 (April 5, 2022).

Entry of Judgment. —

This section, rather than G.S. 1A-1 , Rule 58, controlled appeal to the Property Tax Commission, including entry of judgment. In re Gen. Tire, Inc., 102 N.C. App. 38, 401 S.E.2d 391, 1991 N.C. App. LEXIS 194 (1991).

Property Tax Commission is given general supervisory power over the valuation and taxation of property throughout the State and authority to correct improper assessments. In re King, 281 N.C. 533 , 189 S.E.2d 158, 1972 N.C. LEXIS 1106 (1972).

Property Tax Commission Empowered to Make Final Valuation of Property. —

The legislature’s intent is that the agency designated to hear appeals in all matters pertaining to tax valuations should also be the one empowered to make the final valuation. The State Board of Assessment (now Property Tax Commission) — unlike the courts — has the staff, the specialized knowledge and expertise necessary to make informed decisions upon questions relating to the valuation and assessment of property. King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

Limits on Commission’s Powers. —

State Property Tax Commission’s authority to issue an order reducing, increasing or confirming the valuation or valuations appealed, or listing or removing from the tax lists the property which has been appealed, is subject to the same statutory parameters as assessors, county boards and county commissioners. In re Allred, 351 N.C. 1 , 519 S.E.2d 52, 1999 N.C. LEXIS 1010 (1999).

Decision Regarding Exemption. —

Although the decision of the county board to grant or deny an exemption is a discretionary one, it is reviewable by the Property Tax Commission. In re K-mart Corp., 319 N.C. 378 , 354 S.E.2d 468, 1987 N.C. LEXIS 1922 (1987).

Dismissal of Appeals to Commission. —

A county board of equalization and review operates in a very informal manner. No record is kept and usually little hard evidence exists to indicate the procedures followed. Therefore, appeals to the Property Tax Commission should not be dismissed on technical grounds but only for clear noncompliance with statutory prerequisites. Brock v. North Carolina Property Tax Comm'n, 290 N.C. 731 , 228 S.E.2d 254, 1976 N.C. LEXIS 1178 (1976).

Taxpayer Must Exhaust Administrative Remedy Before Resorting to Courts. —

The legislature has provided adequate means whereby the individual taxpayer may contest not only the valuation which the county commissioners have placed upon his own property but the entire tax list or assessment roll, and he must exhaust this administrative remedy before he can resort to the courts. King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

The superior court has no authority to issue mandamus commanding the commissioners to revalue all real property in the county at its true value in money, since taxpayers must first exhaust the statutory administrative remedies in the county board of equalization and review and in the State Board of Assessment (now Property Tax Commission) before they can resort to the superior court. King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

Superior court did not err in dismissing a taxpayer’s petition for writ of mandamus directing a county tax administrator to report the facts to the board of county commissioners in order that the board could make a decision as to whether the taxpayer received notice of changes in the valuation of its property because the taxpayer failed to timely challenge the change in valuation of the property before the county board of equalization and review, and thus lost its right to appeal; taxpayer also chose not to pursue the second means of redress available to it by paying the taxes and then bringing a suit in the trial court for its recovery under G.S. 105-381 , but instead the taxpayer filed a petition for writ of mandamus in the superior court. Villages at Red Bridge, LLC v. Weisner, 209 N.C. App. 604, 704 S.E.2d 925, 2011 N.C. App. LEXIS 209 (2011).

Availability of Judicial Review. —

Although it was difficult from individual property records for a property owner to ascertain the standard of value by which each individual parcel of land was valued, that was not a proper subject of an appeal under G.S. 105-290(c)(1). In re Appeal of Parker, 191 N.C. App. 313, 664 S.E.2d 1, 2008 N.C. App. LEXIS 1338 (2008).

But Judicial Review Is Available. —

Any person aggrieved by a final decision of the Property Tax Commission, and who has exhausted all administrative remedies available to him, is entitled to judicial review under G.S. 150A-43 (see now G.S. 150B-43 ) et seq. Brock v. North Carolina Property Tax Comm'n, 290 N.C. 731 , 228 S.E.2d 254, 1976 N.C. LEXIS 1178 (1976).

The administrative decisions of the Property Tax Commission, whether with respect to the schedule of values of the appraisal of property, are always subject to judicial review after administrative procedures have been exhausted. Brock v. North Carolina Property Tax Comm'n, 290 N.C. 731 , 228 S.E.2d 254, 1976 N.C. LEXIS 1178 (1976).

Jurisdiction of State Board (now Property Tax Commission) Not Exclusive. —

See In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

Jurisdiction Lacking. —

Where County Tax Assessor attempted to appeal in his individual capacity a decision of the Board of Equalization and Review that he could not appeal in his official capacity as Tax Assessor he had no standing to appeal to the Property Tax Commission and the Commission had no jurisdiction to hear his appeal. In re Moses H. Cone Mem. Hosp., 113 N.C. App. 562, 439 S.E.2d 778, 1994 N.C. App. LEXIS 157 (1994), aff'd in part, 340 N.C. 93 , 455 S.E.2d 431, 1995 N.C. LEXIS 153 (1995).

North Carolina Property Tax Commission erred by denying a county’s motion to dismiss a taxpayer’s petition for a new hearing regarding the valuation of its property and entertaining its appeal of the order of the county board of equalization because the taxpayer did not perfect its appeal with 30 days pursuant to G.S. 105-290(e), which deprived the Commission of jurisdiction to hear the appeal, and that the substance of the appeal could have had merit did not render the time limit for appeals inapplicable; the 30-day “time limit for appeals” set out in G.S. 105-290(e) is jurisdictional. In re Appeals of: La. Pac. Corp. from the Decisions Bd. of Equalization & Review, 208 N.C. App. 457, 703 S.E.2d 190, 2010 N.C. App. LEXIS 2441 (2010).

Weight of Findings of Commission upon Review. —

When judicial review is sought in superior court on the record made before the Property Tax Commission, the court is bound by the findings if they are supported by competent, material and substantial evidence under G.S. 150A-51(5) (see now G.S. 150B-51(5)) in view of the entire record as submitted. Brock v. North Carolina Property Tax Comm'n, 290 N.C. 731 , 228 S.E.2d 254, 1976 N.C. LEXIS 1178 (1976).

When Case Remanded to Commission. —

Where the findings of the Property Tax Commission are not supported according to the requirements of G.S. 150A-51(5) (see now G.S. 150B-51(5)), the case will be remanded for further proceedings. Brock v. North Carolina Property Tax Comm'n, 290 N.C. 731 , 228 S.E.2d 254, 1976 N.C. LEXIS 1178 (1976).

Steps in Obtaining Review of Valuation. —

If the county commissioners have failed to value land at its true value in money — be the failure deliberate, an error in judgment, or caused by a misconception of the law — plaintiffs’ initial step is to complain to the county board of equalization and review and request a hearing. If they are dissatisfied with the action taken by that board they may except to its order and appeal to the State Board (now Property Tax Commission). Thereafter, plaintiffs may resort to the courts, but only to obtain judicial review for errors of law or abuse of discretion by the State Board (now Property Tax Commission). King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

Burden of Proof on Taxpayer. —

While there is an affirmative duty upon the taxing authority to reappraise property if statutorily enumerated circumstances exist, the burden of proof is on the taxpayer to establish the presence of such conditions. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

Showing Required to Have Valuation Set Aside. —

In order for a taxpayer to have valuation set aside, he must show more than a failure to follow the statutory procedures. It is not enough for the taxpayer to show that the means adopted by the tax supervisor were wrong; he must also show that the result arrived at is substantially greater than the true value in money of the property assessed, i.e., that the valuation was unreasonably high. In re Highlands De v. Corp., 80 N.C. App. 544, 342 S.E.2d 588, 1986 N.C. App. LEXIS 2193 (1986).

Where taxpayers failed to show how they were aggrieved by the valuation of other owners’ property, the Commission properly refused to allow them to appeal those valuations as a class action. In re Highlands De v. Corp., 80 N.C. App. 544, 342 S.E.2d 588, 1986 N.C. App. LEXIS 2193 (1986).

Standard of Review. —

Because a taxpayer’s appeal to the North Carolina Property Tax Commission challenged only the sufficiency of a county schedule of values as a matter of law pursuant to G.S. 105-290(c), an appellate court reviewed the Commission’s decision de novo. In re Appeal of Parker, 191 N.C. App. 313, 664 S.E.2d 1, 2008 N.C. App. LEXIS 1338 (2008).

Appeal Not Lost After Waiting for Value to be Carried Forward. —

Taxpayer who does not appeal the valuation in the year when it took place, but rather waits until that value had been carried forward to a subsequent tax year does not lose the right to appeal the tax value that had been carried forward. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

Exemption Properly Granted. —

North Carolina Property Tax Commission’s (PTC) did not err in denying a county’s motion to dismiss a taxpayer’s appeal and in granting the taxpayer an exemption from ad valorem taxes under G.S. 105-278.1 because the PTC appropriately reviewed the materials presented by both parties prior to the hearing and based on competent evidence denied the motion while entering a final decision in favor of the taxpayer; the county was not prejudiced through the holding of one hearing to address all matters, as the evidence was clearly in the taxpayer’s favor. In re David H. Murdock Research Inst., 220 N.C. App. 377, 725 S.E.2d 619, 2012 N.C. App. LEXIS 595 (2012).

§ 105-291. Powers of Department and Commission.

  1. General Powers. —  The Department of Revenue is authorized to exercise all powers reasonably necessary to perform the duties imposed upon it by this Subchapter and other laws of this State.
  2. Rule-Making Power. —  The Department may adopt such rules and regulations, not inconsistent with law, as the Department may deem necessary to perform the duties or responsibilities of this Chapter.
  3. General Investigatory Authority. —  In exercising general and specific supervision over the valuation and taxation of property, the Department or any authorized deputy shall have power to examine witnesses under oath administered by any member or authorized deputy and to examine the documents of any State department, county, city, town, or taxpayer if there is ground for believing that the witnesses have or that the documents contain information pertinent to the subject of the Department’s inquiry. Witnesses and documents examined under the authority of this subsection (c) may be obtained through service of subpoenas as provided in subdivision (c)(1), below.
    1. To obtain the testimony of witnesses or to obtain access to the documents enumerated in this subsection (c), the Department or any authorized deputy is authorized and empowered to subpoena witnesses and to subpoena documents upon a subpoena to be signed by the Secretary of Revenue directed to the witness or to the person having custody of the documents sought, and to be served by any officer authorized to serve subpoenas.
    2. Any person who shall willfully fail or refuse to appear; to produce subpoenaed documents before the Department or authorized deputy in response to a subpoena; or to testify as provided in this subsection (c) shall be guilty of a Class 1 misdemeanor.
  4. Certification of Actions. —  The Property Tax Commission shall have power to certify copies of its records, orders, and proceedings by attesting the copies with its official seal, and copies of records, orders, or proceedings so certified shall be received in evidence in all courts of this State with like effect as certified copies of other public records.
  5. Power to Require Reports. —  In its discretion, the Department may require tax supervisors, clerks of boards of county commissioners, and county accountants to file with it, when called for, complete reports of the appraised and assessed value of all real and personal property in the counties, itemized as the Department may prescribe.
  6. Power to Prescribe Record Forms. —  The Department may prescribe the forms, books, and records to be used in the listing, appraisal, and assessment of property and in the levying and collection of property taxes, and how the same shall be kept.
  7. Power to Recommend Appraisal Standards. —  The Department may develop and recommend standards and rules to be used by tax supervisors and other responsible officials in the appraisal of specific kinds and categories of property for taxation.

History. 1939, c. 310, s. 203; 1945, c. 955; 1951, c. 798; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1993, c. 539, s. 714; 1994, Ex. Sess., c. 24, s. 14(c).

CASE NOTES

Costs Included in Assessment. —

County’s discovery used to determine the valuation of the personal property of the business for a six-year period was not arbitrary and illegal for including the cost of water treatment plant that the taxpayer built, as the county was permitted to include under its own guidelines all costs incurred in obtaining property and making it ready for its intended use, which included the cost of the water treatment plant. In re Appeal of Westmoreland-LG&E, 174 N.C. App. 692, 622 S.E.2d 124, 2005 N.C. App. LEXIS 2611 (2005).

Appraisal of Billboards in Bulk. —

It was not illegal or arbitrary for a county to appraise billboards in bulk; a property owner failed to show that the method prescribed by a billboard structures valuation guide, which was developed under statutory authority, produced a value significantly higher than the true value. The fact that independent valuations of each piece of property might have been more accurate than a mass appraisal did not make the county’s method arbitrary. In re Appeal of Interstate Outdoor Inc., 236 N.C. App. 294, 763 S.E.2d 172, 2014 N.C. App. LEXIS 998 (2014).

§§ 105-292, 105-293. [Repealed]

Repealed by Session Laws 1973, c. 476, s. 193.

Article 16. County Listing, Appraisal, and Assessing Officials.

§ 105-294. County assessor.

  1. Appointment. —  Persons occupying the position of county assessor on July 1, 1983, shall continue in office until the first Monday in July, 1983. At its first regular meeting in July, 1983, and every two years or four years thereafter, as appropriate, the board of county commissioners of each county shall appoint a county assessor to serve a term of not less than two nor more than four years; provided, however, that no person shall be eligible for initial appointment to a term of more than two years unless such person is deemed to be qualified as provided in subsection (b) of this section or has been certified by the Department of Revenue as provided in subsection (c) of this section. The board of commissioners may remove the assessor from office during his term for good cause after giving him notice in writing and an opportunity to appear and be heard at a public session of the board. Whenever a vacancy occurs in this office, the board of county commissioners shall appoint a qualified person to serve as county assessor for the period of the unexpired term.
  2. Persons who held the position of assessor on July 1, 1971, and continue to hold the position, and persons who have been certified for appointment as assessor by the Department of Revenue between July 1, 1971, and July 1, 1983, are deemed to be qualified to serve as county assessor. Any other person selected to serve as county assessor must meet the following requirements:
    1. Be at least 21 years of age as of the date of appointment;
    2. Hold a high school diploma or certificate of equivalency, or in the alternative, have five years employment experience in a vocation which is reasonably related to the duties of a county assessor;
    3. Within two years of the date of appointment, achieve a passing score in courses of instruction approved by the Department of Revenue covering the following topics:
      1. The laws of North Carolina governing the listing, appraisal, and assessment of property for taxation;
      2. The theory and practice of estimating the fair market value of real property for ad valorem tax purposes;
      3. The theory and practice of estimating the fair market value of personal property for ad valorem tax purposes; and
      4. Property assessment administration.
    4. Upon completion of the required four courses, achieve a passing grade in a comprehensive examination in property tax administration conducted by the Department of Revenue.
  3. Certification. —  Persons meeting all of the requirements of this section shall be certified by the Department of Revenue. From the date of appointment until the date of certification, persons appointed to serve as county assessor are deemed to be serving in an acting capacity. Any person who fails to qualify within two years after the date of initial appointment shall not be eligible for reappointment until all of the requirements have been met.
  4. In order to retain the position of county assessor, every person serving as county assessor, including those persons deemed to be qualified under the provisions of this act, shall, in each period of 24 months, attend at least 30 hours of instruction in the appraisal or assessment of property as provided in regulations of the Department of Revenue.
  5. The compensation and expenses of the county assessor shall be determined by the board of county commissioners.
  6. Alternative to separate office of county assessor. —  Pursuant to Act [Article] VI, Section 9 of the North Carolina Constitution, the office of county assessor is hereby declared to be an office that may be held concurrently with any other appointive or elective office except that of member of the board of county commissioners.

History. 1939, c. 310, ss. 400, 401; 1953, c. 970, ss. 1, 2; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1983, c. 813, s. 2; 1987, c. 45, ss. 1, 2; 1997-23, s. 5.

Editor’s Note.

In subsection (f), the word “Article” has been inserted in brackets following “Act” since the intended reference was to N.C. Const., Art. VI, § 9.

§ 105-295. Oath of office for assessor.

The assessor, as the holder of an appointed office, shall take the oath required by Article VI, § 7 of the North Carolina Constitution with the following phrase added to it: “that I will not allow my actions as assessor to be influenced by personal or political friendships or obligations,”. The oath must be filed with the clerk of the board of county commissioners.

History. 1939, c. 310, s. 402; 1971, c. 806, s. 1; 1987, c. 45, s. 1; 1991, c. 110, s. 4; 1991 (Reg. Sess., 1992), c. 1007, s. 21.

§ 105-296. Powers and duties of assessor.

  1. The county assessor shall have general charge of the listing, appraisal, and assessment of all property in the county in accordance with the provisions of law. He shall perform the duties imposed upon him by law, and he shall have and exercise all powers reasonably necessary in the performance of his duties not inconsistent with the Constitution or the laws of this State.
  2. Within budgeted appropriations, he shall employ listers, appraisers, and clerical assistants necessary to carry out the listing, appraisal, assessing, and billing functions required by law. The assessor may allocate responsibility among such employees by territory, by subject matter, or on any other reasonable basis. Each person employed by the assessor as a real property appraiser or personal property appraiser shall during the first year of employment and at least every other year thereafter attend a course of instruction in his area of work. At the end of the first year of their employment, such persons shall also achieve a passing score on a comprehensive examination in property tax administration conducted by the Department of Revenue.
  3. At least 10 days before the date as of which property is to be listed, the assessor shall advertise in a newspaper having general circulation in the county and post in at least five public places in each township in the county a notice containing all of the items listed in this subsection. If the listing period is extended in any county by the board of county commissioners, the assessor shall advertise in the newspaper in which the original notice was published and post in the same places a notice of the extension and of the times during which and the place or places at which lists will be accepted during the extended period. The items that must be included in the notice are:
    1. The date as of which property is to be listed.
    2. The date on which listing will begin.
    3. The date on which listing will end.
    4. The times between the date mentioned in subdivision (c)(2), above, and the date mentioned in subdivision (c)(3), above, during which lists will be accepted.
    5. The place or places at which lists will be accepted at the times established under subdivision (c)(4), above.
    6. A statement that all persons who, on the date as of which property is to be listed, own property subject to taxation must list such property within the period set forth in the notice and that any person who fails to do so will be subject to the penalties prescribed by law.
    7. If the county has provided for electronic listing of personal property under G.S. 105-310.1 , a statement that the county allows electronic listing of personal property and the timetable and procedures for electronic listing.
  4. through (f) Repealed by Session Laws 1987, c. 43, s. 2. (g) He shall have power to subpoena any person for examination under oath and to subpoena documents whenever he has reasonable grounds for the belief that such person has knowledge or that such documents contain information that is pertinent to the discovery or valuation of any property subject to taxation in the county or that is necessary for compliance with the requirements as to what the tax list shall contain. The subpoena shall be signed by the chairman of the board of equalization and review if that board is in session; otherwise, it shall be signed by the chairman of the board of county commissioners. It shall be served by an officer qualified to serve subpoenas. Any person who shall wilfully fail or refuse to appear, produce subpoenaed documents, or testify concerning the subject of the inquiry shall be guilty of a Class 1 misdemeanor.

    (h) Only after the abstract has been carefully reviewed can the assessor require any person operating a business enterprise in the county to submit a detailed inventory, statement of assets and liabilities, or other similar information pertinent to the discovery or appraisal of property taxable in the county. Inventories, statements of assets and liabilities, or other information secured by the assessor under the terms of this subsection, but not expressly required by this Subchapter to be shown on the abstract itself, shall not be open to public inspection but shall be made available, upon request, to representatives of the Department of Revenue or of the Division of Employment Security (DES) of the Department of Commerce. Any assessor or other official or employee disclosing information so obtained, except as may be necessary in listing or appraising property in the performance of official duties, or in the administrative or judicial proceedings relating to listing, appraising, or other official duties, shall be guilty of a Class 3 misdemeanor and punishable only by a fine not exceeding fifty dollars ($50.00).

    (i) Prior to the first meeting of the board of equalization and review, the assessor may, for good cause, change the appraisal of any property subject to assessment for the current year. Written notice of a change in assessment shall be given to the taxpayer at his last known address prior to the first meeting of the board of equalization and review.

    (j) The assessor must annually review at least one eighth of the parcels in the county classified for taxation at present-use value to verify that these parcels qualify for the classification. By this method, the assessor must review the eligibility of all parcels classified for taxation at present-use value in an eight-year period. The period of the review process is based on the average of the preceding three years’ data. The assessor may request assistance from the Farm Service Agency, the Cooperative Extension Service, the North Carolina Forest Service of the Department of Agriculture and Consumer Services, or other similar organizations.The assessor may require the owner of classified property to submit any information, including sound management plans for forestland, needed by the assessor to verify that the property continues to qualify for present-use value taxation. The owner has 60 days from the date a written request for the information is made to submit the information to the assessor. If the assessor determines the owner failed to make the information requested available in the time required without good cause, the property loses its present-use value classification and the property’s deferred taxes become due and payable as provided in G.S. 105-277.4(c). If the property loses its present-use value classification for failure to provide the requested information, the assessor must reinstate the property’s present-use value classification when the owner submits the requested information within 60 days after the disqualification unless the information discloses that the property no longer qualifies for present-use value classification. When a property’s present-use value classification is reinstated, it is reinstated retroactive to the date the classification was revoked and any deferred taxes that were paid as a result of the revocation must be refunded to the property owner. The owner may appeal the final decision of the assessor to the county board of equalization and review as provided in G.S. 105-277.4(b1).In determining whether property is operating under a sound management program, the assessor must consider any weather conditions or other acts of nature that prevent the growing or harvesting of crops or the realization of income from cattle, swine, or poultry operations. The assessor must also allow the property owner to submit additional information before making this determination.

    (k) He shall furnish information to the Department of Revenue as required by the Department to conduct studies in accordance with G.S. 105-289(h).

    ( l ) The assessor shall annually review at least one-eighth of the parcels in the county exempted or excluded from taxation to verify that these parcels qualify for the exemption or exclusion. By this method, the assessor shall review the eligibility of all parcels exempted or excluded from taxation in an eight-year period. The assessor may require the owner of exempt or excluded property to make available for inspection any information reasonably needed by the assessor to verify that the property continues to qualify for the exemption or exclusion. The owner has 60 days from the date a written request for the information is made to submit the information to the assessor. If the assessor determines that the owner failed to make the information requested available in the time required without good cause, then the property loses its exemption or exclusion. If the property loses its exemption or exclusion for failure to provide the requested information, the assessor must reinstate the property’s exemption or exclusion when the owner makes the requested information available within 60 days after the disqualification unless the information discloses that the property is no longer eligible for the exemption or exclusion.

    (m) The assessor shall annually review the transportation corridor official maps and amendments to them filed with the register of deeds pursuant to Article 2E of Chapter 136 of the General Statutes. The assessor must indicate on all tax maps maintained by the county or city that portion of the properties embraced within a transportation corridor and must note any variance granted for the property for such period as the designation remains in effect. The assessor must tax the property within a transportation corridor as required under G.S. 105-277.9 and G.S. 105-277.9 A.

History. 1939, c. 310, ss. 403, 404; 1953, c. 970, s. 3; 1955, c. 1012, s. 1; 1957, c. 202; 1959, c. 740, s. 3; 1963, c. 302; 1971, c. 806, s. 1; 1973, c. 560; 1983, c. 813, s. 3; 1985, c. 518, s. 2; 1987, c. 43, s. 2; c. 45, ss. 1, 2; c. 830, s. 84(b); 1987 (Reg. Sess., 1988), c. 1044, s. 13; 1991, c. 34, s. 2; c. 77, s. 1; 1993, c. 539, ss. 715, 716; 1994, Ex. Sess., c. 24, s. 14(c); 2001-139, ss. 3-5; 2002-184, s. 6; 2005-313, s. 7; 2005-386, s. 1.4; 2011-145, s. 13.25(pp); 2011-238, s. 2; 2011-401, s. 5.1; 2013-155, s. 8; 2014-3, s. 14.19.

Effect of Amendments.

Session Laws 2002-184, s. 6, effective for taxes imposed for taxable years beginning on or after July 1, 2003, divided subsection (j) into paragraphs, and in the first paragraph, inserted “at least” in the first sentence, added the last two sentences, and substituted “must” for “shall” twice; inserted “including sound management plans for forestland” in the second paragraph; and added the last paragraph.

Session Laws 2005-313, s. 7, effective for taxes imposed for taxable years beginning on or after July 1, 2005, inserted “if the property loses its present-use value classification for failure to provide the requested information” and “within 60 days after the disqualification” in the fourth sentence of the second paragraph of (j) and in the last sentence of ( l ); and added the last sentence to the second paragraph of (j).

Session Laws 2005-386, s. 1.4, effective September 13, 2005, substituted “Division of Forest Resources” for “Forest Resources Division” in the first paragraph of subsection (j).

Session Laws 2011-145, s. 13.25(pp), effective July 1, 2011, substituted “Department of Agriculture and Consumer Services” for “Department of Environment and Natural Resources” in the last sentence of the first paragraph in subsection (j).

Session Laws 2011-238, s. 2, effective June 23, 2011, in the introductory paragraph of subsection (c), in the first sentence, substituted “the assessor” for “he” and “all of the items listed in this subsection” for “at least the following,” and added the last two sentences; added subdivision (c)(7); and deleted the former last paragraph of subsection (c), which read: “If the listing period is extended in any county by the board of county commissioners, the assessor shall advertise in the newspaper in which the original notice was published and post in the same places a notice of the extension and of the times during which and the place or places at which lists will be accepted during the extended period.”

Session Laws 2011-401, s. 5.1, effective November 1, 2011, substituted “Division of Employment Security (DES) of the Department of Commerce” for “Employment Security Commission” in the second sentence of subsection (h).

Session Laws 2013-155, s. 8, effective July 1, 2013, substituted “North Carolina Forest Service” for “Division of Forest Resources” in the last sentence of the first paragraph of subsection (j).

Session Laws 2014-3, s. 14.19, effective May 29, 2014, added “and G.S. 105-277.9 A” at the end of subsection (m).

Legal Periodicals.

For article on the need to reform North Carolina property tax law, see 59 N.C.L. Rev. 675 (1981).

§ 105-297. Assistant assessors.

The board of county commissioners may, upon the recommendation of the assessor, appoint one or more assistant assessors. The board may delegate to assistant assessors appointed under this section responsibility for the appraisal of real property, the listing and appraisal of business property, or such other duties as the board deems advisable. Pursuant to Article VI, Sec. 9, of the North Carolina Constitution, the office of assistant assessor is hereby declared to be an office that may be held concurrently with any other appointive office.

History. 1939, c. 310, s. 409; 1955, c. 866; 1963, c. 625; 1967, cc. 59, 293; 1971, c. 802, s. 11; c. 806, s. 1; 1987, c. 45, s. 1.

§ 105-298. [Repealed]

Repealed by Session Laws 1987, c. 43, s. 3.

§ 105-299. Employment of experts.

The board of county commissioners may employ appraisal firms, mapping firms or other persons or firms having expertise in one or more of the duties of the assessor to assist the assessor in the performance of these duties. The county may also assign to county agencies, or contract with State or federal agencies for, any duties involved with the approval or auditing of use-value accounts. The county may make available to these persons any information it has that will facilitate the performance of a contract entered into pursuant to this section. Persons receiving this information are subject to the provisions of G.S. 105-289(e) and G.S. 105-259 regarding the use and disclosure of information provided to them by the county. Any person employed by an appraisal firm whose duties include the appraisal of property for the county must be required to demonstrate that he or she is qualified to carry out these duties by achieving a passing grade on a comprehensive examination in the appraisal of property administered by the Department of Revenue. In the employment of these firms, primary consideration must be given to the firms registered with the Department of Revenue pursuant to G.S. 105-289(i). A copy of the specifications to be submitted to potential bidders and a copy of the proposed contract may be sent by the board to the Department of Revenue for review before the invitation or acceptance of any bids. Contracts for the employment of these firms or persons are contracts for personal services and are not subject to the provisions of Article 8, Chapter 143, of the General Statutes. If the board of county commissioners employs any person or firm to assist the assessor in the performance of the assessor’s duties, the person or firm may not be compensated, in whole or in part, on a contingent fee basis or any other similar method that may impair the assessor’s independence or the perception of the assessor’s independence by the public.

History. 1939, c. 310, s. 408; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1975, c. 508, s. 2; 1983, c. 813, s. 4; 1985, c. 601, s. 2; 1989, c. 79; 2002-184, s. 7; 2003-416, s. 9; 2012-152, s. 2; 2012-194, s. 61.5(b).

Editor’s Note.

Session Laws 2012-152, s. 6, as amended by Session Laws 2012-194, s. 61.5(b) and Session Laws 2015-109, s. 1, provides in part: “After July 1, 2013, cities and counties shall not renew any contingency fee-based contracts for these services. After July 1, 2013, cities and counties shall not assign further audits on a contingency fee basis to an auditing firm under a contract that meets all the following conditions: (i) the contract would have been prohibited under this act had the contract been entered into after July 1, 2013, and (ii) the contract allows the assignment of audits on a discretionary basis.” The amendment by Session Laws 2015-109, s. 1, removed a July 1, 2015 expiration date for this section.

Effect of Amendments.

Session Laws 2002-184, s. 7, effective for taxes imposed for taxable years beginning on or after July 1, 2003, added the second sentence, substituted “must” for “shall” and “are” for “shall be” throughout, and made stylistic changes.

Session Laws 2003-416, s. 9, effective August 14, 2003, made minor punctuation changes in the second sentence of this section.

Session Laws 2012-152, s. 2, as amended by Session Laws 2012-194, s. 61.5(b), and as amended by Session Laws 2015-109, s. 1, effective July 1, 2013, added the last sentence. For applicability, see Editor’s note.

CASE NOTES

Private Auditors. —

The General Assembly had specifically authorized each county to employ private auditors, and a power incidental to that grant of authority is the power to decide the basis upon which the private auditors are to be employed. In re Philip Morris U.S.A, 335 N.C. 227 , 436 S.E.2d 828, 1993 N.C. LEXIS 550 (1993), cert. denied, 512 U.S. 1228, 114 S. Ct. 2726, 129 L. Ed. 2d 850, 1994 U.S. LEXIS 4811 (1994).

Contingent fee contracts for private tax auditor’s services are not contrary to public policy. In re Philip Morris U.S.A, 335 N.C. 227 , 436 S.E.2d 828, 1993 N.C. LEXIS 550 (1993), cert. denied, 512 U.S. 1228, 114 S. Ct. 2726, 129 L. Ed. 2d 850, 1994 U.S. LEXIS 4811 (1994).

§ 105-300. Tax commission.

In all counties having a tax commission or comparable agency, the commission or agency shall, except for levying taxes, perform all the duties required by this Subchapter to be performed by the board of equalization and review and the board of county commissioners. All expenses incurred by the tax commission or agency or its appointees in accordance with this Subchapter shall be paid by the county. Pursuant to Article VI, Sec. 9, of the North Carolina Constitution, the office of member of a tax commission or comparable agency is hereby declared to be an office that may not be held concurrently with any other elective or appointive office.

History. 1939, c. 310, s. 410; 1971, c. 806, s. 1.

Article 17. Administration of Listing.

§ 105-301. Place for listing real property.

All taxable real property that is not required by this Subchapter to be appraised originally by the Department of Revenue shall be listed in the county in which it is situated. If all or part of the real property is situated within the boundaries of a municipal corporation, this fact shall be specified on the abstract as required by G.S. 105-309 . Nothing in this section shall be construed to conflict with the provisions of G.S. 105-326 through 105-328.

History. 1939, c. 310, s. 700; 1971, c. 806, s. 1; 1973, c. 476, s. 193.

CASE NOTES

Where Corporate Owner Must List Property. —

A corporate owner is not authorized to list its property anywhere except the situs of its home office. In re McLean Trucking Co., 283 N.C. 650 , 197 S.E.2d 520, 1973 N.C. LEXIS 1030 (1973) (decided under former provisions of G.S. 105-302 ).

OPINIONS OF ATTORNEY GENERAL

Where tract of land lies within two townships so much of tract as lies within each township must be listed in that township. See opinion of Attorney General to Mr. J.E. Rains, Randolph County Tax Supervisor, 40 N.C.A.G. 824 (1969), issued under former similar provisions.

§ 105-302. In whose name real property is to be listed.

  1. Taxable real property shall be listed in the name of the owner, and it shall be the owner’s duty to list it unless the board of county commissioners shall have adopted a permanent listing system as provided in G.S. 105-303(b). For purposes of this section, the board of county commissioners may require that real property be listed in the name of the owner of record as of the day as of which property is to be listed under G.S. 105-285 .
  2. If real property is listed in the name of one other than the person in whose name it should be listed, and the name of the proper person is later ascertained, the abstract and tax records shall be corrected to list the property in the name of the person in whose name it should have been listed. The corrected listing shall have the same force and effect as if the real property had been listed in the name of the proper person in the first instance.
  3. For purposes of this Subchapter:
    1. The owner of the equity of redemption in real property subject to a mortgage or deed of trust shall be considered the owner of the property, and such real property shall be listed in the name of the owner of the equity of redemption.
    2. Real property owned by a corporation shall be listed in the name of the corporation.
    3. Real property owned by an unincorporated association shall be listed in the name of the association.
    4. Real property owned by a partnership shall be listed in the name of the partnership.
    5. Real property held in connection with a sole proprietorship shall be listed in the name of the owner, and the name and address of the proprietorship shall be noted on the abstract.
    6. Real property of which a decedent died possessed, if not under the control of an executor or administrator, shall be listed in the names of the heirs or devisees if known, but such property may be listed as property of “the heirs” or “the devisees” of the decedent, without naming them, until they have given the assessor notice of their names and of the division of the estate. It shall be the duty of an executor or administrator having control of real property to list it in his fiduciary capacity, as required by subdivision (c)(7), below, until he is divested of control of the property. However, the right of an administrator or executor of a deceased person to petition for the sale of real property to make assets shall not be considered control of the real property for the purposes of this subdivision.
    7. Real property, the title to which is held by a trustee, guardian, or other fiduciary, shall be listed by the fiduciary in his fiduciary capacity except as otherwise provided in this section.
    8. A life tenant or tenant for the life of another shall be considered the owner of real property, and it shall be his duty to list the property for taxation, indicating on the abstract that he is a life tenant or tenant for the life of another named individual.
    9. Upon request to and with the approval of the assessor, undivided interests in real property owned by tenants in common who are not copartners may be listed by the respective owners in accordance with their respective undivided interests. Otherwise, real property held by tenants in common shall be listed in the names of all the owners.
    10. Real property owned by husband and wife as tenants by the entirety shall be listed on a single abstract in the names of both tenants, and the nature of their ownership shall be indicated thereon.
    11. When land is owned by one party and improvements thereon or special rights (such as mineral, timber, quarry, waterpower, or similar rights) therein are owned by another party, the parties shall list their interests separately unless, in accordance with contractual relations between them, both the land and the improvements and special rights are listed in the name of the owner of the land.
    12. If the person in whose name real property should be listed is unknown, or if title to real property is in dispute, the property shall be listed in the name of the occupant or, if there be no occupant, in the name of “unknown owner.” Such a listing shall not affect the validity of the lien for taxes created by G.S. 105-355 . When the name of the owner is later ascertained, the provisions of subsection (b), above, shall apply.
    13. Real property, owned under a time-sharing arrangement but managed by a homeowners association or other managing entity, shall be listed in the name of the managing entity.

History. 1939, c. 310, s. 701; 1971, c. 806, s. 1; 1983, c. 785, s. 1; 1987, c. 45, s. 1.

Legal Periodicals.

For note on procedural developments in the discovery of property unlisted for purposes of ad valorem taxation, see 51 N.C.L. Rev. 531 (1973).

For article, “Future Advances and Title Insurance Coverage,” see 15 Wake Forest L. Rev. 329 (1979).

CASE NOTES

Doctrine of instantaneous seizin does not serve to override a clear statutory provision that the owner of the equity of redemption is considered the owner of the real estate for the purpose of assessing taxes. Powell v. County of Haywood, 15 N.C. App. 109, 189 S.E.2d 785, 1972 N.C. App. LEXIS 1834 (1972).

When Husband and Wife Regarded as Separate Persons. —

The wife is the “taxpayer” with reference to taxes levied on account of property owned by her alone, and the husband is the “taxpayer” with reference to taxes levied on account of property owned by him alone. State v. Tant, 16 N.C. App. 113, 191 S.E.2d 387, 1972 N.C. App. LEXIS 1650 (1972), cert. denied, 282 N.C. 429 , 192 S.E.2d 839, 1972 N.C. LEXIS 996 (1972), cert. denied, 414 U.S. 938, 94 S. Ct. 240, 38 L. Ed. 2d 165, 1973 U.S. LEXIS 1061 (1973).

The husband and wife are, in contemplation of the law, a separate person from either with reference to land owned by them as tenants by the entirety. State v. Tant, 16 N.C. App. 113, 191 S.E.2d 387, 1972 N.C. App. LEXIS 1650 (1972), cert. denied, 282 N.C. 429 , 192 S.E.2d 839, 1972 N.C. LEXIS 996 (1972), cert. denied, 414 U.S. 938, 94 S. Ct. 240, 38 L. Ed. 2d 165, 1973 U.S. LEXIS 1061 (1973).

Life tenant has the obligation to list and pay the taxes on the property. Thompson v. Watkins, 285 N.C. 616 , 207 S.E.2d 740, 1974 N.C. LEXIS 1064 (1974).

Life tenant cannot defeat the estate of the remainderman by allowing the land to be sold for taxes and taking title in himself by purchase at the tax sale. Thompson v. Watkins, 285 N.C. 616 , 207 S.E.2d 740, 1974 N.C. LEXIS 1064 (1974).

Life tenant’s purchase at tax sale is regarded as payment of tax, and the owner of the future interest is regarded as still holding under his original title. Thompson v. Watkins, 285 N.C. 616 , 207 S.E.2d 740, 1974 N.C. LEXIS 1064 (1974).

Improper Listing as Affecting Purchaser’s Title. —

See Morrison v. McLauchlin, 88 N.C. 251 , 1883 N.C. LEXIS 65 (1883); Stone v. Phillips, 176 N.C. 457 , 97 S.E. 375, 1918 N.C. LEXIS 271 (1918); Wake County v. Faison, 204 N.C. 55 , 167 S.E. 391, 1933 N.C. LEXIS 321 (1933).

Where Entry Copied from Former Tax Book. —

Where neither the owner nor his agent had given in the land, and list taker had copied the entry from the former tax book, the land was not rightfully on the tax list, and a sale for taxes pursuant thereto was invalid. Rexford v. Phillips, 176 N.C. 457 , 74 S.E. 337 (1918); Stone v. Phillips, 176 N.C. 457 , 97 S.E. 375, 1918 N.C. LEXIS 271 (1918).

§ 105-302.1. Reports on properties listed in name of unknown owner.

In order to promote the discovery of “State lands” as defined by G.S. 146-64(6) , it shall be the duty of all assessors upon request to furnish the State of North Carolina a report on all properties listed in the name of “unknown owner” pursuant to G.S. 105-302(c)(12) in their respective tax jurisdictions. Such report shall be forwarded to the Secretary of the North Carolina Department of Administration. The report shall contain all information available to the assessor concerning the location and identification of the properties in question.

History. 1979, c. 45, s. 1; 1987, c. 45, s. 1.

§ 105-303. Obtaining information on real property transfers; permanent listing.

  1. To facilitate the accurate listing of real property for taxation, the board of county commissioners may require the register of deeds to comply with the provisions of subdivision (a)(1), below, or it may require him to comply with the provisions of subdivision (a)(2), below:
    1. When any conveyance of real property (other than a deed of trust or mortgage) is recorded, the board of county commissioners may require the register of deeds to certify to the assessor:
      1. The name of the person conveying the property.
      2. The name and address of the person to whom the property is being conveyed.
      3. A description of the property sufficient to locate and identify it.
      4. A statement as to whether the parcel is conveyed in whole or in part.
    2. When any conveyance of real property (other than a deed of trust or mortgage) is submitted for recordation, the board of county commissioners may require the register of deeds to refuse to record it unless it has been presented to the assessor and the assessor has noted thereon that he has obtained the information he desires from the conveyance and from the person recording it.
  2. The board of commissioners of each county must install a permanent listing system. Each county must obtain the approval of the Department of Revenue for its permanent listing system. Under such a system the provisions of subdivisions (b)(1) through (b)(4) of this subsection apply.
    1. The assessor is responsible for listing all real property on the abstracts and tax records each year in the name of the owner of record as of the day as of which property is to be listed under G.S. 105-285 .
    2. Persons whose duty it is to list real property under the provisions of G.S. 105-302 are relieved of that duty, but annually, during the listing period established by G.S. 105-307 , these persons must furnish the assessor with the information concerning improvements on and separate rights in real property required by G.S. 105-309(c)(3) through (c)(5).
    3. The penalties imposed by G.S. 105-308 and 105-312 do not apply to failure to list real property for taxation, but they apply to failure to comply with the provisions of subdivision (b)(2) of this subsection with respect to reporting the construction or acquisition of improvements on and separate rights in real property. In such a case, the penalty prescribed by G.S. 105-312 shall be computed on the basis of the tax imposed on the improvements and separate rights.
    4. The Department of Revenue may authorize the board of county commissioners to make additional modifications of the listing requirements of this Subchapter, as long as the modifications do not conflict with subdivisions (b)(1) through (b)(3) of this subsection.

History. 1939, c. 310, s. 701; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 789; 1987, c. 43, s. 4; c. 45, s. 1; 1999-297, s. 3.

Editor’s Note.

Session Laws 1999-297, s. 1 provides that it is the intent of the General Assembly to encourage all counties to adopt a permanent property tax listing system in accordance with G.S. 105-303 (b), as a permanent listing is more convenient for taxpayers and more efficient for counties; that to encourage counties to adopt permanent listing in the next few years, Session Laws 1999-297, s. 2, which amends G.S. 105-312 , prohibits counties that have not adopted such a system from charging late listing penalties in certain circumstances; and that Session Laws 1999-297, s. 3, which amends G.S. 105-303 , requires all counties to adopt permanent listing systems by the 2004 tax year.

Effect of Amendments.

Session Laws 1999-297, s. 3, effective for taxable years beginning on or after July 1, 2004, rewrote the introductory language of subsection (b), substituted “these persons must” for “such persons shall” in subdivision (b)(2), in subdivision (b)(3), substituted “do not apply to” for “shall not be imposed for,” substituted “apply to” for “shall be imposed for,” and substituted “of this subsection” for “above” and in subdivision (b)(4), substituted “as long . . . conflict with” for “but no such modification shall conflict with the provisions of” and substituted “of this subsection” for “above.”

§ 105-304. Place for listing tangible personal property.

  1. Listing Instructions. —  This section applies to all taxable tangible personal property that has a tax situs in this State and that is not required by this Subchapter to be appraised originally by the Department of Revenue. The place in this State at which this property is taxable is determined according to the rules provided in this section. The person whose duty it is to list property must list it in the county in which the place of taxation is located, indicating on the abstract the information required by G.S. 105-309(d). If the place of taxation lies within a city or town that requires separate listing under G.S. 105-326(a), the person whose duty it is to list must also list the property for taxation in the city or town.

    (a1) Repealed by Session Laws 2011-238, s. 1, effective June 23, 2011.

  2. Definitions. —  The following definitions apply in this section:
    1. Situated. — More or less permanently located.
    2. Business premises. — The term includes, for purposes of illustration, the following: Store, mill, dockyard, piling ground, shop, office, mine, farm, factory, warehouse, rental real estate, place for the sale of property (including the premises of a consignee), and place for storage (including a public warehouse).
    3. Repealed by Session Laws 2011-238, s. 1, effective June 23, 2011.
  3. General Rule. —  Except as otherwise provided in subsections (d) through (h) of this section, tangible personal property is taxable at the residence of the owner. For purposes of this section:
    1. The residence of an individual person who has two or more places in this State at which the individual occasionally dwells is the place at which the individual dwelt for the longest period of time during the calendar year immediately preceding the date as of which property is to be listed for taxation.
    2. The residence of a domestic or foreign taxpayer other than an individual person is the place at which its principal North Carolina place of business is located.
  4. Property of Taxpayers With No Fixed Residence in This State. —
    1. Tangible personal property owned by an individual nonresident of this State is taxable at the place in this State at which the property is situated.
    2. Tangible personal property owned by a domestic or foreign taxpayer (other than an individual person) that has no principal office in this State is taxable at the place in this State at which the property is situated.
  5. Farm Products. —  Farm products produced in this State, if owned by their producer, are taxable at the place in this State at which they were produced.
  6. Property Situated or Commonly Used at Premises Other Than Owner’s Residence. —  Subject to the provisions of subsection (e) of this section:
    1. Tangible personal property situated at or commonly used in connection with a temporary or seasonal dwelling owned or leased by the owner of the personal property is taxable at the place at which the temporary or seasonal dwelling is situated.
    2. Tangible personal property situated at or commonly used in connection with a business premises hired, occupied, or used by the owner of the personal property (or by the owner’s agent or employee) is taxable at the place at which the business premises is situated. Tangible personal property that may be used by the public generally or that is used to sell or vend merchandise to the public falls within the provisions of this subdivision.
    3. Tangible personal property situated at or commonly used in connection with a premise owned, hired, occupied, or used by a person who is in possession of the personal property under a business agreement with the property’s owner is taxable at the place at which the possessor’s premise is situated. For purposes of this subdivision, the term “business agreement” means a commercial lease, a bailment for hire, a consignment, or a similar business arrangement.
    4. In applying the provisions of subdivisions (1), (2), and (3) of this subsection, the temporary absence of tangible personal property from the place at which it is taxable under one of those subdivisions on the day as of which property is to be listed does not affect the application of the rules established in those subdivisions. The presence of tangible personal property at a location specified in subdivision (1), (2), or (3) of this subsection on the day as of which property is to be listed is prima facie evidence that it is situated at or commonly used in connection with that location.
  7. Decedents. —  The tangible personal property of a decedent whose estate is in the process of administration or has not been distributed is taxable at the place at which it would be taxable if the decedent were still alive and still residing at the place at which the decedent resided at the time of death.
  8. Beneficial Ownership. —  Tangible personal property within the jurisdiction of the State held by a resident or nonresident trustee, guardian, or other fiduciary having legal title to the property is taxable in accordance with the following rules:
    1. If any beneficiary is a resident of the State, an amount representing that beneficiary’s portion of the property is taxable at the place at which it would be taxable if the beneficiary owned that portion.
    2. If any beneficiary is a nonresident of the State, an amount representing that beneficiary’s portion of the property is taxable at the place at which it would be taxable if the fiduciary were the beneficial owner of the property.

History. 1939, c. 310, s. 800; 1947, c. 836; 1951, c. 1102, s. 1; 1955, c. 1012, ss. 2, 3; 1969, c. 940; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 1180; 2001-279, s. 1; 2006-30, s. 1; 2011-238, s. 1.

Effect of Amendments.

Session Laws 2006-30, s. 1, effective June 29, 2006, deleted “business” preceding “personal property” in the first and second sentences of subsection (a1).

Session Laws 2011-238, s. 1, effective June 23, 2011, repealed subsection (a1), which pertained to electronic listing of personal property, and repealed subdivision (b)(3), which read: “Electronic. — Defined in G.S. 66-312 .”

Legal Periodicals.

For survey of 1974 case law on taxation of personal property owned by nonresidents, see 53 N.C.L. Rev. 1132 (1975).

For article, “State Jurisdiction To Tax Tangible Personal Property,” see 56 N.C.L. Rev. No. 807 (1978).

CASE NOTES

Analysis

I.General Consideration

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

The theory of taxation is that the right to tax is derived from the protection afforded to the subject upon which it is imposed. The actual situs and control of the property within this State, and the fact that it enjoys the protection of the laws here, are conditions which subject it to taxation here. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

Uniform Rule Established. —

The rules and regulations fixed by the “Revenue Act” and the “Machinery Act” for the guidance of the officers charged with the listing and assessment of property for purposes of State taxation govern and control the action of county and other municipal officers charged with the listing and assessment of property for municipal taxation. The conclusion, therefore, is that the legislature has adopted a “uniform rule” which must be observed. Wiley v. Commissioners of Salisbury, 111 N.C. 397 , 16 S.E. 542, 1892 N.C. LEXIS 193 (1892).

II.“Situated.”

“Situated” connotes a more or less permanent location. It does not mean a mere temporary presence. In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

Words “more or less permanently” exclude necessity of establishing unqualified permanency such as actual and continuous presence in the State. In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

As to origin of term “more or less permanently located,” see In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

More Than Temporary Presence for Specific Service Required. —

Any degree of permanency would seem to require more than a temporary presence of limited duration within the State for a specific service pursuant to a scheduled arrangement as to time of entrance and departure. In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

Cloth materials of nonresident converters shipped from outside the State to textile finishing company for processing and reshipment to these converters or to their customers at designated places outside the State are not “situated” or “more or less permanently located” in the county in which the finishing company is located on January 1, of the year in question, and, therefore, do have a tax situs in that county. In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

III.Situs
A.In General

Situs is an absolute essential for tax exaction. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Taxable tangible personal property must have acquired a tax situs in this State, for situs is an absolute essential for tax exaction. In re Bassett Furn. Indus., Inc., 79 N.C. App. 258, 339 S.E.2d 16, 1986 N.C. App. LEXIS 2025 (1986).

As no state may tax anything not within her jurisdiction without violating U.S. Const., Amend. XIV. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

State of Domicile May Tax Property Which Has Not Acquired Situs Elsewhere. —

The state of domicile may tax the full value of a taxpayer’s tangible personal property for which no tax situs beyond the domicile has been established so that the property may not be said to have “acquired an actual situs elsewhere.” Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Actual situs of taxable property turns on uninterrupted presence of the property within the taxing jurisdiction. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

When Personal Property of Nonresident May Be Taxed. —

When personal property belonging to a nonresident has acquired a taxable situs in this State, this State may tax that nonresident’s property without violating the provisions of U.S. Const., Amend. XIV. In re Bassett Furn. Indus., Inc., 79 N.C. App. 258, 339 S.E.2d 16, 1986 N.C. App. LEXIS 2025 (1986).

It is for the legislature to determine situs of personal property for purposes of taxation, and it may provide different rules for different kinds of property, and change them from time to time, and the courts may not, for consideration of expediency, disregard the legislative will. Planters Bank & Trust Co. v. Town of Lumberton, 179 N.C. 409 , 102 S.E. 629, 1920 N.C. LEXIS 254 (1920).

The situs of personal property for purposes of taxation is determined by the legislature, and the legislature may provide different rules for different kinds of property and may change the rules from time to time. In re Bassett Furn. Indus., Inc., 79 N.C. App. 258, 339 S.E.2d 16, 1986 N.C. App. LEXIS 2025 (1986).

Nature of Property Considered in Determining Situs. —

Any determination of the tax situs of tangible personal property must take into account the nature of the property involved. In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

Different Kinds of Personalty Subject to Different Rules. —

As to the situs of realty there can be no doubt, but the situs of personalty for purposes of taxation from time immemorial has been a matter for the law-making power, which has provided different rules for different kinds of personalty, and has changed them from time to time. In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

Situs of Personalty Is Ordinarily Owner’s Domicile. —

The situs of personal property for purposes of taxation is ordinarily the domicile of the owner. Where, however, the owner maintains said property in a jurisdiction other than that of his domicile, in the conduct of his business within such jurisdiction, the situs of said property for purposes of taxation is its actual situs, and not that of his domicile. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

Taxation of Movable Personal Property. —

A state can impose upon a plaintiff’s movable personal property the same tax imposed upon similar property used in like manner by its own citizens, and such tax may be fixed by an appraisement and valuation of the average amount of the property thus habitually used and employed. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

A jet aircraft hangared in Rockingham County, North Carolina, for approximately one year by a nonresident corporation having no principal place of business in this State, under the stipulated facts and evidence, was “situated” or “more or less permanently located” in Rockingham County on January 1, 1984, and therefore had a tax situs in Rockingham County on that date. The fact that the airplane happened to be physically located at a Virginia airport on January 1, 1984, did not defeat taxation by Rockingham County. In re Bassett Furn. Indus., Inc., 79 N.C. App. 258, 339 S.E.2d 16, 1986 N.C. App. LEXIS 2025 (1986).

Property Held by Executors and Trustees. —

Where a testator appointed executors of his will who were also therein named as trustees for certain beneficiaries, who moved to another town, after the matters of executorship had been closed, leaving those of the trusteeship continuing, it was held, under a former statute, that the personal property should have been listed at the place of residence of the beneficiaries; and the taxes not having been listed at all, it was proper for the commissioners of the town of residence of the beneficiaries to cause the personalty to be listed there and impose the penalty prescribed by law. Smith v. Town of Dunn, 160 N.C. 174 , 76 S.E. 242, 1912 N.C. LEXIS 141 (1912).

As to residence and domicile under former laws, see Town of Roanoke Rapids v. Patterson, 184 N.C. 135 , 113 S.E. 603, 1922 N.C. LEXIS 33 (1922); Ransom v. Board of Comm'rs, 194 N.C. 237 , 139 S.E. 232, 1927 N.C. LEXIS 56 (1927).

Temporary Absence of Property. —

Subdivision (f)(4) of this section clearly provides that the temporary absence of tangible personal property from the place at which it is normally taxable shall not affect the rule of taxation. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

In a case in which a taxpayer appealed a judgment entered by the Property Tax Commission, the taxpayer argued unsuccessfully that the plane’s 2003 tax situs was Delaware, and, therefore, North Carolina could not levy a tax on it, and that it qualified for exception (f) of G.S. 105-304 . The plane was more or less permanently located in North Carolina for tax year 2003 because it was in Delaware only for maintenance or alterations, rather than for continued, actual use as an airplane; the taxpayer did not meet its burden of showing that it had qualified for an exemption under G.S. 105-304 (f), and it was required to pay ad valorem taxes on the plane consistent with its value on 1 January 2003. In re SAS Inst., Inc., 200 N.C. App. 238, 684 S.E.2d 444, 2009 N.C. App. LEXIS 1624 (2009).

Absence on Tax Date for Processing Outside State. —

A foreign corporation which was a broker of high fashion jeans acquired a business situs in Mecklenburg County so as to subject its property (piece goods and finished goods) to ad valorem taxation by Mecklenburg County where its only warehouse for assembling and shipping its inventory was located in Mecklenburg County, and the tax situs of such property remained in Mecklenburg County while it was outside North Carolina on the tax date being stitched or laundered. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

B.Corporations

“Business Situs” Defined. —

Business situs means a situs acquired for tax purposes by one who has carried on a business in the State more or less permanent in its nature. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

Generally, Personalty of Corporation Has Situs at Principal Office. —

Except for its property which has acquired a business situs elsewhere, the legislature has fixed the tax situs of the personalty of a corporation at the place of its principal office in the State. In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

The legislature has fixed the tax situs of a corporation’s tangible personal property subject to North Carolina’s taxing jurisdiction at the place of its principal office in North Carolina unless such property or a part thereof has a tax situs elsewhere and thus is not within the taxing jurisdiction of this State. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

The tax situs of a corporation’s tangible personal property within the jurisdiction of the State is at the place of its principal office in North Carolina. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

Although Part of Personalty Located Elsewhere. —

Where a corporation had its place of business and principal office in one town, with a part of the personal property located in another town, such property was only taxable in the town where the place of business and principal office were located. The same was said to be true of a partnership. City of Winston v. City of Salem, 131 N.C. 404 , 42 S.E. 889, 1902 N.C. LEXIS 306 (1902).

Corporations Engaged in Interstate Operations. —

The state of domicile may constitutionally subject its own corporations to nondiscriminatory property taxes even though they are engaged in interstate commerce. It is only multiple taxation of interstate operations that violates the Commerce Clause. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Taxpayer’s continuous interstate use of its equipment could not exclude North Carolina from taxing its amusement ride equipment, especially when the taxpayer did not provide any evidence establishing that it paid ad valorem taxes on the equipment elsewhere. Thus, pursuant to G.S. 105-304(c)(2), the taxpayer was a resident of Pender County and it failed to establish that its tangible personal property had tax situs elsewhere. In re Appeal of Amusements of Rochester, Inc., 201 N.C. App. 419, 689 S.E.2d 451, 2009 N.C. App. LEXIS 2250 (2009).

Subdivision (d)(2) Contemplates Property in Transient Condition. —

Subdivision (d)(2) of this section contemplates a situation in which a corporation has no principal office in this State, and its property is in a transient condition through the State. In re Plushbottom & Peabody, Ltd., 51 N.C. App. 285, 276 S.E.2d 505, 1981 N.C. App. LEXIS 2229 (1981).

C.Property Located Outside State

Property Permanently Located Outside State May Not Be Taxed. —

The state of domicile may not levy an ad valorem tax on tangible personal property of its citizens which is permanently located in some other state throughout the tax year. This is forbidden by the due process clause of U.S. Const., Amend. XIV. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Tangible personal property permanently located in other states and employed there in the prosecution of plaintiff’s business is not subject to taxation in another state. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Taxation by Apportionment. —

When a defined part of the domiciliary corpus has acquired a taxable situs in one or more nondomiciliary states, it may be taxed by those states on an apportionment basis; and taxation by apportionment precludes taxation of all of the property by the state of the domicile. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

When an apportionment tax is imposed by a nondomiciliary state (a) it must be just and equitable; (b) it must bear a reasonable relation in its practical operation to the opportunities, the benefits, and the protection afforded by the taxing jurisdiction; and (c) the opportunities, benefits and protection must be available throughout the tax year. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Goods owned by nonresident converters but in a textile finishing company’s possession on January 1, purchased from North Carolina greige mills and shipped to the finishing company for processing and reshipment to the converter or its customer at a destination outside of North Carolina, are subject to ad valorem taxation by the county in which the finishing company is located. In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

In respect of a North Carolina corporation, its tangible personal property located in North Carolina on January 1 is subject to ad valorem taxation without reference to whether it is in the custody of a textile finishing company or in the actual custody of the North Carolina corporation. Whether such property is taxable in the county where the principal office and place of business are located or the county where the property is physically situated is a matter for determination by the Department of Revenue. In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

Tax Situs of Fleet of Vehicles Operated Through State. —

When a fleet of vehicles is operated into, through, and out of a nondomiciliary state, a “tax situs” sufficient to satisfy constitutional requirements is acquired if (a) the vehicles are operated along fixed routes and on regular schedules, or (b) the vehicles are habitually situated and employed within the nondomiciliary jurisdiction throughout the tax year. In that event, their continuous presence supports imposition of an ad valorem tax based upon the average number continuously present in the taxing state regardless of routes and schedules. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Burden Is on Taxpayer to Prove Tax Situs Is in Another Jurisdiction. —

The burden is on the taxpayer who contends that some portion of his tangible personal property is not within the taxing jurisdiction of his domiciliary state to prove that the same property has acquired a tax situs in another jurisdiction. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

And Evidence That Part of Property Is Absent from State Is Not Sufficient. —

Continuous presence of the property throughout the tax year in a nondomiciliary state is not shown by evidence which merely proves that some determinable fraction of its property is absent from the state for part of the tax year. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

Mere general showing of continuous use of tangible movable property in other states is insufficient to exclude the taxing power of the state of domicile. Billings Transf. Corp. v. County of Davidson, 276 N.C. 19 , 170 S.E.2d 873, 1969 N.C. LEXIS 336 (1969).

OPINIONS OF ATTORNEY GENERAL

Personalty located in county may be taxed by county when, before January 1, owner marries serviceman not domiciled in State but stationed in same county and she continues to reside in that county. See opinion of Attorney General to Mr. Fred P. Parker, Jr., Wayne County Attorney, 40 N.C. Op. Att'y Gen. 825 (1969).

Ferries owned by a corporation were properly taxed in the village listed as the corporation’s principal place of business, notwithstanding that they were docked each night in a different village from which their first runs in the morning originated, and that other village could not also tax the ferries. See opinion of Attorney General to Michael R. Isenburg, Fairley, Jess, Isenberg & Green, 2001 N.C. AG LEXIS 27 (11/9/01).

§ 105-305. Place for listing intangible personal property.

  1. Listing Instructions. —  This section applies to all taxable intangible personal property that has a tax situs in this State and is not required by this Subchapter to be appraised originally by the Department of Revenue. The place in this State at which this property is taxable shall be determined as provided in this section. The person whose duty it is to list property shall list it in the county in which the place of taxation is located, indicating on the abstract the information required by G.S. 105-309(d). If the place of taxation lies within a city or town that requires separate listing under G.S. 105-326(a), the person whose duty it is to list shall also list the property for taxation in the city or town.
  2. Repealed by Session Laws 1997-456, s. 43(a).
  3. Intangible personal property representing an interest or interests in real property that is situated in this State shall be taxable in the place in which the represented real property is located.
  4. , (e) Repealed by Session Laws 1997-456, s. 43(a).

History. 1939, c. 310, s. 801; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1995, c. 41, s. 8; 1997-456, s. 43(a).

§ 105-306. In whose name personal property is to be listed.

  1. Taxable personal property shall be listed in the name of the owner on the day as of which property is to be listed for taxation, and it shall be the duty of the owner to list the property.
  2. If personal property is listed in the name of a person other than the one in whose name it should be listed, and the name of the proper person is later ascertained, the abstract and tax records shall be corrected to list the property in the name in which it should have been listed. The corrected listing shall have the same force and effect as if the personal property had been listed in the name of the proper person in the first instance.
  3. For purposes of this Subchapter:
    1. The owner of the equity of redemption in personal property subject to a chattel mortgage shall be considered the owner of the property.
    2. The vendee of personal property under a conditional bill of sale, or under any other sale contract through which title to the property is retained by the vender as security for the payment of the purchase price, shall be considered the owner of the property if he has possession of or the right to use the property.
    3. Personal property owned by a corporation, partnership, or unincorporated association shall be listed in the name of the corporation, partnership, or unincorporated association.
    4. Personal property held in connection with a sole proprietorship shall be listed in the name of the owner, and the name and address of the proprietorship shall be noted on the abstract.
    5. Personal property of which a decedent died possessed, if not under the control of a personal representative, shall be listed in the names of the next of kin or devisees if known, but such property may be listed as property of “the next of kin” or “the devisees” of the decedent, without naming them, until they have given the assessor notice of their names and of the division of the estate. It shall be the duty of a personal representative having control of personal property to list it in the personal representative’s fiduciary capacity, as required by subdivision (c)(6), below, until the personal representative is divested of control of the property.
    6. Personal property, the title to which is held by a trustee, guardian, or other fiduciary, shall be listed by the fiduciary in his fiduciary capacity except as otherwise provided in this section.
    7. If personal property is owned by two or more persons who are joint owners, each owner shall list the value of his interest. However, if the joint owners are husband and wife, the property owned jointly shall be listed on a single abstract in the names of both the husband and the wife.
    8. If the person in whose name personal property should be listed is unknown, or if the ownership of the property is in dispute, the property shall be listed in the name of the person in possession of the property, or if there appears to be no person in possession, in the name of “unknown owner.” When the name of the owner is later ascertained, the provisions of subsection (b), above, shall apply.
    9. Personal property, owned under a time-sharing arrangement but managed by a homeowners association or other managing entity, shall be listed in the name of the managing entity.

History. 1939, c. 310, s. 802; 1971, c. 806, s. 1; 1983, c. 785, s. 2; 1987, c. 45, s. 1; 2011-284, s. 71.

Effect of Amendments.

Session Laws 2011-284, s. 71, effective June 24, 2011, in subdivision (c)(5), in the first sentence, substituted “a personal representative” for “an executor or administrator” and twice substituted “devisees” for “legatees,” and in the last sentence, substituted “a personal representative” for “an executor or administrator” and made minor stylistic changes.

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. Bonner R. Lee, Hyde County Accountant, 41 N.C.A.G. 42 (1970), issued under former similar provisions.

§ 105-307. Length of listing period; extension; preliminary work.

  1. Listing Period. —  Unless extended as provided in this section, the period during which property is to be listed for taxation each year begins on the first business day of January and ends on January 31.
  2. General Extensions. —  The board of county commissioners may, by resolution, extend the time during which property is to be listed for taxation as provided in this subsection. Any action by the board of county commissioners extending the listing period must be recorded in the minutes of the board, and notice of the extensions must be published as required by G.S. 105-296(c). The entire period for listing, including any extension of time granted, is considered the regular listing period for the particular year within the meaning of this Subchapter.
    1. In nonrevaluation years, the listing period may be extended for up to 30 additional days.
    2. In years of octennial appraisal of real property, the listing period may be extended for up to 60 additional days.
    3. If the county has provided for electronic listing of personal property under G.S. 105-310.1 , the period for electronic listing of personal property may be extended up to June 1. A resolution that provides a general extension of time for the electronic listing of personal property shall continue in effect until revised or rescinded unless otherwise stated in the resolution.
  3. Individual Extensions. —  The board of county commissioners shall grant individual extensions of time for the listing of real and personal property upon written request and for good cause shown. The request must be filed with the assessor no later than the ending date of the regular listing period. The board may delegate the authority to grant extensions to the assessor. Extensions granted under this subsection shall not extend beyond April 15. Notwithstanding the individual extension time limitation in this subsection, if the county has provided for electronic listing of personal property under G.S. 105-310.1 , extensions granted for electronic listing of personal property shall not extend beyond June 1.
  4. Preliminary Work. —  The assessor may conduct preparatory work before the listing period begins, but may not make a final appraisal of property before the day as of which the value of the property is to be determined under G.S. 105-285 .

History. 1939, c. 310, s. 905; 1971, c. 806, s. 1; 1973, cc. 141, 706; 1975, c. 49; 1977, c. 360; 1987, c. 43, s. 5; c. 45, s. 1; 2001-279, s. 2; 2006-30, s. 2; 2011-238, s. 3.

Effect of Amendments.

Session Laws 2001-279, s. 2, effective July 13, 2001, rewrote subsections (a) and (b); added new subdivisions (b)(1) through (b)(3); in subsection (c), added the subsection catchline, substituted “this subsection” for “this paragraph” in the next to last sentence, and added the last sentence; and in subsection (d), added the subsection catchline.

Session Laws 2006-30, s. 2, effective June 29, 2006, in subdivision (b)(3) and subsection (c), deleted “business” preceding “personal property under G.S. 105-304 , the period for electronic listing” and added “of business personal property” thereafter.

Session Laws 2011-238, s. 3, effective June 23, 2011, in subdivision (b)(3), in the first sentence, updated the section reference and deleted “business” following “electronic listing of,” and added the last sentence; and in subsection (c), rewrote the last sentence, which formerly read: “If the county has provided for electronic listing of personal property under G.S. 105-304 , the period for electronic listing of business personal property is as provided in subsection (b) of this section.”

§ 105-308. Duty to list; penalty for failure.

Every person in whose name any property is to be listed under the terms of this Subchapter shall list the property with the assessor within the time allowed by law on an abstract setting forth the information required by this Subchapter.

In addition to all other penalties prescribed by law, any person whose duty it is to list any property who willfully fails or refuses to list the same within the time prescribed by law shall be guilty of a Class 2 misdemeanor. The failure to list shall be prima facie evidence that the failure was willful.

Any person who willfully attempts, or who willfully aids or abets any person to attempt, in any manner to evade or defeat the taxes imposed under this Subchapter, whether by removal or concealment of property or otherwise, shall be guilty of a Class 2 misdemeanor.

History. 1939, c. 310, s. 901; 1957, c. 848; 1971, c. 806, s. 1; 1977, c. 92; 1987, c. 43, s. 4; c. 45, s. 1; 1993, c. 539, s. 717; 1994, Ex. Sess., c. 24, s. 14(c).

Legal Periodicals.

For comment, “Offer to Purchase and Contract: Buyer Beware,” see 8 Campbell L. Rev. 473 (1986).

§ 105-309. What the abstract shall contain.

  1. Each person whose duty it is to list property for taxation shall file each year with the assessor a tax list or abstract showing, as of the date prescribed by G.S. 105-285(b), the information required by this section. Subject to the provisions of subdivisions (a)(1) and (a)(2), below, each person whose duty it is to list property for taxation shall file a separate abstract.
    1. Tenants by the entirety shall file a single abstract listing the real property so held, together with all personal property they own jointly.
    2. Tenants in common shall file a single abstract listing the real property so held, together with all personal property that they own jointly, unless, as provided in G.S. 105-302(c)(9), the assessor allows them to list their undivided interests in the real property on separate abstracts.
  2. Each abstract shall show the taxpayer’s name; residence address; and, if required by the assessor, business address.
    1. An individual trading under a firm name shall show his name and address and also the name and address of his business firm.
    2. An unincorporated association shall show both the name and address of the association and the names and addresses of its principal officers.
    3. A partnership shall show both the name and address of the partnership and the names and addresses of its full partners.
  3. Each tract, parcel, or lot of real property owned or controlled in the county shall be listed in accordance with the following instructions:
    1. Real property not divided into lots shall be described by giving:
      1. The township in which located.
      2. The total number of acres in the tract, or, if smaller than one acre, the dimensions of the parcel.
      3. The tract name (if any), the names of at least two adjoining landowners, a reference to the tract’s designation on any map maintained in the office of the assessor or on file in the office of the register of deeds, or some other description sufficient to identify and locate the property by parol testimony.
      4. If applicable, the number of acres of:
        1. Cleared land;
        2. Woods and timberland;
        3. Land containing mineral or quarry deposits;
        4. Land susceptible of development for waterpower;
        5. Wasteland.
      5. The portion of the tract or parcel located within the boundaries of any municipality.
    2. Real property divided into lots shall be described by giving:
      1. The township in which located.
      2. The dimensions of the lot.
      3. The location of the lot, including its street number (if any).
      4. The lot’s designation on any map maintained in the office of the assessor or on file in the office of the register of deeds, or some description sufficient to identify and locate the property by parol testimony.
      5. The portion of the lot located within the boundaries of any municipality.
    3. In conjunction with the listing of any real property under subdivisions (c)(1) and (c)(2), above, there shall be given a short description of any buildings and other improvements thereon that belong to the owner of the land.
    4. Buildings and other improvements having a value in excess of one hundred dollars ($100.00) that have been acquired, begun, erected, damaged, or destroyed since the time of the last appraisal of property shall be described.
    5. If some person other than the owner of a tract, parcel, or lot shall own any buildings or other improvements thereon or separate rights (such as mineral, quarry, timber, waterpower, or other rights) therein, that fact shall be specified on the abstract on which the land is listed, together with the name and address of the owner of the buildings, other improvements, or rights.
      1. Buildings, other improvements, and separate rights owned by a taxpayer with respect to the lands of another shall be listed separately and identified so as to indicate the name of the owner thereof and the tract, parcel, or lot on which the buildings or other improvements are situated or to which the separate rights appertain.
      2. In accordance with the provisions of G.S. 105-302(c)(11), buildings or other improvements or separate rights owned by a taxpayer with respect to the lands of another may be listed either in the name of the owner of the buildings, other improvements, or rights, or in the name of the owner of the land.
  4. Personal property shall be listed to indicate the township and municipality, if any, in which it is taxable and shall be itemized by the taxpayer in such detail as may be prescribed by an abstract form approved by the Department of Revenue. The assessor may require additional information as follows:
    1. If the assessor considers it necessary to obtain a complete listing of personal property, the assessor may require a taxpayer to submit additional information, inventories, or itemized lists of personal property.
    2. At the request of the assessor, the taxpayer shall furnish any information the taxpayer has with respect to the true value of the personal property the taxpayer is required to list.
  5. At the end of the abstract each person whose duty it is to list property for taxation shall sign the affirmation required by G.S. 105-310 .
  6. The assessor must print a homestead tax relief notice on each abstract or on an information sheet distributed with the abstract. The abstract or sheet must include the address and telephone number of the assessor below the notice required by this section. The notice must be in the form required by the Department of Revenue designed to notify the taxpayer of his or her rights and responsibilities under the homestead property tax exclusion provided in G.S. 105-277.1 and the property tax homestead circuit breaker provided in G.S. 105-277.1 B.
  7. Any person who fails to give the notice required by  G.S. 105-309(f) shall not only be subject to loss of the exemption, but also to the penalties provided by G.S. 105-312 , and also if willful to the penalty provided in G.S. 105-310 . For the purpose of determining whether a penalty is levied, whenever a taxpayer has received an exemption under G.S. 105-277.1 for one taxable year but the property of taxpayer is not eligible for the exemption the next year, notice given of that fact to the assessor on or before April 15 shall be considered as timely filed.

History. 1939, c. 310, s. 900; 1941, c. 221, s. 1; 1953, c. 970, s. 6; 1955, c. 34; 1971, c. 806, s. 1; 1973, c. 448, s. 2; c. 476, s. 193; 1975, c. 881, s. 3; 1977, c. 666, s. 2; 1979, c. 846, s. 2; 1981, c. 54, ss. 4-6; c. 1052, s. 1; 1985, c. 656, ss. 47, 51; 1985 (Reg. Sess., 1986), c. 947, s. 9; c. 982, s. 23; 1987, c. 43, s. 6; c. 45, s. 1; 1993, c. 360, s. 2; 1996, 2nd Ex. Sess., c. 18, s. 15.1(b); 1998-98, s. 111; 2001-308, s. 2; 2007-484, s. 43.7T(b); 2007-497, s. 2.5; 2014-3, s. 14.20(a).

Effect of Amendments.

Session Laws 2007-497, s. 2.5, as amended by Session Laws 484, s. 43.7T(b), effective for taxes imposed for taxable years beginning on or after July 1, 2009, in subdivision (f), substituted “assessor must print a homestead tax relief notice” for “notice set out below must appear” in the first sentence, substituted “notice required by this section” for “notice” at the end of the second sentence, added the last sentence, and deleted the former statutory notice provision.

Session Laws 2014-3, s. 14.20, effective May 29, 2014, in the introductory paragraph of subsection (d), deleted the former last sentence, which read: “Personal property shall also be listed to indicate which property, if any, is subject to a tax credit under G.S. 105-151.21” and added “The assessor may require additional information as follows:.”

CASE NOTES

Classification Irrelevant. —

All taxpayers are required to list taxable property for ad valorem taxes regardless of its classification. Edward Valves, Inc. v. Wake County, 117 N.C. App. 484, 451 S.E.2d 641, 1995 N.C. App. LEXIS 1 (1995), aff'd, modified, 343 N.C. 426 , 471 S.E.2d 342, 1996 N.C. LEXIS 323 (1996).

Compliance with Statutory Procedure Essential. —

The listing of property must be done in the manner prescribed by the statute. Rexford v. Phillips, 159 N.C. 213 , 74 S.E. 337, 1912 N.C. LEXIS 260 (1912).

This means that listing must be done by owner or his duly accredited agent in cases where listing by an agent is permissible. Stone v. Phillips, 176 N.C. 457 , 97 S.E. 375, 1918 N.C. LEXIS 271 (1918).

Time of Making List. —

Under an earlier statute it was held that property can be listed for taxation only in the year, and for the year, in which taxes are due. North Carolina R.R. v. Commissioners of Alamance, 77 N.C. 4 , 1877 N.C. LEXIS 3 (1877); Johnson v. Royster, 88 N.C. 194 , 1883 N.C. LEXIS 50 (1883).

Sufficiency of Description. —

The listing of land as a certain number of acres lying in a named township was held too vague to support a valid assessment, the land being insufficiently described. Rexford v. Phillips, 159 N.C. 213 , 74 S.E. 337, 1912 N.C. LEXIS 260 (1912).

A description on a tax list made under the direction of the taxpayer in the words, “Tax list in No. 2 township, C. county, for the year 1893,” was held sufficient, as between the taxpayer and a purchaser of his land at a tax sale, where it was the only land owned by the former in the township. Fulcher v. Fulcher, 122 N.C. 101 , 29 S.E. 91, 1898 N.C. LEXIS 200 (1898).

§ 105-310. Affirmation; penalty for false affirmation.

There shall be annexed to the abstract on which the taxpayer’s property is listed the following affirmation, which shall be signed by an individual qualified under the provisions of G.S. 105-311 :

Under penalties prescribed by law, I hereby affirm that to the best of my knowledge and belief this listing, including any accompanying statements, inventories, schedules, and other information, is true and complete. (If this affirmation is signed by an individual other than the taxpayer, he affirms that he is familiar with the extent and true value of all the taxpayer’s property subject to taxation in this county and that his affirmation is based on all the information of which he has any knowledge.)

Any individual who willfully makes and subscribes an abstract listing required by this Subchapter which he does not believe to be true and correct as to every material matter shall be guilty of a Class 2 misdemeanor.

History. 1939, c. 310, s. 902; 1971, c. 806, s. 1; 1993, c. 539, s. 718; 1994, Ex. Sess., c. 24, s. 14(c).

§ 105-310.1. Electronic listing of personal property.

  1. Personal property may be listed by electronic listing as provided in this section.
  2. The Department of Revenue may establish, after consultation with the counties, the standards and requirements for electronic listing of personal property, including the minimum requirements that must exist before electronic listing will be allowed in a county.
  3. The board of county commissioners may, by resolution, provide for electronic listing of personal property in accordance with the standards and requirements prescribed by the Department of Revenue. The board of county commissioners may, by resolution, delegate its authority to provide for electronic listing of personal property to the county assessor.
  4. Definitions. —  The following definitions apply in this section:
    1. Electronic. — Defined in G.S. 66-312 .
    2. Electronic listing. — The filing by electronic means of the abstract required by G.S. 105-309 and the affirmation required by G.S. 105-310 .

History. 2011-238, s. 4.

Editor’s Note.

Session Laws 2011-238, s. 6, made this section effective June 23, 2011.

Subdivisions (d)(1) and (d)(2) were enacted as subdivisions (d)(2) and (d)(1), respectively by Session Laws 2011-238, s. 4. The subdivisions were renumbered and placed in alphabetical order at the direction of the Revisor of Statutes.

§ 105-311. Listing and signing affirmation; use of agents, mail, and electronic listing.

  1. Except as otherwise provided in this section, the person whose duty it is to list property for taxation shall file the completed abstract with the assessor for purposes of listing and shall sign the affirmation required by G.S. 105-310 to be annexed to the completed abstract on which the property is listed. The abstract must be filed with the assessor on a form approved by the Department of Revenue.
    1. In the case of an individual taxpayer who is unable to list his property, a guardian, authorized agent, or other person having knowledge of and charged with the care of the person and property of the taxpayer shall file the completed abstract and shall sign the required affirmation in the name of the taxpayer, noting thereon the capacity in which he signs.
    2. In the case of a corporation, partnership, limited liability company, or unincorporated association, a person specified in sub-subdivision a., b., or c. below, shall file the completed abstract and shall sign the required affirmation in the name of the taxpayer, noting thereon the capacity in which he signs, and no other agent shall be permitted to sign the affirmation required on such a taxpayer’s abstract:
      1. A principal officer of the taxpayer.
      2. A full-time employee of the taxpayer who has been officially empowered by a principal officer of the taxpayer in his behalf to list the taxpayer’s property for taxation in the county and to sign the affirmation annexed to the abstract or abstracts on which its property is listed.
      3. An agent of the taxpayer authorized by a principal officer of the taxpayer in a manner prescribed by the Department of Revenue.
    3. Repealed by Session Laws 2011-238, s. 5, effective June 23, 2011.
  2. Abstracts may be submitted in person or by mail. Additionally, if the county has provided for electronic listing of personal property under G.S. 105-310.1 , personal property abstracts may be submitted by electronic listing.
    1. Submission by mail. —  In no event shall an abstract submitted by mail be accepted unless the affirmation on the abstract is signed by the individual prescribed in subsection (a) of this section. For the purpose of this Subchapter, abstracts submitted by mail are considered filed as of the date shown on the postmark affixed by the United States Postal Service. If no date is shown on the postmark, or if the postmark is not affixed by the United States Postal Service, the abstract is considered filed when received in the office of the assessor.
    2. Submission by electronic listing. —  In no event shall an abstract submitted by electronic listing be accepted unless the affirmation on the abstract is signed by the individual prescribed in subsection (a) of this section. The affirmation may be signed using an electronic signature method approved by the Department of Revenue. For the purpose of this Subchapter, abstracts submitted by electronic listing are considered filed when received in the office of the assessor as denoted by timestamps applied by the receiving equipment or programs.
  3. In any dispute arising under this Subchapter, the burden of proof is on the taxpayer to show that the abstract was timely filed.

History. 1939, c. 310, ss. 901, 903, 904; 1957, c. 848; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1977, c. 327, s. 1; 1987, c. 43, s. 7; c. 45, s. 1; 2001-279, s. 3; 2001-487, s. 70; 2011-238, s. 5.

Effect of Amendments.

Session Laws 2011-238, s. 5, effective June 23, 2011, rewrote the section.

CASE NOTES

This section must be read narrowly because of its incorporation into G.S. 105-312 , a penalty statute. Winston-Salem Joint Venture v. City of Winston-Salem, 54 N.C. App. 202, 282 S.E.2d 509, 1981 N.C. App. LEXIS 2810 (1981).

Word “when” in the second paragraph of subsection (b) of this section refers to a time, not a contingency, necessarily requiring receipt as a prerequisite to application of this section. Winston-Salem Joint Venture v. City of Winston-Salem, 54 N.C. App. 202, 282 S.E.2d 509, 1981 N.C. App. LEXIS 2810 (1981).

Second paragraph of subsection (b) of this section merely creates logical preferences for determination of timeliness where there has been delivery to the tax supervisor by mail. Winston-Salem Joint Venture v. City of Winston-Salem, 54 N.C. App. 202, 282 S.E.2d 509, 1981 N.C. App. LEXIS 2810 (1981).

And Applies Only Where Abstract Is Received and Envelope Is Available. —

Second paragraph of subsection (b) of this section applies only where an abstract has actually been received and the envelope is available for scrutiny. Winston-Salem Joint Venture v. City of Winston-Salem, 54 N.C. App. 202, 282 S.E.2d 509, 1981 N.C. App. LEXIS 2810 (1981).

And Not Where Receipt Is Denied. —

Where property owner alleged he mailed tax listing before deadline, but receipt of the listing was denied by the taxing authority, second paragraph of subsection (b) of this section was not dispositive. Winston-Salem Joint Venture v. City of Winston-Salem, 54 N.C. App. 202, 282 S.E.2d 509, 1981 N.C. App. LEXIS 2810 (1981).

§ 105-312. Discovered property; appraisal; penalty.

  1. Repealed by Session Laws 1991, c. 34, s. 4.
  2. Duty to Discover and Assess Unlisted Property. —  It shall be the duty of the assessor to see that all property not properly listed during the regular listing period be listed, assessed and taxed as provided in this Subchapter. The assessor shall file reports of such discoveries with the board of commissioners in such manner as the board may require.
  3. Carrying Forward Real Property. —  At the close of the regular listing period each year, the assessor shall compare the tax lists submitted during the listing period just ended with the lists for the preceding year, and he shall carry forward to the lists of the current year all real property that was listed in the preceding year but that was not listed for the current year. When carried forward, the real property shall be listed in the name of the taxpayer who listed it in the preceding year unless, under the provisions of G.S. 105-302 , it must be listed in the name of another taxpayer. Real property carried forward in this manner shall be deemed to be discovered property, and the procedures prescribed in subsection (d), below, shall be followed unless the property discovered is listed in the name of the taxpayer who listed it for the preceding year and the property is not subject to appraisal under either G.S. 105-286 or G.S. 105-287 in which case no notice of the listing and valuation need be sent to the taxpayer.
  4. Procedure for Listing, Appraising, and Assessing Discovered Property. —  Subject to the provisions of subsection (c), above, and the presumptions established by subsection (f), below, discovered property shall be listed by the assessor in the name of the person required by G.S. 105-302 or G.S. 105-306 . The discovery shall be deemed to be made on the date that the abstract is made or corrected pursuant to subsection (e) of this section. The assessor shall also make a tentative appraisal of the discovered property in accordance with the best information available to him.When a discovery is made, the assessor shall mail a notice to the person in whose name the discovered property has been listed. The notice shall contain the following information:
    1. The name and address of the person in whose name the property is listed;
    2. A brief description of the property;
    3. A tentative appraisal of the property;
    4. A statement to the effect that the listing and appraisal will become final unless written exception thereto is filed with the assessor within 30 days from date of the notice.Upon receipt of a timely exception to the notice of discovery, the assessor shall arrange a conference with the taxpayer to afford him the opportunity to present any evidence or argument he may have regarding the discovery. Within 15 days after the conference, the assessor shall give written notice to the taxpayer of his final decision. Written notice shall not be required, however, if the taxpayer signs an agreement accepting the listing and appraisal. In cases in which agreement is not reached, the taxpayer shall have 15 days from the date of the notice to request review of the decision of the assessor by the board of equalization and review or, if that board is not in session, by the board of commissioners. Unless the request for review by the county board is given at the conference, it shall be made in writing to the assessor. Upon receipt of a timely request for review, the provisions of G.S. 105-322 or G.S. 105-325 , as appropriate, shall be followed.
  5. Record of Discovered Property. —  When property is discovered, the taxpayer’s original abstract (if one was submitted) may be corrected or a new abstract may be prepared to reflect the discovery. If a new abstract is prepared, it may be filed with the abstracts that were submitted during the regular listing period, or it may be filed separately with abstracts designated “Late Listings.” Regardless of how filed, the listing shall have the same force and effect as if it had been submitted during the regular listing period.
  6. Presumptions. —  When property is discovered and listed to a taxpayer in any year, it shall be presumed that it should have been listed by the same taxpayer for the preceding five years unless the taxpayer shall produce satisfactory evidence that the property was not in existence, that it was actually listed for taxation, or that it was not his duty to list the property during those years or some of them under the provisions of G.S. 105-302 and G.S. 105-306 . If it is shown that the property should have been listed by some other taxpayer during some or all of the preceding years, the property shall be listed in the name of the appropriate taxpayer for the proper years, but the discovery shall still be deemed to have been made as of the date that the assessor first listed it.
  7. Taxation of Discovered Property. —  When property is discovered, it shall be taxed for the year in which discovered and for any of the preceding five years during which it escaped taxation in accordance with the assessed value it should have been assigned in each of the years for which it is to be taxed and the rate of tax imposed in each such year. The penalties prescribed by subsection (h) of this section shall be computed and imposed regardless of the name in which the discovered property is listed. If the discovery is based upon an understatement of value, quantity, or other measurement rather than an omission from the tax list, the tax shall be computed on the additional valuation fixed upon the property, and the penalties prescribed by subsection (h) of this section shall be computed on the basis of the additional tax.
  8. Computation of Penalties. —  Having computed each year’s taxes separately as provided in subsection (g), above, there shall be added a penalty of ten percent (10%) of the amount of the tax for the earliest year in which the property was not listed, plus an additional ten percent (10%) of the same amount for each subsequent listing period that elapsed before the property was discovered. This penalty shall be computed separately for each year in which a failure to list occurred; and the year, the amount of the tax for that year, and the total of penalties for failure to list in that year shall be shown separately on the tax records; but the taxes and penalties for all years in which there was a failure to list shall be then totalled on a single tax receipt.

    (h1) Repealed by Session Laws 1991, c. 624, s. 8.

  9. Collection. —  For purposes of tax collection and foreclosure, the total figure obtained and recorded as provided in subsection (h) of this section shall be deemed to be a tax for the fiscal year beginning on July 1 of the calendar year in which the property was discovered. The schedule of discounts for prepayment and interest for late payment applicable to taxes for the fiscal year referred to in the preceding sentence shall apply when the total figure on the single tax receipt is paid. Notwithstanding the time limitations contained in G.S. 105-381 , any property owner who is required to pay taxes on discovered property as herein provided shall be entitled to a refund of any taxes erroneously paid on the same property to other taxing jurisdictions in North Carolina. Claim for refund shall be filed in the county where such tax was erroneously paid as provided by G.S. 105-381 .
  10. Tax Receipts Charged to Collector. —  Tax receipts prepared as required by subsections (h) and (i) of this section for the taxes and penalties imposed upon discovered property shall be delivered to the tax collector, and he shall be charged with their collection. Such receipts shall have the same force and effect as if they had been delivered to the collector at the time of the delivery of the regular tax receipts for the current year, and the taxes charged in the receipts shall be a lien upon the property in accordance with the provisions of G.S. 105-355 .
  11. Power to Compromise. —  After a tax receipt computed and prepared as required by subsections (g) and (h) of this section has been delivered and charged to the tax collector as prescribed in subsection (j), above, the board of county commissioners, upon the petition of the taxpayer, may compromise, settle, or adjust the county’s claim for taxes arising therefrom. The board of commissioners may, by resolution, delegate the authority granted by this subsection to the board of equalization and review, including any board created by resolution pursuant to G.S. 105-322(a) and any special board established by local act.
  12. Municipal Corporations. —  The provisions of this section shall apply to all cities, towns, and other municipal corporations having the power to tax property. Such governmental units shall designate an appropriate municipal officer to exercise the powers and duties assigned by this section to the assessor, and the powers and duties assigned to the board of county commissioners shall be exercised by the governing body of the unit. When the assessor discovers property having a taxable situs in a municipal corporation, he shall send a copy of the notice of discovery required by subsection (d) to the governing body of the municipality together with such other information as may be necessary to enable the municipality to proceed. The governing board of a municipality may, by resolution, delegate the power to compromise, settle, or adjust tax claims granted by this subsection and by subsection (k) of this section to the county board of equalization and review, including any board created by resolution pursuant to G.S. 105-322(a) and any special board established by local act.

History. 1939, c. 310, s. 1109; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 787; 1977, c. 864; 1981, c. 623, ss. 1, 2; 1987, c. 45, s. 1; c. 743, ss. 1, 2; 1989, c. 522; 1991, c. 34, s. 4; c. 624, s. 8; 1991 (Reg. Sess., 1992), c. 961, s. 12 1999-297, s. 2.

Cross References.

For definitions applicable to this Subchapter, see G.S. 105-273 .

Editor’s Note.

Session Laws 1999-297, s. 4, provides that Session Laws 1999-297, s. 2, which amended subsection (h) of this section, is repealed effective for taxes imposed for taxable years beginning on or after July 1, 2004.

Session Laws 1999-297, s. 1 provides that it is the intent of the General Assembly to encourage all counties to adopt a permanent property tax listing system in accordance with G.S. 105-303 (b), as a permanent listing is more convenient for taxpayers and more efficient for counties; that to encourage counties to adopt permanent listing in the next few years, Session Laws 1999-297, s. 2, which amends G.S. 105-312 , prohibits counties that have not adopted such a system from charging late listing penalties in certain circumstances; and that Session Laws 1999-297, s. 3, which amends G.S. 105-303 , requires all counties to adopt permanent listing systems by the 2004 tax year.

Session Laws 2013-362, s. 1, provides: “Notwithstanding G.S. 105-287 , 105-325, 105-380, any provision of law restricting the time for which a change in appraisal or valuation may be made, or any other provision of Subchapter II of Chapter 105 of the General Statutes inconsistent with the provisions of this act, a board of county commissioners shall undertake the measures required by this act if all of the following conditions are met:

“(1) The county has independent evidence that the majority of commercial neighborhoods in the county reviewed by a qualified appraisal company possess significant issues of inequity.

“(2) The county has independent evidence that for residential neighborhoods instances of inequity or erroneous data had an impact on the valuation of the neighborhood as a whole.

“(3) The county’s last general reappraisal was performed for the 2008 tax year, 2009 tax year, 2010 tax year, 2011 tax year, or 2012 tax year.

“(4) The independent evidence resulted from a review performed by a qualified appraisal company selected and retained by the county and registered with the Department of Revenue and had a sample size of no less than 375 properties, the relevant characteristics of which were reviewed on location at the property.”

Session Laws 2013-362, s. 2, provides: “If all of the conditions of Section 1 of this act are met, a board of county commissioners shall either (i) conduct a reappraisal, using no less than one person certified by the Department of Revenue for mass valuations per 4,250 parcels, pursuant to G.S. 105-286 within 18 months, applicable to all tax years from and including the tax year when the last general reappraisal was performed pursuant to G.S. 105-286 or (ii) have a qualified appraisal company, which may be the same company that provides the evidence in Section 1 of this act, conduct a review of all the values in the county by neighborhoods and make recommendations as to the true value of the properties as of January 1 of the year of the last general reappraisal performed pursuant to G.S. 105-286. After the reappraisal or after each neighborhood review required by this section is complete, the board of county commissioners shall make any change on the abstracts and tax records to ensure that the assessed values of incorrectly appraised properties in the county reflect the true values of those properties effective for the year of the last general reappraisal performed pursuant to G.S. 105-286 and shall apply the adjusted values for those properties for each tax year until the next general reappraisal for real property is performed by the county pursuant to G.S. 105-286 unless those adjusted values are changed in accordance with G.S. 105-287 . In making changes to the abstracts and tax records mandated by this act, the board of county commissioners shall make adjustments for previous errors prioritized as follows:

“(1) Adjustments to parcels with errors that resulted in the parcels having a significantly overstated value.

“(2) Adjustments to parcels with errors that resulted in the parcels having a significantly understated value.

“(3) Adjustments to parcels with errors that resulted in the parcels having an overstated value.

“(4) Adjustments to parcels with errors that resulted in the parcels having an understated value.

“In instances of parcels with errors that resulted in an overpayment of taxes, the governing board shall require that notice of refund and the refund amount be sent to the owner of record as of the date the payment was made. The provisions of G.S. 105-380 do not apply to the issuance of any refund under the provisions of this act.”

Session Laws 2013-362, s. 3, as amended by Session Laws 2015-266, s. 1, provides: “Interest on taxes paid on parcels with errors that resulted in the parcels having an overstated value shall be calculated at a rate of five percent (5%) per annum. Additional taxes levied on parcels as a result of errors causing the parcels to have an understated value (i) shall be treated as taxes on discovered property pursuant to G.S. 105-312 , except that the discovery penalties set forth in subsection (h) of G.S. 105-312 shall not apply, (ii) are due and payable on September 1 of the fiscal year for which the taxes are levied, but not earlier than four years from the last general reappraisal date, and (iii) shall be payable, at the taxpayer’s option, by means of an agreement over a period of not more than 36 months, in equal monthly installments, if the total of the additional taxes levied is greater than one thousand dollars ($1,000). Interest shall not accrue for the period a taxpayer is making timely payments under a payment plan. The tax collector is authorized to issue forms and develop procedures to implement a payment plan authorized under this section. Notwithstanding G.S. 105-365.1(b), for parcels that have been transferred in a tax year for which errors requiring reappraisals under this act resulted in an underpayment of taxes, the following apply:

“(1) The taxes for each tax year prior to and in the fiscal year in which the transfer occurred shall be collected from the owner of record as of January 1 of each tax year for which unpaid taxes exist. Only the remedies available in G.S. 105-367 and G.S. 105-368 may be used to collect against the owner of record as of January 1 of each tax year for which unpaid taxes exist.

“(2) Notwithstanding G.S. 105-355(a), there shall be no lien on the real property for underpaid taxes that arose in a year in which the property is owned by a person other than the current owner as of January 1 of that year. The current owner shall not be held personally responsible for such underpaid taxes.

“(3) If an owner not responsible for underpaid taxes pursuant to this section paid the underpaid taxes, the owner may assert a valid defense for a refund pursuant to G.S. 105-381 , as a tax imposed through clerical error. Interest on the refund shall be calculated at a rate of five percent (5%) per annum from the date the owner asserting the defense paid the underpaid taxes until the date the refund is issued.”

Legal Periodicals.

For note on procedural developments in the discovery of property unlisted for purposes of ad valorem taxation, see 51 N.C.L. Rev. 531 (1973).

For article, “Future Advances and Title Insurance Coverage,” see 15 Wake Forest L. Rev. 329 (1979).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

Construed as Whole. —

Public Laws 1927, c. 71, s. 73, relating to the same subject matter as this section, must be construed as a whole, not piecemeal. Madison County v. Coxe, 204 N.C. 58 , 167 S.E. 486, 1933 N.C. LEXIS 323 (1933).

Construction with Other Statutes. —

Defendant could not use the time period in G.S. 105-312(3), dealing with valuation of gaming machines, to defeat his conviction for possessing illegal gambling machines under G.S. 14-306.1(a)(1); the trial court did not err in instructing the jury on the illegal gaming machine charge and in refusing defendant’s requested charge where there was sufficient evidence that defendant’s warrantless arrest was proper. State v. Childers, 154 N.C. App. 375, 572 S.E.2d 207, 2002 N.C. App. LEXIS 1472 (2002), cert. denied, 356 N.C. 682 , 577 S.E.2d 899, 2003 N.C. LEXIS 237 (2003).

Retroactive Effect. —

The intention of the legislature to give the new Machinery Act of 1971 retroactive effect is expressly declared in G.S. 105-395 . In re Pilot Freight Carriers, Inc., 28 N.C. App. 400, 221 S.E.2d 378, 1976 N.C. App. LEXIS 2707 (1976).

G.S. 105-394 did not let a county recover taxes on a parcel’s corrected value for certain years because (1) the county arbitrarily appraised the parcel for those years, so G.S. 105-287 applied, since the county tried to change a parcel’s value in a year in which a general reappraisal was not made and improperly “discovered” the parcel for those years, and (2) G.S. 105-287 (c) said an increase in value was not retroactive. In re Pace/Dowd Props. Ltd., 233 N.C. App. 7, 755 S.E.2d 401, 2014 N.C. App. LEXIS 267 (2014).

Discovery and Listing of Omitted Property. —

The statute provides for discovery of taxable property not listed, by certain tax authorities, and listing same. Hardware Mut. Fire Ins. Co. v. Stinson, 210 N.C. 69 , 185 S.E. 449, 1936 N.C. LEXIS 21 (1936).

The language of subdivision (a)(3) of this section makes it clear that property can only be discovered if it is not listed. In re Wesleyan Educ. Center, 68 N.C. App. 742, 316 S.E.2d 87, 1984 N.C. App. LEXIS 3416 (1984).

“Listed in the Name of the Taxpayer,” etc., as Used in Subsection (c). —

In light of the definition of “discovered property” in subdivision (a)(1), the phrase “listed in the name of the taxpayer who listed it for the preceding year” as used in subsection (c) of this section includes a listing of property in the name of the taxpayer both when listed personally by the taxpayer and when listed in the taxpayer’s name by “any other person,” according to law, for the preceding year. In re North Carolina Forestry Found., Inc., 35 N.C. App. 414, 242 S.E.2d 492, 1978 N.C. App. LEXIS 3003 (1978), aff'd, 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

Purpose of notice requirement is to inform the taxpayer that his property is subject to ad valorem taxation. In re North Carolina Forestry Found., Inc., 296 N.C. 330 , 250 S.E.2d 236, 1979 N.C. LEXIS 1156 (1979).

Immaterial irregularities in notice do not invalidate taxes imposed. In re Pilot Freight Carriers, Inc., 28 N.C. App. 400, 221 S.E.2d 378, 1976 N.C. App. LEXIS 2707 (1976).

Failure of Owner to Appear to Receive Lists. —

Under the Act of 1784, if the owner failed to attend at the time and place appointed to receive the lists of taxable property, the justice could make out a list for himself to the best of his knowledge. Tores v. Justices of County Court, 6 N.C. 167 , 1812 N.C. LEXIS 24 (1812).

Rebuttal of Presumption. —

The presumption created by statute, that the person in possession of personal property was the owner and in possession of said property on the taxing dates of the five preceding years, was held rebutted by the facts of the case. Coltrane v. Donnell, 203 N.C. 515 , 166 S.E. 397, 1932 N.C. LEXIS 28 (1932).

Compromise Settlement Is Binding Unless Made in Bad Faith. —

In the absence of a finding that the board of commissioners acted in bad faith in making a compromise settlement of a tax, or abused its discretion in so doing, mandamus to compel the commissioners to list and assess will be denied. Stone v. Board of Comm'rs, 210 N.C. 226 , 186 S.E. 342, 1936 N.C. LEXIS 64 (1936).

City has right to impose taxes on discovered property for preceding five years or for any of them in which the property escaped taxation. In re McLean Trucking Co., 283 N.C. 650 , 197 S.E.2d 520, 1973 N.C. LEXIS 1030 (1973).

Right to Review. —

While it is true that the 1987 amendment to G.S. 150-282.1(c) made the decisions of the county boards discretionary, it did not make those decisions unreviewable. Rather, the legislature has placed the duty upon the Property Tax Commission to hear appeals from decisions of the county boards arising under the provisions of this section and other sections of Chapter 105. In re K-mart Corp., 319 N.C. 378 , 354 S.E.2d 468, 1987 N.C. LEXIS 1922 (1987).

Application of Former Discovered-Property Statute. —

See In re McLean Trucking Co., 283 N.C. 650 , 197 S.E.2d 520, 1973 N.C. LEXIS 1030 (1973).

Definition of Phrase “Discovered Property” as Used Under Former Law. —

See In re McLean Trucking Co., 283 N.C. 650 , 197 S.E.2d 520, 1973 N.C. LEXIS 1030 (1973).

OPINIONS OF ATTORNEY GENERAL

Because the statutes authorizing property taxes provide for interest and/or penalties, a county may not, by ordinance, impose a late payment penalty or administrative fee upon delinquent property tax accounts. See opinion of Attorney General to Lloyd C. Smith, Jr., Pritchett & Burch, PLLC, 2001 N.C. AG LEXIS 6 (3/6/2001).

Article 18. Reports in Aid of Listing.

§ 105-313. Report of property by multi-county business.

A taxpayer who is engaged in business in more than one county in this State and who owns real property or tangible personal property in connection with his multi-county business shall, upon the request of the Department of Revenue or the assessor of a county in which part of this business property is situated, file a report with the Department of Revenue stating, as of the dates specified in G.S. 105-285 of any year, the following information:

  1. The counties in this State in which the taxpayer’s business property is situated;
  2. The taxpayer’s investment, on a county by county basis, in his business property situated in this State, categorized as the Department of Revenue or the assessor may require; and
  3. The taxpayer’s total investment in his business property situated in this State, categorized as the Department of Revenue or the assessor may require.

    This report shall be subscribed and sworn to by the owner of the property. If the owner is a corporation, partnership, or unincorporated association, the report shall be subscribed and sworn to by a principal officer of the owner who has knowledge of the facts contained in the report.

History. 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1987, c. 777, s. 3.

Local Modification.

(As to Article 18) Forsyth and Pasquotank: 1979 (2nd Sess., 1980), c. 1110; 1987, c. 602, s. 3.

§ 105-314. [Repealed]

Repealed by Session Laws 1993, c. 761, s. 37.4.

§ 105-315. Report by persons having custody of tangible personal property of others.

  1. As of January 1, every person having custody of taxable tangible personal property that has been entrusted to the person by another for storage, sale, renting, or any other business purpose shall furnish to the assessor of the county in which the property is situated a report with the information listed in this subsection. This requirement does not apply to a person having custody of inventories exempt under G.S. 105-275(32a), 105-275(33), or 105-275(34). As used in this section, the term “person having custody of taxable tangible personal property” includes warehouses, cooperative growers’ and marketing associations, consignees, factors, commission merchants, and brokers. The report must include all of the following:
    1. Repealed by Session Laws 1987, c. 813, s. 14.
    2. The name of the owner of the property.
    3. A description of the property.
    4. The quantity of the property.
    5. The amount of money, if any, advanced against the property by the person having custody of the property.
  2. A person who fails to make the report required by this section, by January 15 in any year is liable to the counties in which the property is taxable for a penalty to be measured by any portion of the tax on the property that has not been paid at the time the action to collect this penalty is brought plus two hundred fifty dollars ($250.00). This penalty may be recovered in a civil action in the appropriate division of the General Court of Justice of the county in which the property is taxable. Upon recovery of this penalty, the tax on the property is deemed paid.

History. 1939, c. 310, ss. 1001, 1002; 1955, c. 1069, ss. 2, 3; 1965, c. 592; 1971, c. 806, s. 1; 1987, c. 45, s. 1; c. 813, s. 14; 2014-3, s. 14.21.

Effect of Amendments.

Session Laws 2014-3, s. 14.21, effective May 29, 2014, substituted “Report” for “Reports” in the section heading; rewrote subsection (a); and, in subsection (b), in the first sentence, substituted “A person” for “Any person” at the beginning, and substituted “this section” for “subsection (a), above” and “is liable” for “shall be liable” near the middle, and, near the end of the last sentence, substituted “is deemed paid” for “shall be deemed to be paid.”

Legal Periodicals.

For survey of 1974 case law on taxation of personal property owned by nonresidents, see 53 N.C.L. Rev. 1132 (1975).

CASE NOTES

Purpose of Section. —

See Davenport v. Ralph N. Peters & Co., 386 F.2d 199, 1967 U.S. App. LEXIS 4877 (4th Cir. 1967) (decided under former similar provisions).

Person discharges his legal obligation upon filing report prescribed in subsection (a) of this section. In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

Effect of Tax Assessed on Textile Goods Shipped to North Carolina Company for Finishing. —

See In re Hanes Dye & Finishing Co., 285 N.C. 598 , 207 S.E.2d 729, 1974 N.C. LEXIS 1063 (1974).

§ 105-316. Reports by house trailer park, marina, and aircraft storage facility operators.

  1. As of January 1 each year:
    1. Every operator of a park or storage lot renting or leasing space for three or more house trailers or mobile homes shall furnish to the assessor of the county in which the park or lot is located the name of the owner of and a description of each house trailer or mobile home situated thereon.
    2. Every operator of a marina or comparable facility renting, leasing, or otherwise providing dockage or storage space for three or more boats, vessels, floating homes, or floating structures shall furnish to the assessor of the county in which the marina or comparable facility is located the name of the owner of and a description of each boat, vessel, floating home, or floating structure for which dockage or storage space is rented, leased, or otherwise provided.
    3. Every operator of a storage facility renting or leasing space for three or more airplanes or other aircraft shall furnish to the assessor of the county in which the storage facility is located the name of the owner of and a description of each airplane or aircraft for which space is rented or leased.
  2. Any person who fails to make any report required by subsection (a), above, by January 15 of any year shall be liable to the county in which the house trailers, mobile homes, boats, vessels, floating homes, floating structures, or airplanes are taxable for a penalty to be measured by any portion of the tax on the personal property that has not been paid at the time the action to collect this penalty is brought, plus two hundred fifty dollars ($250.00). This penalty may be recovered in a civil action in the appropriate division of the General Court of Justice of the county in which the personal property is taxable. Upon recovery of this penalty, the tax on the personal property shall be deemed to be paid.

History. 1939, c. 310, s. 1002; 1955, c. 1069, s. 3; 1965, c. 592; 1971, c. 806, s. 1; 1985, c. 378, ss. 1, 2; 1987, c. 45, s. 1.

§ 105-316.1. Tax permit required to move mobile home.

  1. In order to protect the local taxing units of this State against the nonpayment of ad valorem taxes on mobile homes, it is hereby declared to be unlawful for any person other than a mobile home manufacturer or retailer to remove or cause to be removed any mobile home situated at a premises in this State without first obtaining a tax permit from the tax collector of the county in which the mobile home is situated. The tax permit shall be conspicuously displayed near the license tag on the rear of the mobile home at all times during its transportation. Permits required by G.S. 105-316.1 through 105-316.8 may be obtained at the office of the county tax collector during normal business hours.
  2. Except as provided in G.S. 105-316.4 , manufacturers, retailers and licensed carriers of mobile homes shall not be required to obtain the tax permits required by this section. Persons or firms transporting mobile homes shall, however, be responsible for seeing that a proper license tag, and when required under this section, a tax permit, are properly displayed thereon at all times during their transportation.

History. 1975, c. 881, s. 1; 1977, 2nd Sess., c. 1187, ss. 1, 2.

§ 105-316.2. Requirements for obtaining permit.

  1. In order to obtain the permits herein provided, persons other than manufacturers and retailers of mobile homes shall be required to (i) pay all taxes due to be paid by the owner to the county or to any other taxing unit therein; or (ii) show proof to the tax collector that no taxes are due to be paid; or (iii) demonstrate to the tax collector that the removal of the mobile home will not jeopardize the collection of any taxes due or to become due to the county or to any taxing unit therein.
  2. In addition to complying with the provisions of subsection (a) above, owners of mobile homes required to obtain the permits herein provided shall also furnish the following information to the tax collector:
    1. The name and address of the owner,
    2. The address or location of the premises from which the mobile home is to be moved,
    3. The address or location of the place to which the mobile home is to be moved, and
    4. The name and address of the carrier who is to transport the mobile home.

History. 1975, c. 881, s. 1.

§ 105-316.3. Issuance of permits.

  1. Except as otherwise provided in G.S. 105-316.2 above, no permit required by G.S. 105-316.1 through 105-316.8 shall be issued by the tax collector unless and until all taxes due to be paid by the owner to the county or to any other taxing unit therein, including any penalties or interest thereon, have been paid. Any taxes which have not yet been computed but which will become due during the current calendar year shall be determined as in the case of prepayments.
  2. Upon compliance with the provisions of G.S. 105-316.1 through 105-316.8, the tax collector shall issue, without charge, a permit authorizing the removal of the mobile home. He shall also maintain a record of all permits issued.

History. 1975, c. 881, s. 1.

§ 105-316.4. Issuance of permits under repossession.

Notwithstanding the provisions of G.S. 105-316.2(a) and 105-316.3(a), above, any person who intends to take possession of a mobile home, whether by judicial or nonjudicial authority, as a holder of a lien on said mobile home shall apply for, and be issued, the permit herein provided without paying all taxes due to be paid by the owner of the mobile home being repossessed, upon notifying the tax collector of the location in North Carolina to which the mobile home is to be taken. At the time of notification the tax collector shall render to the holder of the lien a statement of taxes due against only the mobile home. Within seven days of the issuance of the permit the applicant shall pay to the tax collector the taxes due as set forth in the statement.

Notwithstanding the foregoing, any applicant who is a nonresident of North Carolina must pay the taxes due as set forth above at the time of notification to the tax collector and application for the permit.

Upon issuance of the permit and the payment of any taxes as prescribed herein, the mobile home shall no longer be subject to levy or attachment of any lien for any other taxes then owed by the owner thereof, whether or not previously determined.

History. 1975, c. 881, s. 1; 1977, 2nd Sess., c. 1187, s. 3.

§ 105-316.5. Form of permit.

The permit shall be in substantially the following form:

TAX PERMIT County of Permit Number State of North Carolina Date of Issuance Permission is hereby granted to: (Name & address of owner) (Name & address of owner) to remove the following described mobile home: (Make, model, size, serial number, etc.) From: (Address) To: (Address) This permit is issued in accordance with the provisions of through of the General Statutes of North Carolina. G.S. 105-316.1 G.S. 105-316.8 (Signed) Tax Collector (or Deputy Tax Collector) County of

Click to view

History. 1975, c. 881, s. 1; 1977, 2nd Sess., c. 1187, s. 1.

§ 105-316.6. Penalties for violations.

  1. Any person required by G.S. 105-316.1 through 105-316.8 to obtain a tax permit who fails to do so or who fails to properly display same shall be guilty of a Class 3 misdemeanor. This penalty shall be in addition to any penalties imposed for failure to list property for taxation and interest for failure to pay taxes provided by the general laws of this State.
  2. Any manufacturer or retailer of mobile homes who aids or abets any owner covered by G.S. 105-316.1 through 105-316.8 to defeat in any manner the purpose of G.S. 105-316.1 through 105-316.8 shall be guilty of a Class 3 misdemeanor.
  3. Any person who transports a mobile home from a location in this State for an owner other than a manufacturer or retailer of mobile homes without having properly displayed thereon the tax permit required by G.S. 105-316.1 through 105-316.8 shall be guilty of a Class 3 misdemeanor.
  4. Any law-enforcement officer of this State who apprehends any person violating the provisions of G.S. 105-316.1 through 105-316.8 shall detain such person and mobile home until satisfactory arrangements have been made to meet the requirements of G.S. 105-316.1 through 105-316.8.

History. 1975, c. 881, s. 1; 1977, 2nd Sess., c. 1187, ss. 1, 4, 5; 1993, c. 539, s. 719; 1994, Ex. Sess., c. 24, s. 14(c).

§ 105-316.7. Mobile home defined.

For the purpose of G.S. 105-316.1 through 105-316.8, “mobile home” means a structure that (i) is designed, constructed, and intended for use as a dwelling house, office, place of business, or similar place of habitation and (ii) is capable of being transported from place to place on wheels attached to its frame. It also means a manufactured home as described in G.S. 105-273(13). This definition does not include trailers and vehicles required to be registered annually pursuant to Part 3, Article 3 of Chapter 20 of the General Statutes.

History. 1975, c. 881, s. 1; 1987, c. 805, s. 4.

§ 105-316.8. Taxable situs not presumed.

Nothing in G.S. 105-316.1 through 105-316.8 shall be interpreted so as to subject to taxation any mobile home which does not have a taxable situs within this State under the general rules of law appropriate to such a determination.

History. 1975, c. 881, s. 1.

Article 19. Administration of Real and Personal Property Appraisal.

§ 105-317. Appraisal of real property; adoption of schedules, standards, and rules.

  1. Whenever any real property is appraised it shall be the duty of the persons making appraisals:
    1. In determining the true value of land, to consider as to each tract, parcel, or lot separately listed at least its advantages and disadvantages as to location; zoning; quality of soil; waterpower; water privileges; dedication as a nature preserve; conservation or preservation agreements; mineral, quarry, or other valuable deposits; fertility; adaptability for agricultural, timber-producing, commercial, industrial, or other uses; past income; probable future income; and any other factors that may affect its value except growing crops of a seasonal or annual nature.
    2. In determining the true value of a building or other improvement, to consider at least its location; type of construction; age; replacement cost; cost; adaptability for residence, commercial, industrial, or other uses; past income; probable future income; and any other factors that may affect its value.
    3. To appraise partially completed buildings in accordance with the degree of completion on January 1.
  2. In preparation for each revaluation of real property required by G.S. 105-286 , it shall be the duty of the assessor to see that:
    1. Uniform schedules of values, standards, and rules to be used in appraising real property at its true value and at its present-use value are prepared and are sufficiently detailed to enable those making appraisals to adhere to them in appraising real property.
    2. Repealed by Session Laws 1981, c. 678, s. 1.
    3. A separate property record be prepared for each tract, parcel, lot, or group of contiguous lots, which record shall show the information required for compliance with the provisions of G.S. 105-309 insofar as they deal with real property, as well as that required by this section. (The purpose of this subdivision is to require that individual property records be maintained in sufficient detail to enable property owners to ascertain the method, rules, and standards of value by which property is appraised.)
    4. The property characteristics considered in appraising each lot, parcel, tract, building, structure and improvement, in accordance with the schedules of values, standards, and rules, be accurately recorded on the appropriate property record.
    5. Upon the request of the owner, the board of equalization and review, or the board of county commissioners, any particular lot, parcel, tract, building, structure or improvement be actually visited and observed to verify the accuracy of property characteristics on record for that property.
    6. Each lot, parcel, tract, building, structure and improvement be separately appraised by a competent appraiser, either one appointed under the provisions of G.S. 105-296 or one employed under the provisions of G.S. 105-299 .
    7. Notice is given in writing to the owner that he is entitled to have an actual visitation and observation of his property to verify the accuracy of property characteristics on record for that property.
  3. The values, standards, and rules required by subdivision (b)(1) shall be reviewed and approved by the board of county commissioners before January 1 of the year they are applied. The board of county commissioners may approve the schedules of values, standards, and rules to be used in appraising real property at its true value and at its present-use value either separately or simultaneously. Notice of the receipt and adoption by the board of county commissioners of either or both the true value and present-use value schedules, standards, and rules, and notice of a property owner’s right to comment on and contest the schedules, standards, and rules shall be given as follows:
    1. The assessor shall submit the proposed schedules, standards, and rules to the board of county commissioners not less than 21 days before the meeting at which they will be considered by the board. On the same day that they are submitted to the board for its consideration, the assessor shall file a copy of the proposed schedules, standards, and rules in his office where they shall remain available for public inspection.
    2. Upon receipt of the proposed schedules, standards, and rules, the board of commissioners shall publish a statement in a newspaper having general circulation in the county stating:
      1. That the proposed schedules, standards, and rules to be used in appraising real property in the county have been submitted to the board of county commissioners and are available for public inspection in the assessor’s office; and
      2. The time and place of a public hearing on the proposed schedules, standards, and rules that shall be held by the board of county commissioners at least seven days before adopting the final schedules, standards, and rules.
    3. When the board of county commissioners approves the final schedules, standards, and rules, it shall issue an order adopting them. Notice of this order shall be published once a week for four successive weeks in a newspaper having general circulation in the county, with the last publication being not less than seven days before the last day for challenging the validity of the schedules, standards, and rules by appeal to the Property Tax Commission. The notice shall state:
      1. That the schedules, standards, and rules to be used in the next scheduled reappraisal of real property in the county have been adopted and are open to examination in the office of the assessor; and
      2. That a property owner who asserts that the schedules, standards, and rules are invalid may except to the order and appeal therefrom to the Property Tax Commission within 30 days of the date when the notice of the order adopting the schedules, standards, and rules was first published.
  4. Before the board of county commissioners adopts the schedules of values, standards, and rules, the assessor may collect data needed to apply the schedules, standards, and rules to each parcel in the county.

History. 1939, c. 310, s. 501; 1959, c. 704, s. 4; 1967, c. 944; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 695, s. 5; 1981, c. 224; c. 678, s. 1; 1985, c. 216, s. 2; c. 628, s. 4; 1987, c. 45, s. 1; c. 295, s. 1; 1997-226, s. 5.

Editor’s Note.

Session Laws 2009-180, s. 1, provides: “Notwithstanding G.S. 105-285 and G.S. 105-317 , a county may change the value of real property after January 1, 2009, effective for the taxable year beginning July 1, 2009, based upon the schedule of values used to appraise real property in the county for its last reappraisal if the county adopted a resolution to postpone a 2009 reappraisal between January 1, 2009, and June 30, 2009. This authorization does not affect the requirement in G.S. 105-286 to reappraise property at least once every eight years. If a county changes its values of real property pursuant to this section, the schedule of values adopted by the board of county commissioners and used to appraise real property in the county for its last reappraisal will remain the schedule of values to be used to appraise real property until the county reappraises all real property in accordance with G.S. 105-286 .”

Legal Periodicals.

For article on the need to reform North Carolina property tax law, see 59 N.C.L. Rev. 675 (1981).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

This section, generally speaking, is directory. In re Appeal of Reeves Broadcasting Corp., 273 N.C. 571 , 160 S.E.2d 728, 1968 N.C. LEXIS 634 (1968).

Ad valorem tax assessments are presumed correct. In order to rebut this presumption, the taxpayer must present evidence to show that an arbitrary method of valuation was used, or that an illegal method of valuation was used, and that the assessment substantially exceeded the true value in money of the property. In re Interstate Income Fund I, 126 N.C. App. 162, 484 S.E.2d 450, 1997 N.C. App. LEXIS 330 (1997).

Procedural Due Process. —

Under G.S. 105-317(b), taxpayers’ constitutional rights to procedural due process were not violated where they were given multiple opportunities to present evidence to the North Carolina Property Tax Commission advocating their proposed method of valuing their properties. In re Appeal of Owens, 144 N.C. App. 349, 547 S.E.2d 827, 2001 N.C. App. LEXIS 415 (2001).

Failure to consider each and every indicia of value recited in this section does not vitiate the appraisal. In re Appeal of Reeves Broadcasting Corp., 273 N.C. 571 , 160 S.E.2d 728, 1968 N.C. LEXIS 634 (1968).

Subdivision (a)(1) of this section is directory, and failure to consider each and every indicia of value recited in the statute does not vitiate the appraisal. In re Highlands De v. Corp., 80 N.C. App. 544, 342 S.E.2d 588, 1986 N.C. App. LEXIS 2193 (1986).

Privilege “Belonging” or “Appertaining” to Real Property. —

Non-refundable membership fee in a continuing care retirement community was a right and privilege “belonging” or “appertaining to” the taxpayers’ real property and was properly included in its tax appraisal value. In re Appeal of Tillman, 187 N.C. App. 739, 653 S.E.2d 911, 2007 N.C. App. LEXIS 2563 (2007).

Commission Properly Used Income Rather Than County’s Cost Approach. —

North Carolina Property Tax Commission properly employed an income approach to a business property in reducing the appraised value that was assigned to the business property by a county that used a cost approach, as the decision had a rational basis in the evidence. In re Weaver In v. Co., 165 N.C. App. 198, 598 S.E.2d 591, 2004 N.C. App. LEXIS 1150 (2004).

Commission May Decline to Use Highest and Best Use Valuation. —

There is no statutory proscription against the Tax Commission’s declining to use the highest and best use valuation provided it has considered both the specifically enumerated factors of subsection (a) of this section and any other factors that may affect the land’s value. In re Perry-Griffin Found., 108 N.C. App. 383, 424 S.E.2d 212, 1993 N.C. App. LEXIS 90 (1993).

Subsection (a), in fixing the guide which assessors must use in valuing property for taxes, includes as a factor the past income therefrom, and its probable future income. But the income referred to is not necessarily actual income. The language is sufficient to include the income which could be obtained by the proper and efficient use of the property. To hold otherwise would be to penalize the competent and diligent and to reward the incompetent or indolent. In re Greensboro Office Partnership, 72 N.C. App. 635, 325 S.E.2d 24, 1985 N.C. App. LEXIS 3143 (1985).

Neither G.S. 105-283 nor subsection (a) of this section require the commission to value property according to its sales price in a recent arm’s length transaction when competent evidence of a different value is presented. In re Greensboro Office Partnership, 72 N.C. App. 635, 325 S.E.2d 24, 1985 N.C. App. LEXIS 3143 (1985).

The fair market value of real property for tax purposes is the same as that for condemnation purposes. In re Parsons, 123 N.C. App. 32, 472 S.E.2d 182, 1996 N.C. App. LEXIS 584 (1996).

Net income produced is an element which may properly be considered in determining value, but it is only one element. In re Property of Pine Raleigh Corp., 258 N.C. 398 , 128 S.E.2d 855, 1963 N.C. LEXIS 430 (1963); In re Valuation of Property Located at 411-417 W. Fourth St., 282 N.C. 71 , 191 S.E.2d 692, 1972 N.C. LEXIS 887 (1972).

Bankruptcy Stigma as Appraisal Factor. —

Taxpayer’s contention that expert witness ignored the impact of bankruptcy stigma in valuing a property held without merit. In re Phoenix Ltd. Partnership, 134 N.C. App. 474, 517 S.E.2d 903, 1999 N.C. App. LEXIS 810 (1999).

The income approach should have been the primary method used to reach a value for the anchor store in a shopping mall; while the income approach is preferential a combination of approaches may be used because of the inherent weaknesses in each approach, so long as the income approach is given greatest weight. In re Belk-Broome Co., 119 N.C. App. 470, 458 S.E.2d 921, 1995 N.C. App. LEXIS 528 (1995), aff'd, 342 N.C. 890 , 467 S.E.2d 242, 1996 N.C. LEXIS 137 (1996).

But Fact-Finding Board May Also Consider Earning Capacity. —

If it appears that the income actually received is less than the fair earning capacity of the property, the earning capacity should be substituted as a factor rather than the actual earnings. The fact-finding board can properly consider both. In re Property of Pine Raleigh Corp., 258 N.C. 398 , 128 S.E.2d 855, 1963 N.C. LEXIS 430 (1963); In re Valuation of Property Located at 411-417 W. Fourth St., 282 N.C. 71 , 191 S.E.2d 692, 1972 N.C. LEXIS 887 (1972).

The former language in this section, “the past income therefrom, its probable future income,” was not necessarily actual income. The language was sufficient to include the income which could be obtained by the proper and efficient use of the property. In re Property of Pine Raleigh Corp., 258 N.C. 398 , 128 S.E.2d 855, 1963 N.C. LEXIS 430 (1963).

Advantages and Disadvantages in Location to Be Considered. —

Consideration of advantages inherent in the location of the property necessarily requires consideration of any disadvantages inherent in such location. In re Valuation of Property Located at 411-417 W. Fourth St., 282 N.C. 71 , 191 S.E.2d 692, 1972 N.C. LEXIS 887 (1972).

County arbitrarily assessed a landowner’s parcels because the county did not consider water and sewer availability. In re Pace/Dowd Props. Ltd., 233 N.C. App. 7, 755 S.E.2d 401, 2014 N.C. App. LEXIS 267 (2014).

Factors in Subsection (a) Irrelevant to Valuation Under G.S. 105-277.2 . —

Clear legislative intent under G.S. 105-277.2 is that property be valued on the basis of its ability to produce income in the manner of its present use; all other uses for which the property might be employed, and the many factors enunciated in subsection (a) of this section, are irrelevant and immaterial. In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

Landowner did not show a county’s present-use schedule of values (SOV), as applied in determining the value of the landowner’s property, was illegal for not considering soil quality, under G.S. 105-317(a), because (1) G.S. 105-317(a) did not apply when determining present-use valuation, and (2) the landowner did not claim the SOV did not comply with the applicable requirements of G.S. 105.277.2(5) or G.S. 105-317(b)(1), so the landowner did not rebut a presumption that the county’s SOV was proper. In re Appeal McLamb, 218 N.C. App. 485, 721 S.E.2d 285, 2012 N.C. App. LEXIS 223 (2012).

Schedule of Values Sufficient. —

When a county’s schedule of values, standards, and rules included a general reference to legal restrictions on land use, it did not need to list every type of restriction to be sufficiently detailed to enable those making appraisals to adhere to the schedule in appraising real property. In re Appeal of Parker, 191 N.C. App. 313, 664 S.E.2d 1, 2008 N.C. App. LEXIS 1338 (2008).

Detail contained in a county schedule of values was sufficient to enable those making appraisals to adhere to those valuation amounts for each neighborhood to appraise the real property to be valued because the schedule contained a list of neighborhoods with valuation amounts for residential, commercial/industrial, and agricultural properties. G.S. 105-317(a) did not require a table of incremental and decremental values to be included in a county’s schedule of values, standards, and rules. In re Appeal of Parker, 191 N.C. App. 313, 664 S.E.2d 1, 2008 N.C. App. LEXIS 1338 (2008).

Landowner did not show a county’s present-use schedule of values (SOV), as applied in determining the value of the landowner’s property, was illegal for not considering soil quality, under G.S. 105-317(a), because (1) G.S. 105-317(a) did not apply when determining present-use valuation, and (2) the landowner did not claim the SOV did not comply with the applicable requirements of G.S. 105.277.2(5) or G.S. 105-317(b)(1), so the landowner did not rebut a presumption that the county’s SOV was proper. In re Appeal McLamb, 218 N.C. App. 485, 721 S.E.2d 285, 2012 N.C. App. LEXIS 223 (2012).

To find the true value of property subject to conservation easements, the Commission must determine the market value prior to the granting of the easements and then reduce that value by applying a damage factor caused by the granting of the conservation easements. Determining the highest and best use of the property prior to the granting of the easement is a critical part of the appraisal process. Rainbow Springs Partnership v. County of Macon, 79 N.C. App. 335, 339 S.E.2d 681, 1986 N.C. App. LEXIS 2065 (1986).

Equalization of Property Improper. —

It was not the Commission’s place to equalize property values between anchor store property and the surrounding property in a shopping mall; in doing so, the Commission exceeded its authority and committed an error of law. In re Belk-Broome Co., 119 N.C. App. 470, 458 S.E.2d 921, 1995 N.C. App. LEXIS 528 (1995), aff'd, 342 N.C. 890 , 467 S.E.2d 242, 1996 N.C. LEXIS 137 (1996).

Charitable Trusts. —

Because of the valid and enforceable restraint on alienation, property of a charitable trust itself is unmarketable; therefore, to tax the property according to normal market assumptions would be unfair to the charitable trust and in doing so, would seriously erode and ultimately defeat the public policy of this State in favor of charitable trusts. In re Perry-Griffin Found., 108 N.C. App. 383, 424 S.E.2d 212, 1993 N.C. App. LEXIS 90 (1993).

Potential Uses and Income Held Adequately Considered. —

Where county appraisers considered soil quality and whether the land was cropland, pasture, or woodland, and set varying land values on this basis, and also took into consideration that part of the land was swampland, the potential uses and income of the land were adequately considered. In re Wagstaff, 42 N.C. App. 47, 255 S.E.2d 754, 1979 N.C. App. LEXIS 2753 (1979).

Presumption of Correctness of Appraisal Not Rebutted. —

Taxpayer’s contention that cost approach method of appraisal was not legal because it did not consider the 26 U.S.C.S. § 42 rent restrictions on the property was insufficient to rebut the presumption that the appraisal was properly administered; the intermediate appellate court’s ruling reversing a decision of the North Carolina Property Tax Commission was itself reversed. In re Greens of Pine Glen Ltd., 356 N.C. 642 , 576 S.E.2d 316, 2003 N.C. LEXIS 27 (2003).

Assessment of the market value of a taxpayer’s forestland was upheld, despite the taxpayer’s claim that the assessment did not sufficiently account for the land’s (1) wetland restrictions, (2) frequent flooding, (3) topography and tract size, or (4) wasteland because the taxpayer’s forest management plan did not support these alleged factors, and the taxpayer did not otherwise submit supporting evidence. In re Appeal of Family Tree Farm, LLC, 218 N.C. App. 577, 721 S.E.2d 387, 2012 N.C. App. LEXIS 215 (2012).

Presumption of Correctness of Appraisal Rebutted. —

Taxpayers presented substantial evidence to rebut the presumption of correctness of county’s appraisal of land; thus, the Property Tax Commission properly granted the taxpayers relief. In re Parsons, 123 N.C. App. 32, 472 S.E.2d 182, 1996 N.C. App. LEXIS 584 (1996).

Although a county argued the use of its schedule of values, as required by G.S. 105-317 , necessitated the conclusion that a taxpayer failed to rebut the presumption of correctness, the taxpayer offered competent, material, and substantial evidence through the appraisal by its expert tending to show the county’s assessment was substantially in excess of the property’s “true value,” as defined in G.S. 105-283 ; the county appraised the property’s value at $11,696,700 and the taxpayer’s expert appraised the value at $7,735,000. In re Blue Ridge Mall LLC, 214 N.C. App. 263, 713 S.E.2d 779, 2011 N.C. App. LEXIS 1641 (2011).

Solar heating and cooling systems are to be appraised with no additional value assigned for the difference in cost between a solar energy heating or cooling system and a conventional system typically found in the county; therefore, an appraisal of a solar heating system for ad valorem tax purposes was not upheld because a county used a press release from a website to determine the system’s value, failed to follow statutory guidelines for appraisal, and did not consider the obsolescence of the equipment due to the equipment being overbuilt, the income produced by the equipment, and the transfer of tax credits prior to valuation. Moreover, the county’s appraisal substantially exceeded the true value in money of the property. In re Appeal of: FLS Owner II, LLC, 244 N.C. App. 611, 781 S.E.2d 300, 2016 N.C. App. LEXIS 38 (2016).

State Property Tax Commission erred in affirming a county board of equalization and review’s ad valorem tax assessment of a taxpayer’s real property because the taxpayer’s evidence was sufficient to rebut the presumption of correctness for the county’s assessment where the taxpayer’s property was held to facilitate the production of income, which was the property’s highest and best use, produced a true value of that property, the county relied solely on the cost approach, which resulted in arbitrary and illegal valuations that were more than double the valuation determined, and substantiated, by the taxpayer. In re Lowe's Home Ctrs., 257 N.C. App. 610, 810 S.E.2d 713, 2018 N.C. App. LEXIS 124 (2018).

County Tax Assessment Valuation Method Held Arbitrary. —

Where there was no evidence that the county considered the advantages or disadvantages of the location; availability of water; or the nature of the mineral, quarry or other valuable deposits, consideration of which, among other facts, is required by this section, and where there was no evidence that any county representative ever visited or observed any portion of the tract in question as required by this section, the county’s valuation method was held to be arbitrary. In re Land & Mineral Co., 49 N.C. App. 608, 272 S.E.2d 878, 1980 N.C. App. LEXIS 3446 (1980), cert. denied, 302 N.C. 397 , 279 S.E.2d 351, 1981 N.C. LEXIS 1216 (1981).

Appraisal of real property was governed by G.S. 105-317 , making it the duty of the assessor to use a uniform schedule of values, standards, and rules, under G.S. 105-317 (b) and (c), while in contrast the appraisal of personal property was governed by G.S. 105-317.1 and provided specific elements for consideration, which were sale price of similar property, replacement cost, age, physical condition, and remaining life of the property, productivity and economic utility, effect of obsolescence, and any other factor that might affect the value of the property under G.S. 105-317.1 (a), so it was illegal for a county to value personal property manufactured homes in the same manner as real property manufactured homes. In re Murray, 179 N.C. App. 780, 635 S.E.2d 477, 2006 N.C. App. LEXIS 2157 (2006).

Appraisal 27 Months Prior to Effective Date Held Arbitrary. —

Decision to conduct an appraisal in a time of less than two months, and to complete it some 27 months prior to its effective date, does not comport with the realities of the economic world, and is plainly arbitrary under subdivision (a)(3) of this section, which requires that partially completed buildings be appraised “in accordance with the degree of completion on January 1.” In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

Tobacco Allotments as Element of Value. —

Mandamus would lie to compel the board of county commissioners to include tobacco allotments as an element of value in the appraisal and assessment of county real property for ad valorem taxes. Stocks v. Thompson, 1 N.C. App. 201, 161 S.E.2d 149, 1968 N.C. App. LEXIS 1043 (1968).

Tobacco allotments must be considered as an element of value in appraising all tracts of real property. In re Whittington, 129 N.C. App. 259, 498 S.E.2d 194, 1998 N.C. App. LEXIS 427 (1998).

Valuation of Multiple Parcels. —

North Carolina Property Tax Commission did not err in its valuation of a retention pond parcel with another parcel upon which a commercial mall was situated, despite a county’s contention that G.S. 105-317 required separate valuation of the parcels, because the Commission assigned the same value to the retention pond parcel as the county had assigned; the two parcels comprised the taxpayer’s property. In re Blue Ridge Mall LLC, 214 N.C. App. 263, 713 S.E.2d 779, 2011 N.C. App. LEXIS 1641 (2011).

Reassessment In Non-Reappraisal Year Held Improper. —

Court of appeals erred in reversing the North Carolina Property Tax Commission’s order granting a taxpayer summary judgment in its action disputing the tax values of its property because the county’s reassessment of the property in a non-reappraisal year constituted an improper reappraisal in violation of G.S. 105-287(a)(2), and the alteration of the taxable value of the taxpayer’s property under the 2008 reassessment was unlawful; when no timely change to the schedule of values was made, the county could not retroactively label as error an historically approved methodology endorsed by the schedule. In re Ocean Isle Palms, LLC, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

§ 105-317.1. (Effective for taxes imposed for taxable years beginning before July 1, 2019) Appraisal of personal property; elements to be considered.

  1. Whenever any personal property is appraised it shall be the duty of the persons making appraisals to consider the following as to each item (or lot of similar items):
    1. The replacement cost of the property;
    2. The sale price of similar property;
    3. The age of the property;
    4. The physical condition of the property;
    5. The productivity of the property;
    6. The remaining life of the property;
    7. The effect of obsolescence on the property;
    8. The economic utility of the property, that is, its usability and adaptability for industrial, commercial, or other purposes; and
    9. Any other factor that may affect the value of the property.
  2. In determining the true value of taxable tangible personal property held and used in connection with the mercantile, manufacturing, producing, processing, or other business enterprise of any taxpayer, the persons making the appraisal shall consider any information as reflected by the taxpayer’s records and as reported by the taxpayer to the North Carolina Department of Revenue and to the Internal Revenue Service for income tax purposes, taking into account the accuracy of the taxpayer’s records, the taxpayer’s method of accounting, and the level of trade at which the taxpayer does business.
  3. A taxpayer who owns personal property taxable in the county may appeal the value, situs, or taxability of the property within 30 days after the date of the initial notice of value. If the assessor does not give separate written notice of the value to the taxpayer at the taxpayer’s last known address, then the tax bill serves as notice of the value of the personal property. The notice must contain a statement that the taxpayer may appeal the value, situs, or taxability of the property within 30 days after the date of the notice. Upon receipt of a timely appeal, the assessor must arrange a conference with the taxpayer to afford the taxpayer the opportunity to present any evidence or argument regarding the value, situs, or taxability of the property. Within 30 days after the conference, the assessor must give written notice to the taxpayer of the assessor’s final decision. Written notice of the decision is not required if the taxpayer signs an agreement accepting the value, situs, or taxability of the property. If an agreement is not reached, the taxpayer has 30 days from the date of the notice of the assessor’s final decision to request review of that decision by the board of equalization and review or, if that board is not in session, by the board of county commissioners. Unless the request for review is given at the conference, it must be made in writing to the assessor. Upon receipt of a timely request for review, the provisions of G.S. 105-322 or G.S. 105-325 , as appropriate, must be followed.

History. 1971, c. 806, s. 1; 1987, c. 813, s. 15; 2002-156, s. 2.

The section above is effective for taxes imposed for taxable years beginning before July 1, 2019. For this section as in effect for taxes imposed for taxable years beginning on or after July 1, 2019, see the following version, also numbered G.S. 105-317.1 .

Effect of Amendments.

Session Laws 2002-156, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2003, added subsection (c).

CASE NOTES

In substance this section and G.S. 105-283 provide that all property shall be appraised at market value, and that all the various factors which enter into the market value of property are to be considered by the assessors in determining this market value for tax purposes. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

There may be reasonable variations from market value in appraisals of property for tax purposes if these variations are uniform. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

County Tax Assessment Valuation Method Held Arbitrary. —

Appraisal of real property was governed by G.S. 105-317 , making it the duty of the assessor to use a uniform schedule of values, standards, and rules, under G.S. 105-317 (b) and (c), while in contrast the appraisal of personal property was governed by G.S. 105-317.1 and provided specific elements for consideration, which were sale price of similar property, replacement cost, age, physical condition, and remaining life of the property, productivity and economic utility, effect of obsolescence, and any other factor that might affect the value of the property under G.S. 105-317.1 (a), so it was illegal for a county to value personal property manufactured homes in the same manner as real property manufactured homes. In re Murray, 179 N.C. App. 780, 635 S.E.2d 477, 2006 N.C. App. LEXIS 2157 (2006).

Ad valorem tax assessments are presumed to be correct, and when such assessments are challenged, the burden of proof is on the taxpayer to show that the assessment was erroneous. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

Arbitrary Method of Valuing Taxpayer’s Property. —

When a county assessed the value of a mobile home located on leased land without taking into consideration the personal property elements in G.S. 105-317.1 , its appraisal arbitrarily or illegally under G.S. 105-345.2(b) appraised the home as if it were real property and assigned it a value that substantially exceeded its true value, because G.S. 105-273(13) expressly defined differences between real property and tangible personal property as it pertained to manufactured homes. In re Murray, 179 N.C. App. 780, 635 S.E.2d 477, 2006 N.C. App. LEXIS 2157 (2006).

Presumption of Correctness of Appraisal Rebutted. —

Solar heating and cooling systems are to be appraised with no additional value assigned for the difference in cost between a solar energy heating or cooling system and a conventional system typically found in the county; therefore, an appraisal of a solar heating system for ad valorem tax purposes was not upheld because a county used a press release from a website to determine the system’s value, failed to follow statutory guidelines for appraisal, and did not consider the obsolescence of the equipment due to the equipment being overbuilt, the income produced by the equipment, and the transfer of tax credits prior to valuation. Moreover, the county’s appraisal substantially exceeded the true value in money of the property. In re Appeal of: FLS Owner II, LLC, 244 N.C. App. 611, 781 S.E.2d 300, 2016 N.C. App. LEXIS 38 (2016).

§ 105-317.1. (Effective for taxes imposed for taxable years beginning on or after July 1, 2019) Appraisal of personal property; elements to be considered.

  1. Appraisal Elements. —  Whenever any personal property is appraised it shall be the duty of the persons making appraisals to consider the following as to each item (or lot of similar items):
    1. The replacement cost of the property;
    2. The sale price of similar property;
    3. The age of the property;
    4. The physical condition of the property;
    5. The productivity of the property;
    6. The remaining life of the property;
    7. The effect of obsolescence on the property;
    8. The economic utility of the property, that is, its usability and adaptability for industrial, commercial, or other purposes; and
    9. Any other factor that may affect the value of the property.
  2. Business Property. —  In determining the true value of taxable tangible personal property held and used in connection with the mercantile, manufacturing, producing, processing, or other business enterprise of any taxpayer, the persons making the appraisal shall consider any information as reflected by the taxpayer’s records and as reported by the taxpayer to the North Carolina Department of Revenue and to the Internal Revenue Service for income tax purposes, taking into account the accuracy of the taxpayer’s records, the taxpayer’s method of accounting, and the level of trade at which the taxpayer does business.

    (b1) Farm Equipment. — In determining the true value of taxable farm equipment, the person making the appraisal may use any of the appraisal methods listed in subsection (a) of this section and must consider relevant taxpayer information as required under subsection (b) of this section. The Department must publish a depreciation schedule for farm equipment to assist counties that use the cost approach to appraise this equipment. The Department must make the schedule available electronically on its Web site. A county that uses a cost approach method to appraise this equipment must use the depreciation schedule published pursuant to this subsection.

  3. Appeal Process. —  A taxpayer who owns personal property taxable in the county may appeal the value, situs, or taxability of the property within 30 days after the date of the initial notice of value. If the assessor does not give separate written notice of the value to the taxpayer at the taxpayer’s last known address, then the tax bill serves as notice of the value of the personal property. The notice must contain a statement that the taxpayer may appeal the value, situs, or taxability of the property within 30 days after the date of the notice. Upon receipt of a timely appeal, the assessor must arrange a conference with the taxpayer to afford the taxpayer the opportunity to present any evidence or argument regarding the value, situs, or taxability of the property. Within 30 days after the conference, the assessor must give written notice to the taxpayer of the assessor’s final decision. Written notice of the decision is not required if the taxpayer signs an agreement accepting the value, situs, or taxability of the property. If an agreement is not reached, the taxpayer has 30 days from the date of the notice of the assessor’s final decision to request review of that decision by the board of equalization and review or, if that board is not in session, by the board of county commissioners. Unless the request for review is given at the conference, it must be made in writing to the assessor. Upon receipt of a timely request for review, the provisions of G.S. 105-322 or G.S. 105-325 , as appropriate, must be followed.

History. 1971, c. 806, s. 1; 1987, c. 813, s. 15; 2002-156, s. 2; 2018-113, s. 14(a).

The section above is effective for taxes imposed for taxable years beginning on or after July 1, 2019. For this section as effective for taxes imposed for taxable years beginning before July 1, 2019, see the preceding section, also numbered G.S. 105-317.1 .

Editor’s Note.

Sessions Laws 2018-113, s. 16(a), is a severability clause.

Effect of Amendments.

Session Laws 2002-156, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2003, added subsection (c).

Session Laws 2018-113, s. 14(a), effective for taxes imposed for taxable years beginning on or after July 1, 2019, added headings to subsections (a), (b), and (c); and added subsection (b1).

CASE NOTES

In substance this section and G.S. 105-283 provide that all property shall be appraised at market value, and that all the various factors which enter into the market value of property are to be considered by the assessors in determining this market value for tax purposes. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

There may be reasonable variations from market value in appraisals of property for tax purposes if these variations are uniform. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

County Tax Assessment Valuation Method Held Arbitrary. —

Appraisal of real property was governed by G.S. 105-317 , making it the duty of the assessor to use a uniform schedule of values, standards, and rules, under G.S. 105-317 (b) and (c), while in contrast the appraisal of personal property was governed by G.S. 105-317.1 and provided specific elements for consideration, which were sale price of similar property, replacement cost, age, physical condition, and remaining life of the property, productivity and economic utility, effect of obsolescence, and any other factor that might affect the value of the property under G.S. 105-317.1 (a), so it was illegal for a county to value personal property manufactured homes in the same manner as real property manufactured homes. In re Murray, 179 N.C. App. 780, 635 S.E.2d 477, 2006 N.C. App. LEXIS 2157 (2006).

Ad valorem tax assessments are presumed to be correct, and when such assessments are challenged, the burden of proof is on the taxpayer to show that the assessment was erroneous. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, 1976 N.C. App. LEXIS 2542 , cert. denied, 290 N.C. 551 , 226 S.E.2d 509, 1976 N.C. LEXIS 1099 (1976).

Arbitrary Method of Valuing Taxpayer’s Property. —

When a county assessed the value of a mobile home located on leased land without taking into consideration the personal property elements in G.S. 105-317.1 , its appraisal arbitrarily or illegally under G.S. 105-345.2(b) appraised the home as if it were real property and assigned it a value that substantially exceeded its true value, because G.S. 105-273(13) expressly defined differences between real property and tangible personal property as it pertained to manufactured homes. In re Murray, 179 N.C. App. 780, 635 S.E.2d 477, 2006 N.C. App. LEXIS 2157 (2006).

Presumption of Correctness of Appraisal Rebutted. —

Solar heating and cooling systems are to be appraised with no additional value assigned for the difference in cost between a solar energy heating or cooling system and a conventional system typically found in the county; therefore, an appraisal of a solar heating system for ad valorem tax purposes was not upheld because a county used a press release from a website to determine the system’s value, failed to follow statutory guidelines for appraisal, and did not consider the obsolescence of the equipment due to the equipment being overbuilt, the income produced by the equipment, and the transfer of tax credits prior to valuation. Moreover, the county’s appraisal substantially exceeded the true value in money of the property. In re Appeal of: FLS Owner II, LLC, 244 N.C. App. 611, 781 S.E.2d 300, 2016 N.C. App. LEXIS 38 (2016).

§ 105-317.2. Report on transfers of real property.

To facilitate the accurate appraisal of real property for taxation, the information listed in this section must be included in each deed conveying property. The following information is required:

  1. The name of each grantor and grantee and the mailing address of each grantor and grantee.
  2. A statement whether the property includes the primary residence of a grantor.

    Failure to comply with this section does not affect the validity of a duly recorded deed. This section does not apply to deeds of trust, deeds of release, or similar instruments.

History. 2009-454, s. 1.

Article 20. Approval, Preparation, Disposition of Records.

§ 105-318. Forms for listing, appraising, and assessing property.

The Department of Revenue may design and prescribe the books and forms to be used throughout the State in the listing, appraising, and assessing of property for taxation. If the board exercises the authority granted by the preceding sentence, it is authorized to make arrangements for the purchase and distribution of approved books and forms through the Division of Purchase and Contract, the cost thereof to be billed to the counties. If the Department does not exercise the authority granted by the first sentence of this section, each county and municipality shall submit the books and forms it proposes to adopt for these purposes to the Department for approval before they are employed.

History. 1939, c. 310, s. 907; 1971, c. 806, s. 1; 1973, c. 476, s. 193.

§ 105-319. Tax records; preparation of scroll and tax book.

  1. For each year there shall be prepared for each county and tax-levying municipality a scroll (showing property valuations) and a tax book (showing the amount of taxes due) or a combined record (showing both property valuation and taxes due). The governing body of the county or municipality shall have authority to determine whether the tax records shall be prepared in combined form or in a separate scroll and tax book. When used in this Subchapter, the term “tax records” shall mean the scroll, tax book, and combined record. No tax records shall be adopted by any county or municipality until they have been approved by the Department of Revenue.
  2. County tax records shall, unless otherwise authorized by the board of county commissioners, be prepared separately for each township. The tax records of both counties and municipalities shall, unless otherwise authorized by the unit governing body, be divided into two parts:
    1. Individual taxpayers (including corporate fiduciaries when, in their fiduciary capacity, they list the property of individuals).
    2. Corporations, partnerships, other business firms, unincorporated associations, and all other taxpayers other than individual persons.
  3. The tax records shall show at least the following information:
    1. In alphabetical order, the name of each taxpayer whose property is listed and assessed for taxation.
    2. The assessment of each taxpayer’s real property listed for unit-wide taxation (divided into as many categories as the Department of Revenue may prescribe).
    3. The assessment of each taxpayer’s personal property listed for unit-wide taxation (divided into as many categories as the Department of Revenue may prescribe).
    4. The total assessed value of each taxpayer’s real and personal property listed for unit-wide purposes.
    5. The amount of ad valorem tax due by each taxpayer for unit-wide purposes.
    6. The amount of dog license tax due by each taxpayer.
    7. The total assessed value of each taxpayer’s real and personal property listed for taxation in any special district or subdivision of the unit.
    8. The amount of ad valorem tax due by each taxpayer to any special district or subdivision of the unit.
    9. The amount of penalties, if any, imposed under the provisions of G.S. 105-312 .
    10. The total amount of all taxes and penalties due by each taxpayer to the unit and to special districts and subdivisions of the unit.
  4. Listings and assessments and any changes therein made during the period between the close of the regular listing period and the first meeting of the board of equalization and review, as well as those made during the regular listing period, shall be entered on the county tax records, and the county tax records shall be submitted to the board of equalization and review at its first meeting. Additions and changes made by the board of equalization and review shall be entered on the county tax records in accordance with the provisions of G.S. 105-326 . Municipal corporations shall be governed by the provisions of G.S. 105-326 through 105-328 with regard to matters dealt with in this subsection (d).

History. 1939, c. 310, s. 1101; 1963, c. 784, s. 1; 1969, c. 1279; 1971, c. 806, s. 1; 1973, c. 476, s. 193.

CASE NOTES

Constitutionality. —

See Bryant v. State Bd. of Assmt., 293 F. Supp. 1379, 1968 U.S. Dist. LEXIS 11879 (E.D.N.C. 1968) (construing former similar provisions) .

§ 105-320. Tax receipts; preparation.

  1. No taxing unit shall adopt a tax receipt form until it has been approved by the Department of Revenue, and no tax receipt form shall be approved unless it shows at least the following information:
    1. The name and mailing address of the taxpayer charged with taxes.
    2. The assessment of the taxpayer’s real property listed for unit-wide taxation.
    3. The assessment of the taxpayer’s personal property listed for unit-wide taxation.
    4. The total assessed value of the taxpayer’s real and personal property listed for unit-wide taxation.
    5. The total assessed value of the taxpayer’s real and personal property listed for taxation in any special district or subdivision of the unit.
    6. The rate of tax levied for each unit-wide purpose, the total rate levied for all unit-wide purposes, and the rate levied by or for any special district or subdivision of the unit in which the taxpayer’s property is subject to taxation. (In lieu of showing this information on the tax receipt, it may be furnished on a separate sheet of paper, properly identified, at the time the official receipt is delivered upon payment).
    7. The amount of ad valorem tax due by the taxpayer for unit-wide purposes.
    8. The amount of ad valorem tax due by the taxpayer to any special district or subdivision of the unit.
    9. The amount of dog license tax due by the taxpayer.
    10. The amount of penalties, if any, imposed under the provisions of G.S. 105-312 .
    11. The total amount of all taxes and penalties due by the taxpayer to the unit and to special districts and subdivisions of the unit.
    12. The amount of discount allowed for prepayment of taxes under the provisions of G.S. 105-360 .
    13. The amount of interest charged for late payment of taxes under the provisions of G.S. 105-360 .
    14. Repealed by Session Laws 1987, c. 813, s. 16.
    15. Repealed by 1987 (Regular Session, 1988), c. 1041, s. 1.2.
    16. Repealed by Session Laws 2014-3, s. 14.20(b), effective May 29, 2014.
  2. Repealed by Session Laws 2018-5, s. 38.10(i), effective June 12, 2018.
  3. The governing body of the county or municipality shall designate the person or persons who shall compute and prepare the tax receipt for all taxes charged upon the tax records.

History. 1939, c. 310, s. 1102; 1961, c. 380; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1985, c. 656, s. 23; 1985 (Reg. Sess., 1986), c. 947, s. 6; 1987, c. 813, ss. 16, 17; 1987 (Reg. Sess., 1988), c. 1041, ss. 1.2, 1.3; 1991, c. 45, s. 14(c); 2014-3, s. 14.20(b); 2018-5, s. 38.10(i).

Effect of Amendments.

Session Laws 2014-3, s. 14.20(b), effective May 29, 2014, repealed subdivision (a)(16), which read: “The total assessed value of farm machinery, attachments, and repair parts of individual owners and Subchapter S corporations engaged in farming subject to the income tax credit in G.S. 105-151.21 and the amount of ad valorem taxes due by an individual farmer or a Subchapter S corporation engaged in farming on farm machinery, attachments, and repair parts subject to that credit.”

Session Laws 2018-5, s. 38.10(i), effective June 12, 2018, repealed subsection (b), which read: “Instead of being shown on the tax receipt, the information required in subdivision (16) of subsection (a) may be shown on a separate sheet furnished to the affected taxpayers.”

§ 105-321. Disposition of tax records and receipts; order of collection.

  1. County tax records shall be filed in the office of the assessor unless the board of county commissioners shall require them to be filed in some other public office of the county. City and town tax records shall be filed in some public office of the municipality designated by the governing body of the city or town. In the discretion of the governing body, a duplicate copy of the tax records may be delivered to the tax collector at the time he is charged with the collection of taxes.
  2. Before delivering the tax receipts to the tax collector in any year, the board of county commissioners or municipal governing body shall adopt and enter in its minutes an order directing the tax collector to collect the taxes charged in the tax records and receipts. A copy of this order shall be delivered to the tax collector at the time the tax receipts are delivered to him, but the failure to do so shall not affect the tax collector’s rights and duties to employ the means of collecting taxes provided by this Subchapter. The order of collection shall have the force and effect of a judgment and execution against the taxpayers’ real and personal property and shall be drawn in substantially the following form: Click to view

    (d) Repealed by Session Laws 2006-30, s. 5, effective June 29, 2006.

    (e) The governing body of a taxing unit may contract with a bank or other financial institution for receipt of payment of taxes payable at par and of delinquent taxes and interest for the current tax year. A financial institution may not issue a receipt for any tax payments received by it, however. Discount for early payment of taxes shall be allowed by a financial institution that contracts with a taxing unit pursuant to this subsection to the same extent as allowed by the tax collector. A financial institution that contracts with a taxing unit for receipt of payment of taxes shall furnish a bond to the taxing unit conditioned upon faithful performance of the contract in a form and amount satisfactory to the governing body of the taxing unit. A governing body of a taxing unit that contracts with a financial institution pursuant to this subsection shall publish a timely notice of the institution at which taxpayers may pay their taxes in a newspaper having circulation within the taxing unit. No notice is required, however, if the financial institution receives payments only through the mail.

    (f) Minimal Taxes. — Notwithstanding the provisions of G.S. 105-380 , the governing body of a taxing unit that collects its own taxes may, by resolution, direct its assessor and tax collector not to collect minimal taxes charged on the tax records and receipts. Minimal taxes are the combined taxes and fees of the taxing unit and any other units for which it collects taxes, due on a tax receipt prepared pursuant to G.S. 105-320 in a total original principal amount that does not exceed an amount, up to five dollars ($5.00), set by the governing body. The amount set by the governing body should be the estimated cost to the taxing unit of billing the taxpayer for the amounts due on a tax receipt or tax notice. Upon adoption of a resolution pursuant to this subsection, the tax collector shall not bill the taxpayer for, or otherwise collect, minimal taxes but shall keep a record of all minimal taxes by receipt number and amount and shall make a report of the amount of these taxes to the governing body at the time of the settlement. These minimal taxes shall not be a lien on the taxpayer’s real property and shall not be collectible under Article 26 of this Subchapter. A resolution adopted pursuant to this subsection must be adopted on or before June 15 preceding the first taxable year to which it applies and remains in effect until amended or repealed by resolution of the taxing unit. A resolution adopted pursuant to this subsection shall not apply to taxes on registered motor vehicles.

    (g) Minimal Refunds. — The governing body of a taxing unit that collects its own taxes may, by resolution, direct the taxing unit not to mail a refund for an overpayment of tax if the refund is less than fifteen dollars ($15.00). Upon adoption of a resolution pursuant to this subsection, the taxing unit shall keep a record of all minimal refunds by receipt number and amount and shall make a report of the amount of these refunds to the governing body at the time of the settlement and shall implement a system by which payment of the refund may be made to a taxpayer who comes into the office of the taxing unit seeking the refund. Unless the taxpayer requests the minimal refund in person at the office of the taxing unit before the end of the fiscal year in which the refund is due, the taxing unit must implement a system to apply the minimal refund as a credit against the tax liability of the taxpayer for taxes due to the taxing unit for the next succeeding year. An overpayment of tax bears interest at the rate set under G.S. 105-241.21 from the date the interest begins to accrue until a refund is paid or applied in accordance with this section. Interest accrues from the later of the date the tax was paid and the date the tax would have been considered delinquent under G.S. 105-360 . A resolution adopted pursuant to this subsection must be adopted on or before June 15 preceding the first taxable year to which it applies and remains in effect until amended or repealed by resolution of the taxing unit.

State of North Carolina County (or City or Town) of To the Tax Collector of the County (or City or Town) of : You are hereby authorized, empowered, and commanded to collect the taxes set forth in the tax records filed in the office of and in the tax receipts herewith delivered to you, in the amounts and from the taxpayers likewise therein set forth. Such taxes are hereby declared to be a first lien upon all real property of the respective taxpayers in the County (or City or Town) of , and this order shall be a full and sufficient authority to direct, require, and enable you to levy on and sell any real or personal property of such taxpayers, for and on account thereof, in accordance with law. Witness my hand and official seal, this day of , (Seal) Chairman, Board of Commissioners of County (Mayor, City (or Town) of ) Attest: Clerk of Board of Commissioners of County (Clerk of the City (or Town) of ) (c) The original tax receipts, together with any duplicate copies that may have been prepared, shall be delivered to the tax collector by the governing body on or before the first day of September each year if the tax collector has made settlement as required by . The tax collector shall give his receipt for the tax receipts and duplicates delivered to him for collection. G.S. 105-352

History. 1939, c. 310, s. 1103; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 615; 1987, c. 45, s. 1; 1989, c. 578, s. 1; 1991, c. 584, s. 1; 1995, c. 24, s. 1; c. 329, ss. 1, 2; 1999-456, s. 59; 2006-30, s. 5; 2012-79, s. 3.1; 2015-266, s. 2.

Editor’s Note.

Session Laws 1995, c. 329, s. 1, enacted subsection (f) of this section. Section 2 of the session law provides: “A resolution adopted under G.S. 105-330.5(b1), as enacted by Chapter 24 of the 1995 Session Laws, prior to the effective date of this act will be considered a resolution adopted under G.S. 105-321(f) as enacted by this act.” Section 2 also repealed Chapter 24 of the 1995 Session Laws. For the text of G.S. 105-330.5(b1), see editor’s note under that section.

Effect of Amendments.

Session Laws 2006-30, s. 5, effective June 29, 2006, repealed subsection (d), which read: “No tax receipt shall be delivered to the tax collector for any assessment appealed to the Property Tax Commission until such appeal has been finally adjudicated.”

Session Laws 2012-79, s. 3.1, effective June 26, 2012, in subsection (f), deleted “or on a tax notice prepared pursuant to G.S. 105-330.5 ,” following “G.S. 105-320” in the second sentence, and added the last sentence.

Session Laws 2015-266, s. 2, effective October 1, 2015, added subsection (g).

Article 21. Review and Appeals of Listings and Valuations.

§ 105-322. County board of equalization and review.

  1. Personnel. —  Except as otherwise provided herein, the board of equalization and review of each county shall be composed of the members of the board of county commissioners.Upon the adoption of a resolution so providing, the board of commissioners is authorized to appoint a special board of equalization and review to carry out the duties imposed under this section. The resolution shall provide for the membership, qualifications, terms of office and the filling of vacancies on the board. The board of commissioners shall also designate the chairman of the special board. The resolution may also authorize a taxpayer to appeal a decision of the special board with respect to the listing or appraisal of his property or the property of others to the board of county commissioners. The resolution shall be adopted not later than the first Monday in March of the year for which it is to be effective and shall continue in effect until revised or rescinded. It shall be entered in the minutes of the meeting of the board of commissioners and a copy thereof shall be forwarded to the Department of Revenue within 15 days after its adoption.Nothing in this subsection (a) shall be construed as repealing any law creating a special board of equalization and review or creating any board charged with the duties of a board of equalization and review in any county.
  2. Compensation. —  The board of county commissioners shall fix the compensation and allowances to be paid members of the board of equalization and review for their services and expenses.
  3. Oath. —  Each member of the board of equalization and review shall take the oath required by Article VI, § 7 of the North Carolina Constitution with the following phrase added to it: “that I will not allow my actions as a member of the board of equalization and review to be influenced by personal or political friendships or obligations,”. The oath must be filed with the clerk of the board of county commissioners.
  4. Clerk and Minutes. —  The assessor shall serve as clerk to the board of equalization and review, shall be present at all meetings, shall maintain accurate minutes of the actions of the board, and shall give to the board such information as he may have or can obtain with respect to the listing and valuation of taxable property in the county.
  5. Time of Meeting. —  Each year the board of equalization and review shall hold its first meeting not earlier than the first Monday in April and not later than the first Monday in May. In years in which a county does not conduct a real property revaluation, the board shall complete its duties on or before the third Monday following its first meeting unless, in its opinion, a longer period of time is necessary or expedient to a proper execution of its responsibilities. Except as provided in subdivision (g)(5) of this section, the board may not sit later than July 1 except to hear and determine requests made under the provisions of subdivision (g)(2), below, when such requests are made within the time prescribed by law. In the year in which a county conducts a real property revaluation, the board shall complete its duties on or before December 1, except that it may sit after that date to hear and determine requests made under the provisions of subdivision (g)(2), below, when such requests are made within the time prescribed by law. From the time of its first meeting until its adjournment, the board shall meet at such times as it deems reasonably necessary to perform its statutory duties and to receive requests and hear the appeals of taxpayers under the provisions of subdivision (g)(2), below.
  6. Notice of Meetings and Adjournment. —  A notice of the date, hours, place, and purpose of the first meeting of the board of equalization and review shall be published at least three times in some newspaper having general circulation in the county, the first publication to be at least 10 days prior to the first meeting. The notice shall also state the dates and hours on which the board will meet following its first meeting and the date on which it expects to adjourn; it shall also carry a statement that in the event of earlier or later adjournment, notice to that effect will be published in the same newspaper. Should a notice be required on account of earlier adjournment, it shall be published at least once in the newspaper in which the first notice was published, such publication to be at least five days prior to the date fixed for adjournment. Should a notice be required on account of later adjournment, it shall be published at least once in the newspaper in which the first notice was published, such publication to be prior to the date first announced for adjournment.
  7. Powers and Duties. —  The board of equalization and review has the following powers and duties:
    1. Duty to Review Tax Lists. —  The board shall examine and review the tax lists of the county for the current year to the end that all taxable property shall be listed on the abstracts and tax records of the county and appraised according to the standard required by G.S. 105-283 , and the board shall correct the abstracts and tax records to conform to the provisions of this Subchapter. In carrying out its responsibilities under this subdivision (g)(1), the board, on its own motion or on sufficient cause shown by any person, shall:
      1. List, appraise, and assess any taxable real or personal property that has been omitted from the tax lists.
      2. Correct all errors in the names of persons and in the description of properties subject to taxation.
      3. Increase or reduce the appraised value of any property that, in the board’s opinion, has been listed and appraised at a figure that is below or above the appraisal required by G.S. 105-283 ; however, the board shall not change the appraised value of any real property from that at which it was appraised for the preceding year except in accordance with the terms of G.S. 105-286 and 105-287.
      4. Cause to be done whatever else is necessary to make the lists and tax records comply with the provisions of this Subchapter.
      5. Embody actions taken under the provisions of subdivisions (g)(1)a through (g)(1)d, above, in appropriate orders and have the orders entered in the minutes of the board.
      6. Give written notice to the taxpayer at the taxpayer’s last known address in the event the board, by appropriate order, increases the appraisal of any property or lists for taxation any property omitted from the tax lists under the provisions of this subdivision (g)(1).
    2. Duty to Hear Taxpayer Appeals. —  On request, the board of equalization and review shall hear any taxpayer who owns or controls property taxable in the county with respect to the listing or appraisal of the taxpayer’s property or the property of others.
      1. A request for a hearing under this subdivision (g)(2) shall be made in writing to or by personal appearance before the board prior to its adjournment. However, if the taxpayer requests review of a decision made by the board under the provisions of subdivision (g)(1), above, notice of which was mailed fewer than 15 days prior to the board’s adjournment, the request for a hearing thereon may be made within 15 days after the notice of the board’s decision was mailed.
      2. Taxpayers may file separate or joint requests for hearings under the provisions of this subdivision (g)(2) at their election.
      3. At a hearing under provisions of this subdivision (g)(2), the board, in addition to the powers it may exercise under the provisions of subdivision (g)(3), below, shall hear any evidence offered by the appellant, the assessor, and other county officials that is pertinent to the decision of the appeal. Upon the request of an appellant, the board shall subpoena witnesses or documents if there is a reasonable basis for believing that the witnesses have or the documents contain information pertinent to the decision of the appeal.
      4. On the basis of its decision after any hearing conducted under this subdivision (g)(2), the board shall adopt and have entered in its minutes an order reducing, increasing, or confirming the appraisal appealed or listing or removing from the tax lists the property whose omission or listing has been appealed. The board shall notify the appellant by mail as to the action taken on the taxpayer’s appeal not later than 30 days after the board’s adjournment.
    3. Powers in Carrying Out Duties. —  In the performance of its duties under subdivisions (g)(1) and (g)(2), above, the board of equalization and review may exercise the following powers:
      1. It may appoint committees composed of its own members or other persons to assist it in making investigations necessary to its work. It may also employ expert appraisers in its discretion. The expense of the employment of committees or appraisers shall be borne by the county. The board may, in its discretion, require the taxpayer to reimburse the county for the cost of any appraisal by experts demanded by the taxpayer if the appraisal does not result in material reduction of the valuation of the property appraised and if the appraisal is not subsequently reduced materially by the board or by the Department of Revenue.
      2. The board, in its discretion, may examine any witnesses and documents. It may place any witnesses under oath administered by any member of the board. It may subpoena witnesses or documents on its own motion, and it must do so when a request is made under the provisions of subdivision (g)(2)c, above.A subpoena issued by the board shall be signed by the chair of the board, directed to the witness or to the person having custody of the document, and served by an officer authorized to serve subpoenas. Any person who willfully fails to appear or to produce documents in response to a subpoena or to testify when appearing in response to a subpoena shall be guilty of a Class 1 misdemeanor.
    4. Power to Submit Reports. —  Upon the completion of its other duties, the board may submit to the Department of Revenue a report outlining the quality of the reappraisal, any problems it encountered in the reappraisal process, the number of appeals submitted to the board and to the Property Tax Commission, the success rate of the appeals submitted, and the name of the firm that conducted the reappraisal. A copy of the report should be sent by the board to the firm that conducted the reappraisal.
    5. Duty to Change Abstracts and Records After Adjournment. —  Following adjournment upon completion of its duties under subdivisions (g)(1) and (g)(2) of this subsection, the board may continue to meet to carry out the following duties:
      1. To hear and decide all appeals relating to discovered property under G.S. 105-312(d) and (k).
      2. To hear and decide all appeals relating to the appraisal, situs, and taxability of classified motor vehicles under G.S. 105-330.2(b).
      3. To hear and decide all appeals relating to audits conducted under G.S. 105-296(j) and relating to audits conducted under G.S. 105-296(j) and (l) of property classified at present-use value and property exempted or excluded from taxation.
      4. To hear and decide all appeals relating to personal property under G.S. 105-317.1(c).

History. 1939, c. 310, s. 1105; 1965, c. 191; 1967, c. 1196, s. 6; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1977, c. 863; 1987, c. 45, s. 1; 1989, c. 79, s. 3; c. 176, s. 1; c. 196; 1991, c. 110, s. 5; 1991 (Reg. Sess., 1992), c. 1007, s. 22; 1993, c. 539, s. 720; 1994, Ex. Sess., c. 24, s. 14(c); 2001-139, ss. 6, 7; 2002-156, s. 3.

Local Modification.

Buncombe: 1981 (Reg. Sess., 1982), c. 1279; Cabarrus: 2000-92, s. 1 (repealed effective July 15, 2004, by 2004-100, s. 2); 2004-100, s. 1; Catawba: 1973, c. 355; Craven: 1987 (Reg. Sess., 1988), c. 1008; Cumberland: 1987, c. 161; 1989, c. 605, ss. 1, 4(b); Durham: 1989, c. 541, s. 1; 1991 (Reg. Sess., 1992), c. 871, s. 3; Henderson: 1997-186; Iredell: 1993 (Reg. Sess., 1994), c. 645, s. 1; Lincoln: 2000-40; Mecklenburg: 1981, c. 509 (repealed by 2011-1, s. 1, effective upon adoption of resolution by Mecklenburg Board of County Commissioners under s. 3 of that act); 2011-1, s. 3; Rockingham: 1995 (Reg. Sess., 1996), c. 617, s. 1; Stokes: 1999-353, s. 2; Union: 1998-174, s. 1; Wake: 2015-59, s. 2.

Effect of Amendments.

Session Laws 2002-156, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2003, added subdivision (g)(5)d.

Legal Periodicals.

For note on procedural developments in the discovery of property unlisted for purposes of ad valorem taxation, see 51 N.C.L. Rev. 531 (1973).

For article on the need to reform North Carolina property tax law, see 59 N.C.L. Rev. 675 (1981).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

Board’s Authority. —

Property Tax Division properly concluded that a second revaluation of a taxpayer’s property in a non-revaluation year was improper and ordered the county board of equalization and review to restore the accepted appraised values set out in the first revaluation because the second revaluation did not correct a misapplication of the schedule of values and was not statutorily authorized since it was not implemented to correct a misapplication, but, rather, was a proper application of the schedule of values to the newly discovered poorly-selected comparison properties. In re Lowe's Home Ctrs. LLC, 269 N.C. App. 221, 837 S.E.2d 575, 2020 N.C. App. LEXIS 13 (2020).

Valuation by Owner Subject to Review by Board. —

The valuation upon personal property is made by the taxpayer when he lists his property, and is binding upon the list taker, but it may be corrected by the board of equalization at the dates fixed by the statute, upon due notice to the taxpayer. Pocomoke Guano Co. v. City of New Bern, 172 N.C. 258 , 90 S.E. 202, 1916 N.C. LEXIS 278 (1916).

Right to Appeal. —

The plain intent and thrust of this section and G.S. 105-282.1(b) and former G.S. 105-324 is to permit a property owner, as a matter of right, to appeal to the Property Tax Commission upon a county or municipal board denying its application for an exemption. In re K-Mart Corp., 79 N.C. App. 725, 340 S.E.2d 752, 1986 N.C. App. LEXIS 2111 (1986), aff'd in part and rev'd in part, 319 N.C. 378 , 354 S.E.2d 468, 1987 N.C. LEXIS 1922 (1987).

Superior court did not err in dismissing a taxpayer’s petition for writ of mandamus directing a county tax administrator to report the facts to the board of county commissioners in order that the board could make a decision as to whether the taxpayer received notice of changes in the valuation of its property because the taxpayer failed to timely challenge the change in valuation of the property before the county board of equalization and review, and thus lost its right to appeal; taxpayer also chose not to pursue the second means of redress available to it by paying the taxes and then bringing a suit in the trial court for its recovery under G.S. 105-381 , but instead the taxpayer filed a petition for writ of mandamus in the superior court. Villages at Red Bridge, LLC v. Weisner, 209 N.C. App. 604, 704 S.E.2d 925, 2011 N.C. App. LEXIS 209 (2011).

Steps in Obtaining Review of Valuation. —

If the county commissioners have failed to value land at its true value in money — be the failure deliberate, an error in judgment, or caused by a misconception of the law — plaintiffs’ initial step is to complain to the county board of equalization and review and request a hearing. If they are dissatisfied with the action taken by that board they may except to its order and appeal to the State Board. Thereafter plaintiffs may resort to the courts, but only to obtain judicial review for errors of law or abuse of discretion by the State Board. King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

North Carolina law provides two avenues by which a taxpayer may seek relief from an unjust property tax assessment: administrative review followed by judicial review in the Court of Appeals, and direct judicial review in superior or district court. Administrative review begins in the county board of equalization and review. The county board has jurisdiction to hear any taxpayer who has a complaint as to the listing or appraisal of his or others’ property. Any taxpayer who wishes to except to an order of the county board shall appeal to the State Property Tax Commission. In turn, a taxpayer who is unsatisfied with the decision of the Property Tax Commission shall appeal to the North Carolina Court of Appeals, and then to the North Carolina Supreme Court. Johnston v. Gaston County, 71 N.C. App. 707, 323 S.E.2d 381, 1984 N.C. App. LEXIS 3967 (1984).

Before Whom Complaint Made. —

The complaint against excessive valuation must be made before the board of county commissioners, and the aldermen of the city have no jurisdiction to change such valuation. Pocomoke Guano Co. v. City of New Bern, 172 N.C. 258 , 90 S.E. 202, 1916 N.C. LEXIS 278 (1916).

Requisites of Complaint. —

The complaint in an action against a city to recover for taxes paid must allege that the valuation complained of is greater than that fixed by the county board of equalization, or the tax he was forced to pay was greater than it would have been if correctly computed at the legal rate on the valuation properly ascertained, or a demurrer thereto will be sustained. Pocomoke Guano Co. v. City of New Bern, 172 N.C. 258 , 90 S.E. 202, 1916 N.C. LEXIS 278 (1916).

Property Tax Commission Empowered to Make Final Valuation of Property. —

The legislature’s intent is that the agency designated to hear appeals in all matters pertaining to tax valuations should also be the one empowered to make the final valuation. The State Board of Assessment (now Property Tax Commission) — unlike the courts — has the staff, the specialized knowledge and expertise necessary to make informed decisions upon questions relating to the valuation and assessment of property. King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

Purpose of Notice Before Meeting. —

The notice required before the meeting is general, and has reference to a general revision of the lists of the whole county, with a view to an equal and uniform assessment among the several townships, and it is to give opportunity to all who may be dissatisfied with the valuation of their property to make complaint and have it corrected. Commissioners of Cleaveland County v. Atlanta & C. Air Line Ry., 86 N.C. 541 , 1882 N.C. LEXIS 238 (1882).

Limits on Commission’s Powers. —

State Property Tax Commission’s authority to issue an order reducing, increasing or confirming the valuation or valuations appealed, or listing or removing from the tax lists the property which has been appealed, is subject to the same statutory parameters as assessors, county boards and county commissioners. In re Allred, 351 N.C. 1 , 519 S.E.2d 52, 1999 N.C. LEXIS 1010 (1999).

Revision Without Notice Void. —

Where the value of the solvent credits of a taxpayer is increased without due notice to him or his agent, such increase in value is a nullity. Wolfenden v. Board of Comm'rs, 152 N.C. 83 , 67 S.E. 319, 1910 N.C. LEXIS 211 (1910).

Designated Date of Meeting Exclusive of Others. —

See Wolfenden v. Board of Comm'rs, 152 N.C. 83 , 67 S.E. 319, 1910 N.C. LEXIS 211 (1910).

County Board Must Pass upon Question of Tax Situs. —

Where the question of tax situs is raised before the county board, it is an integral part of its duties to pass upon the question. In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

And in doing so, it is not passing upon taxpayer’s liability for tax. In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

Determination of tax situs is a requirement precedent to any legal listing, assessment, and valuation for tax purposes. In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

Designation “property of others” in subdivision (2) of subsection (g) is broad enough to include every piece of rural land or the county’s entire tax list if the commissioners have failed to value it as required by law. King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

When Property Owner May Contest Valuation on “Property of Others”. —

It is clear that the property owner may contest the valuation on the “property of others” under subdivision (g)(2) only where he is in some way aggrieved by that valuation. Brock v. North Carolina Property Tax Comm'n, 290 N.C. 731 , 228 S.E.2d 254, 1976 N.C. LEXIS 1178 (1976).

Standing to Appeal. —

Where taxpayer complained that the property of a real estate corporation was undervalued, with the result that other property owners in the county would bear a disproportionate share of the tax burden, taxpayer was adversely affected by the alleged undervaluation of the corporation’s property and had standing to appeal to the county for a revaluation of the corporate property. North Carolina Prop. Tax Comm'n, 136 N.C. App. 360, 525 S.E.2d 196, 2000 N.C. App. LEXIS 64 , cert. denied, 351 N.C. 473 , 543 S.E.2d 511, 2000 N.C. LEXIS 264 (2000).

Right to Request Hearing, etc., Not Limited. —

The right to request a hearing by and relief from the county board of equalization and review is not limited to the owner in fee simple of the property, the valuation of which is in question. In re Valuation of Property Located at 411-417 W. Fourth St., 282 N.C. 71 , 191 S.E.2d 692, 1972 N.C. LEXIS 887 (1972).

Subsection (e) Mandatory as to Time Prescribed for Completing Work. —

The duty imposed on the board of equalization and review to complete its work within the time prescribed by subsection (e), at least to the extent that authority is given the board to act ex mero motu, is mandatory. Spiers v. Davenport, 263 N.C. 56 , 138 S.E.2d 762, 1964 N.C. LEXIS 749 (1964).

When Board’s Duties and Powers Cease. —

After the board of county commissioners has completed the revision of the tax lists as authorized by the statute, its duties and powers as a revising board cease and determine until the time appointed by the statute for the next succeeding year. Wolfenden v. Board of Comm'rs, 152 N.C. 83 , 67 S.E. 319, 1910 N.C. LEXIS 211 (1910).

Taxpayer Must Exhaust Administrative Remedies Before Resorting to Courts. —

The legislature has provided adequate means whereby the individual taxpayer may contest not only the valuation which the county commissioners have placed upon his own property but the entire tax list or assessment roll, and he must exhaust this administrative remedy before he can resort to the courts. King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

The superior court has no authority to issue mandamus commanding the commissioners to revalue all real property in the county at its true value in money, since taxpayers must first exhaust the statutory administrative remedies in the county board of equalization and review and in the State Board of Assessment (now Property Tax Commission) before they can resort to the superior court. King v. Baldwin, 276 N.C. 316 , 172 S.E.2d 12, 1970 N.C. LEXIS 676 (1970).

Appeal. —

The county commissioners have exclusive original jurisdiction to grant relief against excessive valuation of property for taxation, and, unless they proceed upon some erroneous principle, there is no appeal where the statute gives none. Wade v. Commissioners of Craven County, 74 N.C. 81 (1876). As to appeal to Property Tax Commission, see G.S. 105-290 and notes thereto .

North Carolina Property Tax Commission erred by denying a county’s motion to dismiss a taxpayer’s petition for a new hearing regarding the valuation of its property and entertaining its appeal of the order of the county board of equalization because the taxpayer did not perfect its appeal with 30 days pursuant to G.S. 105-290(e), which deprived the Commission of jurisdiction to hear the appeal, and that the substance of the appeal could have had merit did not render the time limit for appeals inapplicable; the 30-day “time limit for appeals” set out in G.S. 105-290(e) is jurisdictional. In re Appeals of: La. Pac. Corp. from the Decisions Bd. of Equalization & Review, 208 N.C. App. 457, 703 S.E.2d 190, 2010 N.C. App. LEXIS 2441 (2010).

Because the notices of decisions were valid, even though the Mecklenburg County Board of Equalization and Review allowed the Assessor’s Office to conduct its mailings and the Office hired a private third party to mail the notices, and the taxpayers’ appeals were not timely, the Property Tax Commission correctly determined that it did not have jurisdiction of hear the taxpayer’s appeals. This section left flexible what procedure the Board had to follow when it conducting its mailings. In re Appeals of POP Capitol Towers, LP, 2022-NCCOA-205, 2022 N.C. App. LEXIS 234 (April 5, 2022).

Appeal Not Lost After Waiting for Value to be Carried Forward. —

Taxpayer who does not appeal the valuation in the year when it took place, but rather waits until that value had been carried forward to a subsequent tax year does not lose the right to appeal the tax value that had been carried forward. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

§ 105-323. Giving effect to decisions of the board of equalization and review.

All changes in listings, names, descriptions, appraisals, and assessments made by the board of equalization and review shall be reflected upon the abstracts and tax records by insertion of rebates given, additional charges made, or any other insertion; by correction; or by any other charge. The tax records shall then be totalled, and at least a majority of the members of the board of equalization and review shall sign the following statement to be inserted at the end of the tax records:

State of North Carolina County of We, the undersigned members of the Board of Equalization and Review of County, hereby certify that these tax records constitute the fixed and permanent tax list and assessment roll and record of taxes due for the year , subject to only such changes as may be allowed by law. Members of the Board of Equalization and Review of County

Click to view

The omission of this endorsement shall not affect the validity of the tax records or of any taxes levied on the basis of the assessments appearing in them.

History. 1939, c. 310, s. 1106; 1971, c. 806, s. 1; 1999-456, s. 59.

Legal Periodicals.

For note on procedural developments in the discovery of property unlisted for purposes of ad valorem taxation, see 51 N.C.L. Rev. 531 (1973).

§ 105-324. [Repealed]

Repealed by Session Laws 1987, c. 295, s. 4.

§ 105-325. Powers of board of county commissioners to change abstracts and tax records after board of equalization and review has adjourned.

  1. After the board of equalization and review has finished its work and the changes it effected or ordered have been entered on the abstracts and tax records as required by G.S. 105-323 , the board of county commissioners shall not authorize any changes to be made on the abstracts and tax records except as follows:
    1. To give effect to decisions of the Property Tax Commission on appeals taken under G.S. 105-290 .
    2. To add to the tax records any valuation certified by the Department of Revenue for property appraised in the first instance by the Department or to give effect to corrections made in such appraisals by the Department.
    3. Subject to the provisions of subdivisions (a)(3)a and (a)(3)b, below, to correct the name of any taxpayer appearing on the abstract or tax records erroneously; to substitute the name of the person who should have listed property for the name appearing on the abstract or tax records as having listed the property; and to correct an erroneous description of any property appearing on the abstract or tax records.
      1. Any correction or substitution made under the provisions of this subdivision (a)(3) shall have the same force and effect as if the name of the taxpayer or description of the property had been correctly listed in the first instance, but the provisions of this subdivision (a)(3)a shall not be construed as a limitation on the taxation and penalization of discovered property required by G.S. 105-312 .
      2. If a correction or substitution under this subdivision (a)(3) will adversely affect the interests of any taxpayer, he shall be given written notice thereof and an opportunity to be heard before the change is entered on the abstract or tax records.
    4. To correct appraisals, assessments, and amounts of taxes appearing erroneously on the abstracts or tax records, as the result of clerical or mathematical errors. (If the clerical or mathematical error was made by the taxpayer, his agent, or an officer of the taxpayer and if the correction demonstrates that the property was listed at a substantial understatement of value, quantity, or other measurement, the provisions of G.S. 105-312 shall apply.)
    5. To add to the tax records and abstracts or to correct the tax records and abstracts to include property discovered under the provisions of G.S. 105-312 or property exempted or excluded from taxation pursuant to G.S. 105-282.1(a)(4).
    6. Subject to the provisions of subdivisions (a)(6)a, (a)(6)b, (a)(6)c, and (a)(6)d, below, to appraise or reappraise property when the assessor reports to the board that, since adjournment of the board of equalization and review, facts have come to his attention that render it advisable to raise or lower the appraisal of some particular property of a given taxpayer in the then current calendar year.
      1. The power granted by this subdivision (a)(6) shall not authorize appraisal or reappraisal because of events or circumstances that have taken place or arisen since the day as of which property is to be listed.
      2. No appraisal or reappraisal shall be made under the authority of this subdivision (a)(6) unless it could have been made by the board of equalization and review had the same facts been brought to the attention of that board.
      3. If a reappraisal made under the provisions of this subdivision (a)(6) demonstrates that the property was listed at a substantial understatement of value, quantity, or other measurement, the provisions of G.S. 105-312 shall apply.
      4. If an appraisal or reappraisal made under the provisions of this subdivision (a)(6) will adversely affect the interests of any taxpayer, he shall be given written notice thereof and an opportunity to be heard before the appraisal or reappraisal shall become final.
    7. To give effect to decisions of the board of county commissioners on appeals taken under G.S. 105-322(a).
  2. The board of county commissioners may give the assessor general authority to make any changes authorized by subsection (a), above, except those permitted under subdivision (a)(6), above.
  3. Orders of the board of county commissioners and actions of the assessor upon delegation of authority to him by the board that are made under the provisions of this section may be appealed to the Property Tax Commission under the provisions of G.S. 105-290 .

History. 1939, c. 310, s. 1108; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1987, c. 45, s. 1; c. 295, s. 8; c. 680, s. 6; 1989, c. 176, s. 2.

Local Modification.

Buncombe: 1981 (Reg. Sess., 1982), c. 1279.

Editor’s Note.

Session Laws 2013-362, s. 1, provides: “Notwithstanding G.S. 105-287 , 105-325, 105-380, any provision of law restricting the time for which a change in appraisal or valuation may be made, or any other provision of Subchapter II of Chapter 105 of the General Statutes inconsistent with the provisions of this act, a board of county commissioners shall undertake the measures required by this act if all of the following conditions are met:

“(1) The county has independent evidence that the majority of commercial neighborhoods in the county reviewed by a qualified appraisal company possess significant issues of inequity.

“(2) The county has independent evidence that for residential neighborhoods instances of inequity or erroneous data had an impact on the valuation of the neighborhood as a whole.

“(3) The county’s last general reappraisal was performed for the 2008 tax year, 2009 tax year, 2010 tax year, 2011 tax year, or 2012 tax year.

“(4) The independent evidence resulted from a review performed by a qualified appraisal company selected and retained by the county and registered with the Department of Revenue and had a sample size of no less than 375 properties, the relevant characteristics of which were reviewed on location at the property.”

Session Laws 2013-362, s. 2, provides: “If all of the conditions of Section 1 of this act are met, a board of county commissioners shall either (i) conduct a reappraisal, using no less than one person certified by the Department of Revenue for mass valuations per 4,250 parcels, pursuant to G.S. 105-286 within 18 months, applicable to all tax years from and including the tax year when the last general reappraisal was performed pursuant to G.S. 105-286 or (ii) have a qualified appraisal company, which may be the same company that provides the evidence in Section 1 of this act, conduct a review of all the values in the county by neighborhoods and make recommendations as to the true value of the properties as of January 1 of the year of the last general reappraisal performed pursuant to G.S. 105-286. After the reappraisal or after each neighborhood review required by this section is complete, the board of county commissioners shall make any change on the abstracts and tax records to ensure that the assessed values of incorrectly appraised properties in the county reflect the true values of those properties effective for the year of the last general reappraisal performed pursuant to G.S. 105-286 and shall apply the adjusted values for those properties for each tax year until the next general reappraisal for real property is performed by the county pursuant to G.S. 105-286 unless those adjusted values are changed in accordance with G.S. 105-287 . In making changes to the abstracts and tax records mandated by this act, the board of county commissioners shall make adjustments for previous errors prioritized as follows:

“(1) Adjustments to parcels with errors that resulted in the parcels having a significantly overstated value.

“(2) Adjustments to parcels with errors that resulted in the parcels having a significantly understated value.

“(3) Adjustments to parcels with errors that resulted in the parcels having an overstated value.

“(4) Adjustments to parcels with errors that resulted in the parcels having an understated value.

“In instances of parcels with errors that resulted in an overpayment of taxes, the governing board shall require that notice of refund and the refund amount be sent to the owner of record as of the date the payment was made. The provisions of G.S. 105-380 do not apply to the issuance of any refund under the provisions of this act.”

Session Laws 2013-362, s. 3, as amended by Session Laws 2015-266, s. 1, provides: “Interest on taxes paid on parcels with errors that resulted in the parcels having an overstated value shall be calculated at a rate of five percent (5%) per annum. Additional taxes levied on parcels as a result of errors causing the parcels to have an understated value (i) shall be treated as taxes on discovered property pursuant to G.S. 105-312 , except that the discovery penalties set forth in subsection (h) of G.S. 105-312 shall not apply, (ii) are due and payable on September 1 of the fiscal year for which the taxes are levied, but not earlier than four years from the last general reappraisal date, and (iii) shall be payable, at the taxpayer’s option, by means of an agreement over a period of not more than 36 months, in equal monthly installments, if the total of the additional taxes levied is greater than one thousand dollars ($1,000). Interest shall not accrue for the period a taxpayer is making timely payments under a payment plan. The tax collector is authorized to issue forms and develop procedures to implement a payment plan authorized under this section. Notwithstanding G.S. 105-365.1(b), for parcels that have been transferred in a tax year for which errors requiring reappraisals under this act resulted in an underpayment of taxes, the following apply:

“(1) The taxes for each tax year prior to and in the fiscal year in which the transfer occurred shall be collected from the owner of record as of January 1 of each tax year for which unpaid taxes exist. Only the remedies available in G.S. 105-367 and G.S. 105-368 may be used to collect against the owner of record as of January 1 of each tax year for which unpaid taxes exist.

“(2) Notwithstanding G.S. 105-355(a), there shall be no lien on the real property for underpaid taxes that arose in a year in which the property is owned by a person other than the current owner as of January 1 of that year. The current owner shall not be held personally responsible for such underpaid taxes.

“(3) If an owner not responsible for underpaid taxes pursuant to this section paid the underpaid taxes, the owner may assert a valid defense for a refund pursuant to G.S. 105-381 , as a tax imposed through clerical error. Interest on the refund shall be calculated at a rate of five percent (5%) per annum from the date the owner asserting the defense paid the underpaid taxes until the date the refund is issued.”

Legal Periodicals.

For note on procedural developments in the discovery of property unlisted for purposes of ad valorem taxation, see 51 N.C.L. Rev. 531 (1973).

OPINIONS OF ATTORNEY GENERAL

Board of county commissioners may not reappraise property when information as to change comes to tax supervisor’s attention while board of equalization and review is in session. See opinion of Attorney General to Mr. H.L. Riddle, Jr., 41 N.C. Op. Att'y Gen. 514 (1971).

CASE NOTES

Right to Appeal. —

Superior court did not err in dismissing a taxpayer’s petition for writ of mandamus directing a county tax administrator to report the facts to the board of county commissioners in order that the board could make a decision as to whether the taxpayer received notice of changes in the valuation of its property because the county tax assessor did not believe that there were any errors that had to be brought to the attention of the county commissioners, but it was the taxpayer who sought redress, and the taxpayer missed its opportunity to seek relief in its own right by failing to timely challenge the change in valuation of the property before the county board of equalization and review and could not compel the county tax assessor to act on its behalf; plain language of G.S. 105-325(a)(6) suggests that it is intended to provide a route for a county tax assessor to seek correction based on errors it has discovered. Villages at Red Bridge, LLC v. Weisner, 209 N.C. App. 604, 704 S.E.2d 925, 2011 N.C. App. LEXIS 209 (2011).

§ 105-325.1. Special committee for motor vehicle appeals.

The board of county commissioners may appoint a special committee of its members or other persons to hear and decide appeals arising under G.S. 105-330.2(b). The county shall bear the expense of employing the committee.

History. 1991 (Reg. Sess., 1992), c. 961, s. 9.

Article 22. Listing, Appraising, and Assessing by Cities and Towns.

§ 105-326. Listing property for city and town taxation; duty of owner; authority of governing body to obtain lists from county.

  1. All property subject to ad valorem taxation in any city or town shall be listed annually during the period prescribed by G.S. 105-307 in the city or town in which it is taxable in the name of the person required by G.S. 105-302 and 105-306 on an abstract prepared according to G.S. 105-309 and affirmed as required by G.S. 105-310 . In lieu of requiring property owners to list their property with the city or town, the governing body of any city or town may make provision for obtaining from the abstracts and tax records of the county in which the municipality is situated lists of the property subject to taxation by the city or town.
  2. Regardless of whether a city or town adopts the alternative provided in the second sentence of subsection (a), above, the provisions of G.S. 105-311 and 105-312 shall apply to the listing of property for municipal taxation, as shall the penalties imposed by G.S. 105-308 and 105-312 for failure to list. In the preparation of abstracts, tax records, and tax receipts the city or town shall be governed by the provisions of G.S. 105-318 , 105-319, 105-320, and 105-321. The powers and duties assigned to the assessor by the statutes cited as being applicable to municipalities shall be imposed upon and exercised by some official designated by the governing body of the city or town, and the powers and duties assigned therein to the board of county commissioners shall be imposed upon and exercised by the governing body of the city or town.

History. 1939, c. 310, s. 1201; 1971, c. 806, s. 1; 1987, c. 45, s. 1.

§ 105-327. Appraisal and assessment of property subject to city and town taxation.

For the property it is entitled to tax, a city or town situated in a single county shall accept and adopt the appraisals and assessments fixed by the authorities of that county as modified by the Department of Revenue under the provisions of this Subchapter. However, the requirement of this section shall not be construed to modify the appraisal and assessment authority given cities and towns with respect to discovered property by G.S. 105-312 .

History. 1939, c. 310, s. 1201; 1971, c. 806, s. 1; 1973, c. 476, s. 193.

Legal Periodicals.

For note on procedural developments in the discovery of property unlisted for purposes of ad valorem taxation, see 51 N.C.L. Rev. 531 (1973).

§ 105-328. Listing, appraisal, and assessment of property subject to taxation by cities and towns situated in more than one county.

  1. For purposes of municipal taxation, all property subject to taxation by a city or town situated in two or more counties may, by resolution of the governing body of the municipality, be listed, appraised, and assessed as provided in G.S. 105-326 and 105-327 if, in such a case, in the opinion of the governing body, the same appraisal and assessment standards will thereby apply uniformly throughout the municipality. However, if, in such a case, the governing body shall determine that adoption of the appraisals and assessments fixed by the counties will not result in uniform appraisals and assessments throughout the municipality, the governing body may, by horizontal adjustments, equalize the appraisal and assessment values fixed by the counties in order to obtain the required uniformity. Taxes levied by the city or town shall be levied uniformly on the assessments so determined.
  2. Should the governing body of a city or town situated in two or more counties not adopt the procedure provided in subsection (a), above, all property subject to taxation by the municipality shall be listed, appraised, and assessed as provided in subdivisions (b)(1) through (b)(6), below.
    1. The governing body of the city or town shall appoint a municipal assessor on or before the first Monday in July in each odd-numbered year. The governing body may remove the municipal assessor from office during his term for good cause after giving him notice in writing and an opportunity to appear and be heard at a public session of the appointing body. Whenever a vacancy occurs in the office, the governing body shall appoint a qualified person to serve as municipal assessor for the period of the unexpired term. A person appointed as a municipal assessor shall meet the qualifications and requirements set for a county assessor under G.S. 105-294 . Pursuant to Article VI, Sec. 9, of the North Carolina Constitution, the office of municipal assessor is hereby declared to be an office that may be held concurrently with any other appointive office.
    2. With the approval of the governing body, a municipal assessor may employ listers, appraisers, and clerical assistants necessary to carry out the listing, appraisal, assessing, and billing functions required by law.
    3. A municipal assessor and the persons employed by him have the same powers and duties as their county equivalents with respect to property subject to taxation by a city or town.
    4. The governing body shall, with respect to property subject to city or town taxation, be vested with the powers and duties vested by this Subchapter in boards of county commissioners and boards of equalization and review. Appeals may be taken from the municipal board of equalization and review or governing body to the Property Tax Commission in the manner provided in this Subchapter for appeals from county boards of equalization and review and boards of county commissioners.
    5. All expenses incident to the listing, appraisal, and assessment of property for the purpose of city or town taxation shall be borne by the municipality for whose benefit the work is undertaken.
    6. The intent of this subsection (b) is to provide cities and towns that are situated in two or more counties with machinery for listing, appraising, and assessing property for municipal taxation equivalent to that established by this Subchapter for counties. The powers to be exercised by, the duties imposed on, and the possible penalties against municipal governing bodies, boards of equalization and review, assessors, and persons employed by an assessor shall be the same as those provided in this Subchapter by, on, or against county boards of commissioners, boards of equalization and review, assessors, and persons employed by an assessor.

History. 1939, c. 310, s. 1202; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 695, s. 13; 1987, c. 43, s. 8; c. 45, s. 1; c. 46, s. 2.

§ 105-329. [Repealed]

Repealed by Session Laws 1991 (Regular Session, 1992), c. 961, s. 2.

Editor’s Note.

Session Laws 1991, c. 629, s. 10, had provided that this section would become effective January 1, 1993; however, this section was repealed by Session Laws 1991 (Reg. Sess., 1992), c. 961, s. 2, effective January 1, 1993. Therefore, this section never went into effect.

Article 22A. Motor Vehicles.

§ 105-330. Definitions.

The following definitions apply in this Article:

  1. Classified motor vehicle. — A motor vehicle classified under this Article.

    (1a) Collecting authority. — The Division of Motor Vehicles or an agent contracting with the Division of Motor Vehicles.

  2. Motor vehicle. — Defined in G.S. 20-4.01(23) . (2a) Municipal corporation. — Defined in G.S. 105-273(11).
  3. Public service company. — Defined in G.S. 105-333(14) .
  4. Registered classified motor vehicle. — Any of the following:
    1. A classified motor vehicle that has a registration plate issued under Article 3 of Chapter 20 of the General Statutes and whose registration is current.
    2. A classified motor vehicle transferred to an owner who has applied for a registration plate for the motor vehicle.
  5. Registration fees. — Fees set out in G.S. 20-87 and G.S. 20-88 .
  6. Unregistered classified motor vehicle. — A classified motor vehicle that is not a registered classified motor vehicle.

History. 1991, c. 624, s. 1; 2005-294, s. 1; 2006-259, s. 31.5; 2007-527, s. 22(b); 2008-134, s. 65; 2009-445, s. 24(a); 2010-95, s. 22(c); 2011-330, s. 42(a); 2012-79, s. 3.6; 2013-414, s. 70(b), (d).

Cross References.

As to the use and confidential nature of actual addresses of Address Confidentiality Program participants by boards of elections for election-related purposes, see G.S. 15C-8 .

Editor’s Note.

Subdivisions (3) and (4), as added by Session Laws 2005-294, s. 1, were redesignated as subdivisions (1a) and (2a) at the direction of the Revisor of Statutes to maintain alphabetical order.

Session Laws 2005-294, s. 13, as amended by Session Laws 2006-259, s. 31.5, as amended by Session Laws 2007-527, s. 22(b), as amended by Session Laws 2008-134, s. 65, as amended by Session Laws 2012-79, s. 3.6, and as amended by Session Laws 2013-414, s. 70(d), provides: “Sections 4 and 8 of this act become effective January 1, 2006. Sections 1, 2, 3, 5, 6, 7, 10 and 11 of this act become effective July 1, 2013, and apply to combined tax and registration notices issued on or after that date. Counties may continue to collect property taxes on motor vehicles for taxable years beginning on or before September 1, 2013, under the provisions of Article 22A of Chapter 105 of the General Statutes as those statutes are in effect on June 30, 2013. Sections 12 and 13 of this act are effective when they become law. Nothing in this act shall require the General Assembly to appropriate funds to implement it for the biennium ending June 30, 2007.”

Session Laws 2020-3, s. 4.7(a)-(h), as amended by Session Laws 2020-97, ss. 3.15(a), 3.16(a), provides: “(a) Definition. — For purposes of this section, ‘credential’ means any of the following issued by the Division of Motor Vehicles:

“(1) Drivers license.

“(2) Learner’s permit.

“(3) Limited learner’s permit.

“(4) Limited provisional license.

“(5) Full provisional license.

“(6) Commercial drivers license.

“(7) Commercial learner’s permit.

“(8) Temporary driving certificate.

“(9) Special identification card.

“(10) Handicapped placard.

“(11) Vehicle registration.

“(12) Temporary vehicle registration.

“(13) Dealer license plate.

“(14) Transporter plate.

“(15) Loaner/Dealer ‘LD’ plate.

“(16) Vehicle inspection authorization.

“(17) Inspection station license.

“(18) Inspection mechanic license.

“(19) Transportation network company permit.

“(20) Motor vehicle dealer license.

“(21) Sales representative license.

“(22) Manufacturer license.

“(23) Distributor license.

“(24) Wholesaler license.

“(25) Driver training school license.

“(26) Driver training school instructor license.

“(27) Professional housemoving license.

“(b) Extend Validity of Credentials. — Notwithstanding renewal, duration, or expiration provisions of G.S. 20-7 , 20-11, 20-37.6, 20-37.7, 20-37.13, 20-50, 20-66, 20-79, 20-79.02, 20-79.2, 20-183.4B, 20-183.4D, 20-280.3, 20-288, 20-324, and 20-359, or any other provision of law to the contrary, the Division of Motor Vehicles shall extend for a period of five months the validity of any credential that expires on or after March 1, 2020, and before August 1, 2020. The Division shall extend for a period of five months the validity of any credential listed in subdivisions (6), (7), (9), (10), and (18) of subsection (a) of this section that expires on or after March 1, 2020, and before the date 30 days after the date the Governor (i) rescinds Executive Order No. 116 or (ii) issues another executive order lifting restrictions on Division of Motor Vehicles functions. Notwithstanding G.S. 20-37.13 (h) and G.S. 20-37.13 A(a), the Division of Motor Vehicles is authorized to waive the requirement that commercial drivers license and commercial learner’s permit holders have a medical examination and certification, as required by federal law, consistent with any waiver of medical qualifications standards issued by the Federal Motor Carrier Safety Administration. A credential extended under this section shall expire five months from the date it otherwise expires as prescribed by law prior to this section. However, the subsequent expiration of a credential extended under this section shall occur on the date prescribed by law prior to this section without regard to the extension. The Division shall notify individuals affected by an extension granted under this section, including information on new expiration dates and how the extension affects subsequent renewal and expiration dates.

“(b1) Extension of Intrastate Medical Waivers. — Notwithstanding the limitation on duration of waivers in G.S. 20-37.13 A(b), the Division of Motor Vehicles may extend for up to five months the validity of a medical waiver issued by the Division under G.S. 20-37.13 A if the waiver expires on or after March 1, 2020, and before the date 30 days after the date the Governor (i) rescinds Executive Order No. 116 or (ii) issues another executive order lifting restrictions on Division of Motor Vehicles functions, and the Division’s Medical Review Unit determines the extension is appropriate.

“(c) Driving Eligibility Certificates. — Notwithstanding G.S. 20-11 (n)(3), a driving eligibility certificate dated on or after February 9, 2020, and before March 10, 2020, remains valid and may be accepted by the Division of Motor Vehicles to meet the requirements for a license or permit issued under G.S. 20-11 until 30 days after the date the Governor rescinds Executive Order No. 116 or the date the Division reopens all drivers license offices, whichever is earlier.

“(d) Waive Penalties. — Notwithstanding any provision of law to the contrary, the Division shall waive any fines, fees, or penalties associated with failing to renew a credential during the period of time the credential is valid by extension under subsection (b) of this section.

“(e) Motor Vehicle Taxes. — Notwithstanding any provision of law to the contrary, due dates for motor vehicle taxes that are tied to registration expiration under Article 22A of Chapter 105 of the General Statutes shall be extended to correspond with extended expiration dates under subsection (b) of this section.

“(f) Validity by Extension a Defense. — A person may not be convicted or found responsible for any offense resulting from failure to renew a credential issued by the Division if, when tried for that offense, the person shows that the offense occurred during the period of time the credential is valid by extension under subsection (b) of this section.

“(g) Report. — Within 30 days of the extensions made under subsection (b) of this section, the Division shall submit a report to the Joint Legislative Transportation Oversight Committee and the Fiscal Research Division detailing implementation of this section.

“(h) Effective Date. — This section is effective retroactively to March 1, 2020, and applies to expirations occurring on or after that date.”

Session Laws 2020-3, s. 5, is a severability clause.

Session Laws 2020-97, s. 4.5, is a severability clause.

Effect of Amendments.

Session Laws 2005-294, s. 1, added subdivisions (1a) and (2a). For effective date, see editor’s note.

Session Laws 2009-445, s. 24(a), added subdivisions (4) through (6). See Editor’s note for effective date and applicability.

§ 105-330.1. Classification of motor vehicles.

  1. Classification. —  All motor vehicles other than the motor vehicles listed in subsection (b) of this section are designated a special class of property under Article V, Sec. 2(2) of the North Carolina Constitution and are considered classified motor vehicles. Classified motor vehicles must be listed and assessed as provided in this Article and taxes on classified motor vehicles must be collected as provided in this Article.
  2. Exceptions. —  The following motor vehicles are not classified under subsection (a) of this section:
    1. Motor vehicles exempt from registration pursuant to G.S. 20-51 .
    2. Manufactured homes, mobile classrooms, and mobile offices.
    3. Semitrailers or trailers registered on a multiyear basis.
    4. Motor vehicles owned or leased by a public service company and appraised under G.S. 105-335 .
    5. Repealed by Session Laws 2000, c. 140, s. 75(a), effective July 1, 2000.
    6. Motor vehicles registered under the International Registration Plan.
    7. Motor vehicles issued permanent registration plates under G.S. 20-84 .
    8. Self-propelled property-carrying vehicles issued three-month registration plates at the farmer rate under G.S. 20-88 .
    9. Motor vehicles owned by participants in the Address Confidentiality Program authorized under Chapter 15C of the General Statutes.

History. 1991, c. 624, s. 1; 1991 (Reg. Sess., 1992), c. 961, s. 3; 1993, c. 485, s. 18; c. 543, s. 4; 1993 (Reg. Sess., 1994), c. 745, s. 1; 2000-140, s. 75(a); 2007-471, s. 6; 2009-445, ss. 24(a), 25(a); 2010-95, s. 22(c), (d); 2013-414, ss. 70(b), (c), 72.

Effect of Amendments.

Session Laws 2007-471, s. 6, added subdivision (b)(6). For effective date, see Editor’s note.

Session Laws 2009-445, s. 24(a), in subsection (a), in the first sentence, deleted “authority of” preceding “Article V” near the middle, and added “and are considered classified motor vehicles” at the end; in the second sentence, substituted “must” for “shall” twice; and added subdivisions (b)(7) and (b)(8). For effective date and applicability, see Editor’s note.

Session Laws 2013-414, s. 72, effective July 1, 2013, added subdivision (b)(9).

§ 105-330.2. Appraisal, ownership, and situs.

  1. Determination Date for Registered Vehicle.  —  The ownership, situs, and taxability of a registered classified motor vehicle is determined annually as of the date on which the vehicle’s current registration is renewed, regardless of whether the registration is renewed after it has expired, or on the date an application for a new registration is submitted. The situs of a registered classified motor vehicle may not be changed until the next registration date. The value of a registered classified motor vehicle is determined as follows:
    1. For a registration expiring or an application for a new registration during the period January 1 through August 31, the value is determined as of January 1 of the current year.
    2. For a registration expiring or an application for a new registration during the period September 1 through December 31, the value is determined as of January 1 of the following year.
    3. For a new motor vehicle whose value cannot be determined as of January 1 of the year specified in subdivision (1) or (2) of this subsection, the value is determined as of the date that model of motor vehicle is first offered for sale at retail in this State.
    4. For a motor vehicle whose value cannot be determined as of the date set under any other subdivision in this subsection, the value is determined using the most currently available January 1 retail value of the vehicle.

      (a1) Determination Date for Unregistered Vehicle. — The ownership, situs, and taxability of an unregistered classified motor vehicle is determined as of January 1 of the year in which the registration of the motor vehicle expires and is not renewed or the motor vehicle is acquired and the owner does not submit an application for registration. The value of an unregistered classified motor vehicle is determined as of January 1 of the year the vehicle is required to be listed.

  2. Value. —  An assessor must appraise a classified motor vehicle at its true value in money as prescribed by G.S. 105-283 . The sales price of a classified motor vehicle purchased from a dealer, including all accessories attached to the vehicle when it is delivered to the purchaser, is considered the true value of the vehicle, and the assessor must appraise the vehicle at this value. The sales price excludes the tax imposed under Article 5A of this Chapter. The Property Tax Division of the Department of Revenue must annually adopt a schedule of values, standards, and rules to be used in the valuation of all other classified motor vehicles to ensure equitable statewide valuations, taking into account local market conditions and allowing adjustments for mileage and the condition of the vehicles. (b1) Valuation Appeal. — The owner of a classified motor vehicle may appeal the appraised value of the vehicle by filing a request for appeal with the assessor within 30 days of the date taxes are due on the vehicle under G.S. 105-330.4 . An owner who appeals the appraised value of a classified motor vehicle must pay the tax on the vehicle when due, subject to a full or partial refund if the appeal is decided in the owner’s favor.The combined tax and registration notice or tax receipt for a classified motor vehicle must explain the right to appeal the appraised value of the vehicle. A lessee of a vehicle that is required by the terms of the lease to pay the tax on the vehicle is considered the owner of the vehicle for purposes of filing an appeal under this subsection. Appeals filed under this subsection shall proceed in the manner provided in G.S. 105-312(d).

    (b2) Exemption or Exclusion Appeal. — The owner of a classified motor vehicle may appeal the vehicle’s eligibility for an exemption or exclusion by filing a request for appeal with the assessor within 30 days of the assessor’s initial decision on the exemption or exclusion application filed by the owner pursuant to G.S. 105-330.3(b). Appeals filed under this subsection shall proceed in the manner provided in G.S. 105-312(d).

  3. Repealed by Session Laws 2008-134, s. 61, effective July 28, 2008.

History. 1991, c. 624, s. 1; 1991 (Reg. Sess., 1992), c. 961, s. 4; 1995, c. 510, s. 1; 1995 (Reg. Sess., 1996), c. 646, s. 24; 1997-6, s. 10; 1999-353, s. 1; 2005-294, s. 2; 2005-303, s. 1; 2006-259, s. 31.5; 2007-527, s. 22(b); 2008-134, ss. 61, 65; 2009-445, s. 24(a); 2010-95, s. 22(c); 2011-330, s. 42(a); 2012-79, ss. 3.2, 3.6; 2013-414, ss. 70(b), (d), 71(a), (b).

Effect of Amendments.

Session Laws 2005-294, s. 2, rewrote subsection (b); and added the last sentence in subsection (c). For effective date, see Editor’s note.

Session Laws 2005-303, s. 1, effective for taxes imposed for taxable years beginning on or after July 1, 2005, inserted the second sentence of subsection (b).

Session Laws 2008-134, s. 61, effective July 28, 2008, deleted subsection (c), regarding the administration of a memorandum of understanding for the administration of the listing, appraisal, and assessment of classified motor vehicles.

Session Laws 2009-445, s. 24(a), rewrote the section. For effective date and applicability, see Editor’s note.

Session Laws 2013-414, s. 71(b), effective July 1, 2013, in subsection (b1), in the first paragraph, added “Valuation” at the beginning of the subsection heading, and deleted “or taxability” following “appraised value” in the first and second sentences; in the second paragraph, deleted “and taxability” following “appraised value” and added the last sentence; and added subsection (b2).

§ 105-330.3. Listing requirements for classified motor vehicles; application for exempt status.

  1. Registered Vehicles. —  The assessor must list a registered classified motor vehicle each year for each taxing unit in the name of the record owner as of the day on which the current vehicle registration is renewed or the day on which an owner to whom the vehicle is transferred applies for a new registration. The owner of a classified motor vehicle listed pursuant to this subsection need not list the vehicle as provided in G.S. 105-306 . G.S. 105-312 does not apply to a classified motor vehicle listed pursuant to this subsection. (a1) Unregistered Vehicles. — The owner of an unregistered classified motor vehicle must list the vehicle for taxes by filing an abstract with the assessor of the county in which the vehicle is located on or before January 31 following the date the owner acquired the unregistered vehicle or, in the case of a registration that is not renewed, January 31 following the date the registration expires, and on or before January 31 of each succeeding year that the vehicle is unregistered. If a classified motor vehicle required to be listed pursuant to this subsection is registered before the end of the fiscal year for which it was required to be listed, the following applies:
    1. The vehicle is taxed as a registered vehicle, and the tax assessed pursuant to this subsection for the fiscal year in which the vehicle was required to be listed shall be released and/or refunded.
    2. For any months for which the vehicle was not taxed between the date the registration expired and the start of the current registered vehicle tax year, the vehicle is taxed as an unregistered vehicle as follows:
      1. The value of the motor vehicle is determined as of January 1 of the year in which the taxes are computed.
      2. In computing the taxes, the assessor must use the tax rates and any additional motor vehicle taxes of the various taxing units in effect on the date the taxes are computed.
      3. The tax on the motor vehicle is the product of a fraction and the number of months for which the vehicle was not taxed between the date the registration expires and the start of the current registered vehicle tax year. The numerator of the fraction is the product of the appraised value of the motor vehicle and the tax rate of the various taxing units. The denominator of the fraction is 12.
      4. The taxes are due on September 1 following the date the notice was prepared. Taxes are payable at par or face amount if paid before January 6 following the due date. Taxes paid on or after January 6 following the due date are subject to interest charges. Interest accrues on taxes paid on or after January 6 pursuant to G.S. 105-360 .
      5. Repealed by Session Laws 2017-204, s. 5.1(a), effective for taxable years beginning on or after July 1, 2017.
    3. A vehicle required to be listed pursuant to this subsection that is not listed by January 31 and is not registered before the end of the fiscal year for which it was required to be listed is subject to discovery pursuant to G.S. 105-312 .
  2. Exemption or Exclusion. —  The owner of a classified motor vehicle who claims an exemption or exclusion from tax under this Subchapter has the burden of establishing that the vehicle is entitled to the exemption or exclusion. The owner may establish prima facie entitlement to exemption or exclusion of the classified motor vehicle by filing an application for exempt status with the assessor within 30 days of the date taxes on the vehicle are due. When an approved application is on file, the assessor must omit from the tax records the classified motor vehicles described in the application. An application is not required for vehicles qualifying for the exemptions or exclusions listed in G.S. 105-282.1 (a)(1). The remaining provisions of G.S. 105-282.1 do not apply to classified motor vehicles.
  3. Duty to report changes. —  The owner of a classified motor vehicle that has been omitted from the tax records as provided in subsection (b) of this section must report to the assessor any classified motor vehicle registered in the owner’s name or owned by that person but not registered in the person’s name that does not qualify for exemption or exclusion for the current year. This report must be made within 30 days after the renewal of registration or initial registration of the vehicle or, for an unregistered vehicle, on or before January 31 of the year in which the vehicle is required to be listed by subsection (a1) of this section. A classified motor vehicle that does not qualify for exemption or exclusion but has been omitted from the tax records as provided in subsection (b) is subject to discovery under the provisions of G.S. 105-312 , except that in lieu of the penalties prescribed by G.S. 105-312 (h) a penalty of one hundred dollars ($100.00) is assessed for each registration period that elapsed before the disqualification was discovered.
  4. Criminal Sanction. —  A person who willfully attempts, or who willfully aids or abets another person to attempt, in any manner to evade or defeat the taxes subject to this Article, whether by removal or concealment of property or otherwise, is guilty of a Class 2 misdemeanor.

History. 1991, c. 624, s. 1; 2008-134, s. 62; 2009-445, s. 24(a); 2010-95, s. 22(c); 2012-79, s. 3.3; 2013-414, ss. 70(b), 71(a), (c); 2017-204, s. 5.1(a).

Effect of Amendments.

Session Laws 2008-134, s. 62, effective July 28, 2008, in subdivision (a)(2), added “unless the vehicle has been taxed as a registered vehicle for the current year” to the end; and in subsection (b), added the last sentence.

Session Laws 2009-445, s. 24(a), rewrote the section. For effective date and applicability, see Editor’s note.

Session Laws 2013-414, s. 71(c), effective July 1, 2013, rewrote subsection (a1); and, in subsection (b), added “within 30 days of the date taxes on the vehicle are due” at the end of the second sentence.

Session Laws 2017-204, s. 5.1(a), effective for taxes imposed for taxable years beginning on or after July 1, 2017, substituted “the taxes are computed” for “the registration of the motor vehicle expires” in sub-subdivision (a1)(2)a., rewrote sub-subdivision (a1)(2)d., and deleted sub-subdivision (a1)(2)e., related to interest due on unpaid taxes for unregistered classified motor vehicles.

§ 105-330.4. Due date, interest, and enforcement remedies.

  1. Due Date. —  The registration of a classified motor vehicle may not be issued unless a temporary registration plate is issued for the motor vehicle under G.S. 20-79.1 A or the taxes for the motor vehicle’s tax year that begins after the issuance of the registration are paid upon registration. A registration of a classified motor vehicle may not be renewed unless the taxes for the motor vehicle’s tax year that begins after the registration expires are paid upon registration. If the registration of a classified motor vehicle is renewed earlier than the date the taxes are due, the taxes must be paid as if they were due. Taxes on a classified motor vehicle are due as follows:
    1. For an unregistered classified motor vehicle, the taxes are due on September 1 following the date by which the vehicle was required to be listed.
    2. For a registered classified motor vehicle that is registered under the staggered system, the taxes are due each year on the date the owner applies for a new registration or the fifteenth day of the month following the month in which the registration renewal sticker expires pursuant to G.S. 20-66(g).
    3. For a registered classified motor vehicle that is registered under the annual system, taxes are due on the date the owner applies for a new registration or 45 days after the registration expires.
    4. For a registered classified motor vehicle that has a temporary registration plate issued under G.S. 20-79.1 or a limited registration plate issued under G.S. 20-79.1A, the taxes are due on the last day of the second month following the date the owner applied for the plate. (a1) Repealed by Session Laws 2009-445, s. 24(a), effective July 1, 2013, and applicable to combined tax and registration notices issued on or after that date.
  2. Interest. —  Interest accrues on unpaid taxes and unpaid registration fees for registered classified motor vehicles at the rate of five percent (5%) for the remainder of the month the taxes are due under subsection (a) of this section. Interest does not accrue for the first month following the due date. Interest accrues at the rate of three-fourths percent (3/4%) beginning the second month following the due date and for each following month until the taxes and fees are paid. Subject to the provisions of G.S. 105-395.1 , interest accrues on delinquent taxes on unregistered classified motor vehicles as provided in G.S. 105-360(a) and the discounts allowed in G.S. 105-360(a) apply to the payment of the taxes.
  3. Remedies. —  The enforcement remedies in this Subchapter apply to unpaid taxes on an unregistered classified motor vehicle and to unpaid taxes on a registered classified motor vehicle for which the tax year begins before October 1, 2013.
  4. Payments. —  Tax payments submitted by mail are deemed to be received as of the date shown on the postmark affixed by the United States Postal Service. If no date is shown on the postmark or if the postmark is not affixed by the United States Postal Service, the tax payment is deemed to be received when the payment is received by the collecting authority. In any dispute arising under this subsection, the burden of proof is on the taxpayer to show that the payment was timely made.
  5. Waiver. —  Notwithstanding G.S. 105-380 , the governing board of a county may adopt a resolution to create a uniform policy to allow the reduction or waiver of interest or penalties on delinquent motor vehicle taxes for registered classified motor vehicles for tax years prior to July 1, 2013.

History. 1991, c. 624, s. 1; 1991 (Reg. Sess., 1992), c. 961, s. 5; 1995, c. 510, s. 2; 2001-139, s. 8; 2005-294, ss. 3, 4, 5; 2006-259, s. 31.5; 2007-471, s. 3; 2007-527, s. 22(b); 2008-134, s. 65; 2009-445, ss. 24(a), 25(a); 2010-95, s. 22(c), (d); 2011-330, ss. 40, 42(a); 2012-79, ss. 3.4, 3.6; 2013-414, ss. 70(b)-(d), 71(a), (d); 2015-204, s. 1.

Effect of Amendments.

Session Laws 2005-294, ss. 3 and 5, rewrote subsection (a); and rewrote the first two sentences in subsection (b). For effective date, see editor’s note.

Session Laws 2005-294, s. 4, effective January 1, 2006, in subsection (b), substituted “five percent (5%)” for “two percent (2%)” and deleted “tax” preceding “notice required by” in the introductory language.

Session Laws 2007-471, s. 3, added subsection (a1). For effective date, see Editor’s note.

Session Laws 2009-445, s. 24(a), rewrote the section. For effective date and applicability, see Editor’s note.

Session Laws 2011-330, s. 40, effective June 27, 2011, added subsection (d).

Session Laws 2013-414, s. 71(d), effective July 1, 2013, rewrote the introductory paragraph of subsection (a); rewrote subsections (b) and (c); and in subsection (d), added “Payments” as the subsection heading, and substituted “by the collecting authority” for “in the office of the tax collector” in the second sentence.

Session Laws 2015-204, s. 1, effective August 11, 2015, added subsection (e).

OPINIONS OF ATTORNEY GENERAL

Because the statutes authorizing property taxes provide for interest and/or penalties, a county may not, by ordinance, impose a late payment penalty or administrative fee upon delinquent property tax accounts. See opinion of Attorney General to Lloyd C. Smith, Jr., Pritchett & Burch, PLLC, 2001 N.C. AG LEXIS 6 (3/6/2001).

§ 105-330.5. Notice required; distribution and collection fees.

  1. Notice for Registered Vehicle. —  The Property Tax Division of the Department of Revenue or a third-party contractor selected by the Property Tax Division must prepare a combined tax and registration notice for each registered classified motor vehicle. The combined tax and registration notice must contain all county and municipal corporation taxes and fees due on the motor vehicle as computed by the assessor in the county of registration. If the motor vehicle has a temporary or limited registration plate issued under G.S. 20-79.1 or G.S. 20-79.1 A, the combined tax and registration notice must state that the vehicle registration fees for the plate have been paid and that the vehicle’s registration becomes valid for the remainder of the year upon payment of the county and municipal corporation taxes and fees that are due. A combined tax and registration notice that sets out the required information on a vehicle issued a limited registration plate constitutes the registration certificate for that vehicle.In computing the taxes, the assessor must appraise the motor vehicle in accordance with G.S. 105-330.2 and  must use the tax rates and any additional motor vehicle taxes of the various taxing units in effect on the date the taxes are computed. The tax on the motor vehicle is the product of a fraction and the number of months in the motor vehicle tax year. The numerator of the fraction is the product of the appraised value of the motor vehicle and the tax rate of the various taxing units. The denominator of the fraction is 12. This procedure constitutes the listing and assessment of each classified motor vehicle for taxation.The combined tax and registration notice must contain the following:
    1. The appraised value of the motor vehicle.
    2. The tax rate of each taxing unit.
    3. A statement that the appraised value and the taxability of the motor vehicle may be appealed to the assessor in writing within 30 days of the due date.
    4. The registration fee imposed by the Division of Motor Vehicles and any other information required by the Division of Motor Vehicles to comply with the provisions of Chapter 20 of the General Statutes.
    5. Instructions for payment. (a1) Proration. — When a new registration is obtained for a registered classified motor vehicle that is registered under the annual system, the taxes are prorated for the remainder of the calendar year. The amount of prorated taxes due is the product of the proration fraction and the taxes computed according to subsection (a) of this section. The numerator of the proration fraction is the number of full months remaining in the calendar year following the registration application date and the denominator of the fraction is 12.

      (a2) Repealed by Session Laws 2009-445, s. 24(a), effective July 1, 2011, and applicable to combined tax and registration notices issued on or after that date, or when the Division of motor vehicles and the Department of Revenue certify that the integrated computer system or registration renewal and property tax collection for motor vehicles is in operation, whichever occurs first.

  2. Distribution and Collection Fees. —  The Property Tax Division of the Department of Revenue or a third-party contractor selected by the Property Tax Division must send a copy of the combined tax and registration notice for a registered classified motor vehicle to the motor vehicle owner, as defined in G.S. 20-4.01 . Upon receiving written consent from the motor vehicle owner, the notice required under this subsection may be sent electronically to an e-mail address provided by the motor vehicle owner. The Department must establish a fee equal to the actual cost of preparing, printing, and sending the notice. The Department may receive a fee for each notice generated for a vehicle registered in a county or municipal corporation from the taxes and fees remitted to the county or municipal corporation in which the vehicle is registered. The collecting authority is responsible for collecting county and municipal taxes and fees assessed under this Article and may receive a fee for collecting these taxes and fees. The amount of this fee for an agent contracting with the Division of Motor Vehicles must equal at least the applicable amount set under G.S. 20-63 (h). The amount of this fee for the Division of Motor Vehicles is the amount set by the memorandum of understanding entered into under G.S. 105-330.11 but shall not exceed the amount set under G.S. 20-63 . The Property Tax Division must establish procedures to ensure that tax payments and fees received pursuant to this Article and Chapter 20 of the General Statutes are properly accounted for and taxes and fees due other taxing units and the Division of Motor Vehicles are remitted at least once each month. (b1) Repealed by Session Laws 1995, c. 329, s. 2.
  3. Notice for Unregistered Vehicle. —  The assessor must prepare and send a tax notice for each unregistered classified motor vehicle before September 1 following the January 31 listing date. The notice must include all county and special district taxes due on the motor vehicle. In computing the taxes, the assessor must use the tax rates of the taxing units in effect for the fiscal year that begins on July 1 following the January 31 listing date. Municipalities must list, assess, and tax unregistered classified motor vehicles as provided in G.S. 105-326 , 105-327, and 105-328.
  4. Scope of Levy. —  A county must include taxes on registered classified motor vehicles in the tax levy for the fiscal year in which the taxes are collected.
  5. Repealed by Session Laws 2012-79, s. 3.5, effective June 26, 2012.

History. 1991, c. 624, s. 1; 1991 (Reg. Sess., 1992), c. 961, s. 6; 1995, c. 24, s. 1; c. 329, s. 2; c. 510, s. 3; 2005-294, s. 6; 2005-313, s. 8; 2006-259, s. 31.5; 2007-471, ss. 4, 5; 2007-527, s. 22(b); 2008-134, s. 65; 2009-445, ss. 24(a), 25(a); 2010-95, s. 22(c), (d); 2011-330, s. 42(a); 2012-79, ss. 3.5, 3.6; 2013-372, s. 2(b); 2013-414, s. 70(b)-(d); 2014-3, s. 13.3; 2015-108, s. 1.

Editor’s Note.

Session Laws 2005-294, s. 13, as amended by Session Laws 2006-259, s. 31.5, as amended by Session Laws 2007-527, s. 22, as amended by Session Laws 2008-134, s. 65, as amended by Session Laws 2012-79, s. 3.6, and as amended by Session Laws 2013-414, s. 70(d), provides, in part, that s. 6 of the act becomes effective July 1, 2013, and apply to combined tax and registration notices issued on or after that date. Counties may continue to collect property taxes on motor vehicles for taxable years beginning on or before September 1, 2013, under the provisions of Article 22A of Chapter 105 of the General Statutes as those statutes are in effect on June 30, 2013. Nothing in this act shall require the General Assembly to appropriate funds to implement it for the biennium ending June 30, 2007.

Session Laws 2012-142, s. 24.10(a)-(c), as amended by Session Laws 2015-241, s. 29.37, and as amended by Session Laws 2016-94, s. 35.15(a), provides: “(a) Upon request from the Department of Transportation and notwithstanding any other provision of law to the contrary, the Office of State Budget and Management may authorize the creation of permanent, full-time positions within the Department of Transportation and its Division of Motor Vehicles in excess of the positions authorized by this act for the purposes of implementing and administering the combined motor vehicle registration and property tax collection system and providing other support as determined necessary by the Commissioner of the Division of Motor Vehicles. Positions created under this authorization shall be funded with receipts from the fee assessed under G.S. 105-330.5(b).

“(b) Beginning October 1, 2012, the Office of State Budget and Management shall report quarterly on all transfers of funds from the Combined Motor Vehicle and Registration Account (Combined Account) and positions supported by the Combined Account during the 2012-2013 fiscal year to the House Appropriations Subcommittee on Transportation, the Senate Appropriations Committee on Department of Transportation, the Joint Legislative Transportation Oversight Committee, and the Fiscal Research Division. The report shall include, at a minimum, the following:

“(1) A summary of activities funded by the Combined Account to date.

“(2) Amounts transferred from the Combined Account and expended per activity.

“(3) A detailed listing of positions funded by receipts to the Combined Account, identifying the position number, title, effective date and duration, cost, functions performed, and organizational unit to which the position is assigned.

“(c) No later than May 1, 2013, the Department of Revenue and the Department of Transportation shall jointly report on the status of the Memorandum of Understanding required by G.S. 105-330.11 to the following: the House Appropriations Subcommittee on Transportation, the Senate Appropriations Committee on Department of Transportation, the cochairs of the House Appropriations Committee, the cochairs of the Senate Appropriations/Base Budget Committee, and the Fiscal Research Division. The report shall identify the estimated recurring costs of system administration and proposed administrative fees to support the costs of combined notice generation and collection of registration fees and vehicle property taxes.”

Session Laws 2012-142, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2012.’ ”

Session Laws 2012-142, s. 27.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2012-2013 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2012-2013 fiscal year.”

Session Laws 2012-142, s. 27.7 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. 33.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2015-2017 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2015-2017 fiscal biennium.”

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

Session Laws 2016-94, s. 35.15(b), effective June 30, 2016, provides: “Nothing in subsection (a) of this section shall be construed as authorizing the creation of any positions in addition to the 45 remaining positions authorized under Section 24.10(a) of S.L. 2012-142.”

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Effect of Amendments.

Session Laws 2005-294, s. 6, in subsection (a), rewrote the first two sentences, and inserted “combined” and “and registration” in the last sentence and in subdivision (a)(1); substituted “before the taxes and fees become delinquent” for “within 30 days after the date of the notice” in subdivision (a)(4); added subdivision (a)(5); in subsection (a1), substituted “taxes” for “assessor” and “be prorated” for “prorate the taxes due”; rewrote subsection (b) and made minor stylistic changes. For effective date, see editor’s note.

Session Laws 2007-471, ss. 4 and 5, added subsection (a2); and inserted “or (a2) of this section” in the first sentence of subsection (b). For effective date, see Editor’s note.

Session Laws 2009-445, s. 24(a), rewrote the section. For effective date and applicability, see Editor’s note.

Session Laws 2012-79, s. 3.5, effective June 26, 2012, repealed subsection (e), which pertained to the collection of small underpayments and refunds of small overpayments of taxes and fees due on motor vehicles.

Session Laws 2013-372, s. 2(b), effective July 1, 2013, substituted “the applicable amount set” for “one-third of the compensation paid for registration renewals conducted by contract agents” in the next-to-last sentence of subsection (b).

Session Laws 2014-3, s. 13.3, effective July 1, 2014, in subsection (b), inserted “for an agent contracting with the Division of Motor Vehicles” in the fifth sentence, and added the present sixth sentence. See Editor’s note for applicability.

Session Laws 2015-108, s. 1, effective January 1, 2015, added the second sentence of subsection (b).

§ 105-330.6. Motor vehicle tax year; transfer of plates; surrender of plates.

  1. Tax Year. —  The tax year for a classified motor vehicle listed pursuant to G.S. 105-330.3(a)(1) and registered under the staggered system begins on the first day of the first month following the date on which the former registration expires or the new registration is applied for and ends on the last day of the month in which the current registration expires. The tax year for a classified motor vehicle listed pursuant to G.S. 105-330.3(a)(1) and registered under the annual system begins on the first day of the first month following the date on which the registration expires or the new registration is applied for and ends the following December 31. The tax year for a classified motor vehicle listed pursuant to G.S. 105-330.3(a)(2) is the fiscal year that opens in the calendar year in which the vehicle is required to be listed. (a1) Change in Tax Year. — If the tax year for a classified motor vehicle changes because of a change in its registration for a reason other than the transfer of its registration plates to another classified motor vehicle pursuant to G.S. 20-64 , and the new tax year begins before the expiration of the vehicle’s original tax year, the taxpayer may receive a credit, in the form of a release, against the taxes on the vehicle for the new tax year. The amount of the credit is equal to a proportion of the taxes paid on the vehicle for the original tax year. The proportion is the number of full calendar months remaining in the original tax year as of the first day of the new tax year, divided by the number of months in the original tax year. To obtain the credit allowed in this subsection, the taxpayer must apply within 30 days after the taxes for the new tax year are due and must provide the county tax collector information establishing the original tax year of the vehicle, the amount of taxes paid on the vehicle for that year, and the reason for the change in registration.
  2. Transfer of Plates. —  If the owner of a classified motor vehicle listed pursuant to G.S. 105-330.3(a)(1) transfers the registration plates from the listed vehicle to another classified motor vehicle pursuant to G.S. 20-64 during the listed vehicle’s tax year, the vehicle to which the plates are transferred is not required to be listed or taxed until the current registration expires or is renewed.
  3. Surrender of Plates. —  If the owner of a classified motor vehicle, who pays the tax as required by G.S. 105-330.4(a), either transfers the motor vehicle to a new owner or moves out-of-state and registers the vehicle in another jurisdiction, and the owner surrenders the registration plates from the listed vehicle to the Division of Motor Vehicles, then the owner may apply for a release or refund of taxes on the vehicle for any full calendar months remaining in the vehicle’s tax year after the date of surrender. To apply for a release or refund, the owner must present to the county tax collector within one year after surrendering the plates the receipt received from the Division of Motor Vehicles accepting surrender of the registration plates. The county tax collector shall then multiply the amount of the taxes for the tax year on the vehicle by a fraction, the denominator of which is the number of months in the tax year and the numerator of which is the number of full calendar months remaining in the vehicle’s tax year after the date of surrender of the registration plates. The product of the multiplication is the amount of taxes to be released or refunded. If the taxes have not been paid at the date of application, the county tax collector shall make a release of the prorated taxes and credit the owner’s tax notice with the amount of the release. If the taxes have been paid at the date of application, the county tax collector shall direct an order for a refund of the prorated taxes to the county finance officer, and the finance officer shall issue a refund to the vehicle owner.

History. 1991, c. 624, s. 1; 1991 (Reg. Sess., 1992), c. 961, s. 7; 1995, c. 510, s. 4; 1998-139, s. 3; 2001-406, s. 1; 2001-497, s. 1(a); 2005-313, s. 9; 2017-204, s. 5.2.

Effect of Amendments.

Session Laws 2005-313, s. 9, effective January 1, 2006, in the first sentence of subsection (a), inserted “former” and substituted “the month in which the current registration expires” for “the twelfth month following the date on which the registration expires or the new registration is applied for”; in subsection (a1), substituted “divided by the number of months in the original tax year” for “divided by 12” at the end of the third sentence; and in subsection (c), substituted “the number of months in the tax year” for “12” near the middle of the third sentence.

Session Laws 2017-204, s. 5.2, effective August 11, 2017, substituted “motor vehicle, who pays the tax as required by G.S. 105-330.4(a)” for “motor vehicle listed pursuant to G.S. 105-330.3(a)(1)” in the first sentence of subsection (c).

Legal Periodicals.

See legislative survey, 21 Campbell L. Rev. 323 (1999).

§ 105-330.7. [Repealed]

Repealed by Session Laws 2005-294, s. 7, effective July 1, 2013, and applicable to combined tax and registration notices issued on or after that date.

History. 1991, c. 624, s. 1; 1991 (Reg. Sess., 1992), c. 961, s. 8; 2005-294, s. 13; 2006-259, s. 31.5; 2007-527, s. 22; 2008-134, s. 65; 2005-294, s. 7; 2011-330, s. 42(a); 2012-79, s. 3.6; 2013-414, s. 70(d); repealed by 2005-294, s. 7, effective July 1, 2013.

Editor’s Note.

Former G.S. 105-330.7 pertained to list of delinquents sent to Division of Motor Vehicles.

Session Laws 2005-294, s. 13, as amended by Session Laws 2006-259, s. 31.5, as amended by Session Laws 2007-527, s. 22, as amended by Session Laws 2008-134, s. 65, as amended by Session Laws 2012-79, s. 3.6, and as amended by Session Laws 2013-414, s. 70(d), provides, in part, that this section is repealed effective July 1, 2013, and applicable to combined tax and registration notices issued on or after that date. Counties may continue to collect property taxes on motor vehichles for taxable years beginning on or before September 1, 2013, under the provisions of Article 22A of Chapter 105 of the General Statutes as those statutes are in effect on June 30, 2013. Nothing in this act shall require the General Assembly to appropriate funds to implement it for the biennium ending June 30, 2007.

Session Laws 2011-330, s. 42(a), effective June 27, 2011, corrected a citation in Session Laws 2008-134, s. 65, which amended the effective date of the repeal of this section by Session Laws 2005-294, s. 7.

§ 105-330.8. Deadlines not extended.

Except as otherwise provided in this Article, the following sections of the General Statutes do not apply:

  1. G.S. 105-395.1 and G.S. 103-5 .
  2. G.S. 105-321(f).
  3. G.S. 105-360 .

History. 1991, c. 624, s. 1; 2009-445, s. 24(a); 2010-95, s. 22(c); 2013-414, s. 70(b).

Effect of Amendments.

Session Laws 2009-445, s. 24(a), effective July 1, 2013, substituted “following sections of the General Statutes do not apply” for “provisions of G.S. 105-395.1 and G.S. 103-5 do not apply to deadlines established in this Article” in the introductory language, and added subdivisions (1) through (3). For effective date and applicability, see Editor’s note.

§ 105-330.9. Antique automobiles.

  1. Definition. —  For the purpose of this section, the term “antique automobile” means a motor vehicle that meets all of the following conditions:
    1. It is registered with the Division of Motor Vehicles and has an historic vehicle special license plate under G.S. 20-79.4 .
    2. It is maintained primarily for use in exhibitions, club activities, parades, and other public interest functions.
    3. It is used only occasionally for other purposes.
    4. It is owned by an individual, or owned directly or indirectly through one or more pass-through entities, by an individual.
    5. It is used by the owner for a purpose other than the production of income and is not used in connection with a business.
  2. Classification. —  Antique automobiles are designated a special class of property under Article V, Sec. 2(2) of the North Carolina Constitution and must be assessed for taxation in accordance with this section. An antique automobile must be assessed at the lower of its true value or five hundred dollars ($500.00).

History. 1995, c 512, s 2; 2009-445, s. 24(a); 2013-414, s. 70(b); 2017-10, s. 2.8.

Effect of Amendments.

Session Laws 2009-445, s. 24(a), effective August 7, 2009, in subsection (a), inserted “Definition. —”; and in subsection (b), inserted “Classification. —” and substituted “must” for “shall” twice.

Session Laws 2017-10, s. 2.8, effective May 4, 2017, in subdivision (a)(4), added “or owned directly or indirectly through one or more pass-through entities, by an individual”; and made a related change.

§ 105-330.10. Disposition of interest.

The interest collected on unpaid registration fees pursuant to G.S. 105-330.4 shall be transferred on a monthly basis to the North Carolina Highway Fund.

History. 2005-294, ss. 8, 9; 2006-30, s. 3; 2006-259, s. 31.5; 2007-471, s. 7(a); 2007-527, s. 22(a)-(c); 2008-134, ss. 63, 65, 66, 79.; 2009-445, s. 25(b); 2010-95, s. 22(a), (b), (e); 2011-330, s. 42(a)-(c); 2013-414, s. 70(a), (c), (d); 2015-241, s. 29.30(n).

Editor’s Note.

Session Laws 2005-294, s. 13, as amended by Session Laws 2006-259, s. 31.5, as amended by Session Laws 2007-527, s. 22(b), as amended by Session Laws 2008-134, s. 65, as amended by Session Laws 2012-79, s. 3.6, and as amended by Session Laws 2013-414, s. 70(d), provides: “Sections 4 and 8 of this act become effective January 1, 2006. Sections 1, 2, 3, 5, 6, 7, 10 and 11 of this act become effective July 1, 2013, and apply to combined tax and registration notices issued on or after that date. Counties may continue to collect property taxes on motor vehicles for taxable years beginning on or before September 1, 2013, under the provisions of Article 22A of Chapter 105 of the General Statutes as those statutes are in effect on June 30, 2013. Sections 12 and 13 of this act are effective when they become law. Nothing in this act shall require the General Assembly to appropriate funds to implement it for the biennium ending June 30, 2007.”

This section was amended by Session Laws 2007-527, s. 22(c), effective January 1, 2011, in the coded bill drafting format prescribed by G.S. 120-20.1 . The section was subsequently completely rewritten by Session Laws 2008-134, s. 63, effective July 28, 2008, without taking into account the 2007 amendments. Session Laws 2008-134, s. 79, as amended by Session Laws 2009-445, s. 25(b), repealed Session Laws 2008-134, s. 63, effective July 1, 2011, thus resolving the conflict, as of that point.

Session Laws 2007-527, s. 22(d), as amended by Session Laws 2008-134, s. 66, provided that the amendments to this section by s. 22(c) of Session Laws 2007-527 would become effective January 1, 2011, or when the Division of Motor Vehicles of the Department of Transportation and the Department of Revenue certify that the integrated computer system for registration renewal and property tax collection for motor vehicles is in operation, whichever occurs first. Session Laws 2010-95, s. 22(a), amended Session Laws 2007-527, s. 22(d) to change the effective date of the amendment by Session Laws 2007-527, s. 22(c) to July 1, 2010; however, Session Laws 2010-95, s. 22(b) also amended Session Laws 2007-527, s. 22(d), as amended by Session Laws 2008-134, s. 66, (the exact same amendment) to change the effective date of Session Laws 2007-527, s. 22(c) to July 1, 2013, thus creating a conflict as to when that amendment is effective. Session Laws 2011-330, s. 42(b) repealed Session Laws 2010-95, s. 22(a) and, thus, eliminated the conflict as to the effective date of the amendment, which is July 1, 2013.

Furthermore, Session Laws 2010-95, s. 22(e), amended Session Laws 2008-134, s. 79, “as amended by Section 25(b) of S.L. 2009-445,” to add the following sentence: “Section 63 of this act is repealed July 1, 2013.” Although Session Laws 2010-95, s. 22(e) indicates that it is amending Session Laws 2008-134, s. 79, as amended by Session Laws 2009-445, s. 25(b), the illustrative text set out in the act omits the following sentence added by the 2009 act: “Section 63 of this act is repealed July 1, 2011.” Therefore, pursuant to the coded bill drafting format provided by G.S. 120-20.1 , the amendment by Session Laws 2010-95, s. 22(e) did not eliminate that sentence, resulting in a conflict in the date of repeal for Session Laws 2008-134, s. 63. However, Session Laws 2011-330, s. 42(c) amended Session Laws 2010-95, s. 22(e) to delete the repeal date of July 1, 2011 for s. 63 of Session Laws 2008-134, and replace it with a repeal date of July 1, 2013,” thus eliminating the conflict in the repeal date for Session Laws 2008-134, s. 63.

Session Laws 2013-414, s. 70(a), amended Session laws 2007-527, s. 22(d), as amended by Session Laws 2008-134, s. 66, and as amended by Session Laws 2010-95, s. 22(b), to read as follows: “Subsection (c) of this section becomes effective July 1, 2013. The remainder of this section is effective when it becomes law.”

Session Laws 2011-330, s. 42(a), effective June 27, 2011, corrected a citation in Session Laws 2008-134, s. 65, which amended the effective date of the enactment of this section by Session Laws 2005-294, s. 8.

Session Laws 2012-142, s. 24.10(a)-(c), as amended by Session Laws 2015-241, s. 29.37, and as amended by Session Laws 2016-94, s. 35.15(a), provides: “(a) Upon request from the Department of Transportation and notwithstanding any other provision of law to the contrary, the Office of State Budget and Management may authorize the creation of permanent, full-time positions within the Department of Transportation and its Division of Motor Vehicles in excess of the positions authorized by this act for the purposes of implementing and administering the combined motor vehicle registration and property tax collection system and providing other support as determined necessary by the Commissioner of the Division of Motor Vehicles. Positions created under this authorization shall be funded with receipts from the fee assessed under G.S. 105-330.5(b).

“(b) Beginning October 1, 2012, the Office of State Budget and Management shall report quarterly on all transfers of funds from the Combined Motor Vehicle and Registration Account (Combined Account) and positions supported by the Combined Account during the 2012-2013 fiscal year to the House Appropriations Subcommittee on Transportation, the Senate Appropriations Committee on Department of Transportation, the Joint Legislative Transportation Oversight Committee, and the Fiscal Research Division. The report shall include, at a minimum, the following:

“(1) A summary of activities funded by the Combined Account to date.

“(2) Amounts transferred from the Combined Account and expended per activity.

“(3) A detailed listing of positions funded by receipts to the Combined Account, identifying the position number, title, effective date and duration, cost, functions performed, and organizational unit to which the position is assigned.

“(c) No later than May 1, 2013, the Department of Revenue and the Department of Transportation shall jointly report on the status of the Memorandum of Understanding required by G.S. 105-330.11 to the following: the House Appropriations Subcommittee on Transportation, the Senate Appropriations Committee on Department of Transportation, the cochairs of the House Appropriations Committee, the cochairs of the Senate Appropriations/Base Budget Committee, and the Fiscal Research Division. The report shall identify the estimated recurring costs of system administration and proposed administrative fees to support the costs of combined notice generation and collection of registration fees and vehicle property taxes.”

Session Laws 2012-142, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2012.’ ”

Session Laws 2012-142, s. 27.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2012-2013 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2012-2013 fiscal year.”

Session Laws 2012-142, s. 27.7 is a severability clause.

Session Laws 2013-372, s. 3, provides: “Implementation by the Division of Motor Vehicles of the Department of Transportation of an integrated computer system that combines vehicle registration with the collection of property tax includes training commission contractors under G.S. 20-63(h) on the use of that integrated computer system. The cost of the system training required of the commission contractors on or after April 1, 2013, and before July 1, 2013, is a cost of the combined motor vehicle registration renewal and property tax collection system and is payable from the Combined Motor Vehicle and Registration Account, established under G.S. 105-330.10 .”

Session Laws 2015-241, s. 29.30(u), made the amendment to this section by Session Laws 2015-241, s. 29.30(n), applicable to issuances, renewals, restorations, and requests on or after January 1, 2016.

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. 33.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2015-2017 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2015-2017 fiscal biennium.”

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

Session Laws 2016-94, s. 35.15(b), effective June 30, 2016, provides: “Nothing in subsection (a) of this section shall be construed as authorizing the creation of any positions in addition to the 45 remaining positions authorized under Section 24.10(a) of S.L. 2012-142.”

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Effect of Amendments.

Session Laws 2007-527, s. 22(c), as amended by Session Laws 2008-134, s. 66, effective January 1, 2011, rewrote the section.

Session Laws 2008-134, s. 63, effective July 28, 2008, rewrote the section.

Session Laws 2015-241, s. 29.30(n), effective January 1, 2016, substituted “Fund.” for “Fund for technology improvements within the Division of Motor Vehicles.” For applicability, see editor’s note.

§ 105-330.11. Memorandum of understanding.

The Department of Revenue, acting through the Property Tax Division, and the Department of Transportation, acting through the Division of Motor Vehicles are directed to enter into a memorandum of understanding concerning the administration of this Article. The memorandum of understanding must include the following:

  1. A procedure for the administration of the listing, appraisal, and assessment of classified motor vehicles.
  2. Information concerning vehicle identification, the name and address of a vehicle’s owner, and other information that will be required on a motor vehicle registration form to implement the tax listing and collection provisions of this Article.
  3. A procedure for the business practices, accounting, and costs of carrying out the integrated computer system for registration renewal and property tax collection for motor vehicles once the system has been certified to be in operation by the Department of Revenue and the Department of Transportation. The Departments must consult with the North Carolina Association of County Commissioners, acting on behalf of the counties, and the North Carolina League of Municipalities, acting on behalf of the municipalities, in developing the procedures under this subdivision and obtain their signed endorsements before any part of this procedure is implemented.

History. 2008-134, s. 64; 2009-445, s. 24(a); 2013-414, s. 70(b).

Editor’s Note.

Session Laws 2012-142, s. 24.10(a)-(c), as amended by Session Laws 2015-241, s. 29.37, and as amended by Session Laws 2016-94, s. 35.15(a), provides: “(a) Upon request from the Department of Transportation and notwithstanding any other provision of law to the contrary, the Office of State Budget and Management may authorize the creation of permanent, full-time positions within the Department of Transportation and its Division of Motor Vehicles in excess of the positions authorized by this act for the purposes of implementing and administering the combined motor vehicle registration and property tax collection system and providing other support as determined necessary by the Commissioner of the Division of Motor Vehicles. Positions created under this authorization shall be funded with receipts from the fee assessed under G.S. 105-330.5(b).

“(b) Beginning October 1, 2012, the Office of State Budget and Management shall report quarterly on all transfers of funds from the Combined Motor Vehicle and Registration Account (Combined Account) and positions supported by the Combined Account during the 2012-2013 fiscal year to the House Appropriations Subcommittee on Transportation, the Senate Appropriations Committee on Department of Transportation, the Joint Legislative Transportation Oversight Committee, and the Fiscal Research Division. The report shall include, at a minimum, the following:

“(1) A summary of activities funded by the Combined Account to date.

“(2) Amounts transferred from the Combined Account and expended per activity.

“(3) A detailed listing of positions funded by receipts to the Combined Account, identifying the position number, title, effective date and duration, cost, functions performed, and organizational unit to which the position is assigned.

“(c) No later than May 1, 2013, the Department of Revenue and the Department of Transportation shall jointly report on the status of the Memorandum of Understanding required by G.S. 105-330.11 to the following: the House Appropriations Subcommittee on Transportation, the Senate Appropriations Committee on Department of Transportation, the cochairs of the House Appropriations Committee, the cochairs of the Senate Appropriations/Base Budget Committee, and the Fiscal Research Division. The report shall identify the estimated recurring costs of system administration and proposed administrative fees to support the costs of combined notice generation and collection of registration fees and vehicle property taxes.”

Session Laws 2012-142, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2012.’ ”

Session Laws 2012-142, s. 27.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2012-2013 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2012-2013 fiscal year.”

Session Laws 2012-142, s. 27.7 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. 33.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2015-2017 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2015-2017 fiscal biennium.”

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

Session Laws 2016-94, s. 35.15(b), effective June 30, 2016, provides: “Nothing in subsection (a) of this section shall be construed as authorizing the creation of any positions in addition to the 45 remaining positions authorized under Section 24.10(a) of S.L. 2012-142.”

Session Laws 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2016-2017 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2016-2017 fiscal year.”

Session Laws 2016-94, s. 39.7, is a severability clause.

Effect of Amendments.

Session Laws 2009-445, s. 24(a), effective August 7, 2009, substituted “the name and address of a vehicle’s owner” for “identification of a vehicle owner by name and address” in subdivision (2).

§§ 105-330.12 through 105-332.

Reserved for future codification purposes.

Article 23. Public Service Companies.

§ 105-333. Definitions.

The following definitions apply in this Article unless the context requires a different meaning:

  1. Airline company. — A company engaged in the business of transporting passengers and property by aircraft for hire within, into, or from this State.
  2. Bus line company. — A company engaged in the business of transporting passengers and property by motor vehicle for hire over the public highways of this State (but not including a bus line company operating primarily upon the public streets within a single local taxing unit), whether the transportation is within, into, or from this State.
  3. Distributable system property. — All real property and personal property owned or used by a railroad company other than nondistributable system property.
  4. Electric membership corporation. — A company organized, reorganized, or domesticated under Chapter 117 of the General Statutes and engaged in the business of supplying electricity for light, heat, or power to consumers in this State.
  5. Electric power company. — A company engaged in the business of supplying electricity for light, heat, or power to consumers in this State.
  6. Repealed by Session Laws 1973, c. 783, s. 5.
  7. Flight equipment. — Aircraft fully equipped for flying and used in any operation within this State.
  8. Gas company. — A company engaged in the business of supplying artificial or natural gas to, from, within, or through this State through pipe or tubing for light, heat, or power to consumers in this State.
  9. Locally assigned rolling stock. — Rolling stock that is owned or leased by a motor freight carrier company, specifically assigned to a terminal or other premises, and regularly used at the premises to which assigned. (9a) Mobile telecommunications company. — A company providing a mobile telecommunications service as defined in G.S. 105-164.3 .
  10. Motor freight carrier company. — A company engaged in the business of transporting property by motor vehicle for hire over the public highways of this State as provided in this subdivision:
    1. As to interstate carrier companies domiciled in North Carolina, this term includes carriers who regularly transport property by tractor trailer to or from one or more terminals owned or leased by the carrier outside this State or two or more terminals inside this State. For purposes of appraisal and allocation only, the term also includes a North Carolina interstate carrier that does not have a terminal outside this State but whose operations outside the State are sufficient to require the payment of ad valorem taxes on a portion of the value of the rolling stock of the carrier to taxing units in one or more other states.
    2. As to interstate carrier companies domiciled outside this State, this term includes carriers who regularly transport property by tractor trailer to or from one or more terminals owned or leased by the carrier inside this State.
    3. As to intrastate carrier companies, this term includes only those carriers that are engaged in the transportation of property by tractor trailer to or from two or more terminals owned or leased by the carrier in this State.
  11. Nondistributable system property. — The following properties owned by a railroad company: land other than right-of-way, depots, machine shops, warehouses, office buildings, other structures, and the contents of the structures listed in this subdivision.
  12. Nonsystem property. — The real and tangible personal property owned by a public service company but not used in its public service activities.
  13. Pipeline company. — A company engaged in the business of transporting natural gas, petroleum products, or other products through pipelines to, from, within, or through this State, or having control of pipelines for such a purpose.
  14. Public service company. — A railroad company, a pipeline company, a gas company, an electric power company, an electric membership corporation, a telephone company, a bus line company, an airline company, a motor freight carrier company, a mobile telecommunications company, or a tower aggregator company. The term also includes any company performing a public service that is regulated by the United States Department of Energy, the United States Department of Transportation, the Federal Communications Commission, the Federal Aviation Agency, or the North Carolina Utilities Commission, except that the term does not include a water company, a cable television company, or a radio or television broadcasting company.
  15. Railroad company. — A company engaged in the business of operating a railroad to, from, within or through this State on rights-of-way owned or leased by the company. It also means a company operating a passenger service on the lines of any railroad located wholly or partly in this State.
  16. Rolling stock. — Motor vehicles, railroad locomotives, and railroad cars that are propelled by mechanical or electrical power and used upon the highways or, in the case of railroad vehicles, upon tracks.
  17. System property. — The real property and personal property used by a public service company in its public service activities. The term also includes public service company property under construction on the day as of which property is assessed which when completed will be used by the owner in its public service activities.

    (17a) Tangible personal property of a mobile telecommunications company. — All tangible personal property located in this State that is owned by a mobile telecommunications company or is leased to and capitalized on the books of a mobile telecommunications company in accordance with generally accepted accounting principles, including cellular towers, cellular equipment shelters, and site improvements at cellular tower locations. The term does not include FCC licenses or authorizations or other intangible personal property.

    (17b) Tangible personal property of a tower aggregator company. — All tangible personal property located in this State that is owned by a tower aggregator company or is leased to and capitalized on the books of a tower aggregator company in accordance with generally accepted accounting principles, including cellular towers, cellular equipment shelters, and site improvements at cellular tower locations.

  18. Repealed by Session Laws 2014-3, s. 11.1(a), effective for taxes imposed for taxable years beginning on or after July 1, 2015.
  19. Telephone company. — A company engaged in the business of transmitting telephone messages and conversations to, from, within, or through this State, except that the term does not include a mobile telecommunications company.
  20. Repealed by Session Laws 1973, c. 783, s. 5.
  21. Terminal. — A motor freight carrier facility that includes buildings for the handling and temporary storage of freight pending transfer between locations. The term also includes a facility that handles truckloads only and typically consists of a wide, open space where rolling stock is parked and a building for offices and maintenance of rolling stock.
  22. Tower aggregator company. — A company that provides tower infrastructure for broadcasting and mobile telephony and that leases space on the tower infrastructure to mobile telecommunications companies.

History. 1939, c. 310, ss. 1600-1605; 1943, c. 634, s. 3; 1965, c. 287, s. 17; 1971, c. 806, s. 1; c. 1121, s. 4; 1973, c. 198; c. 783, ss. 1-5; c. 1180; 1991 (Reg. Sess., 1992), c. 961, s. 1; 1995, c. 350, ss. 1, 2; 1995 (Reg. Sess., 1996), c. 646, s. 18; 1997-23, ss. 6, 7; 1998-98, s. 25; 2010-95, ss. 19, 20; 2011-330, s. 41; 2014-3, s. 11.1(a).

Effect of Amendments.

Session Laws 2010-95, ss. 19 and 20, effective July 17, 2010, deleted “a radio common carrier company as defined in G.S. 62-119(3)” following “water company” in the last sentence of subdivision (14); and added subdivision (21).

Session Laws 2011-330, s. 41, effective June 27, 2011, inserted “providers of mobile telecommunications service as defined in G.S. 105-164.3 ” near the end of subdivision (14).

Session Laws 2014-3, s. 11.1(a), effective for taxes imposed for taxable years beginning on or after July 1, 2015, added subdivisions (9a), (17a), (17b), and (22); in subdivision (14), in the first sentence, deleted “a telegraph company,” preceding “a bus line company” and substituted “a motor freight carrier company, a mobile telecommunications company, or a tower aggregator company” for “or a motor freight carrier company,” and, in the last sentence, deleted “providers of mobile telecommunications service as defined in G.S. 105-164.3 ,” preceding “a cable television company”; repealed subdivision (18); and added the exception at the end of subdivision (19).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. Douglas R. Holbrook, State Board of Assessment, 41 N.C. Op. Att'y Gen. 702 (1971).

§ 105-334. Duty to file report; penalty for failure to file.

  1. Every public service company, whether incorporated under the laws of this State or any other state or any foreign nation, whose property is subject to taxation in this State, shall prepare and deliver to the Department of Revenue each year a report showing (as of January 1) such information with regard to the property it owns and the system property it leases as the Department of Revenue may by regulation prescribe. This report shall be filed on or before the last day of March, and the following affirmation, which shall be annexed to the report, shall be signed by a principal officer of the public service company making the report:Under penalties prescribed by law, I hereby affirm that to the best of my knowledge and belief this report, including any accompanying statements, inventories, schedules, and other information is true and complete.
  2. Any individual who willfully subscribes a report required by this section which he does not believe to be true and correct as to every material matter shall be guilty of a Class 2 misdemeanor.
  3. For good cause the Department may grant reasonable extensions of time for filing the required reports.
  4. The Department may require any additional reports or information it deems necessary to properly carry out its duties under this Article.
  5. The provisions of G.S. 105-291 and 105-312 are made specifically applicable to all proceedings taken under this Article.

History. 1939, c. 310, ss. 1600-1606; 1943, c. 634, s. 3; 1965, c. 287, s. 17; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1993, c. 539, s. 721; 1994, Ex. Sess., c. 24, s. 14(c).

§ 105-335. Appraisal of property of public service companies.

  1. Duty to Appraise. —  The Department of Revenue shall appraise for taxation each public service company in accordance with subsection (b) of this section except for a public service company listed in this subsection. The Department shall appraise certain specified properties of the following public service companies in accordance with subsection (c) of this section, and all other properties of such companies shall be listed, appraised, and assessed in the manner prescribed by this Subchapter for the properties of taxpayers other than public service companies:
    1. Bus line.
    2. Motor freight carrier.
    3. Airline.
    4. Mobile telecommunications company.
    5. Tower aggregator company.
  2. Property of Public Service Companies Other Than Those Noted in Subsection (c). —
    1. System Property. —  Each year, as of January 1, the Department of Revenue shall appraise at its true value the system property used by each public service company both inside and outside this State. Property leased by a public service company shall be included in appraising the value of its system property if necessary to ascertain the true value of the company’s system property.
    2. Nonsystem Personal Property. —  Each year as of January 1, the Department shall appraise at its true value each public service company’s nonsystem tangible personal property subject to taxation in this State.
    3. Nonsystem Real Property. —  In accordance with the county in which the public service company’s nonsystem real property is located and the schedules set out in G.S. 105-286 and 105-287, the Department of Revenue shall appraise at its true value each public service company’s nonsystem real property subject to taxation in this State.
  3. Property of Bus Line, Motor Freight Carrier, Airline, Mobile Telecommunications, and Tower Aggregator Companies. —
    1. Bus Company Rolling Stock. —  Each year as of January 1, the Department shall appraise at its true value the rolling stock owned or leased by or operated under the control of each bus line that is domiciled in this State or that is regularly engaged in business in this State.
    2. Motor Freight Carrier Company Rolling Stock. —  Each year as of January 1, the Department shall appraise at its true value the rolling stock owned by a motor freight carrier company or leased by a motor freight carrier company and operated by its employees that is domiciled in this State or that is regularly engaged in business in this State at a terminal owned or leased by the carrier.
    3. Flight Equipment. —  Each year, as of January 1, the Department shall appraise at its true value the flight equipment owned or leased by or operated under the control of each airline company that is domiciled in the State or that is regularly engaged in business at some airport in this State.
    4. Property of Mobile Telecommunications Company. —  Each year, as of January 1, the Department shall appraise at its true value the tangible personal property of a mobile telecommunications company as provided in G.S. 105-336(c) and G.S. 105-336(d).
    5. Property of Tower Aggregator Company. —  Each year, as of January 1, the Department shall appraise at its true value the tangible personal property of a tower aggregator company as provided in G.S. 105-336(d).

History. 1939, c. 310, s. 1608; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 783, s. 6; c. 1180; 2014-3, s. 11.1(b).

Effect of Amendments.

Session Laws 2014-3, s. 11.1(b), effective for taxes imposed for taxable years beginning on or after July 1, 2015, rewrote subsection (a); deleted “(as defined in G.S. 105-283 )” throughout subsections (b) and (c); and, in subsection (c), in the heading, substituted “Airline, Mobile Telecommunications, and Tower Aggregator Companies” for “and Airline Companies”, in subdivision (c)(1), substituted “bus line that is domiciled in this State or that” for “bus line company, which bus line company is domiciled in this State or is,” in subdivision (c)(2), substituted “employees that” for “employees which motor freight carrier company that,” added subdivisions (c)(4) and (c)(5), and made minor stylistic changes.

Legal Periodicals.

For survey of 1979 administrative law, see 58 N.C.L. Rev. 1185 (1980).

For survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

Personal property (rolling stock) of motor carriers may be taxed at a higher ratio of true market value than commercial and industrial real property. Arkansas-Best Freight Sys. v. Lynch, 723 F.2d 365, 1983 U.S. App. LEXIS 14301 (4th Cir. 1983).

Assessment of Railroad Property by Local Officers. —

In assessing railroad property, local officers only list and assess such property as is off the right-of-way. Caldwell Land & Lumber Co. v. Smith, 151 N.C. 70 , 65 S.E. 641, 1909 N.C. LEXIS 195 (1909).

Rolling stock of a railroad company used upon the branch roads, or roads otherwise acquired, ascertained by a pro rata standard based on the relative length thereof to the whole line, is liable to taxation. Wilmington & W.R.R. v. Alsbrook, 110 N.C. 137 , 14 S.E. 652, 1892 N.C. LEXIS 27 , aff'd, 146 U.S. 279, 13 S. Ct. 72, 36 L. Ed. 972, 1892 U.S. LEXIS 2197 (1892).

Abandoned Portion of Railroad. —

Where a railroad, under an order of the Interstate Commerce Commission, abandoned its operations as a common carrier on a portion of its road, and thereafter did not operate over such portion of its line except to haul away the scrap as the roadbed was dismantled and salvaged, it was held that such abandoned portion of the road ceased to be vested with a character which would bring it within the jurisdiction of the Department of Revenue for appraisal and taxation. Warren v. Maxwell, 223 N.C. 604 , 27 S.E.2d 721, 1943 N.C. LEXIS 331 (1943).

A road definitely abandoned and retired from the operative system, after a proper order respecting the convenience and necessity of its further operation as a carrying road has been granted for such abandonment, was no longer within the purview of the predecessor to this statute. Warren v. Maxwell, 223 N.C. 604 , 27 S.E.2d 721, 1943 N.C. LEXIS 331 (1943).

Former Law. —

As to construction of prior law providing for the assessment of railroad property by the former Corporation Commission, see Atlantic & N.C.R.R. v. City of New Bern, 147 N.C. 165 , 60 S.E. 925 (1908).

§ 105-336. Methods of appraising certain properties of public service companies.

  1. Appraising System Property of Public Service Companies Other Than Those Noted in Subsections (b), (c), and (d) of This Section.  —  The Department of Revenue shall give consideration to the factors listed in this subsection in determining the true value of each public service company as a system, other than one covered by subsection (b), (c), or (d) of this subsection. The factors are:
    1. The market value of the company’s capital stock and debt, taking into account the influence of any nonsystem property.
    2. The book value of the company’s system property as reflected in the books of account kept under the regulations of the appropriate federal or State regulatory agency and what it would cost to replace or reproduce the system property, less a reasonable allowance for depreciation.
    3. The gross receipts and operating income of the company.
    4. Any other factor or information that in the judgment of the Department has a bearing on the true value of the company’s system property.
  2. Appraising Rolling Stock and Flight Equipment. —  In determining the true value of the rolling stock of bus line and motor freight carrier companies and the flight equipment of airline companies, the Department of Revenue shall consider the book value of the property as reflected in the books of account kept under the regulations of the appropriate federal or State regulatory agency and what it would cost to replace or reproduce the property in its existing condition.
  3. Appraising Tangible Personal Property of Mobile Telecommunications Companies. —  In determining the true value of the tangible personal property of a mobile telecommunications company (excluding towers), the Department of Revenue shall consider the original cost of the property as reflected in the books of account maintained by the company in accordance with generally accepted accounting principles. The Department of Revenue may also consider what it would cost to replace or reproduce the property. In either case, an appropriate deduction shall be made for all forms of depreciation, including physical deterioration, functional obsolescence, and external or economic obsolescence.
  4. Appraising Tangible Personal Property of Tower Aggregator Companies and Certain Property of Mobile Telecommunications Companies. —  In determining the true value of the tangible personal property of a tower aggregator company (excluding towers), the Department of Revenue shall consider the original cost of the property as reflected in the books of account maintained by the company in accordance with generally accepted accounting principles and may also consider what it would cost to replace or reproduce the property. In determining the true value of a tower of a tower aggregator company or a mobile telecommunications company, the Department of Revenue shall consider what it would cost to replace or reproduce the tower, based on tower height and type, as determined by a nationally recognized cost service commonly utilized by appraisers. For all property, an appropriate deduction shall be made for all forms of depreciation, including physical deterioration, functional obsolescence, and external or economic obsolescence.

History. 1939, c. 310, s. 1608; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 2014-3, s. 11.1(c).

Effect of Amendments.

Session Laws 2014-3, s. 11.1(c), effective for taxes imposed for taxable years beginning on or after July 1, 2015, rewrote the introductory language of subsection (a); and added subsections (c) and (d).

Legal Periodicals.

For survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

CASE NOTES

Department of Revenue is by statute given the power to value property. Albemarle Elec. Membership Corp. v. Alexander, 282 N.C. 402 , 192 S.E.2d 811, 1972 N.C. LEXIS 969 (1972).

Implicit in this power is the power to reject a value declared by the taxpayer. Albemarle Elec. Membership Corp. v. Alexander, 282 N.C. 402 , 192 S.E.2d 811, 1972 N.C. LEXIS 969 (1972).

Department Presumed to Act in Good Faith. —

The members of the Department of Revenue are public officers, and the Department’s official acts are presumed to be made in good faith and in accordance with law. Albemarle Elec. Membership Corp. v. Alexander, 282 N.C. 402 , 192 S.E.2d 811, 1972 N.C. LEXIS 969 (1972).

And burden is upon party asserting otherwise to overcome such presumptions by competent evidence to the contrary. Albemarle Elec. Membership Corp. v. Alexander, 282 N.C. 402 , 192 S.E.2d 811, 1972 N.C. LEXIS 969 (1972).

“Appraisal” and “Assessment” Are Synonymous. —

For public service companies, the true value of property is its tax value, and “appraisal” and “assessment” are synonymous. In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Appraisal Methods Discussed and Compared. —

See In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Choice of Valuation Method Generally. —

A careful reading of the statute reveals that all four approaches to valuation are to be used in establishing the appraised value, but no guidelines are set out establishing the weight to be given any single system of valuation. Rather, based on the judgment of the Ad Valorem Tax Division, the Department may exercise its discretion on valuation. The appraisal must not be arbitrary, must be based on substantial evidence, and must be based on lawful methods of valuation. In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Any method of appraisal which does not tend to establish market value is an illegal method of valuation for property tax purposes. In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Appraisal Presumed Correct Although Tentative. —

Although the appraisal is called “tentative,” it nevertheless remains in effect unless the Property Tax Commission overturns or otherwise disposes of it. The appraisals are presumed to be correct. This presumption applies, as well, to the good faith of the tax assessors and the validity of their actions. In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Rebuttal of Presumption of Correctness. —

To rebut the presumption of correctness of an appraisal, the taxpayer must produce competent, material, and substantial evidence that tends to show that: (1) Either the county tax supervisor used an arbitrary method of valuation; or (2) the county tax supervisor used an illegal method of valuation; and (3) the assessment substantially exceeded the true value in money of the property. In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Value Set by Department Will Stand Where Appellants Fail to Rebut. —

Where appellants have failed to offer sufficient evidence of probative value showing the true value of their property, the value set by the Department of Revenue must stand. Albemarle Elec. Membership Corp. v. Alexander, 282 N.C. 402 , 192 S.E.2d 811, 1972 N.C. LEXIS 969 (1972).

Actions to Set Aside or Modify Appraisals Generally. —

Since the appraisal, although tentative, remains in existence and is presumed to be correct, any action to set aside or modify it is an appeal which the Commission was created to hear. Such appeal presents the first opportunity for a public service company to challenge an appraisal made by the Ad Valorem Tax Division. It broadens the scope of the hearing of the appeal in G.S. 105-342(d). In re S. Ry., 59 N.C. App. 119, 296 S.E.2d 463, 1982 N.C. App. LEXIS 3066 (1982), rev'd, 313 N.C. 177 , 328 S.E.2d 235, 1985 N.C. LEXIS 1524 (1985).

Courts Will Only Interfere with Department’s Assessment Where Arbitrary and Capricious. —

It is only when the actions of the Department of Revenue are found to be arbitrary and capricious that courts will interfere with tax assessments because of asserted violations of the due process clause. Albemarle Elec. Membership Corp. v. Alexander, 282 N.C. 402 , 192 S.E.2d 811, 1972 N.C. LEXIS 969 (1972).

Commission erred in approving Department’s use of pipeline company’s imbedded, historical cost of debt rather than current market cost in arriving at a proper capitalization rate under the income approach to value. In re Colonial Pipeline Co., 318 N.C. 224 , 347 S.E.2d 382, 1986 N.C. LEXIS 2584 (1986).

Inclusion of Future Investment Tax Credits in Projected Future Income Stream Not Supported by Record. —

Where there was a stipulation in the record that pipeline company’s last major construction program ended in 1980 and that since termination of this project in 1980, it had had no major construction plans or programs in effect, there was no factual basis in the record for including in the company’s projected future income stream amounts attributable to future investment tax credits, for there was no evidence to support the fact that there would be such credits in the future. In re Colonial Pipeline Co., 318 N.C. 224 , 347 S.E.2d 382, 1986 N.C. LEXIS 2584 (1986).

Department’s refusal to deduct from valuations of the Federal Energy Regulatory Commission (FERC) an amount attributable to “economic obsolescence” because the FERC had limited pipeline company’s rate of return to a rate below the market rate was not error. In re Colonial Pipeline Co., 318 N.C. 224 , 347 S.E.2d 382, 1986 N.C. LEXIS 2584 (1986).

§ 105-337. Apportionment of taxable values to this State.

With respect to any public service company operating both inside and outside this State, other than a mobile telecommunications company or a tower aggregator company, the Department of Revenue shall apportion for taxation in this State a fair and reasonable share of the value of the company as a system or its rolling stock or flight equipment as appraised under the provisions of G.S. 105-336 . Thus, when the Department has determined true value in accordance with the provisions of G.S. 105-336 (a) or G.S. 105-336(b), it shall ascertain the portion of the total value subject to taxation in this State by applying property, business, and mileage factors thereto in accordance with the ratio that the company’s property, business, or mileage in this State bears to its total property, business, or mileage. In its discretion, the Department may use one or more of the factors listed in the preceding sentence in order to achieve a fair and accurate result in the apportionment of the value of the property of any public service company. The following definitions apply in this section:

  1. Business factor. — Data that reflect the use of the company’s property, such as gross revenue, net income, tons of freight carried, revenue ton miles, passenger miles, car miles, ground hours, and comparable data.
  2. Mileage factor. — Factual information as to the linear miles of the company’s track, wire, lines, pipes, routes, and similar operational routes and factual information as to the miles traveled by the company’s rolling stock.
  3. Property factor. — Investment in property; it may be either gross or net investment or any other reasonable figure reflecting the company’s investment in property.

History. 1939, c. 310, s. 1609; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 2014-3, s. 11.1(d).

Effect of Amendments.

Session Laws 2014-3, s. 11.1(d), effective for taxes imposed for taxable years beginning on or after July 1, 2015, in the introductory language, substituted “State, other than a mobile telecommunications company or a tower aggregator company” for “State, it shall be the duty of” near the beginning, and substituted “The following definitions apply in this section:” for “As used in this section,” at the end, and made minor stylistic changes.

§ 105-338. Allocation of appraised valuation of public service property among local taxing units.

  1. State Board’s Duty. —  For purposes of taxation by local taxing units in this State, the Department of Revenue shall allocate the valuations of public service company property among the local taxing units in accordance with the provisions of this section. In no event, however, shall the State Board make an allocation to a taxing unit if, when computed, the valuation for that taxing unit amounts to less than five hundred dollars ($500.00).
  2. System Valuation of Companies Other Than Those Noted in Subsection (c). —
    1. System Property of Railroad Companies. —  The appraised valuation of the distributable system property of a railroad shall be allocated for taxation to the local taxing units in accordance with the ratio of the miles of all the company’s tracks in the local taxing unit to the total miles of all the company’s tracks in this State, adjusted to reflect density of traffic in the local taxing unit.
    2. System Property of Telephone Companies. —
      1. The Department of Revenue shall divide each telephone company’s system property in this State into the following two classes and shall determine the original cost of that property and the percentage thereof represented by the property in each of the two classes.— Class 1: Property located in this State that is identified under the applicable uniform system of accounts as central office equipment, large P.B.X. equipment, motor vehicles, tools and work equipment, office furniture and equipment, materials and supplies, and land and buildings (including towers and other structures).— Class 2: Property located in this State that does not come within Class 1.The Department of Revenue shall then apply the percentages obtained in accordance with this subdivision to the appraised valuation of the company’s system property in this State and thereby derive the proportions of appraised valuation to be allocated as Class 1 and Class 2 valuations to local taxing units in accordance with subdivision (b)(2)b, below.
      2. Having made the division required by subdivision (b)(2)a, above, the Department of Revenue shall allocate the appraised valuation of the properties in each class among the local taxing units of the State as follows:— Class 1: The appraised valuations of property in this class shall be allocated among the local taxing units in which such property of the company is situated on January 1 in the proportion that the original cost of such property in the taxing unit bears to the original cost of all such property in this State.— Class 2: The appraised valuations of property in this class shall be allocated among the local taxing units in which the company operates in the proportion that the miles of the company’s single aerial wire and single wire in cable (including single tube in coaxial cable) in the taxing unit bears to the total of such wire miles of the company in this State.
    3. System Property of Other Companies Appraised by the Department of Revenue. —
      1. The provisions of this subdivision govern the allocation of the property of all companies appraised by the Department of Revenue except railroad, telephone, bus line, motor freight carrier, airline companies, mobile telecommunications companies, and tower aggregator companies.
      2. The appraised valuation of the system property of such a company is allocated for taxation to the local taxing units in which the company operates in the proportion that the original cost of the taxable system property in the local taxing unit on January 1 bears to the original cost of all the taxable system property in this State. If in any local taxing unit the company owns system property acquired prior to January 1, 1972, for which the original cost cannot be definitely ascertained, the company shall make a reasonable estimate of the original cost of that property, and the Department shall use this estimate for allocation purposes as if it were the actual original cost of the property.
  3. Certain Property of Bus Line, Motor Freight Carrier, and Airline Companies. —
    1. The appraised valuation of a bus line company’s rolling stock is allocated for taxation to each local taxing unit according to the ratio of the company’s scheduled miles during the calendar year preceding January 1 in each unit to the company’s total scheduled miles in this State for the same period.
    2. The appraised valuation of the rolling stock (other than locally assigned rolling stock) owned or leased by a motor freight carrier company is allocated for taxation to each local taxing unit in which the company has a terminal according to the ratio of the tons of freight handled in the calendar year preceding January 1 at the company’s terminals within the taxing unit to the total tons of freight handled by the company in this State in the same period. If a North Carolina interstate motor freight carrier company has no terminal outside this State, but has been required to pay ad valorem tax to one or more taxing units outside this State, a reduction is allowed in the North Carolina valuation measured by the ratio of the rolling stock subject to ad valorem taxation outside the State to all of the carrier’s rolling stock.
    3. The appraised valuation of an airline company’s flight equipment is allocated for taxation to each local taxing unit in which an airport used by the company is situated according to the ratio obtained by averaging the following two ratios: the ratio of the company’s ground hours in the taxing unit in the year preceding January 1 to the company’s ground hours in the State in the same period, and the ratio of the company’s gross revenue in the taxing unit in the year preceding January 1 to the company’s gross revenue in the State in the same period.
    4. Repealed by Session Laws 2015-6, s. 2.17(a), effective for taxes imposed for taxable years beginning on or after July 1, 2015.

History. 1939, c. 310, s. 1610; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 1180; 1997-456, s. 27; 2014-3, s. 11.1(e); 2015-6, s. 2.17(a); 2017-204, s. 5.3.

Editor’s Note.

Subdivision (b)(2)(a) was redesignated as subdivision (b)(2)a. pursuant to Session Laws 1997-456, s. 27, which authorized the Revisor of Statutes to renumber or reletter sections and parts of sections having a number or letter designation that is incompatible with the General Assembly’s computer database.

Session Laws 2014-3, s. 11.1(e) had enacted a new subdivision (c)(4), effective for taxes imposed for taxable years beginning on or after July 1, 2015. Session Laws 2015-6, s. 2.17(a) subsequently repealed subdivision (c)(4), also effective for taxes imposed for taxable years beginning on or after July 1, 2015. Had it remained in effect, subdivision (c)(4) would have read: “(4) The appraised valuation of the tangible personal property of a mobile telecommunications company (excluding towers) that is appraised in accordance with the provisions of G.S. 105-336(c) is allocated among the local taxing units in which the property of the company is situated on January 1 in the proportion that the original cost of the property in the taxing unit bears to the original cost of all such property in this State.”

Effect of Amendments.

Session Laws 2014-3, s. 11.1(e), effective for taxes imposed for taxable years beginning on or after July 1, 2015, in the section heading, substituted “public service” for “system”; in subsection (b), in sub-subdivision (b)(3)a., substituted “airline companies, mobile telecommunications companies, and tower aggregator companies” for “and airline companies,” and, in sub-subdivision (b)(3)b., substituted “the company shall make a reasonable estimate of the original cost of that property, and the Department shall use this estimate for allocation purposes” for “a reasonable estimate of the original cost of that property shall be made by the company, and this estimate shall be used by the Department of Revenue for allocation purposes” near the end; and in subsection (c), rewrote the subsection heading, in the first sentence of subdivision (c)(1), substituted “is allocated” for “shall be allocated” and “each unit” for “each such unit,” in subdivision (c)(2), substituted “is allocated” for “shall be allocated” in the first sentence, and substituted “a reduction is allowed” for “there shall be allowed a reduction” in the last sentence, and added subdivision (c)(4).

Session Laws 2017-204, s. 5.3, effective August 11, 2017, added the last sentence in subsection (a); and deleted the former last sentence in subdivision (c)(1), which read: “In no event, however, shall the State Board make an allocation to a taxing unit if, when computed, the valuation for that taxing unit amounts to less than five hundred dollars ($500.00).”

Legal Periodicals.

For survey of 1979 administrative law, see 58 N.C.L. Rev. 1185 (1980).

§ 105-339. Certification of appraised valuations of nonsystem property and locally assigned rolling stock, tangible personal property of tower aggregator companies, and tangible personal property of mobile telecommunications companies.

Having determined the appraised valuations of the nonsystem properties of public service companies in accordance with subdivisions (b)(2) and (b)(3) of G.S. 105-335 and the appraised valuations of locally assigned rolling stock in accordance with subdivision (c)(1) of G.S. 105-335 , the appraised valuations of the tangible personal property of tower aggregator companies in accordance with G.S. 105-336(d) and the appraised valuations of the tangible personal property of mobile telecommunications companies in accordance with G.S. 105-336(c) and (d), the Department of Revenue shall assign those appraised valuations to the taxing units in which such properties are situated by certifying the valuations to the appropriate counties and municipalities. Each local taxing unit receiving such certified valuations shall assess them at the figures certified and shall tax the assessed valuations at the rate of tax levied against other property subject to taxation therein.

History. 1939, c. 310, s. 1610; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 695, s. 18; 2014-3, s. 11.1(f); 2015-6, s. 2.17(b).

Effect of Amendments.

Session Laws 2014-3, s. 11.1(f), effective for taxes imposed for taxable years beginning on or after July 1, 2015, rewrote the section heading; and inserted “appraised valuations of the tangible personal property of tower aggregator companies in accordance with G.S. 105-336(d) and the appraised valuations of towers of mobile telecommunications companies in accordance with G.S. 105-336(d)” in the first sentence of the section.

Session Laws 2015-6, s. 2.17(b), effective for taxes imposed for taxable years beginning on or after July 1, 2015, deleted “certain” preceding “tangible personal property” in the section heading and substituted “the tangible personal property of mobile telecommunications” for “towers of mobile telecommunications” and “G.S. 105-336(c) and (d)” for “G.S. 105-336(d)” in the first sentence.

Legal Periodicals.

For survey of 1979 administrative law, see 58 N.C.L. Rev. 1185 (1980).

§ 105-339.1. [Repealed]

Repealed by Session Laws 2015-6, s. 2.17(c), effective April 9, 2015.

History. 2014-3, s. 11.1(g); repealed by 2015-6, s. 2.17(c), effective April 1, 2015.

Editor’s Note.

Former G.S. 105-339.1 pertained to the certification of appraised valuations of mobile telecommunications companies, effective for taxes imposed for taxable years beginning on or after July 1, 2015.

§ 105-340. Certification of appraised valuations of railroad companies.

  1. Having determined the appraised valuation of the “nondistributable” system property of a railroad company, the Department of Revenue shall assign the valuations for taxation to the local taxing units in which such property is situated in the same manner as is provided for nonsystem property in G.S. 105-339 .
  2. Having determined the appraised valuation of the “distributable” system property of a railroad company and having allocated the valuations in accordance with G.S. 105-338(b)(1), the Department of Revenue shall then certify the amounts of those allocations to the local taxing units to which such amounts are due in accordance with the provisions of G.S. 105-341 .
  3. Each local taxing unit receiving certified valuations in accordance with this section shall assess them at the figures certified and shall tax the assessed valuations at the rate of tax levied against other property subject to taxation therein.

History. 1939, c. 310, s. 1620; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 695, s. 19.

§ 105-341. Certification of public service company system appraised valuations.

Having determined the appraised valuations of public service company system property in accordance with subdivision (b)(1) of G.S. 105-335 and having allocated the valuations in accordance with G.S. 105-338(b)(2) and (3), the Department of Revenue shall assign each local taxing unit’s appraised valuations by certifying them to the appropriate counties and municipalities. Each local taxing unit receiving such certified valuations shall assess them at the figures certified and shall tax the assessed valuations at the rate of tax levied against other property subject to taxation therein.

History. 1939, c. 310, s. 1610; 1971, c. 806, s. 1; 1973, c. 476, s. 193; c. 695, s. 20.

§ 105-342. Notice, hearing, and appeal.

  1. Right to Information. —  Upon written request to the Department of Revenue, any public service company whose property values are subject to appraisal, apportionment, and allocation for purposes of taxation under this Article shall be entitled to be informed of the elements that the Department considered in the appraisal of the company’s property, the result in dollars produced by each element (including the methods and mathematical calculations used in determining those results), the specific factors and ratios the Department used in apportioning the appraised valuation of the company’s property to this State, and the factors and the specific mathematical calculations the Department used in allocating the company’s valuation among the local taxing units of this State. Upon written request to the Department of Revenue, any local taxing unit in this State shall be entitled to the same information with regard to any public service company whose property values are subject to appraisal, apportionment, and allocation for purposes of taxation under this Article.
  2. Appraisal and Apportionment Review. —  The appraised valuation of public service company’s property and the share thereof apportioned for taxation in this State under G.S. 105-335 , 105-336, and 105-337 shall be deemed tentative figures until the provisions of this subsection (b) have been complied with. As soon as practicable after the tentative figures referred to in the preceding sentence have been determined, the Department of Revenue shall give the taxpayer written notice of the proposed figures and shall state in the notice that the taxpayer shall have 20 days after the date on which the notice was mailed in which to submit a written request to the Property Tax Commission for a hearing on the tentative appraisal or apportionment or both. If a timely request for a hearing is not made, the tentative figures shall become final and conclusive at the close of the twentieth day after the notice was mailed. If a timely request is made, the Property Tax Commission shall fix a date and place for the requested hearing and give the taxpayer at least 20 days’ written notice thereof. The hearing shall be conducted under the provisions of subsection (d), below.
  3. Repealed by Session Laws 1985, c. 601.
  4. Hearing and Appeal. —  At any hearing under this section, the Property Tax Commission shall hear all evidence and affidavits offered by the taxpayer and may exercise the authority granted by G.S. 105-290(d) to obtain information pertinent to decision of the issue. The Commission shall make findings of fact and conclusions of law and issue an order embodying its decision. As soon as practicable thereafter, the Commission shall serve a written copy of its decision upon the taxpayer by personal service or by registered or certified mail, return receipt requested.

History. 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1979, c. 584, s. 2; c. 665, s. 1; 1985, c. 601, s. 4; 1987 (Reg. Sess., 1988), c. 1052, s. 1.

Cross References.

As to judicial review and enforcement of orders of the Property Tax Commission, see G.S. 105-345 through 105-346.

Editor’s Note.

Session Laws 1987 (Reg. Sess., 1988), c. 1052, s. 1, effective January 1, 1988, rewrote section 5 of Session Laws 1985, c. 601, section 4 of which act repeals subsection (c) of this section, to read:

“Sec. 5. Sections 1 and 3 of this act shall become effective January 1, 1987; provided that as to any public service company whose property values in a county are adjusted in the third year after the year of reappraisal of real property in the county pursuant to G.S. 105-342(c) and whose property values in the same county are adjusted in the following year pursuant to Section 1 of this act, a county shall be entitled in such following year to increase the property values of the public service company certified to the county by the Department of Revenue by the same amount as the public service company property values were reduced the preceding year pursuant to G.S. 105-342(c). Sections 2 and 5 are effective upon ratification. Section 4 shall become effective in each county as of January 1 of the year in which sales assessment ratio studies are first required to be conducted in the county by the Department of Revenue under Section 1.”

Session Laws 1985, c. 601, by its effectiveness provision removed subsection (c). The Revisor of Statutes has been informed that the condition applies to all counties and directed to show subsection (c) as repealed.

Legal Periodicals.

For survey of 1979 administrative law, see 58 N.C.L. Rev. 1185 (1980).

For article on the need to reform North Carolina property tax law, see 59 N.C.L. Rev. 675 (1981).

CASE NOTES

Purposes in Amending and Rewriting Section Between 1985 and 1988. —

For a case discussing the Legislature’s purposes in amending and rewriting this section between 1985 and 1988, particularly as those amendments affected Division Five counties, see North Carolina E. Mun. Power v. Wake County, 100 N.C. App. 693, 398 S.E.2d 486, 1990 N.C. App. LEXIS 1163 (1990).

North Carolina Const., Art. II, § 23 Not Applicable to Session Laws 1987 (Reg. Sess., 1988), Chapter 1052. —

North Carolina Const., Art. II, § 23 applies, inter alia, to laws enacted for the purpose of imposing a tax. Chapter 1052 of Session Laws 1987 (Reg. Sess., 1988) neither imposes a tax nor authorizes its imposition, and therefore, N.C. Const., Art. II, § 23 does not apply. North Carolina E. Mun. Power v. Wake County, 100 N.C. App. 693, 398 S.E.2d 486, 1990 N.C. App. LEXIS 1163 (1990).

There is no doubt that the effect of Chapter 1052 of Session Laws 1987 (Reg. Sess., 1988) imposed a greater tax burden on plaintiff for 1988. However, N.C. Const., Art. II, § 23 focuses on the purpose of the statute (to impose a tax) and not the result of the statute (an increased tax burden). North Carolina E. Mun. Power v. Wake County, 100 N.C. App. 693, 398 S.E.2d 486, 1990 N.C. App. LEXIS 1163 (1990).

Discriminatory Taxation of Railroads. —

In suits alleging discriminatory taxation of real and personal property in violation of the Railroad Revitalization and Regulatory Reform Act of 1976 (the 4-R Act), codified at 49 U.S.C. § 11503 (1982), the counties had the burden of establishing facts sufficient for the court to find levels of assessment for business personal property different from the levels stipulated for real property. Clinchfield R.R. v. Lynch, 784 F.2d 545, 1986 U.S. App. LEXIS 22405 (4th Cir. 1986).

In suits alleging discriminatory taxation of real and personal property in violation of G.S. 306 of the Railroad Revitalization and Regulatory Reform Act of 1976 (the 4-R Act), codified at 49 U.S.C. § 11503 (1982), the trial court was correct in considering as a factor in its finding of tax discrimination the fact that under G.S. 105-277 stored tobacco inventories were taxed at only 60% of fair market value. Clinchfield R.R. v. Lynch, 784 F.2d 545, 1986 U.S. App. LEXIS 22405 (4th Cir. 1986).

Once North Carolina is shown to have discriminated with respect to real property assessment, the burden shifts to the State and counties to establish facts sufficient to warrant a different conclusion with respect to personal property. In re Duke Power Co., 82 N.C. App. 492, 347 S.E.2d 54, 1986 N.C. App. LEXIS 2517 (1986).

Time Period for Appealing Valuation. —

Appellant taxpayer’s written request for a hearing on the valuation made on its property for tax purposes was properly made within the 20-day period set forth in G.S. 105-342(b) where that request was submitted by facsimile, the statute did not require the written submission be made in any particular form, and the statute had to be strictly construed against appellee state property tax commission and in favor of appellant. In re Appeal of Intermedia Communs., Inc., 144 N.C. App. 424, 548 S.E.2d 562, 2001 N.C. App. LEXIS 440 (2001).

§ 105-343. Penalty for failure to make required reports.

Any public service company which fails or refuses to prepare and deliver to the Department of Revenue any report required by this Article shall forfeit and pay to the State of North Carolina one hundred dollars ($100.00) for each day the report is delayed beyond the date on which it is required to be submitted. This penalty may be recovered in an action in the appropriate division of the General Court of Justice of Wake County in the name of the State on the relation of the Secretary of Revenue. When collected, the penalty shall be paid into the general fund of the State. The Secretary shall have the power to reduce or waive the penalty provided in this section for good cause.

History. 1939, c. 310, s. 1606; 1971, c. 806, s. 1; 1973, c. 476, s. 193.

§ 105-344. Failure to pay tax; remedies; penalty.

If any public service company fails or refuses to pay any taxes imposed on its property by any taxing unit of this State, the taxing unit may bring an action in the appropriate division of the General Court of Justice of the county in which the taxing unit is located for the recovery of the tax. Not less than 15 days before such an action is instituted, the taxing unit shall notify the taxpayer by registered or certified mail of its intention to bring the action. The judgment rendered in such an action shall include the tax imposed and unpaid and, as an additional tax, a penalty of fifty percent (50%) of the amount of the tax with interest on the sum of these taxes at the rate of nine percent (9%) per annum from the date the tax was due to be paid, plus reasonable attorneys’ fees for the prosecution of the action to be fixed by the court. (The awarding of attorneys’ fees by the court shall not prevent the taxing unit from paying its attorney an additional fee pursuant to contract, nor shall it prevent the taxing unit from requiring that the attorneys’ fees awarded by the court be paid into the general fund of the taxing unit in accordance with any arrangement between the taxing unit and its attorneys.) The judgment rendered by the court may include a mandamus ordering the payment of the judgment, penalty, interest, and costs including the attorneys’ fees as part of the costs.

If, during the pendency of an action brought under this section, additional or subsequent taxes shall accrue, those taxes, together with penalties and interest, may be included in the judgment if, prior to rendition of the judgment, the tax collector of the taxing unit files with the court a certificate of the additional taxes, penalties, and interest.

In any action brought under this section, the appraised valuation of the taxpayer’s property as determined, allocated, and certified to the taxing unit by the Department of Revenue shall be conclusive and shall not be subject to collateral attack.

History. 1939, c. 310, s. 1611; 1971, c. 806, s. 1; c. 931, s. 1; 1973, c. 476, s. 193.

Article 24. Review and Enforcement of Orders.

§ 105-345. Right of appeal; filing of exceptions.

  1. No party to a proceeding before the Property Tax Commission may appeal from any final order or decision of the Commission unless within 30 days after the entry of such final order or decision the party aggrieved by such decision or order shall file with the Commission notice of appeal and exceptions which shall set forth specifically the ground or grounds on which the aggrieved party considers said decision or order to be unlawful, unjust, unreasonable or unwarranted, and including errors alleged to have been committed by the Commission.
  2. Any party may appeal from all or any portion of any final order or decision of the Commission in the manner herein provided. Copy of the notice of appeal shall be mailed by the appealing party at the time of filing with the Commission, to each party to the proceeding to the addresses as they appear in the files of the Commission in the proceeding. The failure of any party, other than the Commission, to be served with or to receive a copy of the notice of appeal shall not affect the validity or regularity of the appeal.
  3. The Commission may on motion of any party to the proceeding or on its own motion set the exceptions to the final order upon which such appeal is based for further hearing before the Commission.
  4. The appeal shall lie to the Court of Appeals as provided in G.S. 7A-29 . The procedure for the appeal shall be as provided by the rules of appellate procedure.
  5. The Court of Appeals shall hear and determine all matters arising on such appeal, as in this Article provided, and may in the exercise of its discretion assign the hearing of said appeal to any panel of the Court of Appeals.

History. 1979, c. 584, s. 3; 1983, c. 565.

Legal Periodicals.

For survey of 1979 tax law, see 58 N.C.L. Rev. 1548 (1980).

CASE NOTES

Legislative Intent. —

Subsection (d) of this section, which provides that appeal shall lie to the Court of Appeals, and G.S. 105-345.2(b), which describes the breadth of review by the Court of Appeals, indicate that the General Assembly intended such appeal to be the exclusive mode of judicial review of property tax assessments contested in the county board and Property Tax Commission. Johnston v. Gaston County, 71 N.C. App. 707, 323 S.E.2d 381, 1984 N.C. App. LEXIS 3967 (1984).

North Carolina law provides two avenues by which a taxpayer may seek relief from an unjust property tax assessment: administrative review followed by judicial review in the Court of Appeals, and direct judicial review in superior or district court. Administrative review begins in the county board of equalization and review. The county board has jurisdiction to hear any taxpayer who has a complaint as to the listing or appraisal of his or others’ property. Any taxpayer who wishes to except to an order of the county board shall appeal to the State Property Tax Commission. In turn, a taxpayer who is unsatisfied with the decision of the Property Tax Commission shall appeal to the North Carolina Court of Appeals, and then to the North Carolina Supreme Court. Johnston v. Gaston County, 71 N.C. App. 707, 323 S.E.2d 381, 1984 N.C. App. LEXIS 3967 (1984).

This section effectively bypassed the provision in the North Carolina Administrative Act, G.S. 150B-1 et seq., for judicial review in superior court for persons aggrieved by a final agency decision. Johnston v. Gaston County, 71 N.C. App. 707, 323 S.E.2d 381, 1984 N.C. App. LEXIS 3967 (1984).

A party may not circumvent the manner in which appeals are taken under subsection (a) of this section by relying on N.C.R.A.P., Rule 18(b)(2) or other state or federal rules of civil procedure; therefore, the appropriate analysis for the time for taking such appeal lies in this section where the appealing party has 30 days after the entry of the final order or decision to file its notice of appeal and exceptions not from a party’s receipt of a copy of the final order. In re Gen. Tire, Inc., 102 N.C. App. 38, 401 S.E.2d 391, 1991 N.C. App. LEXIS 194 (1991).

Right to Appeal. —

Superior court did not err in dismissing a taxpayer’s petition for writ of mandamus directing a county tax administrator to report the facts to the board of county commissioners in order that the board could make a decision as to whether the taxpayer received notice of changes in the valuation of its property because the taxpayer failed to timely challenge the change in valuation of the property before the county board of equalization and review, and thus lost its right to appeal; taxpayer also chose not to pursue the second means of redress available to it by paying the taxes and then bringing a suit in the trial court for its recovery under G.S. 105-381 , but instead the taxpayer filed a petition for writ of mandamus in the superior court. Villages at Red Bridge, LLC v. Weisner, 209 N.C. App. 604, 704 S.E.2d 925, 2011 N.C. App. LEXIS 209 (2011).

N.C.R.A.P., Rule 27(b) Inapplicable. —

Under this section, the entry of the final order or decision triggers the time limitations for giving notice of appeal. Service is not required by this section, and therefore, N.C.R.A.P., Rule 27(b) is inapplicable. In re Gen. Tire, Inc., 102 N.C. App. 38, 401 S.E.2d 391, 1991 N.C. App. LEXIS 194 (1991).

§ 105-345.1. No evidence admitted on appeal; remission for further evidence.

No evidence shall be received at the hearing on appeal to the Court of Appeals but if any party shall satisfy the court that evidence has been discovered since the hearing before the Property Tax Commission that could not have been obtained for use at that hearing by the exercise of reasonable diligence, and will materially affect the merits of the case, the court may, in its discretion, remand the record and proceedings to the Commission with directions to take such subsequently discovered evidence, and after consideration thereof, to make such order as the Commission may deem proper, from which order an appeal shall lie as in the case of any other final order from which an appeal may be taken as provided in G.S. 105-345 .

History. 1979, c. 584, s. 3.

CASE NOTES

Evidence Known at Time of Hearing. —

G.S. 105-345.1 addresses only evidence that becomes known after the hearing before the North Carolina Property Tax Commission; because the evidence at issue was known before the hearing, but was not considered at the hearing, the North Carolina Property Tax Commission considered the incorrect square footage of the property. In re Greens of Pine Glen Ltd., 356 N.C. 642 , 576 S.E.2d 316, 2003 N.C. LEXIS 27 (2003).

Commission Properly Followed Mandate. —

North Carolina Property Tax Commission did not err in finding on second remand that the previous decisions of the county’s board of equalization and review were erroneous and in determining the true value of a taxpayer’s property because it was not required to conduct additional hearings; at no point did the court of appeals direct the Commission to take new evidence. In re Appeal of Parkdale Mills, 240 N.C. App. 130, 770 S.E.2d 152, 2015 N.C. App. LEXIS 280 (2015).

§ 105-345.2. Record on appeal; extent of review.

  1. On appeal the court shall review the record and the exceptions and assignments of error in accordance with the rules of appellate procedure, and any alleged irregularities in procedures before the Property Tax Commission, not shown in the record, shall be considered under the rules of appellate procedure.
  2. So far as necessary to the decision and where presented, the court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning and applicability of the terms of any Commission action. The court may affirm or reverse the decision of the Commission, declare the same null and void, or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the appellants have been prejudiced because the Commission’s findings, inferences, conclusions or decisions are:
    1. In violation of constitutional provisions; or
    2. In excess of statutory authority or jurisdiction of the Commission; or
    3. Made upon unlawful proceedings; or
    4. Affected by other errors of law; or
    5. Unsupported by competent, material and substantial evidence in view of the entire record as submitted; or
    6. Arbitrary or capricious.
  3. In making the foregoing determinations, the court shall review the whole record or such portions thereof as may be cited by any party and due account shall be taken of the rule of prejudicial error. The appellant shall not be permitted to rely upon any grounds for relief on appeal which were not set forth specifically in his notice of appeal filed with the Commission.

History. 1979, c. 584, s. 3.

CASE NOTES

Constitutionality. —

That the North Carolina Property Tax Commission granted an ad valorem tax exemption under G.S. 105-278.6(a)(8) to a taxpayer with a 0.1 percent ownership in the property, but the taxpayer was denied the exemption for similar projects by other counties, did not equate to a violation of the Equal Protection Clause of U.S. Const. amend. XIV or the Uniformity Clause of N.C. Const., Art. V, § 2(2), as (1) there was no evidence of “hostile discrimination” in the application of G.S. 105-278.6(a)(8); and (2) the evidence indicated that all the counties applied a uniform rule. In re Appeal of Blue Ridge Hous. of Bakersville LLC, 226 N.C. App. 42, 738 S.E.2d 802, 2013 N.C. App. LEXIS 283 (2013).

This section is the controlling judicial review statute for appeals from the Property Tax Commission. In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

Duty of Appellate Court. —

Under this section, the appellate court is to decide all relevant questions of law and interpret constitutional and statutory provisions to determine whether the decision of the commission is affected by errors of law. MAO/Pines Assocs. v. New Hanover County Bd. of Equalization, 116 N.C. App. 551, 449 S.E.2d 196, 1994 N.C. App. LEXIS 1086 (1994).

Duty of Commission. —

The Property Tax Commission has the authority and responsibility to determine the weight and sufficiency of the evidence and the credibility of the witnesses, to draw inferences from the facts, and to appraise conflicting and circumstantial evidence. In re Philip Morris U.S.A., 130 N.C. App. 529, 503 S.E.2d 679, 1998 N.C. App. LEXIS 1006 (1998).

Directive from Court of Appeals. —

Where a directive of the court of appeals instructs a lower tribunal that the lower tribunal “shall conduct hearings as necessary,” the plain language of such a directive indicates that the lower tribunal may, but is not required to, conduct additional hearings. In re Appeal of Parkdale Mills, 240 N.C. App. 130, 770 S.E.2d 152, 2015 N.C. App. LEXIS 280 (2015).

Review Procedure Equal to That Under Administrative Procedure Act. —

Procedure for judicial review provided by this section is equal to that under the Administrative Procedure Act, Chapter 150A (see now Chapter 150B), G.S. 150B-1 et seq.). In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

“Substantial Prejudice” Defined. —

Substantial prejudice under this section is a substantially higher valuation than one which would have been reached under a legal valuation process. In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

The “whole record” test is not a tool of judicial intrusion, but instead, merely gives a reviewing court the capability to determine whether an administrative decision has a rational basis in the evidence. In re Owens, 132 N.C. App. 281, 511 S.E.2d 319, 1999 N.C. App. LEXIS 105 (1999).

Appraisal Notice in Violation of Constitutional Provisions and Unlawful. —

Where timing of notice, size, generalities of wording and single publication newspaper of schedule of values used by county in appraising property for ad valorem tax purposes were not reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action and to afford them an opportunity to present their objections, such notice was insufficient to fulfill due process requirement and to bar an attack against the revaluation schedules themselves; hence, Property Tax Commission’s action in affirming the procedure employed by county was in violation of constitutional provisions and made upon unlawful proceedings within the meaning of subdivisions (b)(1) and (3) of this section. In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

Error of Law in Using Comparable Sales in Present Use Valuation. —

Property Tax Commission committed an error of law as contemplated by this section by upholding the use of sales of similarly used land as a factor upon which a present use valuation was based. In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

Burden of Overcoming Presumption of Correctness of Ad Valorem Assessments. —

The presumption in this State that ad valorem tax assessments are presumed correct places the burden upon the taxpayer to prove that the assessments are incorrect. In order to overcome this presumption, the taxpayer must produce competent material and substantial evidence that tends to show that: (1) Either the county tax supervisor used an arbitrary method of valuation; or (2) the county tax supervisor used an illegal method of valuation; and (3) the assessment substantially exceeded the true value in money of the property. In re Odom, 56 N.C. App. 412, 289 S.E.2d 83, 1982 N.C. App. LEXIS 2421 , cert. denied, 305 N.C. 760 , 292 S.E.2d 575, 1982 N.C. LEXIS 1569 (1982).

Burden of Proving Reasonableness of Valuation. —

When taxpayer has rebutted the presumption of regularity in favor of the county, burden shifts to the county to demonstrate to the Property Tax Commission that the values determined in the revaluation process were not substantially higher than those called for by the statutory formula, and the county must demonstrate the reasonableness of its valuation under subdivision (b)(5) of this section. In re McElwee, 304 N.C. 68 , 283 S.E.2d 115, 1981 N.C. LEXIS 1338 (1981).

Taxpayer’s contention that cost approach method of appraisal was not legal because it did not consider the 26 U.S.C.S. § 42 rent restrictions on the property was insufficient to rebut the presumption that the appraisal was properly administered; the intermediate appellate court’s ruling reversing a decision of the North Carolina Property Tax Commission was itself reversed. In re Greens of Pine Glen Ltd., 356 N.C. 642 , 576 S.E.2d 316, 2003 N.C. LEXIS 27 (2003).

Assuming that a taxpayer’s evidence was insufficient to shift the evidentiary burden to the county, it was not prejudiced thereby because the North Carolina Property Tax Commission ultimately concluded that the county met its shifted burden by showing why its application of the cost approach resulted in an appraisal reflecting true value. In re Harris Teeter, LLC, 271 N.C. App. 589, 845 S.E.2d 131, 2020 N.C. App. LEXIS 435 (2020), cert. denied, 376 N.C. 544 , 851 S.E.2d 49, 2020 N.C. LEXIS 1160 (2020), aff'd, 378 N.C. 108 , 861 S.E.2d 720, 2021- NCSC-80, 2021 N.C. LEXIS 714 (2021).

Expert Evidence. —

Although Commission agreed with expert that property was affected by functional and economic obsolescence, it was not bound to accept the expert’s percentage for such obsolescence and could arrive at its own percentage so long as supported by competent, material and substantial evidence. In re Stroh Brewery Co., 116 N.C. App. 178, 447 S.E.2d 803, 1994 N.C. App. LEXIS 921 (1994).

Summary Judgment Improperly Granted. —

North Carolina Property Tax Commission erred in granting summary judgment to the property owners because there were disputed issues of fact about whether the application of the condition factor in 2007 to undeveloped lots that had been sold resulted in uniform, consistent, and accurate assessments of the lots’ true values. In re Appeal of Ocean Isle Palms, LLC, 219 N.C. App. 81, 723 S.E.2d 543, 2012 N.C. App. LEXIS 241 (2012), rev'd, 366 N.C. 351 , 749 S.E.2d 439, 2013 N.C. LEXIS 55 (2013).

The Commission’s findings of fact were supported by competent, material, and substantial evidence that the property of the family corporation was not actively engaged in the commercial growing of trees under a sound management program, and therefore, not eligible for taxation at present-use value. North Carolina Prop. Tax Comm'n, 136 N.C. App. 360, 525 S.E.2d 196, 2000 N.C. App. LEXIS 64 , cert. denied, 351 N.C. 473 , 543 S.E.2d 511, 2000 N.C. LEXIS 264 (2000).

Commission’s Decision Supported by Substantial Evidence. —

Application for a property tax exemption by a nonprofit foundation, which operated a summer camp and a winter school, was properly denied by the North Carolina Property Tax Commission because, under the whole record test, substantial evidence showed that the foundation’s property was not wholly and exclusively used for educational purposes, pursuant to G.S. 105-278.4 , and substantial evidence showed that the foundation was not a charitable association or institution pursuant to G.S. 105-278.7 . Thus, the foundation did not meet its burden of proof. In re Eagle's Nest Found., 194 N.C. App. 770, 671 S.E.2d 366, 2009 N.C. App. LEXIS 5 (2009).

Assessment of the market value of a taxpayer’s forestland was upheld, despite the taxpayer’s claim that the assessment did not sufficiently account for the land’s (1) wetland restrictions, (2) frequent flooding, (3) topography and tract size, or (4) wasteland because the taxpayer’s forest management plan did not support these alleged factors, and the taxpayer did not otherwise submit supporting evidence. In re Appeal of Family Tree Farm, LLC, 218 N.C. App. 577, 721 S.E.2d 387, 2012 N.C. App. LEXIS 215 (2012).

Where the North Carolina Property Tax Commission’s decision was supported by substantial evidence, the decision will be affirmed upon appeal, despite the presence of contrary evidence in the record. In re Appeal of Parkdale Mills, 240 N.C. App. 130, 770 S.E.2d 152, 2015 N.C. App. LEXIS 280 (2015).

Commission’s Valuation Not Upheld. —

The Property Tax Commission’s valuation of commercial property was not supported by substantial evidence, where it did not specify in its final decision the “appropriate” capitalization rate used, and the record did not support the ultimate capitalization rate apparently employed. In re Owens, 132 N.C. App. 281, 511 S.E.2d 319, 1999 N.C. App. LEXIS 105 (1999).

North Carolina Property Tax Commission’s valuation of a rent-restricted, low-income, apartment complex was illegal because it did not take into account the restriction on the complex’s income imposed by federal statute. In re Greens of Pine Glen Ltd. P'ship., 147 N.C. App. 221, 555 S.E.2d 612, 2001 N.C. App. LEXIS 1139 (2001), rev'd, 356 N.C. 642 , 576 S.E.2d 316, 2003 N.C. LEXIS 27 (2003).

North Carolina Property Tax Commission (Commission) decision on remand upholding a county’s 2007 ad valorem property tax valuation of two textile mills was arbitrary and capricious under G.S. 105-345.2(b)(6) since the Commission was instructed to make specific findings of fact and conclusions of law explaining how it weighed the evidence to reach its conclusions using the appropriate burden-shifting framework; although the Commission made additional conclusions of law as to why the burden was shifted to the county, it did not adequately explain how the county met its burden under G.S. 105-345.2(b)(5). In re Parkdale Mills & Parkdale Am., 225 N.C. App. 713, 741 S.E.2d 416, 2013 N.C. App. LEXIS 222 (2013).

Commission’s finding that county used an arbitrary method of valuing taxpayer’s property was supported by the evidence, where the county had averaged eight of 14 comparable sales, entirely omitting six others, where county witnesses set a figure of $640 per front foot without considering the suitability for building on parcel with two cemeteries, wetlands and limited depth, and where the county did not consider limited access to the property or the cemeteries. In re Boos, 95 N.C. App. 386, 382 S.E.2d 769, 1989 N.C. App. LEXIS 775 (1989).

When a county assessed the value of a mobile home located on leased land without taking into consideration the personal property elements in G.S. 105-317.1 , its appraisal arbitrarily or illegally under G.S. 105-345.2(b) appraised the home as if it were real property and assigned it a value that substantially exceeded its true value, because G.S. 105-273(13) expressly defined differences between real property and tangible personal property as it pertained to manufactured homes. In re Murray, 179 N.C. App. 780, 635 S.E.2d 477, 2006 N.C. App. LEXIS 2157 (2006).

County arbitrarily assessed a landowner’s parcels because the county did not consider water and sewer availability. In re Pace/Dowd Props. Ltd., 233 N.C. App. 7, 755 S.E.2d 401, 2014 N.C. App. LEXIS 267 (2014).

County’s Method Not Arbitrary. —

It was not illegal or arbitrary for a county to appraise billboards in bulk; a property owner failed to show that the method prescribed by a billboard structures valuation guide, which was developed under statutory authority, produced a value significantly higher than the true value. The fact that independent valuations of each piece of property might have been more accurate than a mass appraisal did not make the county’s method arbitrary. In re Appeal of Interstate Outdoor Inc., 236 N.C. App. 294, 763 S.E.2d 172, 2014 N.C. App. LEXIS 998 (2014).

Absent evidence that the Property Tax Commission’s decision was based on statutorily-mandated criteria, the appellate court found that the Commission exceeded its statutory authority and that its decision was unsupported by competent evidence, resulting in prejudice to the county’s substantial rights. In re Camel City Laundry Co., 115 N.C. App. 469, 444 S.E.2d 689, 1994 N.C. App. LEXIS 681 (1994).

Educational Purpose Not Shown. —

Taxpayer that sent missionaries to different parts of the world did not prove entitlement to additional tax exemption where buildings were used to house owner, for guest lodging, and for storage, as the buildings were not used wholly and exclusively for educational purposes; the taxpayer bore the burden of proving that its property was entitled to an exemption under the law, which it failed to do. In re Master's Mission, 152 N.C. App. 640, 568 S.E.2d 208, 2002 N.C. App. LEXIS 964 (2002).

North Carolina Property Tax Commission’s decision to deny a taxpayer, a university, a tax exemption for a property that was renovated and operated as a restaurant by the taxpayer and its students was affirmed as substantial evidence showed that the property was not used wholly and exclusively for an educational purpose by the taxpayer. In re Uni v. for the Study of Human Goodness & Creative Group Work, 159 N.C. App. 85, 582 S.E.2d 645, 2003 N.C. App. LEXIS 1423 (2003).

Authority Exceeded. —

It is not the Commission’s place to equalize property values between anchor store property and the surrounding property in a shopping mall; thus in doing so, the Commission exceeded its authority and committed an error of law. In re Belk-Broome Co., 119 N.C. App. 470, 458 S.E.2d 921, 1995 N.C. App. LEXIS 528 (1995), aff'd, 342 N.C. 890 , 467 S.E.2d 242, 1996 N.C. LEXIS 137 (1996).

Commission Properly Allowed Exemption. . —

North Carolina Property Tax Commission properly reversed a county board of equalization’s denial of a taxpayer’s ad valorem tax exemption under G.S. 105-278.6(a)(8); although the taxpayer had only a 0.1 percent ownership interest in the property, its management of the property and its right of first refusal to buy out the other owner, among other things, were sufficient indicia of ownership to entitle it to the exemption. In re Appeal of Blue Ridge Hous. of Bakersville LLC, 226 N.C. App. 42, 738 S.E.2d 802, 2013 N.C. App. LEXIS 283 (2013).

Commission Properly Followed Mandate. —

North Carolina Property Tax Commission did not err in finding on second remand that the previous decisions of the county’s board of equalization and review were erroneous and in determining the true value of a taxpayer’s property because it was not required to conduct additional hearings; the directive of the court of appeals was to conduct further hearings as necessary and to enter findings of fact and conclusions of law to reconcile the huge discrepancy in valuation of taxpayer’s property. In re Appeal of Parkdale Mills, 240 N.C. App. 130, 770 S.E.2d 152, 2015 N.C. App. LEXIS 280 (2015).

Commission’s Valuation Upheld. —

Under the “whole record” test, an appellate court found that substantial evidence in the record supported the findings of fact of the North Carolina Property Tax Commission as to the typical fee paid for use of race tracks such as was located on the taxpayer’s property, the highest and best use of the property, and the true value in money of the property; in light of this conclusion, the appellate court also held that the commission’s decision was neither arbitrary nor capricious, as the commission reasonably concluded from the evidence the property’s market value. In re North Wilkesboro Speedway, Inc., 158 N.C. App. 669, 582 S.E.2d 39, 2003 N.C. App. LEXIS 1233 (2003).

Where a taxpayer submitted insufficient evidence to meet a burden of proof under G.S. 105-345.2(b) to show that a county board of equalization and review’s decision to use the cost valuation assessment method for appraising the taxpayer’s property was improper, the taxpayer’s appeal was rejected. In re Schwartz & Schwartz, Inc., 166 N.C. App. 744, 603 S.E.2d 852, 2004 N.C. App. LEXIS 2022 (2004).

Taxpayer did not show that county used an arbitrary and illegal valuation method or that the assessment of its personal property for a prior, six-year period substantially exceeded that property’s true value in money; thus, the assessment was upheld because the taxpayer failed to meet its initial burden of presenting material, competent, and substantial evidence that the assessment was arbitrary and illegal. In re Appeal of Westmoreland-LG&E, 174 N.C. App. 692, 622 S.E.2d 124, 2005 N.C. App. LEXIS 2611 (2005).

Although a county argued that its appraisal produced true value of a taxpayer’s property and the North Carolina Property Tax Commission exceeded its authority in reducing the appraised value of the property from $11,696,700 to $9,461,476, the Commission’s decision demonstrated that it weighed the evidence and found the income capitalization method, rather than the sales comparison approach used by the county, should be used to determine the market value of the property, the direct capitalization method was the most appropriate method, and an overall capitalization rate of 10.5 percent was most appropriate. In re Blue Ridge Mall LLC, 214 N.C. App. 263, 713 S.E.2d 779, 2011 N.C. App. LEXIS 1641 (2011).

North Carolina Property Tax Commission’s use of a capitalization rate of 10.5 percent for the subject property, a commercial mall and retention pond, was supported by the evidence because the Commission’s use of the 10.5 capitalization rate was within the range of capitalization rates from sales of malls “most comparable” to the subject property. In re Blue Ridge Mall LLC, 214 N.C. App. 263, 713 S.E.2d 779, 2011 N.C. App. LEXIS 1641 (2011).

North Carolina Property Tax Commission did not err in its valuation of a retention pond parcel with another parcel upon which a commercial mall was situated, despite a county’s contention that G.S. 105-317 required separate valuation of the parcels, because the Commission assigned the same value to the retention pond parcel as the county had assigned; the two parcels comprised the taxpayer’s property. In re Blue Ridge Mall LLC, 214 N.C. App. 263, 713 S.E.2d 779, 2011 N.C. App. LEXIS 1641 (2011).

Land Without Buildings was not Exempt. —

Property tax exemption for religious purposes applied only to buildings used for religious purposes and the land necessary for their convenient use; where a church’s land had no buildings on it, the land was not exempt. In re Appeal of the Church of Yahshua the Christ, 160 N.C. App. 236, 584 S.E.2d 827, 2003 N.C. App. LEXIS 1766 (2003).

Corporation’s Tax-Exempt Status Supported by Evidence. —

Finding that a corporation was entitled to a tax exemption under G.S. 105-278.7 was supported by substantial evidence, including the fact that 90 percent of the corporation’s income was provided by government funding, and that the corporation was recognized as a nonprofit organization by both the state and federal governments. In re Totsland Preschool, Inc., 180 N.C. App. 160, 636 S.E.2d 292, 2006 N.C. App. LEXIS 2249 (2006).

§ 105-345.3. Relief pending review on appeal.

Pending judicial review, the Property Tax Commission is authorized, where it finds that justice so requires, to postpone the effective date of any action taken by it. Upon such conditions as may be required and to the extent necessary to prevent irreparable injury, a judge of the Court of Appeals is authorized to issue all necessary and appropriate process to postpone the effective date of any action by the Commission or take such action as may be necessary to preserve status or rights of any of the parties pending conclusion of the proceedings on appeal. The court may require the applicant for such stay to post adequate bond as required by the court.

History. 1979, c. 584, s. 3.

§ 105-345.4. Appeal to Supreme Court.

In all appeals heard in the Court of Appeals, any party may file a motion for review in the Supreme Court of the decision of the Court of Appeals under G.S. 7A-31 , and in cases entitled to be appealed as a matter of right under G.S. 7A-30(3) any party may appeal to the Supreme Court from the decision of the Court of Appeals under the same rules and regulations as are prescribed by law for appeals, and such court may advance the cause on its docket.

History. 1979, c. 584, s. 3.

Editor’s Note.

Subdivision (3) of G.S. 7A-30 , referred to in this section, was deleted by Session Laws 1983, c. 526, s. 2.

§ 105-345.5. Judgment on appeal enforced by mandamus.

In all cases in which, upon appeal, an order or decision of the Property Tax Commission is affirmed, in whole or in part, the appellate court may include in its decree a mandamus to the appropriate party to put said order in force, or so much thereof as shall be affirmed, or the appellate court may make such other order as it deems appropriate.

History. 1979, c. 584, s. 3.

§ 105-346. Peremptory mandamus to enforce order when no appeal.

  1. If no appeal is taken from an order or decision of the Property Tax Commission within the time prescribed by law and the person to which the order or decision is directed fails to put the same in operation, as therein required, the Commission may apply to the judge regularly assigned to the superior court district which includes Wake County, or to the resident judge of said district at chambers upon 10 days’ notice, for a peremptory mandamus upon said person for the putting in force of said order or decision; and if said judge shall find that the order of said Commission was valid and within the scope of its powers, he shall issue such peremptory mandamus.
  2. An appeal shall lie to the Court of Appeals in behalf of the Commission, or the defendant, from the refusal or the granting of such peremptory mandamus. The remedy prescribed in this section for enforcement of orders of the Commission is in addition to other remedies prescribed by law.

History. 1979, c. 584, s. 3.

Article 25. Levy of Taxes and Presumption of Notice.

§ 105-347. Levy of property taxes.

Each year — not later than the date prescribed by applicable law or, in the absence of specific statutory provisions, not later than the first day of August — the tax levying authorities of counties and municipalities shall levy on property rates of taxes, not exceeding any constitutional or statutory limits, necessary to meet the general and other legally authorized expenses of the taxing units.

History. 1939, c. 310, s. 1400; 1971, c. 806, s. 1.

CASE NOTES

Reason Why Board Must Act Within Fixed Time. —

The reason why the board of equalization is required to act within a fixed time is apparent. The taxing authority must know the value of the taxable property before it can fix a rate sufficient to meet governmental needs. Spiers v. Davenport, 263 N.C. 56 , 138 S.E.2d 762, 1964 N.C. LEXIS 749 (1964) (decided under former similar provisions).

§ 105-348. All interested persons charged with notice of taxes.

All persons who have or who may acquire any interest in any real or personal property that may be or may become subject to a lien for taxes are hereby charged with notice that such property is or should be listed for taxation, that taxes are or may become a lien thereon, and that if taxes are not paid the proceedings allowed by law may be taken against such property. This notice shall be conclusively presumed, whether or not such persons have actual notice.

History. 1939, c. 310, s. 1705; 1971, c. 806, s. 1.

Article 26. Collection and Foreclosure of Taxes.

§ 105-349. Appointment, term, qualifications, and bond of tax collectors and deputies.

  1. Appointment and Term. —  The governing body of each county and municipality shall appoint a tax collector on or before July 1, 1971, to serve for a term to be determined by the appointing body and until his successor has been appointed and qualified. Until the first such appointments are made, county and municipal taxes shall be collected by the tax collectors presently serving under prior provisions of law. The governing body may remove the tax collector from office during his term for good cause after giving him notice in writing and an opportunity to appear and be heard at a public session of the governing body. No hearing shall be required, however, if the tax collector is removed for failing to meet the prerequisites prescribed by G.S. 105-352(b) for delivery of the tax receipts. Unless otherwise provided by G.S. 105-373 , whenever any vacancy occurs in this office, the governing body shall appoint a qualified person to serve as tax collector for the period of the unexpired term.
  2. Qualifications. —  The governing body shall appoint as tax collector a person of character and integrity whose experience in business and collection work is satisfactory to the governing body.
  3. Bond. —  No tax collector shall be allowed to begin his duties until he shall have furnished bond conditioned upon his honesty and faithful performance in such amount as the governing body may prescribe. A tax collector shall not be permitted to collect any taxes not covered by his bond, nor shall a tax collector be permitted to continue collecting taxes after his bond has expired without renewal.
  4. Compensation. —  The compensation and expense allowances of the tax collector shall be fixed by the governing body.
  5. Alternative to Separate Office of Tax Collector. —  Pursuant to Article VI, Sec. 9, of the North Carolina Constitution, the office of tax collector is hereby declared to be an office that may be held concurrently with any appointive or elective office other than those hereinafter designated, and the governing body may appoint as tax collector any appointive or elective officer who meets the personal and bonding requirements established by this section. A member of the governing body of a taxing unit may not be appointed tax collector, nor may the duties of the office be conferred upon him. A person appointed or elected as the treasurer or chief accounting officer of a taxing unit may not be appointed tax collector, nor may the duties of the office of tax collector be conferred upon him except with the written permission of the secretary of the Local Government Commission who, before giving his permission, shall satisfy himself that the unit’s internal control procedures are sufficient to prevent improper handling of public funds.
  6. Deputy Tax Collectors. —  The governing body of a county or municipality is authorized to appoint one or more deputy tax collectors and to establish their terms of office, compensation, and bonding requirements. A deputy tax collector shall have authority to perform, under the direction of the tax collector, any act that the tax collector may perform unless the governing body appointing the deputy specifically limits the scope of the deputy’s authority.
  7. Oath. —  Every tax collector and deputy tax collector, as the holder of an office, shall take the oath required by Article VI, § 7 of the North Carolina Constitution with the following phrase added to it: “that I will not allow my actions as tax collector to be influenced by personal or political friendships or obligations,”. The oath must be filed with the clerk of the governing body of the taxing unit.

History. 1939, c. 310, ss. 1701, 1702; 1957, c. 537; 1971, c. 806, s. 1; 1991, c. 110, s. 6; 1991 (Reg. Sess., 1992), c. 1007, s. 23.

Local Modification.

Bald Head Island: 1997, c. 324, s. 1; Havelock: 1995 (Reg. Sess., 1996), c. 619, s. 1; New Hanover (As to subsection (a)): 1971, c. 928; Roanoke Rapids: 1995, c. 34, s. 5.3; city of Elizabeth City: 2001, c. 227, s.1; city of Mount Airy: 1989, c. 416, s. 1; 2003-281, s. 1; town of Carthage: 1999-239, s. 1; town of China Grove: 2002-42, s. 1; town of Indian Trail: 2009-257; town of Laurel Park: 2000-8, s. 1; town of Plymouth: 1995, c. 325; town of Tarboro: 1995, c. 73, s. 5.3.

OPINIONS OF ATTORNEY GENERAL

For a discussion of the proper authority and procedures for appointing an interim county tax collector, see opinion of Attorney General to The Honorable Charles Beall, North Carolina House of Representatives, 1998 N.C. Op. Att'y Gen. 35 (8/5/98).

§ 105-350. General duties of tax collectors.

It shall be the duty of each tax collector:

  1. To employ all lawful means to collect all property, dog, license, privilege, and franchise taxes with which he is charged by the governing body.
  2. To give such bond as may be required of him by the governing body under the provisions of G.S. 105-349 .
  3. To perform such duties in connection with the preparation of the tax records and tax receipts as the governing body may direct under the provisions of G.S. 105-319 and 105-320.
  4. To keep adequate records of all collections he makes.
  5. To account for all moneys coming into his hands in such form and detail as may be required by the chief accounting officer of the taxing unit.
  6. To make settlement at the times required by G.S. 105-373 and at any other time the governing body may require him to do so.
  7. To submit to the governing body at each of its regular meetings a report of the amount he has collected on each year’s taxes with which he is charged, the amount remaining uncollected, and the steps he is taking to encourage or enforce payment of uncollected taxes.
  8. To send bills or notices of taxes due to taxpayers if instructed to do so by the governing body.
  9. To visit delinquent taxpayers to encourage payment of taxes if instructed to do so by the governing body.

History. 1939, c. 310, s. 1703; 1971, c. 806, s. 1.

Local Modification.

Roanoke Rapids: 1995, c. 34, s. 5.3.

§ 105-351. Authority of successor collector.

The successor in office of any tax collector may continue and complete any legally authorized process or proceeding begun by his predecessor for the collection of taxes.

History. 1939, c. 310, s. 1703; 1971, c. 806, s. 1.

§ 105-352. Delivery of tax receipts to tax collector; prerequisites; procedure upon default.

  1. Time of Delivery. —  As provided in G.S. 105-321 , upon order of the governing body, the tax receipts shall be delivered to the tax collector on or before the first day of September.
  2. Settlement, Bond, and Prepayments. —  Before the tax receipts for the current year are delivered to the tax collector, he shall have:
    1. Delivered to the chief accounting officer of the taxing unit the duplicate receipts issued for prepayments received by the tax collector.
    2. Demonstrated to the satisfaction of the chief accounting officer that all moneys received by the tax collector as prepayments have been deposited to the credit of the taxing unit.
    3. Made his annual settlement (as defined in G.S. 105-373 ) for all taxes in his hands for collection.
    4. Provided bond or bonds as required by G.S. 105-349(c) for taxes for the current year and all prior years in his hands for collection. (In no event shall the governing body accept a bond of lesser amount than that prescribed by any local act applying to the taxing unit.) In the event prepayments have been received by a person other than the regular tax collector, that person shall, before the tax receipts are delivered to the tax collector, deliver the prepayment receipt duplicates to the chief accounting officer and demonstrate to the satisfaction of that officer that all moneys received by him as prepayments have been deposited to the credit of the taxing unit. If the chief accounting officer has accepted prepayments, he shall not later than the day on which the tax receipts are delivered to the tax collector, make settlement with the governing body in such manner and form as the governing body may prescribe.
  3. Procedure upon Default. —  If, when the tax receipts for the current year have been computed and prepared, the regular tax collector shall not have met the requirements of subsection (b), above, the governing body shall immediately appoint a special tax collector and, after he has given satisfactory bond for the full amount of the taxes as required by G.S. 105-349(c), deliver to him the tax receipts for the current year and order him to make collections as provided in G.S. 105-321 . In the discretion of the governing body, the cost of the special tax collector’s bond and compensation may be deducted from the compensation of the regular tax collector. If the regular tax collector shall thereafter meet the requirements of subsection (b), above, the special collector shall make full settlement (in the manner provided in G.S. 105-373 for tax collectors retiring from office), and the governing body, as provided in G.S. 105-321 , shall deliver the tax receipts for the current year to the regular tax collector and order their collection.
  4. Civil and Criminal Penalties. —
    1. Any member of the governing body who shall vote to deliver the tax receipts to a tax collector before the tax collector has met the requirements prescribed by this section shall be individually liable for the amount of taxes charged against the tax collector for which he has not made satisfactory settlement; and any member of the governing body who so votes, or who willfully fails to perform any duty imposed by this section, shall be guilty of a Class 1 misdemeanor.
    2. Any tax collector or other official who fails to account for prepayments as prescribed by this section shall be guilty of a Class 1 misdemeanor.

History. 1939, c. 310, s. 1707; 1971, c. 806, s. 1; 1993, c. 539, s. 722; 1994, Ex. Sess., c. 24, s. 14(c).

Local Modification.

(As to subsection (d)) Alamance and Orange: 2010-61, s. 4(c); 2012-108, s. 4(b).

§ 105-353. Place for collection of taxes.

Taxes shall be payable at the office of the tax collector or at a financial institution with which the taxing unit has contracted for receipt of payment of taxes. For the convenience of taxpayers, the governing body may require the tax collector to be present to collect taxes in person or by deputy at other designated places within the taxing unit at times prescribed by the governing body. If the governing body exercises this authority, the tax collector shall give timely notice of the places and times at which he will be present for collection; this notice shall be published in a newspaper having general circulation in the taxing unit and posted at three or more public places within the taxing unit.

History. 1939, c. 310, s. 1712; 1971, c. 806, s. 1; 1989, c. 578, s. 2.

Local Modification.

Cleveland: 1989, c. 155, s. 1; Gaston and municipalities and special districts located in that county: 1987 (Reg. Sess., 1988), c. 908; Iredell: 1983, c. 284, s. 4; 1985, c. 570, s. 5; Wake and municipalities and special districts located in that county: 1987 (Reg. Sess., 1988), c. 908.

§ 105-354. Collections for districts and other units of local government.

Whenever a taxing unit collects taxes for some district or other unit of local government, those taxes, for collection and foreclosure purposes, shall be treated as taxes of the taxing unit making the collection.

History. 1971, c. 806, s. 1.

§ 105-355. Creation of tax lien; date as of which lien attaches.

  1. Lien on Real Property. —  Regardless of the time at which liability for a tax for a given fiscal year may arise or the exact amount thereof be determined, the lien for taxes levied on a parcel of real property shall attach to the parcel taxed on the date as of which property is to be listed under G.S. 105-285 , and the lien for taxes levied on personal property shall attach to all real property of the taxpayer in the taxing unit on the same date. All penalties, interest, and costs allowed by law shall be added to the amount of the lien and shall be regarded as attaching at the same time as the lien for the principal amount of the taxes. For purposes of this subsection (a):
    1. Taxes levied on real property listed in the name of a life tenant under G.S. 105-302(c)(8) shall be a lien on the fee as well as the life estate.
    2. Taxes levied on improvements on or separate rights in real property owned by one other than the owner of the land, whether or not listed separately from the land under G.S. 105-302(c)(11), shall be a lien on both the improvements or rights and on the land.
  2. Lien on Personal Property. —  Taxes levied on real and personal property (including penalties, interest, and costs allowed by law) shall be a lien on personal property from and after levy or attachment and garnishment of the personal property levied upon or attached.

History. 1939, c. 310, s. 1704; 1971, c. 806, s. 1; 1973, c. 564, s. 4.

Cross References.

For present provisions as to listing land owned by husband and wife as tenants by the entirety, see G.S. 105-302 .

Legal Periodicals.

For article, “Future Advances and Title Insurance Coverage,” see 15 Wake Forest L. Rev. 329 (1979).

For note discussing sufficiency of notice of tax sales in light of Mennonite Board of Missions v. Adams, 103 S. Ct. 2706 (1983), see 62 N.C.L. Rev. 1091 (1984).

For article, “North Carolina’s Real Estate Recording Laws: The Ghost of 1885,” see 28 N.C. Cent. L.J. 199 (2006).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

This section authorizes a tax lien on the land to which improvements are connected for the value of the tax on those improvements. Mid-State Serv. Co. v. Dunford, 18 N.C. App. 641, 197 S.E.2d 626, 1973 N.C. App. LEXIS 1964 (1973).

This lien attaches the date the land is listed. Mid-State Serv. Co. v. Dunford, 18 N.C. App. 641, 197 S.E.2d 626, 1973 N.C. App. LEXIS 1964 (1973).

When Tax on Personal Property Becomes Lien on That Property. —

A tax on personal property becomes a lien on that personal property only after levy or attachment of the personal property taxed. Mid-State Serv. Co. v. Dunford, 18 N.C. App. 641, 197 S.E.2d 626, 1973 N.C. App. LEXIS 1964 (1973).

And When It Becomes Lien on Real Property. —

A tax assessed against personal property becomes a lien on real property only when both the realty and personalty are owned by the same owner. Mid-State Serv. Co. v. Dunford, 18 N.C. App. 641, 197 S.E.2d 626, 1973 N.C. App. LEXIS 1964 (1973).

Taxes Owed on Due Parcel Not a Lien on Another Parcel. —

Taxes owed on Parcel A are not a lien on taxpayer’s Parcel B in the same county. Goldsboro Milling Co. v. Reaves, 804 F. Supp. 762, 1991 U.S. Dist. LEXIS 20950 (E.D.N.C. 1991).

Lessee’s Obligation to Pay Taxes Extinguished. —

Any obligation a lessee may have had to pay taxes was extinguished with the release and cancellation of the lease contract. Mid-State Serv. Co. v. Dunford, 18 N.C. App. 641, 197 S.E.2d 626, 1973 N.C. App. LEXIS 1964 (1973).

Lien Attaches Only to Land of Taxpayer Liable. —

Though liability for the payment of taxes does not arise out of contract, a tax is a debt of the taxpayer, and a lien for taxes cannot be fastened upon the land of a person other than the taxpayer liable for the tax. Duplin County v. Jones, 267 N.C. 68 , 147 S.E.2d 603, 1966 N.C. LEXIS 978 (1966).

Land Owned by Entireties Is Not Subject to Lien for Taxes on Personal Property Owned Separately. —

When land, owned by a husband and wife as tenants by the entireties, is listed for taxation by the husband in his name as owner it is not subject to a lien for taxes assessed on account of personal property, listed by him at the same time in his own name, some of which is owned by him and some by his wife but none by both together. Duplin County v. Jones, 267 N.C. 68 , 147 S.E.2d 603, 1966 N.C. LEXIS 978 (1966).

The pivotal event in determining when a tax is incurred is the date that the property is listed by the owner thereof; the obligation to pay ad valorem property taxes in the State of North Carolina attaches at the time the property is listed, even though the amount of the tax has not yet been determined. Burns v. City of Winston-Salem, 991 F.2d 116, 1993 U.S. App. LEXIS 8372 (4th Cir. 1993).

OPINIONS OF ATTORNEY GENERAL

EDITOR’S NOTE.— Some of the opinions of the Attorney General cited below were issued under former similar provisions.

Lien Arising from Levy of Supplemental Taxes Went Back to Date Prior to Creation of School District and Authorization of Tax. — See opinion of Attorney General to Mr. Rom B. Parker, Halifax County Attorney 40 N.C. Op. Att'y Gen. 265 (1969).

Lien for Ad Valorem Taxes, Both upon Real and Personal Property, Attaches to All Real Property of Taxpayer Within Taxing Unit. — See opinion of Attorney General to Mr. Jule McMichael, Rockingham County Attorney, 40 N.C. Op. Att'y Gen. 814 (1970).

Imposition of Interest by Town Governing Board on Delinquent Property Taxes Is Mandatory. — See opinion of Attorney General to Dr. A.P. Dickson, 41 N.C. Op. Att'y Gen. 538 (1971).

County May Not Impose Late Payment Penalty or Administrative Fee Upon Delinquent Property Tax Accounts. — Because the statutes authorizing property taxes provide for interest and/or penalties, a county may not, by ordinance, impose a late payment penalty or administrative fee upon delinquent property tax accounts. See opinion of Attorney General to Lloyd C. Smith, Jr., Pritchett & Burch, PLLC, 2001 N.C. AG LEXIS 6 (3/6/2001).

§ 105-356. Priority of tax liens.

  1. On Real Property. — The lien of taxes imposed on real and personal property shall attach to real property at the time prescribed in G.S. 105-355(a). The priority of that lien shall be determined in accordance with the following rules:
    1. Subject to the provisions of the Revenue Act prescribing the priority of the lien for State taxes, the lien of taxes imposed under the provisions of this Subchapter shall be superior to all other liens, assessments, charges, rights, and claims of any and every kind in and to the real property to which the lien for taxes attaches regardless of the claimant and regardless of whether acquired prior or subsequent to the attachment of the lien for taxes. For purposes of this subdivision, the term “lien for State taxes” includes a lien for contributions under G.S. 96-10 .
    2. The liens of taxes of all taxing units shall be of equal dignity.
    3. The priority of the lien for taxes shall not be affected by transfer of title to the real property after the lien has attached, nor shall it be affected by the death, receivership, or bankruptcy of the owner of the real property to which the lien attaches.
  2. On Personal Property. —  The lien of taxes on real and personal property shall attach to personal property at the time prescribed in G.S. 105-355(b). The priority of that lien shall be determined in accordance with the following rules:
    1. The tax lien, when it attaches to personal property, shall, insofar as it represents taxes imposed upon the property to which the lien attaches, be superior to all other liens and rights whether such other liens and rights are prior or subsequent to the tax lien in point of time.
    2. The tax lien, when it attaches to personal property, shall, insofar as it represents taxes imposed upon property other than that to which the lien attaches, be inferior to prior valid liens and perfected security interests and superior to all subsequent liens and security interests.
    3. As between the tax liens of different taxing units, the tax lien first attaching shall be superior.

History. 1939, c. 310, s. 1704; 1971, c. 806, s. 1; 2020-3, s. 1.4(b).

Editor’s Note.

Session Laws 2020-3, s. 5, is a severability clause.

Effect of Amendments.

Session Laws 2020-3, s. 1.4(b), effective May 4, 2020, added the last sentence in subdivision (a)(1).

Legal Periodicals.

For article, “Future Advances and Title Insurance Coverage,” see 15 Wake Forest L. Rev. 329 (1979).

CASE NOTES

Federal Tax Lien. —

Deed to real property obtained at a foreclosure sale without notice to the United States did not extinguish a pre-existing federal tax lien. Because a village’s foreclosure action and judicial foreclosure sale violated federal law by failing to provide notice to, and joining as a party, the United States, and occurred before the federal tax lien foreclosure sale, a quitclaim deed was conveyed subject to the federal tax lien. Henkel v. Triangle Homes, Inc., 249 N.C. App. 478, 790 S.E.2d 602, 2016 N.C. App. LEXIS 974 (2016).

Purchase of Warehouse Receipt without Knowledge of Lien Senior in Time. —

Under G.S. 105-241 , a lien for State taxes on personal property is not enforceable against a bona fide purchaser for value, except upon a levy upon such property under an execution or a tax warrant; but when a tax lien is perfected, it is, by subsection (b) of this section, superior to all other liens or rights prior or subsequent in time. By G.S. 25-7-502(1)(c) a bona fide purchaser of a warehouse receipt acquires good title against a lien senior in time of which the purchaser had no notice. Thus, an enforceable lien on oil stored in North Carolina would not arise until it was executed on; but it could not be attached when a warehouse receipt therefor was in the hands of one who purchased it not knowing of the lien. Davenport v. Ralph N. Peters & Co., 386 F.2d 199, 1967 U.S. App. LEXIS 4877 (4th Cir. 1967) (decided under former provisions similar to this section) .

Tax Liens Take Priority Over Estate Administration Costs. —

The conflict between G.S. 28A-19-6 and this section was resolved in favor of city and county who sought to recover back taxes and interest through a foreclosure proceeding on property, although a guardian ad litem and public administrator, who had advanced funds to administrate the properties, asserted that such foreclosure would cause the tax lien to take precedence over the costs of estate administration in violation of G.S. 28A-19-6 and would result in inequity should the sale fail to render sufficient funds to cover both taxes and costs. City of Durham v. Hicks, 135 N.C. App. 699, 522 S.E.2d 583, 1999 N.C. App. LEXIS 1227 (1999).

A local ad valorem tax lien is superior to all other liens, including State tax liens. County of Lenoir v. Moore, 114 N.C. App. 110, 441 S.E.2d 589, 1994 N.C. App. LEXIS 318 (1994), aff'd, 340 N.C. 104 , 455 S.E.2d 158, 1995 N.C. LEXIS 158 (1995).

§ 105-357. Payment of taxes.

  1. Medium of Payment. —  Taxes shall be payable in existing national currency. Deeds to real property, notes of the taxpayer or others, bonds or notes of the taxing unit, and payments in kind shall not be accepted in payment of taxes. A taxing unit may not permit the payment of taxes by offset of any bill, claim, judgment, or other obligation owed to the taxpayer by the taxing unit. The prohibition against payment of taxes by offset does not apply to offset of an obligation arising from a lease or another contract entered into between the taxpayer and the taxing unit before July 1 of the fiscal year for which the unpaid taxes were levied.
  2. Acceptance of Checks and Electronic Payment. —  The tax collector may accept checks and electronic payments, as defined in G.S. 147-86.20 , in payment of taxes, as authorized by G.S. 159-32.1 . Acceptance of a check or electronic payment is at the tax collector’s own risk. A tax collector who accepts electronic payment of taxes may add a fee to each electronic payment transaction to offset the service charge the taxing unit pays for electronic payment service. A tax collector who accepts electronic payment or check in payment of taxes may issue the tax receipt immediately or withhold the receipt until the check has been collected or the electronic payment invoice has been honored by the issuer.If a tax collector accepts a check or an electronic payment and issues a tax receipt and the check is returned unpaid (without negligence on the part of the tax collector in presenting the check for payment) or the electronic payment invoice is not honored by the issuer, the taxes for which the check or electronic payment was given shall be deemed unpaid; the tax collector shall immediately correct the copy of the tax receipt and other appropriate records to show the fact of nonpayment, and shall give written notice by certified or registered mail to the person to whom the tax receipt was issued to return it to the tax collector. After correcting the records to show the fact of nonpayment, the tax collector shall proceed to collect the taxes by the use of any remedies allowed for the collection of taxes or by bringing a civil action on the check or electronic payment.A financial institution with which a taxing unit has contracted for receipt of payment of taxes may accept a check in payment of taxes. If the check is honored, the financial institution shall so notify the tax collector, who shall, upon request of the taxpayer, issue a receipt for payment of the taxes. If the check is returned unpaid, the financial institution shall so notify the tax collector, who shall proceed to collect the taxes by use of any remedy allowed for collection of taxes or by bringing a civil action on the check.
    1. Effect on Tax Lien. —  If the tax collector accepts a check or electronic payment in payment of taxes on real property and issues the receipt, and the check is later returned unpaid or the electronic payment invoice is not honored by the issuer, the taxing unit’s lien for taxes on the real property shall be inferior to the rights of purchasers for value and of persons acquiring liens of record for value if the purchasers or lienholders acquire their rights in good faith and without actual knowledge that the check has not been collected or the electronic payment invoice has not been honored, after examination of the copy of the tax receipt in the tax collector’s office during the time that record showed the taxes as paid or after examination of the official receipt issued to the taxpayer prior to the date on which the tax collector notified the taxpayer to return the receipt.
    2. Penalty. —  In addition to interest for nonpayment of taxes provided by G.S. 105-360 and in addition to any criminal penalties provided by law, the penalty for presenting in payment of taxes a check or electronic funds transfer that is returned or not completed because of insufficient funds or nonexistence of an account of the drawer or transferor is twenty-five dollars ($25.00) or ten percent (10%) of the amount of the check or electronic invoice, whichever is greater, subject to a maximum of one thousand dollars ($1,000). This penalty does not apply if the tax collector finds that, when the check or electronic funds transfer was presented for payment, the drawer of the check or transferor of funds had sufficient funds in an account at a financial institution in this State to make the payment and, by inadvertence, the drawer of the check or transferor of the funds failed to draw the check or initiate a transfer on the account that had sufficient funds. This penalty shall be added to and collected in the same manner as the taxes for which the check or electronic payment was given.
  3. Small Underpayments and Overpayments. —  The governing body of a taxing unit may, by resolution, permit its tax collector to treat small underpayments of taxes as fully paid and to not refund small overpayments of taxes unless the taxpayer requests a refund before the end of the fiscal year in which the small overpayment is made. A “small underpayment” is a payment made, other than in person, that is no more than one dollar ($1.00) less than the taxes due on a tax receipt. A “small overpayment” is a payment made, other than in person, that is no more than one dollar ($1.00) greater than the taxes due on a tax receipt.The tax collector shall keep records of all underpayments and overpayments of taxes by receipt number and amount and shall report these payments to the governing body as part of his settlement.A resolution authorizing adjustments of underpayments and overpayments as provided in this subsection shall:
    1. Be adopted on or before June 15 of the year to which it is to apply;
    2. Apply to taxes levied for all previous fiscal years; and
    3. Continue in effect until repealed or amended by resolution of the taxing unit.

History. 1939, c. 310, s. 1710; 1971, c. 806, s. 1; 1987, c. 661; 1989, c. 578, s. 3; 1989 (Reg. Sess., 1990), c. 1005, s. 8; 1991, c. 584, s. 2; 1999-434, s. 6; 2001-487, s. 25; 2002-156, s. 1; 2005-134, s. 1; 2005-313, s. 10.

Local Modification.

Cleveland: 1989, c. 155, s. 1; Durham: 1985 (Reg. Sess., 1986), c. 910; Gaston and municipalities and special districts located in that county: 1987 (Reg. Sess. 1988), c. 908; Iredell: 1983, c. 284, s. 4; 1985, c. 570, s. 5; Wake and municipalities and special districts located in that county: 1987 (Reg. Sess. 1988), c. 908; city of Reidsville: 1989 (Reg. Sess., 1990), c. 957, s. 1; city of Salisbury: 1985 (Reg. Sess., 1986), c. 910; city of Wilmington: 1985 (Reg. Sess., 1986), c. 910; town of Ahoskie: 1987, c. 262, s. 2; town of Elkin: 1987, c. 740, s. 1; town of Farmville: 1985 (Reg. Sess., 1986), c. 910.

Effect of Amendments.

Session Laws 2005-134, s. 1, effective June 29, 2005, in subsection (a), divided the former one sentence into two by substituting “payment of taxes. A taxing unit may not permit” for “payment of taxes, nor shall any taxing unit permit,” and added the present third sentence.

Session Laws 2005-313, s. 10, effective August 25, 2005, rewrote subdivision (b)(2).

CASE NOTES

Failure to Follow Statutory Procedure upon Return of Check. —

The fact that a county tax collector accepted a check in payment of taxes, and the check was returned, and he paid the taxes in his settlement with the board of county commissioners, did not give him a lien which might be foreclosed under former G.S. 105-414. The collector having failed to correct the tax record so as to show that the check had been returned and that the taxes were not paid, the tax lien was not reinstated. He could have protected himself and preserved the tax lien if he had followed the procedure outlined in this section; this he failed to do, and the returned check was but a simple promise to pay. Since the provisions of this section enacted for the protection of the collector were not complied with and he elected to hold the returned check as evidence of the nonpayment of the taxes, he was in no better position than if he had accepted a note in lieu of the check. Miller v. Neal, 222 N.C. 540 , 23 S.E.2d 852, 1943 N.C. LEXIS 367 (1943).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. Fred P. Parker, Jr., Wayne County Attorney, 40 N.C.A.G. 817 (1969), issued under former similar provisions.

§ 105-358. Waiver of penalties; partial payments.

  1. Waiver. —  A tax collector may, upon making a record of the reasons therefor, reduce or waive the penalty imposed on giving a worthless check under G.S. 105-357(b)(2).
  2. Partial Payments. —  Unless otherwise directed by the governing body, the tax collector shall accept partial payments on taxes and issue partial payment receipts therefor.When a payment is made on the tax for any year or on any installment, it shall first be applied to accrued penalties, interest, and costs and then to the principal amount of the tax or installment. In its discretion, the governing body may prescribe by uniform regulation the minimum amount or percentage of tax liability that may be accepted as a partial payment.

History. 1939, c. 310, ss. 1708, 1709; 1971, c. 806, s. 1; 2002-156, s. 1.2; 2003-416, s. 10.

Effect of Amendments.

Session Laws 2003-416, s. 10, effective August 14, 2003, deleted “ten percent (10%)” following “or waive the” in subsection (a).

§ 105-359. Prepayments.

  1. To Whom Made. —  Payments of taxes made before the tax receipts have been delivered to the tax collector, herein referred to as prepayments, shall be made to the regular tax collector unless the governing body shall have designated some other person to receive them. The regular tax collector or person named to receive prepayments shall give bond satisfactory to the governing body.
  2. When Accepted. —  No taxing unit shall be required to accept any tender of prepayment until the annual budget estimate has been filed as required by law.
  3. Estimation of Liability; Overpayment and Underpayment. —  If the tax rate has not been finally fixed or if the assessed valuation of the taxpayer’s property has not been finally determined at the time a prepayment is tendered, the tax collector shall compute the amount of the tax liability on the basis of the best information available to him. If it is later ascertained that there has been an overpayment, the excess (without interest) shall be refunded by the taxing unit. If it is later ascertained that there was an underpayment, the unpaid balance of the tax shall be due, and the balance due shall be allowed the discount or charged the interest in effect with respect to taxes for the same year at the time the balance is paid.
  4. Receipts. —  A receipt issued for a prepayment made on the basis of an estimate of the tax rate or assessed valuation shall so state, and such a receipt shall not release property from the tax lien created by G.S. 105-355(a). An official and final receipt shall be made available to the taxpayer as soon as possible after determination that the tax has been fully paid.
  5. Duties of Chief Accounting Officer. —  It shall be the duty of the chief accounting officer of the taxing unit to:
    1. Secure and retain in his office, available to taxpayers upon request, the official receipts for taxes paid in full by prepayment.
    2. Credit on the tax receipts to be delivered to the tax collector all taxes that have been paid in full or in part by prepayment.
    3. Prepare and deliver refunds for overpayments made by way of prepayment.
    4. Reduce the charge to be made against the tax collector by deducting from the total amount of taxes levied so much of the amount received as prepayments as is not required to be refunded under the provisions of subsection (c), above.

      Any chief accounting officer who fails to perform the duties imposed upon him by this subsection (e) shall be guilty of a Class 1 misdemeanor.

History. 1939, c. 310, ss. 1706, 1707; 1969, c. 921, s. 2; 1971, c. 806, s. 1; 1993, c. 539, s. 723; 1994, Ex. Sess., c. 24, s. 14(c).

CASE NOTES

Designation of County Official to Collect Prepayments. —

By its failure to designate specifically any county official to collect prepayments under this section, and by its instructions to the sheriff as to the manner of collecting taxes and the payment of commissions, and by its acquiescence in the manner in which commissions were paid to the sheriffs in the past years, a county board of commissioners in effect designated the sheriff as collector of prepayments of taxes under this section. Barbour v. Goodman, 247 N.C. 655 , 101 S.E.2d 696, 1958 N.C. LEXIS 297 (1958) (decided under former similar provisions).

§ 105-360. Due date; interest for nonpayment of taxes; discounts for prepayment; interest on overpayment of tax.

  1. Taxes levied under this Subchapter by a taxing unit are due and payable on September 1 of the fiscal year for which the taxes are levied. Taxes are payable at par or face amount if paid before January 6 following the due date. Taxes paid on or after January 6 following the due date are subject to interest charges. Interest accrues on taxes paid on or after January 6 as follows:
    1. For the period January 6 to February 1, interest accrues at the rate of two percent (2%).
    2. For the period February 1 until the principal amount of the taxes, the accrued interest, and any penalties are paid, interest accrues at the rate of three-fourths of one percent (3/4%) a month or fraction thereof.
  2. Repealed by Session Laws 1987, c. 93, s. 2.
  3. Under the conditions established by this subsection (c), the governing body of any county or municipality levying taxes under the provisions of this Subchapter shall have authority to establish a schedule of discounts to be applied to taxes paid prior to the due date prescribed in subsection (a) above. To exercise this authority, the governing body shall:
    1. Not later than the first day of May preceding the due date of the taxes to which it first applies, adopt a resolution or ordinance specifying the amounts of the discounts and the periods of time during which they are to be applicable.
    2. Submit the resolution or ordinance to the Department of Revenue for approval.
    3. Upon approval by the Department of Revenue, publish the discount schedule at least once in some newspaper having general circulation in the taxing unit.

      When such a resolution or ordinance is submitted to the Department of Revenue, the Department may approve it or disapprove it in whole or in part if, in the opinion of the Department, the discounts or the periods of time for which discounts are allowed are excessive or unreasonable. Such a resolution or ordinance, once adopted and approved by the Department of Revenue, shall continue in effect until repealed. Nothing in this subsection (c) shall prevent the governing body of any taxing unit from providing by resolution that the schedule of discounts for prepayment of taxes in effect in the taxing unit on June 30, 1971, shall continue in effect through November 1, 1971, but no longer.

  4. For the purposes of computing discounts and interest, tax payments submitted by mail shall be deemed to be received as of the date shown on the postmark affixed by the United States Postal Service. If no date is shown on the postmark or if the postmark is not affixed by the United States Postal Service, the tax payment shall be deemed to be received when the payment is received in the office of the tax collector. In any dispute arising under this subsection, the burden of proof shall be on the taxpayer to show that the payment was timely made.
  5. When an order of the county board of equalization and review reduces the valuation of property or removes the property from the tax lists and, based on the order, the taxpayer has paid more tax than is due on the property, the taxpayer is entitled to receive interest on the overpayment in accordance with this subdivision. An overpayment of tax bears interest at the rate set under subsection (a) of this section from the date the interest begins to accrue until a refund is paid. Interest accrues from the later of the date the tax was paid and the date the tax would have been considered delinquent under G.S. 105-360 . A refund is considered paid on a date determined by the governing body of the taxing unit that is no sooner than five days after a refund check is mailed.

History. 1939, c. 310, s. 1403; 1943, c. 667; 1945, c. 247, s. 3; c. 1041; 1947, c. 888, s. 1; 1969, c. 921, s. 1; 1971, c. 806, s. 1; 1973, c. 476, s. 193; 1977, c. 327, s. 2; c. 630; 1979, c. 233, ss. 1, 2; 1987, c. 93, ss. 1, 2; 2008-35, s. 2.7; 2011-3, s. 3(a).

Local Modification.

Brunswick: 1979, c. 439; Cabarrus: 1983, c. 823; Lincoln: 1981 (Reg. Sess., 1982), c. 1171, 1983 (Reg. Sess., 1984), c. 958; Pasquotank: 2010-30, s. 4 (applicable only to the 2010 process of adopting a resolution to set the discount to be applied to taxes paid prior to the due date); Stokes and municipalities located therein (for taxes paid prior to November 1, 2002): 2002-51, s. 2; Surry: 1991, c. 148; 1983, c. 241; town of Duck: 2001, c. 394, s. 1 (for fiscal year 2002-2003); town of Midland (for fiscal year 2000-01, contingent on passage of local referendum): 2000-91, s. 2; town of Red Cross: 2002-56, s. 2 (for fiscal year 2002-2003), as amended by 2015-253, s. 8; village of Chimney Rock: 1991, c. 444, s. 3 (for fiscal year 1991-92); village of Wesley Chapel: 1998-43, s. 2 (for fiscal years 1997-98 and 1998-99).

Effect of Amendments.

Session Laws 2008-35, s. 2.7, effective for taxes imposed for taxable years beginning on or after July 1, 2008, in subsection (a), deleted “are delinquent and” preceding “are subject to” in the second sentence of the introductory paragraph, and deleted “and” at the end of subdivision (a)(2).

Session Laws 2011-3, s. 3(a), effective for taxable years beginning on or after January 1, 2011, added subsection (e).

Legal Periodicals.

See legislative survey, 21 Campbell L. Rev. 323 (1999).

CASE NOTES

Meaning of “When Due” In Lease Not Ambiguous. —

When a lessor sent notice of termination and paid the taxes it deprived a lessee of the opportunity to meet its obligation to pay, or direct the sublessee to pay, the taxes on or before 5 January because the taxes first became due on September 1st, but they did not become past due or delinquent until the following January 6th; because the plain meaning of “when due” referred to the period running from September 1st to January 5th, the lease was not ambiguous. RME Mgmt., LLC v. Chapel H.O.M. Assocs., LLC, 251 N.C. App. 562, 795 S.E.2d 641, 2017 N.C. App. LEXIS 26 (2017).

Property Taxes “Due” Over Period of Time. —

There is no meaningful distinction between the terms due and payable, and just because taxes first become due on September 1st does not mean that they become past due on the following day; instead, property taxes in North Carolina are “due” (i.e., payable) over a period of time (September 1st through the following January 5th) and not on any single date. RME Mgmt., LLC v. Chapel H.O.M. Assocs., LLC, 251 N.C. App. 562, 795 S.E.2d 641, 2017 N.C. App. LEXIS 26 (2017).

Use of the phrase “when due,” without qualifying language, must be given its plain meaning, and its plain meaning is, when applied to the statute, the period of time between the first and last dates for timely payment of those taxes (September 1st and January 5th, respectively). RME Mgmt., LLC v. Chapel H.O.M. Assocs., LLC, 251 N.C. App. 562, 795 S.E.2d 641, 2017 N.C. App. LEXIS 26 (2017).

Discrimination Between Different Counties. —

A statute which discriminates between the different counties of the State, as to the times when the payment of taxes can be compelled, is not unconstitutional, since its provisions affect every one alike in the localities to which they are applicable and contain no violation of the principle of equation of taxation. State v. Jones, 121 N.C. 616 , 28 S.E. 347, 1897 N.C. LEXIS 294 (1897) (decided under former similar provisions).

OPINIONS OF ATTORNEY GENERAL

Because the statutes authorizing property taxes provide for interest and/or penalties, a county may not, by ordinance, impose a late payment penalty or administrative fee upon delinquent property tax accounts. See opinion of Attorney General to Lloyd C. Smith, Jr., Pritchett & Burch, PLLC, 2001 N.C. AG LEXIS 6 (3/6/2001).

§ 105-361. Statement of amount of taxes due.

  1. Duty to Furnish a Certificate. —  On the request of a person who is listed in subdivision (1) of this subsection and who complies with subdivision (2) of this subsection, the tax collector must give the person a written certificate stating the amount of any taxes and special assessments owed for the current year and for any prior year and the amount of any deferred taxes and interest that would become due if a disqualifying event occurred.
    1. Who may make request. —  Any of the following persons may request the certificate:
      1. An owner of the real property.
      2. An occupant of the real property.
      3. A person having a lien on the real property.
      4. A person having a legal interest or estate in the real property.
      5. A person or firm having a contract to purchase or lease the property or a person or firm having contracted to make a loan secured by the real property.
      6. The authorized agent or attorney of any person described in this subdivision.
    2. Identification of property. —  A person requesting a certificate with respect to taxes must specify the name of the person who listed the real property for taxation for each year for which the information is sought. A person requesting a certificate  with respect to assessments must identify the real estate in the manner required by the tax collector.
  2. Reliance on the Certificate. —  When a certificate has been issued as provided in subsection (a), above, all taxes and special assessments that have accrued against the property for the period covered by the certificate shall cease to be a lien against the property, except to the extent of taxes and special assessments stated to be due in the certificate, as to all persons, firms, and corporations obtaining such a certificate and their successors in interest who rely on the certificate:
    1. By paying the amount of taxes and assessments stated therein to be a lien on the real property;
    2. By purchasing or leasing the real property; or
    3. By lending money secured by the real property.The tax collector shall be liable on his bond for any loss to the taxing unit arising from an understatement of the tax and special assessment obligations in the preparation of a certificate furnished under this section.
  3. Penalty. —  Any tax collector who fails or refuses to furnish a certificate when requested under the conditions prescribed in this section shall be liable for a penalty of fifty dollars ($50.00) recoverable in a civil action by the person who made the request.
  4. Oral Statements. —  An oral statement made by the tax collector as to the amount of taxes, special assessments, penalties, interest, and costs due on any real or personal property shall bind neither the tax collector nor the taxing unit.
  5. Internet. —  If the taxing unit maintains an Internet web site on which current information on the amount of taxes, special assessments, penalties, interest, and costs due on any real or personal property is available, the governing body of the taxing unit may adopt an ordinance to allow a person to rely on information obtained from the web site as if it were a certificate issued pursuant to subsection (a) of this section. The ordinance may provide for disclaimers to be posted on the web site containing language notifying the person relying on the information contained in the web site about matters relevant to the information, such as the date on which the information was posted, the date as of which the information is current, and any special instructions and procedures for accessing the complete and accurate information. The ordinance may also provide for appropriate procedural provisions by which the tax collector may ensure full and accurate payment of all taxes, assessments, and obligations certified under this subsection.A person who relies on the web site information must keep and present a copy of the information as necessary or appropriate, as if the copy were a certificate issued under subsection (a) of this section. The tax collector shall be liable on the tax collector’s bond for any loss to the taxing unit arising from an understatement of the tax and special assessment obligations contained in the information available on the web site unless the taxing unit’s ordinance provides the disclaimers authorized by this subsection.

History. 1939, c. 310, s. 1711; 1971, c. 806, s. 1; 1973, c. 604; c. 1340; 2003-399, s. 1; 2009-445, s. 26.

Effect of Amendments.

Session Laws 2003-399, s. 1, effective August 7, 2003, added subsection (e).

Session Laws 2009-445, s. 26, effective August 7, 2009, rewrote subsection (a).

§ 105-362. Discharge of lien on real property.

  1. General Rule. —  The tax lien on real property shall continue until the principal amount of the taxes plus penalties, interest, and costs allowed by law have been fully paid.
  2. Release of Separate Parcels from Tax Lien. —
    1. When the lien of taxes of any taxing unit for any year attaches to two or more parcels of real property owned by the same taxpayer, the lien may be discharged as to any parcel at any time prior to advertisement of tax foreclosure sale in accordance with either subdivision (b)(1)a or subdivision (b)(1)b:
      1. Upon payment, by or on behalf of the listing taxpayer, of the taxes for the year on the parcel or parcels to be released, plus all personal property taxes owed by the listing taxpayer for the same year.
      2. Upon payment, by or on behalf of any person (other than the listing taxpayer) who has a legal interest in the parcel or parcels to be released, of the taxes for the year on the parcel or parcels to be released, plus a proportionate part of personal property taxes owed by the listing taxpayer for the same year. The proportionate part shall be a percentage of the personal property taxes equal to the percentage of the total assessed valuation of the taxpayer’s real property in the taxing unit represented by the assessed valuation of the parcel or parcels to be released.
    2. When real property listed as one parcel is divided, a part thereof may be released as provided in subdivision (b)(1), above, after the assessed valuation of the part to be released has been determined and certified to the tax collector by the tax supervisor.
    3. It shall be the duty of the tax collector accepting a payment made under this subsection (b) for the purpose of releasing the tax lien from less than all of the taxpayer’s real property:
      1. To give the person making the payment a receipt setting forth a description of the real property released from the tax lien and bearing a statement that such property is being released from the tax lien.
      2. To indicate on the tax receipts, tax records, and other official records of his office what real property has been released from the tax lien.

        If the tax collector fails to issue the receipt or make the record entries required by this subdivision (3), the omission may be supplied at any time.

    4. When any parcel of real property has been released under the provisions of this subsection (b) from the lien of taxes of any taxing unit for any year, the property shall not thereafter be subject to the lien of any other regularly levied taxes of the same taxing unit for the same year, whether such other taxes be levied against the listing owner of the property or against some other person acquiring title thereto. No tax foreclosure judgment for such other taxes shall become a lien on the released property; and, upon appropriate request and satisfactory proof of the release by any interested person, the clerk of the superior court shall indicate on the judgment docket that the judgment is not a lien on the released property. However, the failure to make such an entry shall not have the effect of making the judgment a lien on the released property.

History. 1939, c. 310, s. 1704; 1971, c. 806, s. 1.

CASE NOTES

Duration of Lien. —

The General Assembly, pursuant to the Constitution, has established the procedure for levying and collecting taxes and when levied the tax lien shall continue until the taxes, plus interest, penalties, and costs, as allowed by law, have been fully paid. City of Charlotte v. Kavanaugh, 221 N.C. 259 , 20 S.E.2d 97, 1942 N.C. LEXIS 451 (1942) (decided under former similar provisions).

Cancellation of Liens on Specific Parcels. —

When taxes are owed on several parcels of real estate in a county, an interested party may pay the taxes owed on one parcel and cancel the tax lien on that parcel. Goldsboro Milling Co. v. Reaves, 804 F. Supp. 762, 1991 U.S. Dist. LEXIS 20950 (E.D.N.C. 1991).

Any time before the taxes have been reduced to a judgment, one may pay the real property taxes accrued on a specific parcel, with a pro-rata portion of any personal property taxes and advertising expenses, and have that parcel released from all tax liens. Goldsboro Milling Co. v. Reaves, 804 F. Supp. 762, 1991 U.S. Dist. LEXIS 20950 (E.D.N.C. 1991).

Attorney’s Fees. —

Subsection (a) and G.S. 105-374(e) do not specifically include attorney’s fees as “costs” and G.S. 105-374(i) contemplates attorney’s fees as they are awarded by the court in its discretion; thus, plaintiff acted improperly by refusing to release tax lien against defendants’ property until attorney’s fees were paid. Onslow County v. Phillips, 123 N.C. App. 317, 473 S.E.2d 643, 1996 N.C. App. LEXIS 724 (1996), rev'd in part, 346 N.C. 265 , 485 S.E.2d 618, 1997 N.C. LEXIS 300 (1997).

§ 105-363. Remedies of cotenants and joint owners of real property.

  1. Payment of Taxes on Share of One Cotenant. —  Any one of several tenants in common or joint tenants (other than copartners) of real property may pay that portion of the taxes, interest, and costs that are a lien upon his undivided share of the property and thereby release the tax lien from his share. Thereafter, in any partition sale of the property the share of the joint owner who has paid his portion of the taxes shall be set apart free from the tax lien, and his share of the proceeds of any sale shall not be diminished by disbursements to pay any taxes, interest, or costs. In the event the tax lien is foreclosed and the property is sold for failure to pay taxes, the share of any joint owner who has paid his portion of the taxes shall be excepted from the advertisement and sale.
  2. Payment of Entire Amount of Taxes by One Cotenant. —  Any one of several tenants in common or joint tenants (other than copartners) of real property may pay the entire amount of the taxes, interest, and costs constituting a lien on the property, and any amount so paid that is in excess of his share of the taxes, interest, and costs and that was not paid through agreement with or on behalf of the other joint owners shall constitute a lien in his favor upon the shares of the other joint owners. Such a lien may be enforced in a proceeding for actual partition, a proceeding for partition and sale, or by any other appropriate judicial proceeding.

History. 1901, c. 558, ss. 13, 14, 47; Rev., s. 2860; C.S., s. 7983; 1971, c. 806, s. 1.

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

Payment by One Tenant in Common. —

Petitioners in a proceeding for sale of land for partition may not object to the allowance of a sum advanced by one of the parties to pay taxes on the property, as provided by this section, when there is no exception or appeal entered of record by the testator’s administrator. Everton v. Rodgers, 206 N.C. 115 , 173 S.E. 48, 1934 N.C. LEXIS 124 (1934).

Where One Tenant in Possession. —

This section refers to cases where all the tenants are on the same footing, all or none being in possession. It does not authorize one tenant in common to take title for the whole tract, nor does it apply to a case where one tenant was in possession for all. Smith v. Smith, 150 N.C. 81 , 63 S.E. 177, 1908 N.C. LEXIS 136 (1908).

Contention of Exclusive Possession Rejected. —

Trial judge properly ordered reimbursement under this section, despite contention of one cotenant that the other, her ex-husband, was in sole possession of the property. A cotenant’s mere presence on the property does not amount to a prima facie showing of exclusive possession. Consequently, the trial judge did not, and was not required to, make findings on that issue. Knotts v. Hall, 85 N.C. App. 463, 355 S.E.2d 237, 1987 N.C. App. LEXIS 2631 , aff'd, 321 N.C. 119 , 361 S.E.2d 591, 1987 N.C. LEXIS 2500 (1987).

Contribution for Insurance Expenses. —

Brother’s daughters were entitled to contribution for homeowner’s insurance expenses that accrued after a father’s death because the brother became a co-tenant with his siblings upon their father’s death. Harris v. Gilchrist, 246 N.C. App. 67, 785 S.E.2d 119, 2016 N.C. App. LEXIS 234 (2016).

Allowance for Taxes Paid. —

Trial court did not err in awarding a brother’s daughters an allowance for the taxes and insurance paid by them and the deceased father during the time they were tenants in common because the record tended to show sole possession, not exclusive possession; neither the brother nor his daughters withheld the property from the other co-tenants, and the other co-tenants never made any demand to possess the property after the father’s death. Harris v. Gilchrist, 246 N.C. App. 67, 785 S.E.2d 119, 2016 N.C. App. LEXIS 234 (2016).

§ 105-364. Collection of taxes outside the taxing unit.

  1. Duty of Governing Body. —  It shall be the duty of the governing body of each taxing unit to require reports from the tax collector at such times as it may prescribe (but not less frequently than in connection with the tax collector’s annual settlement) concerning the efforts he has made to locate taxpayers who have removed from the taxing unit, the efforts he has made to locate personal property in other taxing units belonging to delinquent taxpayers, and the efforts he has made under the provisions of this section to collect taxes.
  2. Duty to Certify Unpaid Taxes. —  If a taxpayer has no personal property or real property subject to the tax lien in the taxing unit but does have personal property in some other taxing unit in this State, or if a taxpayer has removed from the taxing unit, leaving no personal property or real property subject to the tax lien there, and is known to be in some other taxing unit in this State, the tax collector shall forward the tax receipt (with a certificate stating that the taxes are unpaid) for collection to the tax collector of the taxing unit in which the taxpayer is known to have personal property or in which he is known to be. The tax collector may not, however, certify an unpaid tax receipt to another taxing unit if 10 years have elapsed since the date the unpaid taxes became due.
  3. Effect of Certificate; Duty of Receiving Tax Collector. —  In the hands of the tax collector receiving them, the copy of the tax receipt and the certificate of nonpayment shall have the force and effect of an unpaid tax receipt of his own taxing unit, and it shall be the receiving tax collector’s duty to proceed immediately to collect the taxes by any means by which he could lawfully collect taxes of his own taxing unit. Within 30 days after receiving such a tax receipt and certificate, the collector receiving them shall report to the tax collector that sent them that he has collected the tax, that he has begun proceedings to collect the tax, or that he is unable to collect it. If the tax collector reports that he has begun proceedings to collect the tax, he shall, not later than 90 days after so reporting, make a final report to the tax collector who certified the tax receipt stating that he has collected the tax or that he is unable to collect it.
    1. In acting on a tax receipt and certificate under the provisions of this section, the tax collector receiving them shall, in addition to collecting the amount of taxes certified as due, also impose a fee equal to ten percent (10%) of the amount of taxes certified as unpaid, to be paid into the general fund of his taxing unit.
    2. Within five days after making a collection under the provisions of this section, the tax collector receiving the tax receipt and certificate shall remit the funds collected, less the fee provided for in subdivision (c)(1), above, to the tax collector of the taxing unit that levied the tax.
    3. If the tax collector receiving the tax receipt and certificate reports that he is unable to collect the tax, he shall make his report under oath and shall state therein that he has used due diligence and is unable to collect the tax by levy, attachment and garnishment, or any other legal means.
  4. Liability on Bond. —  A tax collector who receives a tax receipt and certificate from the tax collector of another taxing unit under the provisions of subsection (b), above, shall be liable on his bond to the taxing unit that levied the tax for the amount of the taxes certified if:
    1. The tax collector receiving the certified tax receipt fails to make any report to the certifying tax collector within 30 days after receiving the certified tax receipt.
    2. The tax collector receiving the certified tax receipt fails to swear to any report stating that he is unable to collect the certified tax.
    3. Having reported that he has begun proceedings to collect a certified tax, the tax collector receiving the certified tax receipt fails to make a final report within 90 days after reporting that he has begun proceedings for collection.

History. 1939, c. 310, s. 1714; 1955, c. 909; 1963, c. 132; 1971, c. 806, s. 1; 1973, c. 231.

Local Modification.

Gaston: 1979, c. 303.

§ 105-365. Preference accorded taxes in liquidation of debtors’ estates.

In all cases in which a taxpayer’s assets are in the hands of a receiver or assignee for the benefit of creditors or are otherwise being liquidated or managed for the benefit of creditors, the taxes owed by the debtor (together with interest, penalties, and costs) shall be a preferred claim, second only to administration expenses and specific liens. The provisions of this section shall not be construed to modify or reduce the priority given by G.S. 105-356 to tax liens on real and personal property or to alter or preclude the exercise of any remedies against personal property provided for in G.S. 105-366 .

History. 1939, c. 310, s. 1704; 1971, c. 806, s. 1.

§ 105-365.1. When and against whom collection remedies may be used.

  1. Date of Delinquency. —  A tax collector may collect a tax using the remedies provided in G.S. 105-366 through G.S. 105-375 on or after the date the tax is delinquent. A tax is delinquent on the following date:
    1. For a tax that is not a deferred tax, the date the tax accrues interest.
    2. For a deferred tax, other than a tax described in subdivision (3) of this subsection, the date a disqualifying event occurs.
    3. For a deferred tax under G.S. 105-277.1 B that lost its eligibility for deferral due to the death of the owner, the first day of the ninth month following the date of death.
  2. Enforced Collection. —  For purposes of using the collection remedies provided in G.S. 105-366 through G.S. 105-375 to collect delinquent taxes, the taxing unit shall proceed against property of the following taxpayer:
    1. To collect delinquent taxes assessed on real property, the owner of record of property on which tax is due as of the date of delinquency and any subsequent owner of record of the property.
    2. To collect delinquent taxes assessed on personal property, the owner of record as of January 1 of the calendar year in which the fiscal year of taxation begins.
    3. To collect delinquent taxes assessed on a registered motor vehicle, the owner of record as of the date on which the current vehicle registration is renewed or the date on which a new registration is applied for.

History. 2008-35, s. 2.8.

Editor’s Note.

Session Laws 2008-35, s. 4, made this section effective for taxes imposed for taxable years beginning on or after July 1, 2008.

Session Laws 2013-362, s. 3, as amended by Session Laws 2015-266, s. 1, provides: “Interest on taxes paid on parcels with errors that resulted in the parcels having an overstated value shall be calculated at a rate of five percent (5%) per annum. Additional taxes levied on parcels as a result of errors causing the parcels to have an understated value (i) shall be treated as taxes on discovered property pursuant to G.S. 105-312 , except that the discovery penalties set forth in subsection (h) of G.S. 105-312 shall not apply, (ii) are due and payable on September 1 of the fiscal year for which the taxes are levied, but not earlier than four years from the last general reappraisal date, and (iii) shall be payable, at the taxpayer’s option, by means of an agreement over a period of not more than 36 months, in equal monthly installments, if the total of the additional taxes levied is greater than one thousand dollars ($1,000). Interest shall not accrue for the period a taxpayer is making timely payments under a payment plan. The tax collector is authorized to issue forms and develop procedures to implement a payment plan authorized under this section. Notwithstanding G.S. 105-365.1(b), for parcels that have been transferred in a tax year for which errors requiring reappraisals under this act resulted in an underpayment of taxes, the following apply:

“(1) The taxes for each tax year prior to and in the fiscal year in which the transfer occurred shall be collected from the owner of record as of January 1 of each tax year for which unpaid taxes exist. Only the remedies available in G.S. 105-367 and G.S. 105-368 may be used to collect against the owner of record as of January 1 of each tax year for which unpaid taxes exist.

“(2) Notwithstanding G.S. 105-355(a), there shall be no lien on the real property for underpaid taxes that arose in a year in which the property is owned by a person other than the current owner as of January 1 of that year. The current owner shall not be held personally responsible for such underpaid taxes.

“(3) If an owner not responsible for underpaid taxes pursuant to this section paid the underpaid taxes, the owner may assert a valid defense for a refund pursuant to G.S. 105-381 , as a tax imposed through clerical error. Interest on the refund shall be calculated at a rate of five percent (5%) per annum from the date the owner asserting the defense paid the underpaid taxes until the date the refund is issued.”

§ 105-366. Remedies against personal property.

  1. Authority to Proceed against Personal Property; Relation between Remedies against Personal Property and Remedies against Real Property. —  All tax collectors shall have authority to proceed against personal property to enforce the collection of taxes as provided in this section and in G.S. 105-367 and 105-368. Any tax collector may, in his discretion, proceed first against personal property before employing the remedies for enforcing the lien for taxes against real property, and he shall proceed first against personal property:
    1. When directed to do so by the governing body of the taxing unit; or
    2. When requested to do so by the taxpayer or by a mortgagee or other person holding a lien upon the real property subject to the lien for taxes if the person making the request furnishes the tax collector with a written statement describing the personal property to be proceeded against and giving its location.No foreclosure of a tax lien on real property may be attacked as invalid on the ground that payment of the tax should have been procured from personal property.
  2. Remedies after Taxes Are Delinquent. —  At any time after taxes are delinquent and before the filing of a tax foreclosure complaint under G.S. 105-374 or the docketing of a judgment for taxes under G.S. 105-375 , and subject to the provisions of G.S. 105-356 governing the priority of liens, the tax collector may levy upon and sell or attach the following property for failure to pay taxes:
    1. Any personal property owned by the taxpayer, regardless of the time at which it was acquired and regardless of the existence or date of creation of mortgages or other liens thereon.
    2. Any personal property transferred by the taxpayer to a relative (which shall mean any parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, or nephew, or their spouses, of the taxpayer or his spouse).
    3. Personal property in the hands of a receiver for the taxpayer. (It shall not be necessary for the tax collector to apply for an order of the court directing payment or authorizing the levy or attachment, but he may proceed as though the property were not in the hands of the receiver, and the tax collector’s filing of a claim in a receivership proceeding shall not preclude him from proceeding to levy under G.S. 105-367 or to attach under G.S. 105-368 .)
    4. Personal property of a deceased taxpayer if the levy or attachment is made before final settlement of the estate.
    5. The stock of goods or fixtures of a wholesale merchant or retailer, as defined in G.S. 105-164.3 , in the hands of a purchaser or transferee thereof, or any other personal property of the purchaser or transferee of the property, if the taxes on the goods or fixtures remain unpaid 30 days after the date of the sale or transfer. In the case of other personal property of the purchaser or transferee, the levy or attachment must be made within six months of the sale or transfer.
    6. Personal property of the taxpayer that has been repossessed by one having a security interest therein so long as the property remains in the hands of the person who has repossessed it or the person to whom it has been transferred other than by bona fide sale for value.
    7. Personal property due the taxpayer or to become due to him within the calendar year.
    8. Personal property of a partner in satisfaction of taxes on partnership property, but only after the tax collector:
      1. Has sold the taxing unit’s lien for taxes against the partnership real property, if any; and
      2. Exhausted the partnership’s personal property through the use of levy and attachment and garnishment; and
      3. Exercised the authority granted him by G.S. 105-364 in an effort to collect the tax due on the partnership’s property.
    9. Personal property transferred by the taxpayer by any type of transfer other than those mentioned in this subsection (b) and other than by bona fide sale for value if the levy or attachment is made within six months of the transfer.
  3. Remedies Before Taxes Are Delinquent. —  If between the date as of which property is to be listed and January 6 of the fiscal year for which the taxes are imposed the tax collector has reasonable grounds for believing that the taxpayer is about to remove his property from the taxing unit or transfer it to another person or is in imminent danger of becoming insolvent, the tax collector may levy on or attach that property or any other personal property of the taxpayer, in the manner provided in G.S. 105-367 and 105-368. If the amount of taxes collected under this subsection has not yet been determined, these taxes shall be computed in accordance with G.S. 105-359 and any applicable discount shall be allowed.
  4. Remedies against Sellers and Purchasers of Stocks of Goods or Fixtures of Wholesale Merchants or Retailers. —
    1. Any wholesale merchant or retailer, as defined in G.S. 105-164.3 , who sells or transfers the major part of its stock of goods, materials, supplies, or fixtures, other than in the ordinary course of business, or who goes out of business, must take the following actions:
      1. At least 48 hours prior to the date of the pending sale, transfer, or termination of business, give notice to the assessors and tax collectors of the taxing units in which the business is located.
      2. Within 30 days of the sale, transfer, or termination of business, pay all taxes due or to become due on the transferred property on the first day of September of the current calendar year.
    2. Any person to whom the major part of the stock of goods, materials, supplies, or fixtures of a wholesale merchant or retailer is sold or transferred, other than in the ordinary course of business, or who becomes the successor in business of a wholesale merchant or retailer shall withhold from the purchase money paid to the merchant an amount sufficient to pay the taxes due or to become due on the transferred property on the first day of September of the current calendar year until the former owner or seller produces either a receipt from the tax collector showing that the taxes have been paid or a certificate that no taxes are due. If the purchaser or successor in business fails to withhold a sufficient amount of the purchase money to pay the taxes as required by this subsection and the taxes remain unpaid after the 30-day period allowed, the purchaser or successor is personally liable for the amount of the taxes unpaid. This liability may be enforced by means of a civil action brought in the name of the taxing unit against the purchaser or successor in an appropriate trial division of the General Court of Justice in the county in which the taxing unit is located.
    3. Whenever any wholesale merchant or retailer sells or transfers the major part of its stock of goods, materials, supplies, or fixtures, other than in the ordinary course of business, or goes out of business and the taxes due or to become due on the transferred property on the first day of September of the current calendar year are unpaid, the tax collector, to enforce collection of the unpaid taxes, may do any of the following:
      1. Levy on or attach any personal property of the seller.
      2. If the taxes remain unpaid 30 days after the date of the transfer or termination of business, levy on or attach any of the property transferred in the hands of the transferee or successor in business, or any other personal property of the transferee or successor in business, but in either case the levy or attachment must be made within six months of the transfer or termination of business.
    4. In using the remedies provided in this subsection, the amount of taxes not yet determined shall be computed in accordance with G.S. 105-359 , and any applicable discount shall be allowed.

History. 1939, c. 310, s. 1713; 1951, c. 1141, s. 1; 1955, cc. 1263, 1264; 1957, c. 1414, ss. 2-4; 1969, c. 305; c. 1029, s. 1; 1971, c. 806, s. 1; 1973, c. 564, s. 1; 1987, c. 45, s. 1; c. 93, s. 3; 1998-98, ss. 112, 113.

CASE NOTES

Constitutionality. —

This section and G.S. 105-368 , enabling a city to garnish defendant taxpayer’s bank account for taxes due on a bulk sale without prior notice or hearing, do not violate the due process or equal protection rights of the taxpayer as guaranteed by the Constitutions of the United States and this State. Town of Hudson v. Martin-Kahill Ford Lincoln Mercury, Inc., 54 N.C. App. 272, 283 S.E.2d 417, 1981 N.C. App. LEXIS 2837 (1981).

Sale by Assignee for Benefit of Creditors Prior to Levy. —

Where an assignee for the benefit of the creditors of a taxpayer sells personal property of his assignor, on which a tax had been assessed, but not levied, prior to the assignment, the proceeds in the hands of the assignee are not subject to garnishment for the payment of the tax, but belong to the creditors. Town of Shelby v. Tiddy, 118 N.C. 792 , 24 S.E. 521, 1896 N.C. LEXIS 136 (1896).

Tax list in the hands of a tax collector is equivalent to an execution, and the tax collector, in lieu of selling real estate for the collection of taxes due thereon, may seize personal property belonging to the taxpayer and sell same or so much thereof as may be necessary for the satisfaction of all taxes due by the taxpayer. Town of Apex v. Templeton, 223 N.C. 645 , 27 S.E.2d 617, 1943 N.C. LEXIS 340 (1943).

Notice of Place Where Property Will be Sold. —

Notice that a county would conduct a tax sale at a “storage location” to collect taxes due on a mobile home did not provide specificity required by G.S. 1-339.51 , and the trial court properly invalidated the sale of a home that was valued at $50,000, but was sold for $5,000. Oakwood Acceptance Corp., LLC v. Massengill, 162 N.C. App. 199, 590 S.E.2d 412, 2004 N.C. App. LEXIS 118 (2004).

OPINIONS OF ATTORNEY GENERAL

When merchant transfers goods without paying personal property tax, and when taxing unit fails to levy on the property within six months, the purchaser becomes personally liable. See opinion of Attorney General to Mr. Fred P. Parker, Jr., 41 N.C. Op. Att'y Gen. 482 (1971).

§ 105-367. Procedure for levy.

  1. The levy upon the sale of tangible personal property for tax collection purposes (including levy and sale fees) shall be governed by the laws regulating levy and sale under execution except as otherwise provided in this section.
  2. The tax collector or any duly appointed deputy tax collector shall make the levy and conduct the sale; it shall not be necessary for the sheriff to make the levy or conduct the sale. However, upon the authorization of the governing body of the taxing unit, the tax collector may direct an execution against personal property for taxes to the sheriff in the case of county or municipal taxes or to a municipal policeman in the case of municipal taxes. In either case the officer to whom the execution is directed shall proceed to levy on and sell the personal property subject to levy in the manner and with the powers and authority normally exercised by sheriffs in levying upon and selling personal property under execution.
  3. In addition to the notice of sale required by the laws governing sale of property levied upon under execution, the tax collector may advertise the sale in any reasonable manner and for any reasonable period of time he deems necessary to produce an adequate bid for the property. The taxing unit shall advance the cost of all advertising.
  4. Levy and sale fees, plus actual advertising costs, shall be added to and collected in the same manner as taxes. The advertising costs, when collected, shall be used to reimburse the taxing unit for advertising costs it has advanced. Levy and sale fees, when collected, shall be treated in the same manner as other fees received by the collecting official.

History. 1939, c. 310, s. 1713; 1951, c. 1141, s. 1; 1955, cc. 1263, 1264; 1957, c. 1414, ss. 2-4; 1969, c. 305; c. 1029, s. 1; 1971, c. 806, s. 1.

CASE NOTES

Notice of Place Where Property Will be Sold. —

Notice that a county would conduct a tax sale at a “storage location” to collect taxes due on a mobile home did not provide specificity required by G.S. 1-339.51 , and the trial court properly invalidated the sale of a home that was valued at $50,000, but was sold for $5,000. Oakwood Acceptance Corp., LLC v. Massengill, 162 N.C. App. 199, 590 S.E.2d 412, 2004 N.C. App. LEXIS 118 (2004).

§ 105-368. Procedure for attachment and garnishment.

  1. Subject to the provisions of G.S. 105-356 governing the priority of the lien acquired, the tax collector may attach wages and other compensation, rents, bank deposits, the proceeds of property subject to levy, or any other intangible personal property, including property held in the Escheat Fund, in the circumstances and to the extent prescribed in G.S. 105-366(b), (c), and (d).In the case of property due the taxpayer or to become due to him within the current calendar year, the person owing the property to the taxpayer or having the property in his possession shall be liable for the taxes to the extent of the amount he owes or has in his possession. However, when wages or other compensation for personal services is attached, the garnishee shall not pay to the tax collector more than ten percent (10%) of such compensation for any one pay period.
  2. To proceed under this section, the tax collector shall serve or cause to be served upon the taxpayer and the person owing or having in his possession the wages, rents, debts or other property sought to be attached a notice as provided by this subsection. The notice may be personally served by any deputy or employee of the tax collector or by any officer having authority to serve summonses, or may be served in any manner provided in Rule 4 of the North Carolina Rules of Civil Procedure. The notice shall contain:
    1. The name of the taxpayer, and if known his Social Security number or federal tax identification number and his address.
    2. The amount of the taxes, penalties, interest, and costs (including the fees allowed by this section) and the year or years for which the taxes were imposed.
    3. The name of the taxing unit or units by which the taxes were levied.
    4. A brief description of the property sought to be attached.
    5. A copy of the applicable law, that is, G.S. 105-366 and 105-368. Notices concerning two or more taxpayers may be combined if they are to be served upon the same garnishee, but the taxes, penalties, interest, and costs charged against each taxpayer must be set forth separately.
  3. If the garnishee has no defense to offer or no setoff against the taxpayer, he shall within 10 days after service of the notice answer it by sending to the tax collector by registered or certified mail a statement to that effect, and if the amount demanded by the tax collector is then due to the taxpayer or subject to his demand, the garnishee shall remit it to the tax collector with his statement; but if the amount due to the taxpayer or subject to his demand is to mature in the future, the garnishee’s statement shall set forth that fact, and the demand shall be paid to the tax collector upon maturity. Any payment by the garnishee under the provisions of this subsection (c) shall completely satisfy any liability therefor on his part to the taxpayer.
  4. If the garnishee has a defense or setoff against the taxpayer, he shall state it in writing under oath, and, within 10 days after service of the garnishment notice, he shall send two copies of his statement to the tax collector by registered or certified mail. If the tax collector admits the defense or setoff, he shall so advise the garnishee in writing within 10 days after receipt of the garnishee’s statement, and the attachment or garnishment shall thereupon be discharged to the amount required by the defense or setoff, and any amount attached or garnished which is not affected by the defense or setoff shall be remitted to the tax collector as provided in subsection (c), above.If the tax collector does not admit the defense or setoff, he shall set forth in writing his objections thereto and send a copy thereof to the garnishee within 10 days after receipt of the garnishee’s statement, or within such further time as may be agreed on by the garnishee, and at the same time the tax collector shall file a copy of the notice of garnishment, a copy of the garnishee’s statement, and a copy of the tax collector’s objections thereto in the appropriate division of the General Court of Justice of the county in which the garnishee resides or does business, where the issues made shall be tried as in civil actions.
  5. If the garnishee has not responded to the notice of garnishment as required by subsections (c) and (d), above, within 15 days after service of the notice, the tax collector may file in the appropriate division of the General Court of Justice of the county in which the garnishee resides a copy of the notice of garnishment, accompanied by a written statement that the garnishee has not responded thereto and a request for judgment, and the issues shall be tried as in civil actions.
  6. The taxpayer may raise any defenses to the attachment or garnishment that he may have in the manner provided in subsection (d), above, for the garnishee.
  7. The fee for serving a notice of garnishment shall be the same as that charged in a civil action. If judgment is entered in favor of the taxing unit by default or after hearing, the garnishee shall become liable for the taxes, penalties, and interest due by the taxpayer, plus the fees and costs of the action, but payment shall not be required from amounts which are not to become due to the taxpayer until they actually come due. The garnishee may satisfy the judgment upon paying the amount thereof, and if he fails to do so, execution may issue as provided by law. From any judgment or order entered, either the taxing unit or the garnishee may appeal as provided by law. If, before or after judgment, adequate security is filed for the payment of the taxes, penalties, interest, and costs, the tax collector may release the attachment or garnishment, or execution may be stayed at the request of the tax collector pending appeal, but the final judgment shall be paid or enforced as above provided. If judgment is rendered against the taxing unit, it shall pay the fees and costs of the action. All fees collected by officers shall be disposed of in the same manner as other fees collected by such officers.
  8. Tax collectors may proceed against the wages, salary, or other compensation of officials and employees of this State and its agencies, instrumentalities, and political subdivisions in the manner provided in this section. If the taxpayer is an employee of the State, the notice of attachment shall be served upon him and upon the head or chief fiscal officer of the department, agency, instrumentality, or institution by which he is employed. If the taxpayer is an employee of a political subdivision of the State (county, municipality, etc.), the notice of attachment shall be served upon him and upon the officer charged with making up the payrolls of the political subdivision by which he is employed. All deductions from the wages or salary of a taxpayer made pursuant to this subsection (h) and remitted to the tax collector shall, pro tanto, constitute a satisfaction of the salary or wages due the taxpayer.
    1. Any person who, after written demand therefor, refuses to give the tax collector or assessor a list of the names and addresses of all of his employees who may be liable for taxes, shall be guilty of a Class 1 misdemeanor.
    2. Any tax collector or assessor who receives, upon his written demand, any list of employees may not release or furnish that list or any copy thereof, or disclose any name or information thereon, to any other person, and may not use that list in any manner or for any purpose not directly related to and in furtherance of the collection and foreclosure of taxes. Any tax collector or assessor who violates or allows the violation of this subdivision (i)(2) shall be guilty of a Class 1 misdemeanor.

History. 1939, c. 310, s. 1713; 1951, c. 1141, s. 1; 1955, cc. 1263, 1264; 1957, c. 1414, ss. 2-4; 1969, c. 305; c. 1029, s. 1; 1971, c. 806, s. 1; 1979, c. 103, ss. 3, 4; 1979, 2nd Sess., c. 1085, s. 2; 1981, c. 76, s. 1; 1987, c. 45, s. 1; 1989, c. 580, s. 2; 1993, c. 539, s. 724; 1994, Ex. Sess., c. 24, s. 14(c).

CASE NOTES

Constitutionality. —

G.S. 105-366 and this section, enabling a city to garnish defendant taxpayer’s bank account for taxes due on a bulk sale without prior notice or hearing, do not violate the due process or equal protection rights of the taxpayer as guaranteed by the Constitutions of the United States and this State. Town of Hudson v. Martin-Kahill Ford Lincoln Mercury, Inc., 54 N.C. App. 272, 283 S.E.2d 417, 1981 N.C. App. LEXIS 2837 (1981).

Proper notice under this statute is a prerequisite to a valid attachment. City of Durham v. Herndon, 61 N.C. App. 275, 300 S.E.2d 460, 1983 N.C. App. LEXIS 2643 (1983).

Where the notice states the amount of taxes, penalties, interest, and assessments, the requirement of the statute even though the amount stated is not divided specifically into the stated categories and although the notice does not contain the year or years for which the taxes were imposed, this omission is not fatal since giving notice to those whose property is attached, which is the purpose of the statute. City of Durham v. Herndon, 61 N.C. App. 275, 300 S.E.2d 460, 1983 N.C. App. LEXIS 2643 (1983).

To require the bank to establish priority by exercising the right to setoff before receiving notice of attachment would necessitate the senseless practice of requiring a garnishee bank to anticipate which accounts might potentially be attached in order to avoid losing its right to the property upon receipt of notice of attachment. In re Taxes of Bob Dance Chevrolet, 67 N.C. App. 509, 313 S.E.2d 207, 1984 N.C. App. LEXIS 3093 (1984).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. J. Troy Smith, Jr., 42 N.C. Op. Att'y Gen. 296 (1973).

Home addresses of State employees may be obtained by ad valorem tax collectors pursuant to subsection (i) of this section. See opinion of Attorney General to Dr. Sarah T. Morrow, Secretary, Department of Human Resources, 52 N.C. Op. Att'y Gen. 85 (1983).

§ 105-369. Advertisement of tax liens on real property for failure to pay taxes.

  1. Report of Unpaid Taxes That Are Liens on Real Property. —  In February of each year, the tax collector must report to the governing body the total amount of unpaid taxes for the current fiscal year that are liens on real property. A county tax collector’s report is due the first Monday in February, and a municipal tax collector’s report is due the second Monday in February. Upon receipt of the report, the governing body must order the tax collector to advertise the tax liens. For purposes of this section, district taxes collected by county tax collectors shall be regarded as county taxes and district taxes collected by municipal tax collectors shall be regarded as municipal taxes.
  2. Repealed by Session Laws 1983 (Regular Session, 1984), c. 1013.

    (b1) Notice to Owner. — After the governing body orders the tax collector to advertise the tax liens, the tax collector must send a notice to the record owner of each affected parcel of property, as determined as of the date the taxes became delinquent. The notice must be sent to the owner’s last known address by first-class mail at least 30 days before the date the advertisement is to be published. The notice must state the principal amount of unpaid taxes that are a lien on the parcel to be advertised and inform the owner that the name of the record owner as of the date the taxes became delinquent will appear in a newspaper advertisement of delinquent taxes if the taxes are not paid before the publication date. Failure to mail the notice required by this section to the correct record owner does not affect the validity of the tax lien or of any foreclosure action.

  3. Time and Contents of Advertisement. —  A tax collector’s failure to comply with this subsection does not affect the validity of the taxes or tax liens. The county tax collector shall advertise county tax liens by posting a notice of the liens at the county courthouse and by publishing each lien at least one time in one or more newspapers having general circulation in the taxing unit. The municipal tax collector shall advertise municipal tax liens by posting a notice of the liens at the city or town hall and by publishing each lien at least one time in one or more newspapers having general circulation in the taxing unit. Advertisements of tax liens shall be made during the period March 1 through June 30. The costs of newspaper advertising shall be paid by the taxing unit. If the taxes of two or more taxing units are collected by the same tax collector, the tax liens of each unit shall be advertised separately unless, under the provisions of a special act or contractual agreement between the taxing units, joint advertisement is permitted.The posted notice and newspaper advertisement shall set forth the following information:
    1. Repealed by Session Laws 2006-106, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2006.

      (1a) The name of the record owner as of the date the taxes became delinquent for each parcel on which the taxing unit has a lien for unpaid taxes, in alphabetical order.

      (1b) After the information required by subdivision (1a) of this subsection for each parcel, a brief description of each parcel of land to which a lien has attached and a statement of the principal amount of the taxes constituting a lien against the parcel.

    2. A statement that the amounts advertised will be increased by interest and costs and that the omission of interest and costs from the amounts advertised will not constitute waiver of the taxing unit’s claim for those items.
    3. In the event the list of tax liens has been divided for purposes of advertisement in more than one newspaper, a statement of the names of all newspapers in which advertisements will appear and the dates on which they will be published.
    4. A statement that the taxing unit may foreclose the tax liens and sell the real property subject to the liens in satisfaction of its claim for taxes.
  4. Costs. —  Each parcel of real property advertised pursuant to this section shall be assessed an advertising fee to cover the actual cost of the advertisement. Actual advertising costs per parcel shall be determined by the tax collector on any reasonable basis. Advertising costs assessed pursuant to this subsection are taxes.
  5. Payments during Advertising Period. —  At any time during the advertisement period, any parcel may be withdrawn from the list by payment of the taxes plus interest that has accrued to the time of payment and a proportionate part of the advertising fee to be determined by the tax collector. Thereafter, the tax collector shall delete that parcel from any subsequent advertisement, but the tax collector is not liable for failure to make the deletion.
  6. Listing and Advertising in Wrong Name. —  No tax lien is void because the real property to which the lien attached was listed or advertised in the name of a person other than the person in whose name the property should have been listed for taxation if the property was in other respects correctly described on the abstract or in the advertisement.
  7. Wrongful Advertisement. —  Any tax collector or deputy tax collector who willfully advertises any tax lien knowing that the property is not subject to taxation or that the taxes advertised have been paid is guilty of a Class 3 misdemeanor, and shall be required to pay the injured party all damages sustained in consequence.

History. 1939, c. 310, s. 1715; 1955, c. 993; 1971, c. 806, s. 1; 1983, c. 808, s. 1; 1983 (Reg. Sess., 1984), c. 1013; 1993, c. 539, s. 725; 1994, Ex. Sess., c. 24, s. 14(c); 1999-439, s. 1; 2000-140, s. 73; 2006-106, s. 2.

Editor’s Note.

Subdivision (b1) has been designated as such at the direction of the Revisor of Statutes.

Session Laws 1983, c. 808, which rewrote this section, provided in s. 12 that the act would not affect the validity of any tax lien sale held before July 1, 1983, and in s. 13 provided: “Anything in this act to the contrary notwithstanding, any person, firm, or corporation who purchased or took assignment of a tax lien sale certificate before July 1, 1983, pursuant to statutes amended or repealed by this act may initiate a foreclosure action under G.S. 105-374 no earlier than six months after the date of the original lien sale.”

Effect of Amendments.

Session Laws 2006-106, s. 2, effective for taxes imposed for taxable years beginning on or after July 1, 2006, rewrote subsection (b1); repealed subdivision (c)(1); and rewrote subdivision (c)(1a).

CASE NOTES

Judgment Is Lien on All Property Owned by Debtor. —

A judgment for taxes is a lien on all of the property owned by the judgment debtor in the county. Goldsboro Milling Co. v. Reaves, 804 F. Supp. 762, 1991 U.S. Dist. LEXIS 20950 (E.D.N.C. 1991).

Power to sell real estate for taxes was repealed by Session Laws 1939, c. 310, and the sheriff or tax collector is limited to the sale of the tax lien. Crandall v. Clemmons, 222 N.C. 225 , 22 S.E.2d 448, 1942 N.C. LEXIS 70 (1942).

Tax lien can be enforced only by an action in the county in which the land is situated in the nature of an action to foreclose a mortgage. Crandall v. Clemmons, 222 N.C. 225 , 22 S.E.2d 488 (1942). See G.S. 105-374 and G.S. 105-375 .

Newspaper Must Meet “General Circulation” Requirements of Both Subsection (d) and G.S. 1-597 . —

In order to qualify to publish notices of tax lien sales a newspaper must meet the “general circulation” requirements of both subsection (d) of this section, and G.S. 1-597 . Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

Reading both G.S. 1-597 and subsection (d) of this section together and giving effect to each, in order for a newspaper to qualify to publish notices of tax lien sales it must be a newspaper of general circulation to actual paid subscribers in the taxing unit. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

This Section and G.S. 1-597 Do Not Conflict. —

The “general circulation” provision in subsection (d) of this section does not conflict with its counterpart in G.S. 1-597 . It simply specifies the geographic area, i.e., “the taxing unit” in which there must be a newspaper of general circulation and the times at which publication must be made. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

General Circulation to Actual Paid Subscribers in Taxing Unit. —

For a newspaper to be one of general circulation to actual paid subscribers in the taxing unit it must meet a four-pronged test: first, it must have a content that appeals to the public generally; second, it must have more than a de minimis number of actual paid subscribers in the taxing unit; third, its paid subscriber distribution must not be entirely limited geographically to one community, or section, of the taxing unit; and fourth, it must be available to anyone in the taxing unit who wishes to subscribe to it. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

Contents Are Primary Consideration. —

The term “general circulation,” when applied to newspapers, refers not so much to the numerical or geographic distribution of the newspaper as it does to the contents of the paper itself. The primary consideration is whether the newspaper contains information of general interest. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

But Quantitative Aspects Also Considered. —

Although courts have focused on content in defining “general circulation,” the term is not devoid of quantitative aspects. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

More Than De Minimis Number of Readers Required. —

In order to satisfy the quantitative considerations inherent in the term “general circulation,” a newspaper must enjoy more than a de minimis number of readers in the taxing unit; this number must not be so insignificant that the newspaper simply fails to reach a diverse group of people in the area prescribed. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

Need for more than de minimis number of paid subscribers does not mean that those subscribers must be evenly distributed in every city, town or section of the county or taxing unit, nor must publication be in the paper with the widest geographical distribution in the county. Neither G.S. 1-597 nor subsection (d) of this section so require. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

Whether newspaper has de minimis number of subscribers must always be determined in context. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

Only Actual Paid Subscribers May Be Considered. —

To determine whether more than a de minimis number of readers exists, only actual paid subscribers may be considered. Great S. Media, Inc. v. McDowell County, 304 N.C. 427 , 284 S.E.2d 457, 1981 N.C. LEXIS 1356 (1981).

Cancellation of Lien on Specific Parcel. —

Any time before the taxes have been reduced to a judgment, one may pay the real property taxes accrued on a specific parcel, with a pro-rata portion of any personal property taxes and advertising expenses, and have that parcel released from all tax liens. Goldsboro Milling Co. v. Reaves, 804 F. Supp. 762, 1991 U.S. Dist. LEXIS 20950 (E.D.N.C. 1991).

§§ 105-370 through 105-372. [Repealed]

Repealed by Session Laws 1983, c. 808, ss. 2-4.

Editor’s Note.

Session Laws 1983, c. 808, s. 12, provided that the act would not affect the validity of any tax lien sale held before July 1, 1983.

Session Laws 1983, c. 808, s. 13, provided: “Anything in this act to the contrary notwithstanding, any person, firm, or corporation who purchased or took assignment of a tax lien sale certificate before July 1, 1983, pursuant to statutes amended or repealed by this act may initiate a foreclosure action under G.S. 105-374 no earlier than six months after the date of the original lien sale.”

§ 105-373. Settlements.

  1. Annual Settlement of Tax Collector. —
    1. Preliminary Report. —  After July 1 and before a tax collector is charged with taxes for the current fiscal year, the tax collector shall make a sworn report to the governing body of the taxing unit showing all of the following:
      1. A list of the persons owning real property whose taxes for the preceding fiscal year remain unpaid and the principal amount owed by each person.
      2. A list of the persons not owning real property whose personal property taxes for the preceding fiscal year remain unpaid and the principal amount owed by each person. To this list the tax collector shall append a statement under oath that the tax collector has made diligent efforts to collect the taxes due from the persons listed out of their personal property and by other means available for collection, and the tax collector shall report any other information concerning these taxpayers that may be of interest to or required by the governing body, including a report of the tax collector’s efforts to make collection outside the taxing unit under G.S. 105-364 . The governing body of the taxing unit may publish this list in any newspaper in the taxing unit. The cost of publishing this list shall be paid by the taxing unit.
    2. Insolvents. —  Upon receiving the report required by subdivision (a)(1) of this section, the governing body of the taxing unit shall enter upon its minutes the names of persons owing taxes, but that listed no real property, that it finds to be insolvent, and it shall by resolution designate the list entered in its minutes as the insolvent list to be credited to the tax collector in the tax collector’s settlement.
    3. Settlement for Current Taxes. —  After July 1 and before a tax collector is charged with taxes for the current fiscal year, the tax collector shall make full settlement with the governing body of the taxing unit for all taxes in the tax collector’s hands for collection for the preceding fiscal year. The following charges and credits apply:
      1. In the settlement the tax collector shall be charged with all of the following:
        1. The total amount of all taxes in the tax collector’s hands for collection for the year, including amounts originally charged to the tax collector and all amounts subsequently charged on account of discoveries.
        2. All penalties, interest, and costs collected by the tax collector in connection with taxes for the current year.
        3. All other sums collected by the tax collector.
      2. The tax collector shall be credited with all of the following:
        1. All sums representing taxes for the year deposited by the tax collector to the credit of the taxing unit or receipted for by a proper official of the unit.
        2. Releases duly allowed by the governing body.
        3. The principal amount of taxes constituting liens on real property.
        4. The principal amount of taxes included in the insolvent list determined in accordance with subdivision (a)(2) of this section.
        5. Discounts allowed by law.
        6. Commissions, if any, lawfully payable to the tax collector as compensation.
        7. The principal amount of taxes for any assessment appealed to the Property Tax Commission when the appeal has not been finally adjudicated.The tax collector shall be liable on the tax collector’s bond for both honesty and faithful performance of duty; for any deficiencies; and, in addition, for all criminal penalties provided by law.The settlement, together with the action of the governing body with respect to it, shall be entered in full upon the minutes of the governing body.
    4. Disposition of Tax Receipts after Settlement. —  Uncollected taxes allowed as credits in the settlement prescribed in subdivision (a)(3) of this section, whether represented by tax liens held by the taxing unit or included in the list of insolvents, shall, for purposes of collection, be recharged to the tax collector or charged to some other person designated by the governing body of the taxing unit under statutory authority. The person charged with uncollected taxes shall take the following actions:
      1. Give bond satisfactory to the governing body.
      2. Receive the tax receipts and tax records representing the uncollected taxes.
      3. Have and exercise all powers and duties conferred or imposed by law upon tax collectors.
      4. Receive compensation as determined by the governing body.
  2. Settlements for Delinquent Taxes. —  Annually, at the time prescribed for the settlement provided in subdivision (a)(3) of this section, all persons having in their hands for collection any taxes for years prior to the year involved in the settlement shall settle with the governing body of the taxing unit for collections made on each prior year’s taxes. The settlement for the taxes for prior years shall be made in whatever form is satisfactory to the chief accounting officer and the governing body of the taxing unit, and it shall be entered in full upon the minutes of the governing body.
  3. Settlement at End of Term. —  At the end of a tax collector’s last term of office, the tax collector shall, on the last business day of the term, make full and complete settlement for all taxes, current or delinquent, in the tax collector’s hands and deliver the tax records, tax receipts, and accounts to the successor in office. The settlement shall be made in whatever form is satisfactory to the chief accounting officer and the governing body of the taxing unit, and it shall be entered in full upon the minutes of the governing body.
  4. Settlement upon Vacancy during Term. —  When a tax collector voluntarily resigns, the tax collector shall, upon the last day in office, make full settlement in the manner provided in subsection (c) of this section for all taxes in the tax collector’s hands for collection. In default of a settlement, or in case of a vacancy occurring during a term for any reason, it shall be the duty of the chief accounting officer or, in the discretion of the governing body, of some other qualified person appointed by it immediately to prepare and submit to the governing body a report in the nature of a settlement made on behalf of the former tax collector. The report, together with the governing body’s action with respect to it, shall be entered in full upon the minutes of the governing body. Whenever a settlement is made on behalf of a former tax collector, the governing body may deliver the tax receipts and tax records to a successor collector immediately upon the occurrence of the vacancy, or it may make whatever temporary arrangements for the collection of taxes as may be expedient, but in no event shall any person be permitted to collect taxes until the person has given bond satisfactory to the governing body.
  5. Effect of Approval of Settlement. —  Approval of any settlement by the governing body does not relieve the tax collector or the tax collector’s bondsmen of liability for any shortage actually existing at the time of the settlement and thereafter discovered; nor does it relieve the collector of any criminal liability.
  6. Penalties. —  In addition to any other civil or criminal penalties provided by law, any member of a governing body of a taxing unit, tax collector, or chief accounting officer who fails to perform any duty imposed by this section is guilty of a Class 1 misdemeanor.
  7. Relief from Collecting Insolvents. —  The governing body of any taxing unit may, in its discretion, relieve the tax collector of the charge of taxes owed by persons on the insolvent list that are five or more years past due when it appears to the governing body that the taxes are uncollectible.
  8. Relief from Collecting Taxes on Classified Motor Vehicles. —  The board of county commissioners may, in its discretion, relieve the tax collector of the charge of taxes on classified motor vehicles listed pursuant to G.S. 105-330.3(a) that are one year or more past due when it appears to the board that the taxes are uncollectible. This relief, when granted, shall include municipal and special district taxes charged to the collector.

History. 1939, c. 310, s. 1719; 1945, c. 635; 1947, c. 484, ss. 3, 4; 1951, c. 300, s. 1; c. 1036, s. 1; 1953, c. 176, s. 2; 1955, c. 908; 1967, c. 705, s. 1; 1971, c. 806, s. 1; 1983, c. 670, s. 22; c. 808, ss. 5-7; 1987, c. 16; 1991, c. 624, s. 3; 1991 (Reg. Sess., 1992), c. 961, s. 10; 1993, c. 539, s. 726; 1994, Ex. Sess., c. 24, s. 14(c); 1997-456, s. 27; 2006-30, s. 7; 2021-91, s. 3(c).

Editor’s Note.

Session Laws 1983, c. 808, which amended this section, provided in s. 12 that the act would not affect the validity of any tax lien sale held before July 1, 1983, and in s. 13 provided: “Anything in this act to the contrary notwithstanding, any person, firm, or corporation who purchased or took assignment of a tax lien sale certificate before July 1, 1983, pursuant to statutes amended or repealed by this act may initiate a foreclosure action under G.S. 105-374 no earlier than six months after the date of the original lien sale.”

In subdivision (a)(3), the first subdivisions (a)(3)a. through (a)(3)c. were redesignated as subdivisions (a)(3)a.1. through (a)(3)a.3., and the second subdivisions (a)(3)a. through (a)(3)f. were redesignated as subdivisions (a)(3)b.1. through (a)(3)b.6. pursuant to Session Laws 1997-456, s. 27, which authorized the Revisor of Statutes to renumber or reletter sections and parts of sections having a number or letter designations that is incompatible with the General Assembly’s computer database.

Effect of Amendments.

Session Laws 2006-30, s. 7, effective June 29, 2006, added subdivision (a)(3)b.7; and made related changes.

Session Laws 2021-91, s. 3(c), effective October 1, 2021, rewrote the section.

CASE NOTES

Legislative Power to Penalize. —

The legislature has the power to impose penalties on the tax collector for his delay or failure to make settlement with the proper county authorities within a stated time. The power to coerce prompt collection and settlement of taxes is no less necessary than the power to levy and assess them, and both are essential to the maintenance of the government. State ex rel. Lovingood v. Gentry, 183 N.C. 825 , 112 S.E. 427, 1922 N.C. LEXIS 378 (1922).

An extension of time, within which a sheriff may settle State taxes, does not exonerate the sureties upon his bond. Worth v. Cox, 89 N.C. 44 , 1883 N.C. LEXIS 174 (1883) (decided under former statute).

§ 105-374. Foreclosure of tax lien by action in nature of action to foreclose a mortgage.

  1. General Nature of Action. —  The foreclosure action authorized by this section is in the nature of an action to foreclose a mortgage and shall be instituted in the appropriate division of the General Court of Justice in the county in which the real property is situated.
  2. Tax Lien. —  Taxing units may proceed under this section on the tax lien created by G.S. 105-355(a).
  3. Parties; Summons. —  Each of the following persons shall be made parties and shall be served with a summons in the manner provided by G.S. 1A-1 , Rule 4:
    1. The owner of record and the owner’s spouse, if any.
    2. All other taxing units having tax liens.
    3. All other lienholders of record.
    4. All persons that would be entitled to be made parties to a court action to foreclose a mortgage on the property in which no deficiency judgment is sought.A trustee in a deed of trust shall not be made a party and shall not be served.The fact that the owner of record or any other defendant is a minor, is incompetent, or is under any other disability shall not prevent or delay the foreclosure of the tax lien; and each of these persons shall be made parties and shall be served with a summons in the same manner as in other civil actions.Persons that cannot be located, persons whose names and whereabouts are unknown, and all possible heirs or assignees of these persons may be served by publication; and these persons, their heirs, and assignees may be designated by general description or by fictitious names in the action. (c1) Lienholders Separately Designated. — The word “lienholder” shall appear immediately after the name of each lienholder whose name appears in the caption of any action instituted under this section. This designation is intended to make clear to the public the capacity of these persons that necessitated their having been made parties to the action. Failure to add this designation to captions does not constitute grounds for attacking the validity of an action brought under this section or the title to real property derived from the action.
  4. Complaint as Lis Pendens. —  The complaint in an action brought under this section shall, from the time it is filed in the office of the clerk of superior court, serve as notice of the pendency of the foreclosure action, and every person whose interest in the real property is subsequently acquired or whose interest in the property is subsequently registered or recorded shall be bound by all proceedings taken in the foreclosure action after the filing of the complaint in the same manner as if those persons had been made parties to the action. It is not necessary to have the complaint cross-indexed as a notice of action pending to have the effect prescribed by this subsection.
  5. Subsequent Taxes. —  The complaint in a tax foreclosure action brought under this section by a taxing unit shall, in addition to alleging the tax lien on which the action is based, include a general allegation of subsequent taxes that are or may become a lien on the same real property in favor of the plaintiff unit. Thereafter it shall not be necessary to amend the complaint to incorporate the subsequent taxes by specific allegation. In case of redemption before confirmation of the foreclosure sale, the person redeeming shall be required to pay, before the foreclosure action is discontinued, at least all taxes on the real property that have at the time of discontinuance become due to the plaintiff unit, plus penalties, interest, and costs. Immediately prior to judgment ordering sale in a foreclosure action, if there has been no redemption prior to that time, the tax collector or the attorney for the plaintiff unit shall file in the action a certificate setting forth all taxes that are a lien on the real property in favor of the plaintiff unit, other than taxes the amount of which has not been definitely determined.

    (e1) Taxes Paid by Plaintiff. — Any plaintiff in a tax foreclosure action, other than a taxing unit, may include in the complaint, originally or by amendment, all other taxes and special assessments paid by the plaintiff that were liens on the same real property.

  6. Joinder of Parcels. —  All real property within the taxing unit subject to liens for taxes levied against the same taxpayer for the first year involved in the foreclosure action may be joined in one action. However, if real property is transferred by the listing taxpayer subsequent to the first year involved in the foreclosure action, all subsequent taxes, penalties, interest, and costs for which the property is ordered sold under this Subchapter shall be prorated to the property in the same manner as if payments were being made to release the property from the tax lien under G.S. 105-356(b).
  7. Special Benefit Assessments. —  A cause of action for the foreclosure of the lien of any special benefit assessments may be included in any complaint filed under this section.
  8. Joint Foreclosure by Two or More Taxing Units. —  Liens of different taxing units on the same parcel of real property, representing taxes in the hands of the same tax collector, shall be foreclosed in one action. Liens of different taxing units on the same parcel of real property, representing taxes in the hands of different tax collectors, may be foreclosed in one action in the discretion of the governing bodies of the taxing units.The lien of any taxing unit made a party defendant in any foreclosure action shall be alleged in an answer filed by the taxing unit, and the tax collector of each answering unit shall, prior to judgment ordering sale, file a certificate of subsequent taxes similar to that filed by the tax collector of the plaintiff unit, and the taxes of each answering unit shall be of equal dignity with the taxes of the plaintiff unit. Any answering unit may, in case of payment of the plaintiff unit’s taxes, continue the foreclosure action until all taxes due to it have been paid, and it is not necessary for any answering unit to file a separate foreclosure action or to proceed under G.S. 105-375 with respect to the taxes.If a taxing unit properly served as a party defendant in a foreclosure action fails to answer and file the certificate of subsequent taxes provided for in this subsection, all of its taxes shall be barred by the judgment of sale except to the extent that the purchase price at the foreclosure sale, after payment of costs and of the liens of all taxing units whose liens are properly alleged by complaint or answer and certificates, is sufficient to pay the taxes. However, if a defendant taxing unit is plaintiff in another foreclosure action pending against the same property, or if it has begun a proceeding under G.S. 105-375 , its answer may allege that fact in lieu of alleging its liens, and the court, in its discretion, may order consolidation of the actions or such other disposition of the actions, including disposition of the costs, as it deems advisable. The order may be made by the clerk of the superior court, subject to appeal as provided in G.S. 1-301.1 .
  9. Costs. —  Except as modified by this subsection, costs may be taxed in any foreclosure action brought under this section in the same manner as in other civil actions. When costs are collected, either by payment prior to the sale or upon payment of the purchase price at the foreclosure sale, the fees allowed officers shall be paid to those entitled to receive them. In foreclosure actions in which the plaintiff is a taxing unit, no prosecution bond shall be required.The word “costs,” as used in this subsection, includes a reasonable attorney’s fee for the plaintiff in such amount as the court shall, in its discretion, determine and allow. When a taxing unit is made a party defendant in a tax foreclosure action and files an answer, the court may include in the costs an attorney’s fee for the defendant unit in an amount that the court, in its discretion, determines and allows. The governing body of any taxing unit may, in its discretion, pay a smaller or greater sum than that allowed as costs to its attorney as a suit fee, and the governing body may allow a reasonable commission to its attorney on taxes collected by the attorney. Alternatively, the governing body may arrange with its attorney for the handling of tax foreclosure suits on a salary basis or may make any other reasonable agreement with its attorney. Any arrangement made between a taxing unit and its attorney may provide that attorneys’ fees collected as costs in foreclosure actions shall be collected for the use of the taxing unit.In any foreclosure action in which real property is actually sold after judgment, costs shall include a commissioner’s fee to be fixed by the court, not exceeding five percent (5%) of the purchase price; and in case of redemption between the date of sale and the order of confirmation, the fee shall be added to the amount otherwise necessary for redemption. In case more than one sale is made of the same property in any action, the commissioner’s fee may be based on the highest amount bid, but the commissioner shall not be allowed a separate fee for each such sale. The governing body of any plaintiff unit may request the court to appoint as commissioner a salaried official, attorney, or employee of the unit and, when the requested appointment is made, may require that the commissioner’s fees, when collected, be paid to the plaintiff unit for its use.
  10. Contested Actions. —  Any action brought under this section in which an answer raising an issue requiring trial is filed within the time allowed by law is entitled to a preference as to time of trial over all other civil actions.
  11. Judgment of Sale. —  Any judgment in favor of the plaintiff or any defendant taxing unit in an action brought under this section shall order the sale of the real property or as much as may be necessary for the satisfaction of all of the following:
    1. Taxes adjudged to be liens in favor of the plaintiff, other than taxes the amount of which has not been definitely determined, together with penalties, interest, and costs.
    2. Taxes adjudged to be liens in favor of other taxing units, other than taxes the amount of which has not yet been definitely determined, if those taxes have been alleged in answers filed by the other taxing units, together with penalties, interest, and costs. The judgment shall appoint a commissioner to conduct the sale and shall order that the property be sold in fee simple, free and clear of all interests, rights, claims, and liens whatever, except that the sale shall be subject to (i) taxes the amount of which cannot be definitely determined at the time of the judgment, (ii) taxes and special assessments of taxing units which are not parties to the action, and (iii) in the discretion of the court, taxes alleged in other tax foreclosure actions or proceedings pending against the same real property.In all cases in which no answer is filed within the time allowed by law, and in cases in which answers filed do not seek to prevent sale of the property, the clerk of the superior court may enter the judgment, subject to appeal as provided in G.S. 1-301.1 .
  12. Advertisement of Sale. —  The sale and all necessary resales shall be advertised in the manner provided by Article 29A of Chapter 1 of the General Statutes.
  13. Sale. —  The sale shall be by public auction to the highest bidder and shall, in accordance with the judgment, be held at the courthouse door on any day of the week except a Sunday or legal holiday when the courthouse is closed for transactions. In actions brought by a municipality that is not a county seat, the court may, in its discretion, direct that the sale be held at the city or town hall door.

    (m1) Deposit from Bidder. — The commissioner conducting the sale may, in the commissioner’s discretion, require from any successful bidder a deposit equal to not more than twenty percent (20%) of the bid. In the event that the bidder refuses to take title and a resale becomes necessary, the deposit shall be applied to pay the costs of sale and any loss resulting. Nothing in this subsection deprives the commissioner of the commissioner’s right to sue for specific performance of the contract. No deposit shall be required of a taxing unit that has made the highest bid at the foreclosure sale.

  14. Report of Sale. —  Within three days following the foreclosure sale, the commissioner shall report the sale to the court giving full particulars of the sale.
  15. Exceptions and Increased Bids. —  At any time within 10 days after the commissioner files the report of the foreclosure sale, any person having an interest in the real property may file exceptions to the report, and at any time within that 10-day period, an increased bid may be filed in the amount specified by and subject to the provisions of Article 29A of Chapter 1 of the General Statutes, except as otherwise provided by this section. In the absence of exceptions or increased bids, the court may, whenever it deems it necessary for the best interests of the parties, order resale of the property.
  16. Judgment of Confirmation. —  At any time after the expiration of 10 days from the time the commissioner files the report, if no exception or increased bid has been filed, the commissioner may apply for judgment of confirmation, and in like manner the commissioner may apply for a judgment of confirmation after the court has passed upon exceptions filed, or after any necessary resales have been held and reported and 10 days have elapsed. The judgment of confirmation shall direct the commissioner to deliver the deed upon payment of the purchase price. This judgment may be entered by the clerk of superior court subject to appeal as provided in G.S. 1-301.1 . This judgment shall bear interest at the same rate as a judgment entered under G.S. 105-375 .
  17. Application of Proceeds; Commissioner’s Final Report. —  After delivery of the deed and collection of the purchase price, the commissioner shall apply the proceeds as follows:
    1. First, to payment of all costs of the action, including the commissioner’s fee and the attorney’s fee. The costs shall be paid to the officials or funds entitled to them.
    2. Then to the payment of taxes, penalties, and interest for which the real property was ordered to be sold, and in case the funds remaining are insufficient for this purpose, they shall be distributed pro rata to the various taxing units for whose taxes the property was ordered sold.
    3. Then pro rata to the payment of any special benefit assessments for which the property was ordered sold, together with interest and costs.
    4. Then pro rata to payment of taxes, penalties, interest, and costs of taxing units that were parties to the foreclosure action but that filed no answers in the action.
    5. Then pro rata to payment of special benefit assessments of taxing units that were parties to the foreclosure action but that filed no answers in the action, together with interest and costs.
    6. And any balance then remaining shall be paid in accordance with any directions given by the court and, in the absence of directions, shall be paid into court for the benefit of the persons entitled to it. If the clerk is in doubt as to which person is entitled to the surplus or if any adverse claims are asserted to the surplus, the clerk shall hold the surplus until rights to it are established in a special proceeding pursuant to G.S. 1-339.71 . Within five days after delivering the deed, the commissioner shall make a full report to the court showing delivery of the deed, receipt of the purchase price, and the disbursement of the proceeds, accompanied by receipts evidencing all the disbursements.
  18. Purchase and Resale by Taxing Unit. —  The rights of a taxing unit to purchase real property at a foreclosure sale and resell it are governed by G.S. 105-376 .

History. 1939, c. 310, s. 1719; 1945, c. 635; 1947, c. 484, ss. 3, 4; 1951, c. 300, s. 1; c. 1036, s. 1; 1953, c. 176, s. 2; 1955, c. 908; 1967, c. 705, s. 1; 1971, c. 806, s. 1; 1973, c. 788, s. 1; 1981, c. 580; 1983, c. 808, s. 8; 1999-216, ss. 14-16; 2003-337, s. 11; 2006-106, s. 3; 2021-91, s. 3(a).

Editor’s Note.

Session Laws 1983, c. 808, which amended this section, provided in s. 12 that the act would not affect the validity of any tax lien sale held before July 1, 1983, and in s. 13 provided: “Anything in this act to the contrary notwithstanding, any person, firm, or corporation who purchased or took assignment of a tax lien sale certificate before July 1, 1983, pursuant to statutes amended or repealed by this act may initiate a foreclosure action under G.S. 105-374 no earlier than six months after the date of the original lien sale.”

Session Laws 2021-91, s. 3(e), made the amendments to this section by Session Laws 2021-91, s. 3(a), effective October 1, 2021, and applicable to tax foreclosure actions or proceedings commenced on or after that date.

Effect of Amendments.

Session Laws 2003-337, s. 11, effective October 1, 2003, and applicable to any act required or permitted by law to be done on or after that date, added “when the courthouse is closed for transactions” at the end of the first sentence in subsection (m).

Session Laws 2006-106, s. 3, effective for taxes imposed for taxable years beginning on or after July 1, 2006, in subsection (c), substituted “owner of record as of the date the taxes became delinquent” for “listing taxpayer” and “any subsequent owner” for “the current owner” in the first sentence and substituted “owner of record as of the date the taxes became delinquent, any subsequent owner” for “listing taxpayer” in the first sentence of the second paragraph.

Session Laws 2021-91, s. 3(a), rewrote the section. For effective date and applicability, see editor’s note.

Legal Periodicals.

For survey of 1977 law on taxation, see 56 N.C.L. Rev. 1128 (1978).

CASE NOTES

Analysis

I.General Consideration

Editor’s Note. —

Some of the cases cited below were decided under former similar provisions.

G.S. 105-375 was enacted as an alternative to this section which authorizes tax foreclosures by actions in nature of action to foreclose mortgage. Jenkins v. Richmond County, 99 N.C. App. 717, 394 S.E.2d 258, 1990 N.C. App. LEXIS 819 (1990).

There are two distinct alternate methods provided by statute for the foreclosure of a tax sale certificate or the lien evidenced thereby: 1. After the land has been sold by the tax collector and a certificate of sale has been issued, the purchaser may institute an action to foreclose the lien evidenced by the certificate. This section provides the regulations and procedure respecting an action instituted pursuant to this method. 2. Under G.S. 105-375 the taxing unit may file in the office of the clerk of the superior court a certificate of sale of land to satisfy taxes. Thereupon, the clerk must docket the certificate upon his judgment docket. It then has the full force and effect of a judgment, and execution may issue thereon against the property of the tax debtor. Boone v. Sparrow, 235 N.C. 396 , 70 S.E.2d 204, 1952 N.C. LEXIS 417 (1952).

Prescribed Remedy Optional with State. —

The fact that the Revenue Act prescribes a specific remedy for the collection of taxes does not restrict the State to pursue that method, nor preclude it from seeking the aid of the superior court through a creditor’s suit. The specific remedy pointed out restricts only the officers who collect only the revenue and not the sovereign. State v. Georgia Co., 112 N.C. 34 , 17 S.E. 10, 1893 N.C. LEXIS 161 (1893).

Summary Proceeding Unnecessary. —

Where the legislature has authorized a municipality to collect back taxes, and in an action for that purpose it appears that the taxes of the defendant are due, and were properly assessed against lots of land within the limits of the municipality subject to the lien therefor it is not necessary that the plaintiffs should first have resorted to the summary method of levy and sale, for recourse may be had directly by suit to foreclose the lien, under this section. City of Wilmington v. Moore, 170 N.C. 52 , 86 S.E. 775, 1915 N.C. LEXIS 334 (1915); Muddy Creek Drainage Comm'n v. Epley, 190 N.C. 672 , 130 S.E. 497, 1925 N.C. LEXIS 148 (1925).

Suit for foreclosure of tax liens is a civil action, and not a special proceeding. This is made plain by the specific declaration of this section that “the foreclosure action . . . shall be an action in the nature of an action to foreclose a mortgage.” Chappell v. Stallings, 237 N.C. 213 , 74 S.E.2d 624, 1953 N.C. LEXIS 505 (1953).

Consolidation of Actions. —

Where actions are pending in the same court, at the same time, between the same parties and involving substantially the same facts, they may be consolidated. The principle applies to tax foreclosure suits. McIver Park v. Brinn, 223 N.C. 502 , 27 S.E.2d 548, 1943 N.C. LEXIS 312 (1943).

Effect of Failure of Owners to List Property for Taxes. —

The jurisdiction of the superior court to determine the liability of the land for taxes was not defeated by a finding that the owners — defendants in the action — had not listed the property for taxes. County of Franklin v. Jones, 245 N.C. 272 , 95 S.E.2d 863, 1957 N.C. LEXIS 453 (1957).

Benefits of subsection (e) apply only to taxing units, not private citizens. Keener v. Korn, 46 N.C. App. 214, 264 S.E.2d 829, 1980 N.C. App. LEXIS 2808 (1980).

Taxes Due after Commencement of Action. —

Where a county brings suit to foreclose a tax lien on the lands of the taxpayer and draws its complaint according to the provisions of this section, other taxes due after the commencement of the action are properly included in the judgment therein rendered in its favor. New Hanover County v. Whiteman, 190 N.C. 332 , 129 S.E. 808, 1925 N.C. LEXIS 72 (1925).

Tax Collector Has No Lien Where Check Returned Unpaid. —

The fact that a county tax collector accepted a check in payment for taxes, and the check was returned unpaid, and the collector in his settlement with the county paid the taxes in question, does not give him a lien which may be enforced under this section. The collector having failed to correct the tax record so as to show the check returned and the taxes unpaid, the tax lien was not reinstated. Miller v. Neal, 222 N.C. 540 , 23 S.E.2d 852, 1943 N.C. LEXIS 367 (1943).

Taxes Not Subject to Setoff or Counterclaim. —

Taxes are not debts in the ordinary sense of the word and they do not rest upon contract or consent of the taxpayer. Pleas of setoff and counterclaim are not allowed because to do so would delay the collection and payment of taxes, and would deprive the government of means of performing its functions. State ex rel. Graded Sch. v. McDowell, 157 N.C. 316 , 72 S.E. 1083, 1911 N.C. LEXIS 47 (1911); Commissioners of Yancey County v. Hall, 177 N.C. 490 , 99 S.E. 372, 1919 N.C. LEXIS 153 (1919).

In a suit by a town against defendants to foreclose a tax lien where defendants set up defense by answer and also a counterclaim, motion to strike the counterclaim and order thereon was proper, but the other defenses were unaffected thereby. Town of Apex v. Templeton, 223 N.C. 645 , 27 S.E.2d 617, 1943 N.C. LEXIS 340 (1943).

Trial court did not have authority to grant the heirs and devisees of deceased property owners affirmative relief on their counterclaims in a tax foreclosure action upon their motion under N.C. R. Civ. P. 60(b) for relief from a default judgment entered against them on a city and county’s tax foreclosure claim, as the trial court only had authority to vacate, modify, or set aside the default judgment; further, it was improper to assert a counterclaim in a tax foreclosure matter pursuant to G.S. 105-374 . County of Durham v. Daye, 195 N.C. App. 527, 673 S.E.2d 683, 2009 N.C. App. LEXIS 214 (2009).

Amount of Interest Recoverable. —

Since no rate of interest was fixed by the section, only six percent interest was held recoverable. City of Wilmington v. Stolter, 122 N.C. 395 , 30 S.E. 12 (1898).

Judgment Is Lien in Rem. —

In an action to foreclose a lien for delinquent taxes or special assessments, the judgment obtained in said action constitutes a lien in rem, and the owner of the property is not personally liable for the payment thereof. Town of Apex v. Templeton, 223 N.C. 645 , 27 S.E.2d 617, 1943 N.C. LEXIS 340 (1943).

Order of Foreclosure Restricted to Land Described in Complaint. —

Where the complaint describes the real estate sought to be foreclosed to enforce the tax lien, the order of foreclosure is restricted to the described parcels, and so much of the judgment as authorizes the sale of other lands is in excess of the jurisdiction of the court. Miller v. McConnell, 226 N.C. 28 , 36 S.E.2d 722, 1946 N.C. LEXIS 387 (1946).

Sale with No Other Notice Than Posting and Publication Offends Due Process. —

Where the statutory alternative to foreclosure by court action as prescribed in G.S. 105-391 (now this section), is a sale without any notice except by posting and publication, the statutory alternative offends the fundamental concept of due process of law. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

Effect of Failure to Allege Collection of Costs and Fees. —

In an action by an ex clerk of the superior court against a county for the recovery of fees allegedly due such clerk in tax foreclosure suits by the county, the complaint, alleging that all of the tax suits in question were prosecuted to judgment against the various defendants, without any allegation or admission that in any of the suits the costs or fees were collected and turned over to the county, is demurrable as not stating a cause of action, the county being under no obligation to pay costs and officer’s fees in advance, or ever unless collected. Watson v. Lee County, 224 N.C. 508 , 31 S.E.2d 535, 1944 N.C. LEXIS 419 (1944).

Purported Adverse Possessor Not Entitled to Personal Notice. —

Where a city, in a foreclosure action, gave personal notice to all the record owners of the property in question and notice by publication to all others having an interest in the disputed property who could not with due diligence be located, it was not required to give personal notice to a purported adverse possessor whose purported interest was not recorded. Overstreet v. City of Raleigh, 75 N.C. App. 351, 330 S.E.2d 643, 1985 N.C. App. LEXIS 3639 (1985).

Judgment Foreclosing Tax Lien Extinguished All Rights. —

The effect of a judgment foreclosing a tax lien on real property was to extinguish all rights, title and interests in the property subject to foreclosure, including a claim based on adverse possession. The interest in the disputed property acquired by the purchaser at the tax foreclosure sale was fee simple and the purchaser’s title defeated the claims of ownership based on adverse possession. Overstreet v. City of Raleigh, 75 N.C. App. 351, 330 S.E.2d 643, 1985 N.C. App. LEXIS 3639 (1985).

Failure to Notify Party with Interest. —

In an action to foreclose a tax lien, all persons having an interest in the equity of redemption should be made parties by name, and judgment rendered in such proceeding is void as to any person having such interest who are not made parties; furthermore, one who purchases at a tax sale does so without warranty, is chargeable with knowledge that a commissioner’s deed is no more than a quitclaim deed, and has the duty to investigate, or cause to be investigated, all sources of title. Thus, a county foreclosure action was void where a mortgagor and a second mortgagee, both being the only record interest holders at the time the action was commenced, and the buyers were charged with constructive notice of the recorded interests and, therefore, were unable to avail themselves to any argument as being a good faith purchaser for value. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

II.Parties to Actions

Necessary Parties. —

In an action to foreclose a tax lien all persons having an interest in the equity of redemption must be made parties by name, and judgment rendered in such proceeding is void as to persons having such interest who are not made parties. City of Wilmington v. Merrick, 231 N.C. 297 , 56 S.E.2d 643, 1949 N.C. LEXIS 523 (1949).

Owner of remainder subject to a life estate is a necessary party in an action to foreclose a tax lien. Board of Comm'rs v. Bumpass, 233 N.C. 190 , 63 S.E.2d 144, 1951 N.C. LEXIS 552 (1951).

Class Representation of Contingent Remaindermen. —

In an action to enforce the lien for taxes against lands affected by a contingent limitation over, in which each class of contingent remaindermen is represented by defendants actually served and answering, the judgment is binding upon all contingent remaindermen by class representation. Rodman v. Norman, 221 N.C. 320 , 20 S.E.2d 294, 1942 N.C. LEXIS 460 (1942).

Failure to Join Heirs and Devisees Where Owners Deceased. —

In an action to enforce the lien for taxes, each person having an estate in the land is a necessary party if his equity of redemption is to be barred, and where at the time of the institution of the proceeding the persons named in the summons and complaint as owners of the land are dead, and their heirs or devisees are not made parties, judgment of foreclosure and sale of the land thereunder cannot divest the title of the heirs or devisees. Page v. Miller, 252 N.C. 23 , 113 S.E.2d 52, 1960 N.C. LEXIS 402 (1960).

Tax Sale of Land Owned by Minors. —

A judgment decreeing foreclosure and ordering sale of land for taxes was not void on the ground that three of the defendants were minors where the court upon learning of such fact appointed a guardian ad litem for the minors who filed an answer prior to the date of the tax sale. County of Franklin v. Jones, 245 N.C. 272 , 95 S.E.2d 863, 1957 N.C. LEXIS 453 (1957).

Receiver of a drainage district may proceed in an action in the nature of an action to foreclose a mortgage under this section for the collection of such drainage assessments. Nesbit v. Kafer, 222 N.C. 48 , 21 S.E.2d 903, 1942 N.C. LEXIS 19 (1942).

III.Adequacy of Purchase Price

Court has authority to reject bid made at foreclosure sale of a tax sale certificate and order a resale, even in the absence of exceptions of an increased bid, under the provisions of subsection (o). Bladen County v. Squires, 219 N.C. 649 , 14 S.E.2d 665, 1941 N.C. LEXIS 121 (1941).

Finding of Inadequacy Five Years Later. —

A tax sale confirmed by the court was not rendered void by a finding five years later that the purchase price was unjust and inadequate. County of Franklin v. Jones, 245 N.C. 272 , 95 S.E.2d 863, 1957 N.C. LEXIS 453 (1957).

Fraud, Suppression, or Unfairness Must Be Shown. —

In an action to foreclose a tax lien on land, the mere inadequacy of the price bid therefor is not sufficient to avoid the sale and cancel the deed to the purchaser, unless some element of fraud, suppression of bidding, or other unfairness in the sale appears. Duplin County v. Ezzell, 223 N.C. 531 , 27 S.E.2d 448, 1943 N.C. LEXIS 317 (1943).

IV.Exceptions

When Exceptions Must Be Filed. —

It is manifest that subsections (n), (o) and (p) require a person having an interest in the property involved in a tax foreclosure action to file exceptions to the report of a particular sale and to appeal from an adverse ruling on such exceptions when, and only when, his exceptions challenge the validity of the steps taken by the commissioner in conducting the particular sale, or the fairness of the particular sale in respect to price or other factors to the parties concerned. Chappell v. Stallings, 237 N.C. 213 , 74 S.E.2d 624, 1953 N.C. LEXIS 505 (1953).

Subsections (n), (o) and (p) do not apply to objections which are addressed to the validity of the judgment of sale itself. In consequence, a person having an interest in the property involved in a tax foreclosure action does not lose the benefit of an aptly taken objection to the validity of the judgment of sale by failing to file exceptions to the report of a particular sale made under it, or by failing to take a specific appeal from an order confirming such particular sale. A proper legal objection to the validity of a judgment of sale in and of itself puts in issue the validity of all proceedings under it. Chappell v. Stallings, 237 N.C. 213 , 74 S.E.2d 624, 1953 N.C. LEXIS 505 (1953).

V.Redemption

Owner’s right of redemption is recognized in express terms in this section. The owner has the right to redeem his land from the lien of unpaid taxes by paying the taxes with accrued interest, penalties and costs, and the court costs at any time before the entry of a valid judgment in a tax foreclosure action confirming the judicial sale of the land for the satisfaction of the lien. Chappell v. Stallings, 237 N.C. 213 , 74 S.E.2d 624, 1953 N.C. LEXIS 505 (1953).

Ample Opportunity Given to Redeem. —

Where the judgment of foreclosure in a tax suit authorized a sale, in default of payment of all taxes, etc., on or before 60 days from the date of the judgment, and the original sale was held within 60 days of such date, and after two resales, the last of which was held more than three months after the date of the judgment, the sale was finally consummated, there was ample opportunity to redeem, and sale and confirmation were valid. McIver Park v. Brinn, 223 N.C. 502 , 27 S.E.2d 548, 1943 N.C. LEXIS 312 (1943).

VI.Attorneys’ Fee

Construed together, G.S. 160A-233(c) and subsection (i) of this section provide for an award of one reasonable attorneys’ fee, in the court’s discretion, in a foreclosure of an assessment lien by action in nature of action to foreclose a mortgage. Guilford County v. Boyan, 42 N.C. App. 627, 257 S.E.2d 463, 1979 N.C. App. LEXIS 3201 (1979).

Award of Attorneys’ Fee Not Limited by G.S. 6-21.2 . —

The amount of an attorneys’ fee awarded in a tax foreclosure proceeding under this section is to be determined pursuant to subsection (i) in the discretion of the trial court and is not limited by the provisions of G.S. 6-21.2 . Town of Sylva v. Gibson, 51 N.C. App. 545, 277 S.E.2d 115, 1981 N.C. App. LEXIS 2268 , cert. denied, 303 N.C. 319 , 281 S.E.2d 659, 1981 N.C. LEXIS 1319 (1981).

Attorney Fees Properly Awarded to Defendant in Proceeding Under Chapter 156. —

Assuming subsection (i) of this section is incorporated by reference into Chapter 156, that the section provides for attorney fees for taxing authorities does not mean it prohibits attorney fees being taxed as part of costs for members of drainage districts. Northampton County Drainage Dist. Number One v. Bailey, 326 N.C. 742 , 392 S.E.2d 352, 1990 N.C. LEXIS 295 (1990).

Determination of Fee by Defendants. —

Where plaintiff was the party seeking attorney’s fees, defendants could proceed by counterclaim for a determination of what constituted a reasonable attorney’s fee and were not required to file a motion in the cause under subsection (i). Onslow County v. Phillips, 123 N.C. App. 317, 473 S.E.2d 643, 1996 N.C. App. LEXIS 724 (1996), rev'd in part, 346 N.C. 265 , 485 S.E.2d 618, 1997 N.C. LEXIS 300 (1997).

Refusal to Release Tax Lien Improper. —

G.S. 105-362(a) and subsection (e) of this section do not specifically include attorney’s fees as “costs” and subsection (i) of this section contemplates attorney’s fees as they are awarded by the court in its discretion; thus, plaintiff acted improperly by refusing to release tax lien against defendants’ property until attorney’s fees were paid. Onslow County v. Phillips, 123 N.C. App. 317, 473 S.E.2d 643, 1996 N.C. App. LEXIS 724 (1996), rev'd in part, 346 N.C. 265 , 485 S.E.2d 618, 1997 N.C. LEXIS 300 (1997).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. James R. Sugg, Craven County Attorney, 40 N.C. Op. Att'y Gen. 808 (1970).

See opinion of Attorney General to Mr. Michael D. Lea, 41 N.C. Op. Att'y Gen. 337 (1971).

§ 105-375. In rem method of foreclosure.

  1. Intent of Section. —  Proceedings brought under this section are strictly in rem. This section provides, as an alternative to G.S. 105-374 , a simple and inexpensive method of enforcing payment of taxes necessarily levied, to the knowledge of all persons, for the requirements of local governments in this State and recognizes, in authorizing this proceeding, that all persons owning interests in real property know or should know that the tax lien on their real property may be foreclosed and the property sold for failure to pay taxes.
  2. Docketing Certificate of Taxes as Judgment. —  In lieu of following the procedure set forth in G.S. 105-374 , the governing body of any taxing unit may direct the tax collector to file with the clerk of superior court, no earlier than 30 days after the tax liens were advertised, a certificate showing the following: the name of the taxpayer, as defined in G.S. 105-273 , for each parcel on which the taxing unit has a lien for unpaid taxes, together with the amount of taxes, penalties, interest, and costs that are a lien on it; the year or years for which the taxes are due; and a description of the property sufficient to permit its identification by parol testimony. The fees for docketing and indexing the certificate assessed pursuant to G.S. 7A-308(a)(11) are payable to the clerk of superior court at the time the taxes are collected or the property is sold.
  3. Notice to Taxpayer and Others. —
    1. Notice required. —  The tax collector filing the certificate provided for in subsection (b) of this section, shall, at least 30 days prior to docketing the judgment, send notice of the tax lien foreclosure to the taxpayer, as defined in G.S. 105-273 , at the taxpayer’s last known address and to all lienholders of record required to be served under G.S. 105-374(c).
    2. Contents of notice. —  The notice required by this subsection shall state that a judgment will be docketed and the proposed date of the docketing, state that execution will be issued as provided by law, provide a brief description of the real property affected, and state that the lien may be satisfied prior to judgment being entered.
    3. Service of notice. —  The notice required by this subsection shall be sent by registered or certified mail, return receipt requested.
    4. Additional efforts may be required. —  If within 10 days following the mailing of a notice, a return receipt has not been received by the tax collector indicating receipt of the notice, then the tax collector shall do both of the following:
      1. Make reasonable efforts to locate and notify the taxpayer, if not yet notified, and all unnotified lienholders of record prior to the docketing of the judgment and the issuance of the execution. Reasonable efforts may include posting the notice in a conspicuous place on the property, or, if the property has an address to which mail may be delivered, mailing the notice by first-class mail to the attention of the occupant.
      2. Have a notice published in a newspaper of general circulation in the county once a week for two consecutive weeks directed to, and naming, all unnotified lienholders and the taxpayer that a judgment will be docketed against the taxpayer.
    5. Costs of notice added to lien. —  All costs of mailing and publication, plus a charge of two hundred fifty dollars ($250.00) to defray administrative costs, shall be added to the amount of taxes that are a lien on the real property and shall be paid by the taxpayer to the taxing unit at the time the taxes are collected or the property is sold.
  4. Effect of Docketing Certificate of Taxes Due. —  Immediately upon the docketing and indexing of a certificate as provided in subsection (b) of this section, the taxes, penalties, interest, and costs constitute a valid judgment against the real property described in the judgment, with the priority provided for tax liens in G.S. 105-356 . The judgment, except as expressly provided in this section, has the same force and effect as a duly rendered judgment of the superior court directing sale of the property for the satisfaction of the tax lien, and it shall bear interest at an annual rate of eight percent (8%).
  5. Special Assessments. —  Street, sidewalk, and other special assessments may be included in any judgment for taxes taken under this section, or the special assessments may be included in a separate judgment docketed under this section. The tax collector may use the judgment as a method of foreclosing the lien of special assessments. When used to foreclose the lien of special assessments, the procedure may be instituted at any time after the assessment or installment falls due and remains unpaid; the waiting period required by subsection (b) of this section does not apply to the foreclosure of special assessments.
  6. Motion to Set Aside. —  At any time prior to the issuance of execution, any person having an interest in the real property to be foreclosed may appear before the clerk of superior court and move to set aside the judgment on the ground that the tax has been paid or that the tax lien on which the judgment is based is invalid.
  7. Cancellation upon Payment. —  Upon payment in full of any judgment docketed under this section, together with interest and costs accrued to the date of payment, the tax collector receiving payment shall certify the fact of the payment to the clerk of superior court and cancel the judgment.
  8. Relationship between G.S. 105-374 and This Section. —  If, before the issuance of execution on the judgment under subsection (i) of this section, the taxing unit is made a defendant in a foreclosure action brought against the property under G.S. 105-374 , it shall file an answer in that proceeding and thereafter all proceedings shall be governed by order of the court in accordance with that section.
  9. Issuance of Execution. —  At any time after three months and before two years from the indexing of the judgment as provided in subsection (b) of this section, execution shall be issued at the request of the tax collector in the same manner as executions are issued upon other judgments of the superior court, and the real property shall be sold by the sheriff in the same manner as other real property is sold under execution with the following exceptions:
    1. No debtor’s exemption shall be allowed.
    2. At least 30 days prior to the day fixed for the sale, the sheriff shall send notice by registered or certified mail, return receipt requested, to the taxpayer at the taxpayer’s last known address, in lieu of personal service, and to all lienholders of record. If within 10 days following the mailing of a notice, a return receipt has not been received by the sheriff indicating receipt of the notice, then the sheriff shall make additional efforts to locate and notify the taxpayer, if not yet notified, and all unnotified lienholders of record of the sale under execution in accordance with subdivision (4) of subsection (c) of this section.
    3. The sheriff shall add to the amount of the judgment as costs of the sale any postage expenses incurred by the tax collector and the sheriff in foreclosing under this section.
    4. In any advertisement or posted notice of sale under execution, the sheriff may (and at the request of the governing body shall) combine the advertisements or notices for properties to be sold under executions against the properties of different taxpayers in favor of the same taxing unit or group of units; however, the property included in each judgment shall be separately described and the name of the taxpayer specified in connection with each property. The purchaser at the execution sale acquires title to the property in fee simple free and clear of all claims, rights, interests, and liens except the liens of other taxes or special assessments not paid from the purchase price and not included in the judgment.

      (i1) Fee. — The fee assessed in G.S. 7A-308(a)(1a) is payable to the clerk of superior court out of the sale proceeds at the time the property is sold.

  10. Attorney’s Fee. —  The governing body of the taxing unit may make whatever arrangement it deems satisfactory for compensating an attorney rendering assistance or advice in foreclosure proceedings brought under this section, but the attorney’s fee shall not be added to the judgment as part of the costs of the action.
  11. Consolidation of Liens. —  By agreement between the governing bodies, two or more taxing units may consolidate their tax liens for the purpose of docketing a judgment, or may have one execution issued for separate judgments, against the same property. In like manner, one execution may issue for separate judgments in favor of one or more taxing units against the same property for different years’ taxes.
  12. Purchase and Resale by Taxing Unit. —  The rights of a taxing unit to purchase real property at a foreclosure sale and resell it are governed by G.S. 105-376 .
  13. Procedure if Section Declared Unconstitutional. —  If any provisions of this section are declared invalid or unconstitutional by the Supreme Court of North Carolina, a United States district court of three judges, the United States Circuit Court of Appeals, or the United States Supreme Court, all taxing units that have proceeded under this section shall have five years from the date of the filing of the opinion (or, in the case of appeal, from the date of the filing of the opinion on appeal) in which to institute foreclosure actions under G.S. 105-374 for all taxes included in judgments taken under this section and for subsequent taxes due or which, but for purchase of the property by the taxing unit, would have become due; and the judicial decision shall not have the effect of invalidating the tax lien or disturbing its priority.

History. 1939, c. 310, s. 1720; 1945, c. 646; 1957, cc. 91, 1262; 1971, c. 806, s. 1; 1973, c. 108, s. 52; c. 681, ss. 1, 2; 1983, c. 808, s. 9; c. 855, ss. 1, 2; 1987, c. 450; 1989, c. 37, s. 7; c. 682; 1999-439, ss. 2, 3; 2001-139, s. 9; 2006-106, ss. 4-6; 2011-352, s. 1; 2019-243, s. 12(b); 2021-91, s. 3(b).

Editor’s Note.

Session Laws 1983, c. 808, which amended this section, provided in s. 12 that the act would not affect the validity of any tax lien sale held before July 1, 1983, and in s. 13 provided: “Anything in this act to the contrary notwithstanding, any person, firm, or corporation who purchased or took assignment of a tax lien sale certificate before July 1, 1983, pursuant to statutes amended or repealed by this act may initiate a foreclosure action under G.S. 105-374 no earlier than six months after the date of the original lien sale.”

Session Laws 2019-243, s. 12(c), made the amendment of subsection (b) and the addition of subsection (i1) of this section by Session Laws 2019-243, s. 12(b), effective December 1, 2019, and applicable to execution sales conducted on or after that date.

Session Laws 2021-91, s. 3(e), made the amendments to this section by Session Laws 2021-91, s. 3(b), effective October 1, 2021, and applicable to tax foreclosure actions or proceedings commenced on or after that date.

Effect of Amendments.

Session Laws 2006-106, ss. 4 - 6, effective for taxes imposed for taxable years beginning on or after July 1, 2006, substituted “as defined in G.S. 105-273(17), for each parcel on which the taxing unit has a lien for unpaid taxes” for “listing real property on which the taxes are a lien” in subsection (b), and rewrote subsection (c) and subdivision (i)(2).

Session Laws 2011-352, s. 1, effective July 1, 2011, and applicable to in rem foreclosure proceedings commenced on or after that date, substituted “two hundred fifty dollars ($250.00)” for “fifty dollars ($50.00)” in subdivision (c)(5).

Session Laws 2019-243, s. 12(b), inserted “assessed pursuant to G.S. 7A-308(a)(11)” in the last sentence of subsection (b); and added subsection (i1). For effective date and applicability, see editor’s note.

Session Laws 2021-91, s. 3(b), rewrote the section. For effective date and applicability, see editor’s note.

Legal Periodicals.

For survey of 1977 law on taxation, see 56 N.C.L. Rev. 1128 (1978).

CASE NOTES

This section was enacted as an alternative to G.S. 105-374 , which authorizes tax foreclosures by actions in nature of action to foreclose mortgage. Jenkins v. Richmond County, 99 N.C. App. 717, 394 S.E.2d 258, 1990 N.C. App. LEXIS 819 (1990).

Notices Indispensable to Valid Sale. —

The giving of the notices of the docketing of the judgment and of the sale under execution, required by this section, is indispensable to a valid sale under that statute and the provision of G.S. 105-394 , to the contrary, is in conflict with N.C. Const., Art. I, § 19. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

The giving of the notice of sale under execution, by mailing a copy of the notice to the listing taxpayer at his last known address at least one week prior to the day fixed for the sale, as required by subdivision (i)(2) of this section, is constitutionally indispensable to a valid sale. Annas v. Davis, 40 N.C. App. 51, 252 S.E.2d 28, 1979 N.C. App. LEXIS 2571 (1979).

Notice and Opportunity to Object. —

It is axiomatic that prior to action affecting property, State must provide notice reasonably calculated, under all circumstances, to apprise interested parties of pendency of action and afford them opportunity to present objections. Jenkins v. Richmond County, 99 N.C. App. 717, 394 S.E.2d 258, 1990 N.C. App. LEXIS 819 (1990).

Execution Sale Invalid Due to County’s Failure to Provide Attempt to Provide Notice to Property Owners. —

Defendant county made no effort to determine location of or to send tax notice to three out of four current owners of real property in question, all of whom were listed on deed. This failure of the county to attempt to send mailed notices to each individual taxpayer rendered subsequent execution sale invalid. Jenkins v. Richmond County, 99 N.C. App. 717, 394 S.E.2d 258, 1990 N.C. App. LEXIS 819 (1990).

Due Process Satisfied. —

When notice of the execution sale is sent by registered or certified mail to the listing taxpayer at his last known address, as is required by this section, such notice, in conjunction with the posting and publication also required by the statute, would be sufficient to satisfy the fundamental concept of due process of law and therefore, to comply with N.C. Const., Art. I, § 19, and the due process clause of U.S. Const., Amend. XIV. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

Note holder’s deed of trust in property that was condemned and sold to pay liens for demolition costs was declared extinguished because due process requirements were met by notice pursuant to G.S. 105-375 , which provides that purchasers at execution sales acquired title clear of all claims other than liens of other taxes. Da Da Mai v. Carolina Holdings, Inc., 205 N.C. App. 659, 696 S.E.2d 769, 2010 N.C. App. LEXIS 1309 (2010).

Presumption of Regularity of Official Acts Applies to Mailing of Notice. —

Under this section the taxpayer has constructive notice of the tax lien. Before the tax sale can take place, however, the sheriff is required to mail notice of the sale to the taxpayer at his last known address. The presumption of regularity of official acts should be applicable to the mailing of this notice by the sheriff’s office. Henderson County v. Osteen, 297 N.C. 113 , 254 S.E.2d 160, 1979 N.C. LEXIS 1142 (1979).

While strict compliance with the notice provisions of this section is essential to a valid sale, the purchaser at a sale under the statute is entitled to rely on the presumption that official duties in connection with the sale were regularly and properly performed until a party challenging the validity of the sale has produced ample evidence to the contrary. Henderson County v. Osteen, 297 N.C. 113 , 254 S.E.2d 160, 1979 N.C. LEXIS 1142 (1979).

Foreclosure Sale Permissible After Death of Judgment Debtor. —

Foreclosure of a tax lien by judgment and execution, pursuant to this section, is an exception to the general rule that land may not be sold under an execution issued after the death of the judgment debtor. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

Mailing of Notice to Last Known Address Required. —

When a county which has purchased a tax lien at a valid sale thereof and which, after notice to the listing taxpayer, has docketed a judgment and issued execution in accordance with the procedures prescribed in this section, the county may not, after the death of the taxpayer, without mailing notice to his last known address by registered or certified mail, as specified in the statute, sell his land, at a sale otherwise held in conformity to the statute, and convey a valid title to the purchaser for the reason that the provision of G.S. 105-394 declaring the failure so to mail the prescribed notice to the listing taxpayer a mere irregularity, not affecting the validity of the deed, is unconstitutional. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

The county tax department provided a foreign taxpayer with sufficient notice of a tax foreclosure sale by mailing notice to the taxpayer’s last known address in England and by publishing notice of the sale in the local newspaper, even though it could have gotten the taxpayer’s new address by calling the country club where the lot was located, since such a call would place an “intolerable burden” on the local taxing unit. Hardy v. Moore County, 133 N.C. App. 321, 515 S.E.2d 84, 1999 N.C. App. LEXIS 416 , aff'd, 351 N.C. 185 , 522 S.E.2d 582, 1999 N.C. LEXIS 1256 (1999).

Tenancy by Entireties. —

Where, tax foreclosure proceedings under this section are instituted in regard to land held by husband and wife by the entireties, but the proceedings are solely against the husband without notice to the wife, the tax sale on the certificate-judgment is wholly ineffectual, since the wife is not bound thereby and the husband has no divisible interest in the property which is subject to execution. Edwards v. Arnold, 250 N.C. 500 , 109 S.E.2d 205, 1959 N.C. LEXIS 462 (1959) (decided under former similar provisions) .

Burden of proof is on party attacking validity of tax foreclosure sale. Henderson County v. Osteen, 297 N.C. 113 , 254 S.E.2d 160, 1979 N.C. LEXIS 1142 (1979).

Judgment Foreclosing Tax Lien Extinguished All Rights. —

The effect of a judgment foreclosing a tax lien on real property was to extinguish all rights, title and interests in the property subject to foreclosure, including a claim based on adverse possession. The interest in the disputed property acquired by the purchaser at the tax foreclosure sale was fee simple and the purchaser’s title defeated the claims of ownership based on adverse possession. Overstreet v. City of Raleigh, 75 N.C. App. 351, 330 S.E.2d 643, 1985 N.C. App. LEXIS 3639 (1985).

Failure to Serve Owner. —

Where the evidence clearly showed that there was no personal service upon defendant-owner and that plaintiff town knew that defendant no longer resided at recorded address, trial court unerringly ruled that the judgment entered in the action was void. Town of Cary v. Stallings, 97 N.C. App. 484, 389 S.E.2d 143, 1990 N.C. App. LEXIS 159 (1990).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. John T. Page, Jr., Richmond County Attorney, 40 N.C.A.G. 778 (1970), issued under former similar provisions.

See opinion of Attorney General to Mr. Edwin Roland, 41 N.C.A.G. 427 (1971), issued under former similar provisions.

§ 105-376. Taxing unit as purchaser at foreclosure sale; payment of purchase price; resale of property acquired by taxing unit.

  1. Taxing Unit as Purchaser. —  Any taxing unit (or two or more taxing units jointly) may bid at a foreclosure sale conducted under G.S. 105-374 or G.S. 105-375 , and any taxing unit that becomes the successful bidder may assign its bid at any time by private sale for not less than the amount of the bid.
  2. Payment of Purchase Price by Taxing Units; Status of Property Purchased by Taxing Units. —  Any taxing unit that becomes the purchaser at a tax foreclosure sale may, in the discretion of its governing body, pay only that part of the purchase price that would not be distributed to it and other taxing units on account of taxes, penalties, interest, and such costs as accrued prior to the initiation of the foreclosure action under G.S. 105-374 or docketing of a judgment under G.S. 105-375 . Thereafter, in such a case, the purchasing taxing unit shall hold the property for the benefit of all taxing units that have an interest in the property as defined in this subsection (b). All net income from real property so acquired and the proceeds thereof, when resold, shall be first used to reimburse the purchasing unit for disbursements actually made by it in connection with the foreclosure action and the purchase of the property, and any balance remaining shall be distributed to the taxing units having an interest therein in proportion to their interests. The total interest of each taxing unit, including the purchasing unit, shall be determined by adding:
    1. The taxes of the unit, with penalties, interest, and costs (other than costs already reimbursed to the purchasing unit) to satisfy which the property was ordered sold;
    2. Other taxes of the unit, with penalties, interest, and costs which would have been paid in full from the purchase price had the purchase price been paid in full;
    3. Taxes of the unit, with penalties, interest, and costs to which the foreclosure sale was made subject; and
    4. The principal amount of all taxes which became liens on the property after purchase at the foreclosure sale or which would have become liens thereon but for the purchase, but no amount shall be included for taxes for years in which (on the day as of which property was to be listed for taxation) the property was being used by the purchasing unit for a public purpose. If the amount of net income and proceeds of resale distributable exceeds the total interests of all taxing units defined in this subsection (b), the remainder shall be applied to any special benefit assessments to satisfy which the sale was ordered or to which the sale was made subject, and any balance remaining shall accrue to the purchasing unit.When any real property that has been purchased as provided in this section is permanently dedicated to use for a public purpose, the purchasing unit shall make settlement with other taxing units having an interest in the property (as defined in this subsection) in such manner and in such amount as may be agreed upon by the governing bodies; and if no agreement can be reached, the amount to be paid shall be determined by a resident judge of the superior court in the district in which the property is situated.Nothing in this section shall be construed as requiring the purchasing unit to secure the approval of other interested taxing units before reselling the property or as requiring the purchasing unit to pay other interested taxing units in full if the net income and resale price are insufficient to make such payments.Any taxing unit purchasing property at a foreclosure sale may, in the discretion of its governing body, instead of following the foregoing provisions of this section, make full payment of the purchase price, and thereafter it shall hold the property as sole owner in the same manner as it holds other real property, subject only to taxes and special assessments, with penalties, interest, and costs, to which the sale was made subject.
  3. Resale of Real Property Purchased by Taxing Units. —  Real property purchased at a tax foreclosure sale by a taxing unit may be resold at any time (for such price as the governing body of the taxing unit may approve) at a sale conducted in the manner provided by law for sales of other real property of the taxing unit. However, a purchasing taxing unit, in the discretion of its governing body, may resell such property to the former owner or to any other person formerly having an interest in the property at private sale for an amount not less than the taxing unit’s interest therein if it holds the property as sole owner or for an amount not less than the total interests of all taxing units (other than special assessments due the taxing unit holding title) if it holds the property for the benefit of all such units.

History. 1939, c. 310, s. 1719; 1945, c. 635; 1947, c. 484, ss. 3, 4; 1951, c. 300, s. 1; c. 1036, s. 1; 1953, c. 176, s. 2; 1955, c. 908; 1967, c. 705, s. 1; 1971, c. 806, s. 1.

Local Modification.

Avery: 1973, c. 313.

§ 105-377. Time for contesting validity of tax foreclosure title.

Notwithstanding any other provisions of law prescribing the period for commencing an action, no action or proceeding shall be brought to contest the validity of any title to real property acquired by a taxing unit or by a private purchaser in any tax foreclosure action or proceeding authorized by this Subchapter or by other laws of this State in force at the time the title was acquired, nor shall any motion to reopen or set aside the judgment in any such tax foreclosure action or proceeding be entertained after one year from the date on which the deed is recorded.

History. 1939, c. 310, s. 1721; 1971, c. 806, s. 1; 1977, c. 886, s. 2.

CASE NOTES

A remainderman, who has been served only by publication based upon a fatally defective affidavit, may attack the tax foreclosure more than one year afterward, since neither this section nor any statute of limitations can bar the right to attack a judgement for want of jurisdiction. Board of Comm'rs v. Bumpass, 233 N.C. 190 , 63 S.E.2d 144, 1951 N.C. LEXIS 552 (1951).

Motion to Set Aside Tax Sale Held Not Barred by This Section. —

A judgment having been entered in favor of a county against the defendants for ad valorem taxes, and the land in question having been sold and conveyed pursuant to an execution, a motion properly filed by the defendants in the cause seeking to set aside the tax sale was not barred by former G.S. 105-393 (the predecessor to this section) since the motion in the cause was not an action or proceeding brought to contest the validity of a title to real property, nor a motion to reopen or set aside the judgment pursuant to which the tax sale was held. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

Where city became record owner of property pursuant to tax foreclosure sale, and while purported adverse possessors brought their action to quiet title beyond the one year statute of limitation contained in this section, there were no genuine issues of material fact and the city was entitled to summary judgment. Overstreet v. City of Raleigh, 75 N.C. App. 351, 330 S.E.2d 643, 1985 N.C. App. LEXIS 3639 (1985).

§ 105-378. (Effective until October 1, 2021) Limitation on use of remedies.

  1. Use of Remedies Barred. —  No county or municipality may maintain an action or procedure to enforce any remedy provided by law for the collection of taxes or the enforcement of any tax liens (whether the taxes or tax liens are evidenced by the original tax receipts, tax sales certificates, or otherwise) unless the action or procedure is instituted within 10 years from the date the taxes became due.
  2. Not Applicable to Special Assessments. —  The provisions of subsection (a), above, shall not be construed to apply to the lien of special assessments.
  3. Repealed by Session Laws 1998-98, s. 26, effective August 14, 1998.
  4. Enforcement and Collection Delayed Pending Appeal. —  When the board of county commissioners or municipal governing body delivers a tax receipt to a tax collector for any assessment that has been or is subsequently appealed to the county board of equalization and review or the Property Tax Commission, the tax collector may not seek collection of taxes or enforcement of a tax lien resulting from the assessment until the appeal has been finally adjudicated. The tax collector, however, may send an initial bill or notice to the taxpayer.

History. 1933, c. 181, s. 7; c. 399; 1945, c. 832; 1947, c. 1065, s. 1; 1949, cc. 60, 269, 735; 1951, cc. 71, 306, 572; 1953, cc. 381, 427, 538, 645, 656, 752, 775, 1008; 1955, c. 1087; 1957, cc. 53, 678, 1123; 1959, cc. 373, 608; 1961, cc. 542, 695, 885; 1965, cc. 129, 294; 1967, c. 242; c. 321, s. 1; c. 422, s. 1; 1969, c. 96; 1971, c. 806, s. 1; 1998-98, s. 26; 2006-30, s. 6; 2011-3, s. 3(b).

Effect of Amendments.

Session Laws 2006-30, s. 6, effective June 29, 2006, added subsection (d).

Session Laws 2011-3, s. 3(b), effective for taxable years beginning on or after January 1, 2011, inserted “county board of equalization and review or the” in subsection (d).

CASE NOTES

The legislature did not intend for taxing units to assign barred claims to individuals who would then serve as collection agents for the taxing unit and thereby circumvent the limitation placed on the taxing units by this section. Bradbury v. Cummings, 68 N.C. App. 302, 314 S.E.2d 568, 1984 N.C. App. LEXIS 3188 (1984).

Private Holders of Tax Lien Sale Certificates. —

Although private holders of tax lien sale certificates are not mentioned in this section, the statute nevertheless applies to private holders. Bradbury v. Cummings, 68 N.C. App. 302, 314 S.E.2d 568, 1984 N.C. App. LEXIS 3188 (1984).

§ 105-378. Limitation on use of remedies.

  1. Use of Remedies Barred. —  No county or municipality shall maintain an action or procedure to enforce any remedy provided by law for the collection of taxes or the enforcement of any tax liens, whether the taxes or tax liens are evidenced by tax receipts or otherwise, unless the action or procedure is instituted within 10 years from the date the taxes became due.
  2. Not Applicable to Special Assessments. —  Subsection (a) of this section does not apply to the lien of special assessments.
  3. Repealed by Session Laws 1998-98, s. 26, effective August 14, 1998.
  4. Enforcement and Collection Delayed Pending Appeal. —  When the board of county commissioners or municipal governing body delivers a tax receipt to a tax collector for any assessment that has been or is subsequently appealed to the county board of equalization and review or the Property Tax Commission, the tax collector shall not seek collection of taxes or enforcement of a tax lien resulting from the assessment until the appeal has been finally adjudicated. The tax collector, however, may send an initial bill or notice to the taxpayer.

History. 1933, c. 181, s. 7; c. 399; 1945, c. 832; 1947, c. 1065, s. 1; 1949, cc. 60, 269, 735; 1951, cc. 71, 306, 572; 1953, cc. 381, 427, 538, 645, 656, 752, 775, 1008; 1955, c. 1087; 1957, cc. 53, 678, 1123; 1959, cc. 373, 608; 1961, cc. 542, 695, 885; 1965, cc. 129, 294; 1967, c. 242; c. 321, s. 1; c. 422, s. 1; 1969, c. 96; 1971, c. 806, s. 1; 1998-98, s. 26; 2006-30, s. 6; 2011-3, s. 3(b); 2021-91, s. 3(d).

Effect of Amendments.

Session Laws 2006-30, s. 6, effective June 29, 2006, added subsection (d).

Session Laws 2011-3, s. 3(b), effective for taxable years beginning on or after January 1, 2011, inserted “county board of equalization and review or the” in subsection (d).

Session Laws 2021-91, s. 3(d), effective October 1, 2021, rewrote subsections (a), and (b); and substituted “shall not seek” for “may not seek” in subsection (d).

CASE NOTES

The legislature did not intend for taxing units to assign barred claims to individuals who would then serve as collection agents for the taxing unit and thereby circumvent the limitation placed on the taxing units by this section. Bradbury v. Cummings, 68 N.C. App. 302, 314 S.E.2d 568, 1984 N.C. App. LEXIS 3188 (1984).

Private Holders of Tax Lien Sale Certificates. —

Although private holders of tax lien sale certificates are not mentioned in this section, the statute nevertheless applies to private holders. Bradbury v. Cummings, 68 N.C. App. 302, 314 S.E.2d 568, 1984 N.C. App. LEXIS 3188 (1984).

Article 27. Refunds and Remedies.

§ 105-379. Restriction on use of injunction and claim and delivery.

  1. Grounds for Injunction. —  No court may enjoin the collection of any tax, the sale of any tax lien, or the sale of any property for nonpayment of any tax imposed under the authority of this Subchapter except upon a showing that the tax (or some part thereof) is illegal or levied for an illegal or unauthorized purpose.
  2. No Order in Claim and Delivery. —  No court may issue any order in claim and delivery proceedings or otherwise for the taking of any personal property levied on or attached by the tax collector under the authority of this Subchapter.

History. 1901, c. 558, s. 30; Rev., s. 2855; C.S., s. 7979; 1971, c. 806, s. 1.

CASE NOTES

Editor’s Note. —

Redevelopment Comm’n v. Guilford County, 274 N.C. 585 , 164 S.E.2d 476 (1968), cited below, was decided under former provisions similar to subsection (a) of this section.

A distinction between an erroneous tax and an illegal or invalid tax is recognized by this section and North Carolina case law. Redevelopment Comm'n v. Guilford County, 274 N.C. 585 , 164 S.E.2d 476, 1968 N.C. LEXIS 819 (1968).

An illegal or invalid tax results when the taxing body seeks to impose a tax without authority, as in cases where it is asserted that the rate is unconstitutional, or that the subject is exempt from taxation. Redevelopment Comm'n v. Guilford County, 274 N.C. 585 , 164 S.E.2d 476, 1968 N.C. LEXIS 819 (1968).

When Injunction Will Lie. —

Injunction will lie when the tax or assessment is itself invalid or illegal. Redevelopment Comm'n v. Guilford County, 274 N.C. 585 , 164 S.E.2d 476, 1968 N.C. LEXIS 819 (1968).

§ 105-380. No taxes to be released, refunded, or compromised.

  1. The governing body of a taxing unit is prohibited from releasing, refunding, or compromising all or any portion of the taxes levied against any property within its jurisdiction except as expressly provided in this Subchapter.
  2. Taxes that have been released, refunded, or compromised in violation of this section shall be deemed to be unpaid and shall be collectible by any means provided by this Subchapter, and the existence and priority of any tax lien on property shall not be affected by the unauthorized release, refund, or compromise of the tax liability.
  3. Any tax that has been released, refunded, or compromised in violation of this section may be recovered from any member or members of the governing body who voted for the release, refund, or compromise by civil action instituted by any resident of the taxing unit, and when collected, the recovered tax shall be paid to the treasurer of the taxing unit. The costs of bringing the action, including reasonable attorneys’ fees, shall be allowed the plaintiff in the event the tax is recovered.
  4. The provisions of this section are not intended to restrict or abrogate the powers of a board of equalization and review or any agency exercising the powers of such a board.
  5. Expired.

History. 1901, c. 558, s. 31; Rev., s. 2854; C.S., s. 7976; 1971, c. 806, s. 1; 1973, c. 564, s. 2; 2013-19, s. 1.

Local Modification.

Town of Stoneville: 1975, c. 336.

Editor’s Note.

Session Laws 2006-72, s. 1, provides: “A taxing unit’s governing body may by resolution provide that, notwithstanding the provisions of G.S. 105-360 regarding the due date and accrual of interest, G.S. 105-380 and G.S. 105-381 regarding the release, refund, and compromise of taxes, and G.S. 160A-58.10 regarding the taxation of newly annexed property, property taxes for the partial fiscal year October 1, 2005, through June 30, 2006, shall be collected over a three-year period with one-third due and payable on September 1, 2006, one-third due and payable on September 1, 2007, and the remaining one-third due and payable on September 1, 2008. The resolution may provide that interest accrues on unpaid property taxes only to the extent that the property taxes have become due and payable under the payment schedule set out in the resolution. To the extent property taxes are due and payable pursuant to a resolution adopted under this act, interest accruing on taxes that remain unpaid shall be computed according to the schedule stated in G.S. 105-360 . A resolution adopted pursuant to this act applies only to taxes for the partial fiscal year October 1, 2005, through June 30, 2006, on property located in an area that was annexed between January 1, 2003, and January 1, 2006, and for which effective date of the annexation was set by judicial order.”

Session Laws 2006-72, s. 2, provides: “If a resolution adopted by a taxing unit’s governing body pursuant to this act delays the due date, accrual of interest, or both for any property taxes, the tax collector’s obligations under G.S. 160A-58.10 and G.S. 105-360 with respect to those taxes are delayed to the same extent.”

Former subsection (e), as added by Session Laws 2013-19, s. 1, expired July 1, 2016.

Session Laws 2013-362, s. 1, provides: “Notwithstanding G.S. 105-287 , 105-325, 105-380, any provision of law restricting the time for which a change in appraisal or valuation may be made, or any other provision of Subchapter II of Chapter 105 of the General Statutes inconsistent with the provisions of this act, a board of county commissioners shall undertake the measures required by this act if all of the following conditions are met:

“(1) The county has independent evidence that the majority of commercial neighborhoods in the county reviewed by a qualified appraisal company possess significant issues of inequity.

“(2) The county has independent evidence that for residential neighborhoods instances of inequity or erroneous data had an impact on the valuation of the neighborhood as a whole.

“(3) The county’s last general reappraisal was performed for the 2008 tax year, 2009 tax year, 2010 tax year, 2011 tax year, or 2012 tax year.

“(4) The independent evidence resulted from a review performed by a qualified appraisal company selected and retained by the county and registered with the Department of Revenue and had a sample size of no less than 375 properties, the relevant characteristics of which were reviewed on location at the property.”

Session Laws 2013-362, s. 2, provides: “If all of the conditions of Section 1 of this act are met, a board of county commissioners shall either (i) conduct a reappraisal, using no less than one person certified by the Department of Revenue for mass valuations per 4,250 parcels, pursuant to G.S. 105-286 within 18 months, applicable to all tax years from and including the tax year when the last general reappraisal was performed pursuant to G.S. 105-286 or (ii) have a qualified appraisal company, which may be the same company that provides the evidence in Section 1 of this act, conduct a review of all the values in the county by neighborhoods and make recommendations as to the true value of the properties as of January 1 of the year of the last general reappraisal performed pursuant to G.S. 105-286. After the reappraisal or after each neighborhood review required by this section is complete, the board of county commissioners shall make any change on the abstracts and tax records to ensure that the assessed values of incorrectly appraised properties in the county reflect the true values of those properties effective for the year of the last general reappraisal performed pursuant to G.S. 105-286 and shall apply the adjusted values for those properties for each tax year until the next general reappraisal for real property is performed by the county pursuant to G.S. 105-286 unless those adjusted values are changed in accordance with G.S. 105-287 . In making changes to the abstracts and tax records mandated by this act, the board of county commissioners shall make adjustments for previous errors prioritized as follows:

“(1) Adjustments to parcels with errors that resulted in the parcels having a significantly overstated value.

“(2) Adjustments to parcels with errors that resulted in the parcels having a significantly understated value.

“(3) Adjustments to parcels with errors that resulted in the parcels having an overstated value.

“(4) Adjustments to parcels with errors that resulted in the parcels having an understated value.

“In instances of parcels with errors that resulted in an overpayment of taxes, the governing board shall require that notice of refund and the refund amount be sent to the owner of record as of the date the payment was made. The provisions of G.S. 105-380 do not apply to the issuance of any refund under the provisions of this act.”

Session Laws 2013-362, s. 3, as amended by Session Laws 2015-266, s. 1, provides: “Interest on taxes paid on parcels with errors that resulted in the parcels having an overstated value shall be calculated at a rate of five percent (5%) per annum. Additional taxes levied on parcels as a result of errors causing the parcels to have an understated value (i) shall be treated as taxes on discovered property pursuant to G.S. 105-312 , except that the discovery penalties set forth in subsection (h) of G.S. 105-312 shall not apply, (ii) are due and payable on September 1 of the fiscal year for which the taxes are levied, but not earlier than four years from the last general reappraisal date, and (iii) shall be payable, at the taxpayer’s option, by means of an agreement over a period of not more than 36 months, in equal monthly installments, if the total of the additional taxes levied is greater than one thousand dollars ($1,000). Interest shall not accrue for the period a taxpayer is making timely payments under a payment plan. The tax collector is authorized to issue forms and develop procedures to implement a payment plan authorized under this section. Notwithstanding G.S. 105-365.1(b), for parcels that have been transferred in a tax year for which errors requiring reappraisals under this act resulted in an underpayment of taxes, the following apply:

“(1) The taxes for each tax year prior to and in the fiscal year in which the transfer occurred shall be collected from the owner of record as of January 1 of each tax year for which unpaid taxes exist. Only the remedies available in G.S. 105-367 and G.S. 105-368 may be used to collect against the owner of record as of January 1 of each tax year for which unpaid taxes exist.

“(2) Notwithstanding G.S. 105-355(a), there shall be no lien on the real property for underpaid taxes that arose in a year in which the property is owned by a person other than the current owner as of January 1 of that year. The current owner shall not be held personally responsible for such underpaid taxes.

“(3) If an owner not responsible for underpaid taxes pursuant to this section paid the underpaid taxes, the owner may assert a valid defense for a refund pursuant to G.S. 105-381 , as a tax imposed through clerical error. Interest on the refund shall be calculated at a rate of five percent (5%) per annum from the date the owner asserting the defense paid the underpaid taxes until the date the refund is issued.”

Effect of Amendments.

Session Laws 2013-19, s. 1, effective April 3, 2013, and expiring July 1, 2016, added subsection (e).

CASE NOTES

Duty of Commissioners to Rescind Order Releasing Tax. —

It is not only competent, but the duty of county commissioners to rescind an order improvidently granted to release one from the assessment of a legal tax upon property. Lemly v. Commissioners of Forsyth, 85 N.C. 379 , 1881 N.C. LEXIS 276 (1881) (decided under former similar provisions).

§ 105-381. Taxpayer’s remedies.

  1. Statement of Defense. —  Any taxpayer asserting a valid defense to the enforcement of the collection of a tax assessed upon his property shall proceed as hereinafter provided.
    1. For the purpose of this subsection, a valid defense shall include the following:
      1. A tax imposed through clerical error;
      2. An illegal tax;
      3. A tax levied for an illegal purpose.
    2. If a tax has not been paid, the taxpayer may make a demand for the release of the tax claim by submitting to the governing body of the taxing unit a written statement of his defense to payment or enforcement of the tax and a request for release of the tax at any time prior to payment of the tax.
    3. If a tax has been paid, the taxpayer, at any time within five years after said tax first became due or within six months from the date of payment of such tax, whichever is the later date, may make a demand for a refund of the tax paid by submitting to the governing body of the taxing unit a written statement of his defense and a request for refund thereof.
  2. Action of Governing Body. —  Upon receiving a taxpayer’s written statement of defense and request for release or refund, the governing body of the taxing unit shall within 90 days after receipt of such request determine whether the taxpayer has a valid defense to the tax imposed or any part thereof and shall either release or refund that portion of the amount that is determined to be in excess of the correct tax liability or notify the taxpayer in writing that no release or refund will be made. The governing body may, by resolution, delegate its authority to determine requests for a release or refund of tax of less than one hundred dollars ($100.00) to the finance officer, manager, or attorney of the taxing unit. A finance officer, manager, or attorney to whom this authority is delegated shall monthly report to the governing body the actions taken by him on requests for release or refund. All actions taken by the governing body or finance officer, manager, or attorney on requests for release or refund shall be recorded in the minutes of the governing body. If a release is granted or refund made, the tax collector shall be credited with the amount released or refunded in his annual settlement.
  3. Suit for Recovery of Property Taxes. —
    1. Request for Release before Payment. —  If within 90 days after receiving a taxpayer’s request for release of an unpaid tax claim under (a) above, the governing body of the taxing unit has failed to grant the release, has notified the taxpayer that no release will be granted, or has taken no action on the request, the taxpayer shall pay the tax. He may then within three years from the date of payment bring a civil action against the taxing unit for the amount claimed.
    2. Request for Refund. —  If within 90 days after receiving a taxpayer’s request for refund under (a) above, the governing body has failed to refund the full amount requested by the taxpayer, has notified the taxpayer that no refund will be made, or has taken no action on the request, the taxpayer may bring a civil action against the taxing unit for the amount claimed. Such action may be brought at any time within three years from the expiration of the period in which the governing body is required to act.
  4. Civil Actions. —  Civil actions brought pursuant to subsection (c) above shall be brought in the appropriate division of the general court of justice of the county in which the taxing unit is located. If, upon the trial, it is determined that the tax or any part of it was illegal or levied for an illegal purpose, or excessive as the result of a clerical error, judgment shall be rendered therefor with interest thereon at six percent (6%) per annum, plus costs, and the judgment shall be collected as in other civil actions.

History. 1901, c. 558, s. 30; Rev., s. 2855; C. S., s. 7979; 1971, c. 806, s. 1; 1973, c. 564, s. 3; 1977, c. 946, s. 2; 1985, c. 150, s. 1; 1987, c. 127.

Local Modification.

Forsyth: 1981 (Reg. Sess., 1982), c. 1154; 1985, c. 150, s. 2.

Property Affected by Alamance/Orange County Boundary Changes.

Session Laws 2011-88, s. 5(a)-(d), provides: “(a) Any properties affected by S.L. 2010-61 or this act and which are subject to taxation under G.S. 105-274 and which were taxed by both the Alamance County and Orange County taxing authorities on or after January 1, 2007, are hereby granted the following relief:

“(1) Property owners of any such dually taxed properties may, pursuant to the terms of G.S. 105-381 , demand refund and/or release of taxes paid to the county from which their property, or portion thereof, was transitioned.

“(2) Any claim for relief pursuant to this section and under the terms of G.S. 105-381 may be made for taxes assessed January 1, 2007, through December 31, 2011. All such claims for relief must be made in writing to the county from which the affected property was transitioned on or before February 28, 2012. Should a claim for relief pursuant to this section not be made by February 28, 2012, such claim is waived, and no further relief shall be granted pursuant to this or any other act. Alamance County and Orange County shall not grant refunds or releases pursuant to this section for any claims made after February 28, 2012, and are released from all liability, and no court action shall be maintained for any such claims made for any act or failure to act pursuant to this section.

“(b) The provisions of this section shall apply only to properties transitioned or reassigned from one county to the other, in whole or in part, by the resurveys of individual qualifying properties pursuant to S.L. 2010-61 and this act.

“(c) For purposes of this section only, the term ‘property owner’ shall include any builder or developer that paid property taxes on real property to both counties and subsequently sold said property or that as part of an escrow agreement in which the buyer of such property paid taxes to one county and the builder or developer who sold the property paid taxes on the same piece of property to the adjoining county.

“(d) The taxing authorities of Alamance County and Orange County shall notify property owners affected by this section of the terms of this section within 30 days after this act becomes law. Such notice shall be by United States mail at the mailing address to which any tax bills were previously submitted. No other notice is or shall be required.”

The purpose of Session Laws 2010-61, referred to in subsections 5(a) and (b) of Session Laws 2011-88, was to clarify or reestablish the boundary between Alamance County and Orange County. For a fuller explanation, see the Editor’s notes under G.S. 153A-18 .

Session Laws 2012-108, s. 5(a)-(d), provides: “(a) Any properties affected by S.L. 2010-61 or this act and that are subject to taxation under G.S. 105-274 and that were taxed by both the Alamance County and Orange County taxing authorities on or after January 1, 2007, are hereby granted the following relief:

“(1) Property owners of any such dually taxed properties may, pursuant to the terms of G.S. 105-381 , demand refund and/or release of taxes paid to the county from which their property, or portion thereof, was transitioned.

“(2) Any claim for relief pursuant to this section and under the terms of G.S. 105-381 may be made for taxes assessed January 1, 2007, through December 31, 2012. All such claims for relief must be made in writing to the county from which the affected property was transitioned on or before February 28, 2013. Should a claim for relief pursuant to this section not be made by February 28, 2013, such claim is waived and no further relief shall be granted pursuant to this or any other act. Alamance County and Orange County shall not grant refunds or releases pursuant to this section for any claims made after February 28, 2013, and are released from all liability, and no court action shall be maintained for any such claims made for any act or failure to act pursuant to this section.

“(b) The provisions of this section shall apply only to properties transitioned or reassigned from one county to the other, in whole or in part, by the resurveys of individual qualifying properties pursuant to S.L. 2010-61 and this act.

“(c) For purposes of this section only, the term ‘property owner’ shall include any builder or developer that paid property taxes on real property to both counties and subsequently sold said property or that, as part of an escrow agreement in which the buyer of such property paid taxes to one county and the builder or developer who sold the property, paid taxes on the same piece of property to the adjoining county.

“(d) The taxing authorities of Alamance County and Orange County shall notify property owners affected by this section of the terms of this section within 30 days of this act becoming law. Such notice shall be by United States mail at the mailing address to which any tax bills were previously submitted. No other notice is or shall be required.”

Editor’s Note.

Session Laws 2006-72, s. 1, provides: “A taxing unit’s governing body may by resolution provide that, notwithstanding the provisions of G.S. 105-360 regarding the due date and accrual of interest, G.S. 105-380 and G.S. 105-381 regarding the release, refund, and compromise of taxes, and G.S. 160A-58.10 regarding the taxation of newly annexed property, property taxes for the partial fiscal year October 1, 2005, through June 30, 2006, shall be collected over a three-year period with one-third due and payable on September 1, 2006, one-third due and payable on September 1, 2007, and the remaining one-third due and payable on September 1, 2008. The resolution may provide that interest accrues on unpaid property taxes only to the extent that the property taxes have become due and payable under the payment schedule set out in the resolution. To the extent property taxes are due and payable pursuant to a resolution adopted under this act, interest accruing on taxes that remain unpaid shall be computed according to the schedule stated in G.S. 105-360 . A resolution adopted pursuant to this act applies only to taxes for the partial fiscal year October 1, 2005, through June 30, 2006, on property located in an area that was annexed between January 1, 2003, and January 1, 2006, and for which effective date of the annexation was set by judicial order.”

Session Laws 2006-72, s. 2, provides: “If a resolution adopted by a taxing unit’s governing body pursuant to this act delays the due date, accrual of interest, or both for any property taxes, the tax collector’s obligations under G.S. 160A-58.10 and G.S. 105-360 with respect to those taxes are delayed to the same extent.”

Legal Periodicals.

For survey of 1979 tax law, see 58 N.C.L. Rev. 1548 (1980).

CASE NOTES

Analysis

I.General Consideration

Editor’s Note. —

Many of the cases cited below were decided under former similar provisions.

Constitutionality of Provisions. —

See Richmond & D.R.R. v. Town of Reidsville, 109 N.C. 494 , 13 S.E. 865, 1891 N.C. LEXIS 252 (1891); Kirkpatrick v. Currie, 250 N.C. 213 , 108 S.E.2d 209, 1959 N.C. LEXIS 619 (1959).

Jurisdiction which G.S. 105-290 confers upon State Board of Assessment (now Property Tax Commission) is not exclusive. The provisions of this section are still open to a taxpayer if he prefers them. In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

Taxpayers in North Carolina have an alternative to administrative review. They can seek judicial review of an assessment directly in superior or district court by paying taxes and then bringing a suit against the taxing unit for recovery of taxes paid. In order to have such an action, the taxpayer must first have filed a written statement of a valid defense to the tax with the governing body of the taxing unit and a request for release or refund of the tax. A valid defense is either that: (1) the tax was imposed through clerical error, (2) the tax was an “illegal tax,” or (3) the tax was levied for an illegal purpose. Within 90 days of receiving the taxpayer’s statement and request, the governing body of the taxing unit must act. If it denies the request or does not act within that time, then the taxpayer may bring a civil suit, provided he has paid the taxes assessed. The trial court will allow recovery of the taxes if it finds that one or more of the defenses exists. Johnston v. Gaston County, 71 N.C. App. 707, 323 S.E.2d 381, 1984 N.C. App. LEXIS 3967 (1984).

Commission’s Decisions Subject to Judicial Review. —

The administrative decisions of the State Board of Assessment (now Property Tax Commission) are always subject to review by the superior court. Under both G.S. 105-290 and this section, if either the taxpayer or the taxing authority wants judicial review, it is available. In re Pilot Freight Carriers, Inc., 263 N.C. 345 , 139 S.E.2d 633, 1965 N.C. LEXIS 1284 (1965).

Clerical Error. —

The meaning of clerical error in this section is not ambiguous and applies only to transcription errors. Ammons v. County of Wake, 127 N.C. App. 426, 490 S.E.2d 569, 1997 N.C. App. LEXIS 887 (1997).

To qualify as a clerical error, the mistake must ordinarily be apparent on the face of the instrument and a clerical error must be unintended. Ammons v. County of Wake, 127 N.C. App. 426, 490 S.E.2d 569, 1997 N.C. App. LEXIS 887 (1997).

Clerical Error Not Shown. —

Assessor’s allegedly inaccurate assertion that plaintiffs’ property failed to qualify for present use value taxation did not constitute clerical error. Ammons v. County of Wake, 127 N.C. App. 426, 490 S.E.2d 569, 1997 N.C. App. LEXIS 887 (1997).

Ordinarily, sovereign may not be denied or delayed in enforcement of its right to collect revenue upon which its very existence depends. This rule applies to municipalities and other subdivisions of the State government. If a tax is levied against a taxpayer which he deems unauthorized or unlawful, he must pay the same under protest and then sue for its recovery. And if the statute provides an administrative remedy, he must first exhaust that remedy before resorting to the courts for relief. Moreover, as broad and comprehensive as it is, even the Declaratory Judgment Act does not supersede the rule or provide an additional or concurrent remedy. Bragg Dev. Co. v. Braxton, 239 N.C. 427 , 79 S.E.2d 918, 1954 N.C. LEXIS 376 (1954).

Section Not to Preclude Counterclaim. —

This section provides a mechanism by which a taxpayer can sue a taxing unit and prevent foreclosure without impeding the collection of tax revenue needed. It should not be applied to preclude a counterclaim in a foreclosure proceeding. Onslow County v. Phillips, 123 N.C. App. 317, 473 S.E.2d 643, 1996 N.C. App. LEXIS 724 (1996), rev'd in part, 346 N.C. 265 , 485 S.E.2d 618, 1997 N.C. LEXIS 300 (1997).

Adequate Remedy at Law. —

Under this section the taxpayer has an adequate remedy at law by first paying the tax and then suing to recover it. Henrietta Mills v. Rutherford County, 281 U.S. 121, 50 S. Ct. 270, 74 L. Ed. 737, 1930 U.S. LEXIS 371 (1930); Fox v. Board of Comm'rs, 244 N.C. 497 , 94 S.E.2d 482, 1956 N.C. LEXIS 453 (1956).

Exclusiveness of Statutory Remedy. —

The taxpayer is restricted to the remedy provided by the statute, and, in order to avail himself of it, he must comply with all the requirements thereof. Richmond & D.R.R. v. Town of Reidsville, 109 N.C. 494 , 13 S.E. 865, 1891 N.C. LEXIS 252 (1891); Wilson v. Green, 135 N.C. 343 , 47 S.E. 469, 1904 N.C. LEXIS 37 (1904).

Where a corporation, under Session Laws 1925, c. 102, submitted its report to the Department of Revenue, and the Department in accordance with the statute certified to the register of deeds of the county where the property was situated the corporate excess liable for local taxation, the exclusive remedy of the corporation if dissatisfied with the report of the Department was to file exceptions with the Department in accordance with the statute, with the right of appeal from the Department upon a hearing by it, and the corporation could not pay the tax under protest and seek to recover it under the provisions of this section. Garysburg Mfg. Co. v. Board of Comm'rs, 196 N.C. 744 , 147 S.E. 284, 1929 N.C. LEXIS 95 (1929).

Assumpsit for money had and received does not lie to recover improperly listed taxables. Huggins v. Hinson, 61 N.C. 126 , 1867 N.C. LEXIS 66 (1867).

Quo warranto is the sole remedy to test the validity of an election to public office, but not to test the validity of a tax even though it is levied under the authority of a popular election. Barbee v. Board of Comm'rs, 210 N.C. 717 , 188 S.E. 314, 1936 N.C. LEXIS 208 (1936).

Where a town ordinance imposes a license tax upon those selling at wholesale or peddling therein, and provides that its violation is punishable as a misdemeanor, the remedy to test the validity of the ordinance is to pay the tax under protest and bring action to recover it back, in accordance with this section, and equity will not enjoin the town from executing its threat to arrest for violations of the ordinance, it not appearing that the plaintiff would be irreparably damaged by the payment of the tax, and the legal remedy to recover the tax affording adequate relief. Loose-Wiles Biscuit Co. v. Town of Sanford, 200 N.C. 467 , 157 S.E. 432, 1931 N.C. LEXIS 362 (1931).

Compliance with this section is prerequisite to right of action for recovery of taxes or any part thereof. Taxes paid voluntarily and without objection or compulsion cannot be recovered, even though the tax be levied unlawfully. Middleton v. Wilmington, B. & S.R.R., 224 N.C. 309 , 30 S.E.2d 42, 1944 N.C. LEXIS 356 (1944).

Party Seeking Relief Under (c)(2) Must Assert Valid Defense. —

A party seeking relief under subdivision (c)(2) of this section must assert a valid defense, as that term is defined in subdivision (a)(1) of this section, in their initial statement to the governing body of the taxing unit as a prerequisite to the later filing of a civil action. Kinro, Inc. v. Randolph County, 108 N.C. App. 334, 423 S.E.2d 513, 1992 N.C. App. LEXIS 883 (1992).

Payment Under Protest. —

Where the owner resists the payment of taxes as unlawful, he is required to pay them under his protest and sue to recover them. Carstarphen v. Town of Plymouth, 186 N.C. 90 , 118 S.E. 905, 1923 N.C. LEXIS 182 (1923); Galloway v. Board of Educ., 184 N.C. 245 , 114 S.E. 165, 1922 N.C. LEXIS 63 (1922). See also State v. Snipes, 161 N.C. 242 , 76 S.E. 243, 1912 N.C. LEXIS 407 (1912).

To test the legality of a tax imposed, the taxpayer should pay the same and sue to recover it in accordance with the provisions of this section. Southeastern Express Co. v. City of Charlotte, 186 N.C. 668 , 120 S.E. 475, 1923 N.C. LEXIS 314 (1923).

Payment of Tax But Not Attorney’s Fees Prerequisite. —

Payment of tax, even an allegedly illegal tax, is a prerequisite for filing suit under this statute; however, payment of attorney’s fees not assessed by the court was not a prerequisite. Onslow County v. Phillips, 123 N.C. App. 317, 473 S.E.2d 643, 1996 N.C. App. LEXIS 724 (1996), rev'd in part, 346 N.C. 265 , 485 S.E.2d 618, 1997 N.C. LEXIS 300 (1997).

Right to Sue. —

Upon the failure of the county treasurer to refund within 90 days, the person so paying the tax may maintain an action against the county, including in his demand both the State and county taxes. Brunswick-Balke-Collender Co. v. County of Mecklenburg, 181 N.C. 386 , 107 S.E. 317, 1921 N.C. LEXIS 84 (1921).

Right to Appeal. —

Superior court did not err in dismissing a taxpayer’s petition for writ of mandamus directing a county tax administrator to report the facts to the board of county commissioners in order that the board could make a decision as to whether the taxpayer received notice of changes in the valuation of its property because the taxpayer failed to timely challenge the change in valuation of the property before the county board of equalization and review, and thus lost its right to appeal; taxpayer also chose not to pursue the second means of redress available to it by paying the taxes and then bringing a suit in the trial court for its recovery under G.S. 105-381 , but instead the taxpayer filed a petition for writ of mandamus in the superior court. Villages at Red Bridge, LLC v. Weisner, 209 N.C. App. 604, 704 S.E.2d 925, 2011 N.C. App. LEXIS 209 (2011).

Distinction between an erroneous tax and an illegal or invalid tax is recognized by this section and North Carolina case law. Redevelopment Comm'n v. Guilford County, 274 N.C. 585 , 164 S.E.2d 476, 1968 N.C. LEXIS 819 (1968).

Illegal or invalid tax results when taxing body seeks to impose tax without authority, as in cases where it is asserted that the rate is unconstitutional, or that the subject is exempt from taxation. Redevelopment Comm'n v. Guilford County, 274 N.C. 585 , 164 S.E.2d 476, 1968 N.C. LEXIS 819 (1968); Reeves Bros. v. Town of Rutherfordton, 15 N.C. App. 385, 190 S.E.2d 345, 1972 N.C. App. LEXIS 1923 (1972), rev'd, 282 N.C. 559 , 194 S.E.2d 129, 1973 N.C. LEXIS 1108 (1973).

A tax or assessment is invalid or illegal only when the taxing body lacks the authority to impose the tax, as where the rate is unconstitutional or the subject is exempt from taxation. Reeves Bros. v. Town of Rutherfordton, 15 N.C. App. 385, 190 S.E.2d 345, 1972 N.C. App. LEXIS 1923 (1972), rev'd, 282 N.C. 559 , 194 S.E.2d 129, 1973 N.C. LEXIS 1108 (1973).

Burden on Taxpayer. —

Where a taxpayer seeks equitable relief against the alleged unlawful assessment of taxes against its property by the county authorities, it must allege and show that the amount claimed as excessive was in fact an excessive valuation. Norfolk-Southern R.R. v. Board of Comm'rs, 188 N.C. 265 , 124 S.E. 560, 1924 N.C. LEXIS 50 (1924).

Statute Inapplicable to Service Charges and Fees. —

Landfill fees, like sewer service charges, are neither taxes nor assessments, but are tolls or rents for benefits received by the use of the landfill. Therefore, the statute is inapplicable to landfill fees and campground owners did not preserve their right to challenge payment of county landfill fees by writing that they paid the fees under protest on their check to the county. Stafford v. County of Bladen, 163 N.C. App. 149, 592 S.E.2d 711, 2004 N.C. App. LEXIS 305 (2004).

II.Demand

Demand for Refund Required. —

The General Assembly, as far back as 1887, enacted that demand for the return of taxes must be made within the prescribed time after payment, and it was held in Richmond & D.R.R. v. Town of Reidsville, 109 N.C. 494 , 13 S.E. 865 (1891), and Teeter v. Wallace, 138 N.C. 264 , 50 S.E. 701 (1905), that the statute applied to all taxes, that the remedy provided was exclusive, and that a failure to make demand within the time prescribed was fatal to the right to maintain an action to recover the tax. Blackwell v. City of Gastonia, 181 N.C. 378 , 107 S.E. 218, 1921 N.C. LEXIS 81 (1921).

The requirement of making a demand within the prescribed time is mandatory. Richmond & D.R.R. v. Town of Reidsville, 109 N.C. 494 , 13 S.E. 865, 1891 N.C. LEXIS 252 (1891).

It must also be made in writing. Bristol v. Commissioners of Morganton, 125 N.C. 365 , 34 S.E. 512, 1899 N.C. LEXIS 219 (1899).

Requirement of demand is not confined to claim for refunding any particular tax or taxes alleged to be invalid on any particular account. Richmond & D.R.R. v. Town of Reidsville, 109 N.C. 494 , 13 S.E. 865, 1891 N.C. LEXIS 252 (1891).

Alleging Demand. —

A complaint which fails to allege that the demand was made within the prescribed time is insufficient on demurrer. Richmond & D.R.R. v. Town of Reidsville, 109 N.C. 494 , 13 S.E. 865, 1891 N.C. LEXIS 252 (1891). See Hunt v. Cooper, 194 N.C. 265 , 139 S.E. 446, 1927 N.C. LEXIS 64 (1927).

III.Injunctions

When Injunction Will Lie. —

Injunction is the appropriate relief to prevent the collection of an illegal and invalid tax. This constitutes the exception in the statute and gives the taxpayer an additional remedy (see Purnell v. Page, 133 N.C. 125 , 45 S.E. 534 (1903)) to test the validity of a tax. Wrought Iron Range Co. v. Carver, 118 N.C. 328 , 24 S.E. 352, 1896 N.C. LEXIS 54 (1896).

An injunction will lie to restrain the collection of taxes and to restrain the sale of property under distraint, for three reasons, to wit: (1) If the taxes or any part thereof be assessed for an illegal or unauthorized purpose. (2) If the tax itself be illegal or invalid. (3) If the assessment of the tax be illegal or invalid. Purnell v. Page, 133 N.C. 125 , 45 S.E. 534, 1903 N.C. LEXIS 27 (1903); Sherrod v. Dawson, 154 N.C. 525 , 70 S.E. 739, 1911 N.C. LEXIS 305 (1911).

The remedy of injunction is available to a taxpayer when a tax levy or assessment, or some part thereof, is challenged on the ground (1) the tax or assessment is itself illegal or invalid, or (2) for an illegal or unauthorized purpose. Wynn v. Trustees of Charlotte Community College Sys., 255 N.C. 594 , 122 S.E.2d 404, 1961 N.C. LEXIS 654 (1961).

Injunction will lie when the tax or assessment is itself invalid or illegal. Redevelopment Comm'n v. Guilford County, 274 N.C. 585 , 164 S.E.2d 476, 1968 N.C. LEXIS 819 (1968); Reeves Bros. v. Town of Rutherfordton, 15 N.C. App. 385, 190 S.E.2d 345, 1972 N.C. App. LEXIS 1923 (1972), rev'd, 282 N.C. 559 , 194 S.E.2d 129, 1973 N.C. LEXIS 1108 (1973).

The equitable remedy of injunction is proper where it is contended that the taxing body is without authority to impose the tax because of a constitutional exemption. Reeves Bros. v. Town of Rutherfordton, 15 N.C. App. 385, 190 S.E.2d 345, 1972 N.C. App. LEXIS 1923 (1972), rev'd, 282 N.C. 559 , 194 S.E.2d 129, 1973 N.C. LEXIS 1108 (1973).

Only collection of tax will be enjoined, until the merits of the controversy can be determined. North Carolina R.R. v. Commissioners of Alamance, 82 N.C. 259 , 1880 N.C. LEXIS 222 (1880).

Failure to Give Taxpayer Notice. —

An injunction will be granted to the hearing against the sheriff for collecting back taxes on a solvent credit, upon the ground that the plaintiff was not given notice of the assessment or opportunity to be heard before the board of assessors or the tribunal having the power to list or assess such property. Caldwell Land & Lumber Co. v. Smith, 146 N.C. 199 , 59 S.E. 653, 1907 N.C. LEXIS 24 (1907).

Special Assessment for Improvements. —

Where an owner of a town lot resists payment of an assessment of his property for the cost of paving or laying down a sidewalk on the ground of excessive cost, discrimination, or for other causes, the remedy of injunction is an improper one, for the owner should pay, under protest, the assessment levied and bring his action to recover it or the excess over a proper charge. Marion v. Town of Pilot Mt., 170 N.C. 118 , 87 S.E. 53, 1915 N.C. LEXIS 354 (1915).

Levy for School Purposes. —

Injunctive relief is not available to the taxpayers of a county, where a tax levy for school purposes has been made, when it appears that under the levy complained of the moneys have been raised and distributed to the branches of government entitled thereto, some of which are not parties to the suit. Semble, the only remedy for the injured taxpayers is to pay the illegal tax under protest and sue to recover the same, as provided by statute. Galloway v. Board of Educ., 184 N.C. 245 , 114 S.E. 165, 1922 N.C. LEXIS 63 (1922).

Parties to Suit for Injunction. —

The sheriff (tax collector) is the proper party defendant to a suit to enjoin the collection of taxes, but the commissioners may make themselves parties if they think the rights of the county require it. Caldwell Land & Lumber Co. v. Smith, 146 N.C. 199 , 59 S.E. 653, 1907 N.C. LEXIS 24 (1907).

Necessary Allegations. —

In order to enjoin the collection of taxes on land, it is necessary to allege that the taxes sought to be recovered were illegally imposed or unlawfully collected. Hunt v. Cooper, 194 N.C. 265 , 139 S.E. 446, 1927 N.C. LEXIS 64 (1927).

Injunction Granted. —

For case in which injunctive relief against the collection of taxes was granted, see Barber v. Town of Benson, 200 N.C. 683 , 158 S.E. 245, 1931 N.C. LEXIS 412 (1931).

Portion of Levy Enjoined. —

The courts will not enjoin the collection of an entire levy of taxes if the portion conceded to be valid can be separated from the portion alleged to be unconstitutional. Southern Ry. v. Board of Comm'rs, 148 N.C. 220 , 61 S.E. 690, 1908 N.C. LEXIS 180 (1908).

§ 105-382. [Repealed]

Repealed by Session Laws 1977, c. 946, s. 3.

Article 28. Special Duties to Pay Taxes.

§ 105-383. Fiduciaries to pay taxes.

  1. Duty to Pay. —  It shall be the duty of every guardian, executor, administrator, agent, trustee, receiver, or other fiduciary having care or control of any real or personal property to pay the taxes thereon out of the trust funds in his hands.
  2. Liability for Failure to Pay. —  Any fiduciary who fails to pay the taxes on property in his care or control when trust funds are available to him for that purpose shall be personally liable for the taxes. This liability may be enforced by a civil action brought in the name of the tax collector of the taxing unit to which the taxes are owed against the fiduciary in an appropriate division of the General Court of Justice of the county in which the taxing unit is located.
  3. Liability for Sale of Property. —  Any fiduciary who suffers property in his care or control to be sold by reason of his negligence in failing to pay the taxes thereon when available funds were in his hands shall be liable to his ward, principal, or cestui que trust for all actual damages incurred as a result of his neglect.
  4. Effect of Section. —  This section shall not have the effect of relieving property and estates held in trust or under the control of fiduciaries from the lien of property taxes.

History. 1762, c. 69, s. 14; R.C., c. 54, s. 27; 1868-9, c. 201, s. 32; 1879, c. 71, s. 53; Code, ss. 1595, 3698; Rev., s. 2862; C.S., s. 7985; 1971, c. 806, s. 1.

§ 105-384. Duties and liabilities of life tenant.

  1. If real or personal property is held by a tenant for life or by a tenant for the life of another, it shall be the duty of the life tenant to pay the taxes imposed on the property.
  2. Any remainderman or reversioner of real or personal property who pays the taxes thereon may recover the money so paid in an action against the life tenant of the property; in the case of real property, the action may be brought only in the appropriate division of the General Court of Justice of the county in which the real property is located.
  3. Any tenant for life of real or personal property who suffers the property to be foreclosed and sold or sold under levy for failure to pay the taxes thereon shall be liable to the remainderman or to the reversioner for any damages incurred.

History. 1879, c. 71, ss. 53, 54; Code, ss. 3698, 3699; 1901, c. 558, s. 45; Rev., s. 2859; C.S., s. 7982; 1971, c. 806, s. 1.

CASE NOTES

Life tenant cannot defeat the estate of the remainderman by allowing the land to be sold for taxes and taking title in himself by purchase at the tax sale. Thompson v. Watkins, 285 N.C. 616 , 207 S.E.2d 740, 1974 N.C. LEXIS 1064 (1974).

Life tenant’s purchase at tax sale is regarded as payment of tax, and the owner of the future interest is regarded as still holding under his original title. Thompson v. Watkins, 285 N.C. 616 , 207 S.E.2d 740, 1974 N.C. LEXIS 1064 (1974).

Life tenant has obligation to list and pay taxes on the property. Thompson v. Watkins, 285 N.C. 616 , 207 S.E.2d 740, 1974 N.C. LEXIS 1064 (1974).

§ 105-385. Duty to pay taxes on real property; judicial sales; sales under powers; governmental purchasers.

  1. Judicial Sales. —  In all civil actions and special proceedings in which the sale of any real property is ordered, the judgment shall provide for the payment of all taxes then constituting a lien upon the property and all special assessments or installments thereof then due, and the tax liens and special assessments shall be satisfied from the proceeds of the sale before the proceeds are disbursed. The judgment in such a civil action or special proceeding shall adjust the disbursements for taxes and special assessments between the parties to the action or special proceeding in accordance with their respective rights.
  2. Sales under Powers. —  Any person who sells real property under a power of sale conferred upon him by a deed, will, power of attorney, mortgage, deed of trust, or assignment for the benefit of creditors shall from the proceeds of the sale first satisfy all taxes constituting a lien upon the real property and all special assessments or installments thereof then due unless the notice of sale provided that the property would be sold subject to tax liens and special assessments, and it was so sold.
  3. Governmental Purchasers. —  Any agency, department, or institution of the State of North Carolina and any county or municipal corporation that purchases real property shall satisfy all taxes constituting a lien upon the property purchased and all special assessments or installments thereof then due by deducting the amount of the taxes and special assessments from the purchase price and paying it to the proper taxing unit or units. Any agency, department, or institution of the State and any county or municipal corporation that fails to make the deductions and payments required by this subsection (c) shall be liable to the taxing unit or units to which the taxes and special assessments are owed for the amount thereof. This liability may be enforced in a civil action brought by the taxing unit or units to which the taxes and special assessments are owed in the appropriate trial division of the General Court of Justice of the county in which the property is located; this remedy shall be in addition to any remedies the taxing unit may have against the grantor of the property.

History. 1901, c. 558, s. 47; Rev., s. 2857; C.S., s. 7980; 1929, c. 231, s. 1; 1951, c. 252, s. 1; 1971, c. 806, s. 1.

§ 105-386. Tax paid by holder of lien; remedy.

If any person having a lien or encumbrance of any kind upon real property shall pay the taxes that constitute a lien upon the real property:

  1. He shall thereby acquire a lien upon the real property from the time of payment, which lien shall be superior to all other liens and which may be enforced by an action in the appropriate division of the General Court of Justice of the county in which the real property is situated.
  2. He may, by an action for moneys paid to the use of the owner of the real property at the time of payment, recover the amount paid.

History. 1879, c. 71, s. 55; Code, s. 3700; 1901, c. 558, s. 46; Rev., s. 2858; C.S., s. 7981; 1971, c. 806, s. 1.

Article 29. Validations. [Repealed]

§§ 105-387 through 105-392.

Recodified as G.S. 47-108.21 to 47-108.26 by Session Laws 1987, c. 777, s. 4(1).

§ 105-393. [Repealed]

Repealed by Session Laws 1987, c. 777, s. 4(2).

Article 30. General Provisions.

§ 105-394. Immaterial irregularities.

Immaterial irregularities in the listing, appraisal, or assessment of property for taxation or in the levy or collection of the property tax or in any other proceeding or requirement of this Subchapter shall not invalidate the tax imposed upon any property or any process of listing, appraisal, assessment, levy, collection, or any other proceeding under this Subchapter.

The following are examples of immaterial irregularities:

  1. The failure of list takers, tax supervisors, or members of boards of equalization and review to take and subscribe the oaths required of them.
  2. The failure to sign the affirmation required on the abstract.
  3. The failure to list, appraise, or assess any property for taxation or to levy any tax within the time prescribed by law.
  4. The failure of the board of equalization and review to meet or to adjourn within the time prescribed by law or to give any required notice of its meetings and adjournment.
  5. Any defect in the description upon any abstract, tax receipt, tax record, notice, advertisement, or other document, of real or personal property, if the description be sufficient to enable the tax collector or any person interested to determine what property is meant by the description. (In such cases the tax supervisor or tax collector may correct the description on the documents bearing the defective description, and the correct description shall be used in any documents later issued in tax foreclosure proceedings authorized by this Subchapter.)
  6. The failure of the collector to advertise any tax lien.
  7. Repealed by Session Laws 1983, c. 808, s. 11.
  8. Any irregularity or informality in the order or manner in which tax liens on real property are offered for sale.
  9. The failure to make or serve any notice mentioned in this Subchapter.
  10. The omission of a dollar mark or other designation descriptive of the value of figures upon any document required by this Subchapter.
  11. Any other immaterial informality, omission, or defect on the part of any person in any proceeding or requirement of this Subchapter.

History. 1939, c. 310, s. 1715; 1965, c. 192, ss. 1, 2; 1971, c. 806, s. 1; 1983, c. 808, ss. 10, 11.

Editor’s Note.

Session Laws 1983, c. 808, which amended this section, provided in s. 12 that the act would not affect the validity of any tax lien sale held before July 1, 1983, and in s. 13 provided: “Anything in this act to the contrary notwithstanding, any person, firm, or corporation who purchased or took assignment of a tax lien sale certificate before July 1, 1983, pursuant to statutes amended or repealed by this act may initiate a foreclosure action under G.S. 105-374 no earlier than six months after the date of the original lien sale.”

Legal Periodicals.

For survey of 1977 law on taxation, see 56 N.C.L. Rev. 1128 (1978).

CASE NOTES

Purpose. —

This section contains a broad statement that is intended to cover cases where there is no dispute that but for a clerical error, the tax would have been valid. In re Notice of Attachment & Garnishment Issued by Catawba County Tax Collector, 59 N.C. App. 332, 296 S.E.2d 499, 1982 N.C. App. LEXIS 3100 (1982).

Constitutionality of Notice Provisions. —

The giving of the notices of the docketing of the judgment and of the sale under execution, required by G.S. 105-375 , is indispensable to a valid sale under that statute and the provision of this section, to the contrary, is in conflict with N.C. Const., Art. I, § 19. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

When a county which has purchased a tax lien at a valid sale thereof and which, after notice to the listing taxpayer, has docketed a judgment and issued execution in accordance with the procedures prescribed in G.S. 105-375 , the county may not, after the death of the taxpayer, without mailing to his last known address by registered or certified mail, as specified in the statute, sell his land, at a sale otherwise held in conformity to the statute, and convey a valid title to the purchaser for the reason that the provision of this section declaring the failure so to mail the prescribed notice to the listing taxpayer a mere irregularity, not affecting the validity of the deed, is unconstitutional. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

Section Not Limited to Procedures Incident to Sale of Tax Liens. —

Former G.S. 105-397.1 was originally a subparagraph in the section entitled, “Sales of Tax Liens on Real Property for Failure to Pay Taxes.” (former G.S. 105-387(j)). The legislature of 1965 took this provision out of that section and, with minor modifications, made it a separate section in Article 28 (now Article 30) of Chapter 105 of the General Statutes. This would indicate a legislative intent to free this provision from any possible limitation of it to procedures incident to the sale of tax liens so as to extend it to procedures for foreclosure thereof as well. Henderson County v. Osteen, 292 N.C. 692 , 235 S.E.2d 166, 1977 N.C. LEXIS 1171 (1977).

Immaterial irregularities in notice do not invalidate taxes imposed. In re Pilot Freight Carriers, Inc., 28 N.C. App. 400, 221 S.E.2d 378, 1976 N.C. App. LEXIS 2707 (1976).

Failure to List Taxpayer’s Residence in Tax Bills Not “Immaterial Irregularity.” —

As a county tax assessor could have obtained valuations for a taxpayer’s residence in the 11 years before the county first asserted a claim for back taxes, the county’s failure to include the residence on the taxpayer’s tax bills for those years was not an “immaterial irregularity” or a clerical error under G.S. 105-394 ; therefore, the county was barred from collecting the back taxes. In re Appeal of Morgan, 186 N.C. App. 567, 652 S.E.2d 655, 2007 N.C. App. LEXIS 2315 (2007), rev'd, 362 N.C. 339 , 661 S.E.2d 733, 2008 N.C. LEXIS 495 (2008).

Failure to Levy Assessments by Prescribed Date as Immaterial Irregularity. —

Section 156-105 provides that assessments shall be collected “in the same manner and by the same officers as the state and county taxes are collected,” and subdivision (3) of this section provides that “[t]he failure to list, appraise, or assess any property for taxation or to levy any tax within the time prescribed by law” is an immaterial irregularity that does not affect the validity of the assessment; therefore, plaintiff drainage district’s failure to levy annual assessments for 1974 and 1983 by the first Monday in September of those years did not bar later collection of the assessments. Northampton County Drainage Dist. Number One v. Bailey, 92 N.C. App. 68, 373 S.E.2d 560, 1988 N.C. App. LEXIS 984 (1988), aff'd in part and rev'd in part, 326 N.C. 742 , 392 S.E.2d 352, 1990 N.C. LEXIS 295 (1990).

Section Not to Be Strictly Construed against Taxing Authority. —

Tax statutes are to be strictly construed against the taxing authority; but that is only when the statute is susceptible of two constructions, unlike this section, which is clear and uncomplicated. In re Notice of Attachment & Garnishment Issued by Catawba County Tax Collector, 59 N.C. App. 332, 296 S.E.2d 499, 1982 N.C. App. LEXIS 3100 (1982).

Clerical error by a tax supervisor’s office is an immaterial irregularity under this section so as not to invalidate the tax levied on the property. In re Notice of Attachment & Garnishment Issued by Catawba County Tax Collector, 59 N.C. App. 332, 296 S.E.2d 499, 1982 N.C. App. LEXIS 3100 (1982).

The failure by a county tax assessor due to an administrative error to include on homeowner’s tax bill an assessment for the improvements to the lot was an immaterial irregularity and did not, contrary to the homeowner’s contention, invalidate the tax owed on the house. In re Dickey, 110 N.C. App. 823, 431 S.E.2d 203, 1993 N.C. App. LEXIS 692 (1993).

County Not Allowed to Recover Taxes on Parcel’s Corrected Value. —

G.S. 105-394 did not let a county recover taxes on a parcel’s corrected value for certain years because (1) the county arbitrarily appraised the parcel for those years, so G.S. 105-287 applied, since the county tried to change a parcel’s value in a year in which a general reappraisal was not made and improperly “discovered” the parcel for those years, and (2) G.S. 105-287 (c) said an increase in value was not retroactive. In re Pace/Dowd Props. Ltd., 233 N.C. App. 7, 755 S.E.2d 401, 2014 N.C. App. LEXIS 267 (2014).

§ 105-395. Application and effective date of Subchapter.

  1. The provisions of G.S. 105-333 through 105-344 (being Article 23 in this Subchapter) shall first be applicable to public service company property to be listed or reported for taxation as of January 1, 1972. Unless otherwise specifically provided herein, all other provisions of this Machinery Act (being Subchapter II of Chapter 105 of the General Statutes) shall become effective July 1, 1971, and shall apply to all taxes due and uncollected as of that date as well as to those that shall become due thereafter.
  2. Repealed by Session Laws 1998-98, s. 27, effective August 14, 1998.
  3. It is the intent of the General Assembly to make the provisions of this Subchapter uniformly applicable throughout the State, and to assure this objective all laws and clauses of laws, including private and local acts, other than local acts relating to the selection of tax collectors, in conflict with this Subchapter are repealed effective July 1, 1971. As used in this section, the term “local acts” means any acts of the General Assembly that apply to one or more counties by name, to one or more municipalities by name, or to all municipalities within one or more named counties.

History. 1971, c. 806, s. 1; 1993, c. 485, s. 19; 1998-98, s. 27.

Legal Periodicals.

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

CASE NOTES

Retroactive Effect. —

The intention of the legislature to give the new Machinery Act of 1971 retroactive effect is expressly declared in this section. In re Pilot Freight Carriers, Inc., 28 N.C. App. 400, 221 S.E.2d 378, 1976 N.C. App. LEXIS 2707 (1976).

OPINIONS OF ATTORNEY GENERAL

Provisions for selection of tax collectors do not repeal or affect collection of tax collector in a county that has a local law on the subject. See opinion of Attorney General to Mr. Warren H. Pritchard, 41 N.C. Op. Att'y Gen. 589 (1971).

§ 105-395.1. Applicable date when due date falls on weekend, holiday, or closure date.

When the last day for doing an act required or permitted by this Subchapter falls on a day listed in this section, the act is considered to be done within the prescribed time limit if it is done on the next business day. This section applies to the following days:

  1. A Saturday or Sunday.
  2. A holiday.
  3. A day for which all of the following conditions are met in the taxing entity:
    1. The tax office is closed.
    2. The taxpayer certifies in writing that the United States Postal Service did not provide service to the taxpayer’s address.
    3. A disaster declaration is declared pursuant to G.S. 166A-19.21 or G.S. 166A-19.22 .

History. 1987, c. 777, s. 5; 2018-5, s. 38.9(a); 2018-76, s. 9.5.

Effect of Amendments.

Session Laws 2018-5, s. 38.9(a), as amended by Session Laws 2018-76, s. 9.5, effective for taxes imposed for taxable years beginning on or after July 1, 2017, in the section heading, substituted “weekend, holiday, or closure date” for “weekend or holiday”; in the introductory paragraph, substituted “day listed in this section” for “Saturday, Sunday, or holiday”, and added “This section applies to the following days:” and added subdivisions (1) through (3).

§§ 105-396 through 105-398. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 1.

Subchapter III. Collection Of Taxes.

Former Article 30. General Provisions.

§§ 105-399 through 105-403. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

§ 105-404. [Transferred]

Transferred to G.S. 105-32 by Session Laws 1971, c. 806, s. 2.

§ 105-405. [Repealed]

Repealed by Session Laws 1963, c. 548.

§§ 105-405.1, 105-406. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

§ 105-407. [Transferred]

Transferred to G.S. 105-267.1 by Session Laws 1971, c. 806, s. 2.

Article 31. Rights of Parties Adjusted. [Repealed]

§§ 105-408 through 105-411. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

§ 105-412. [Transferred]

Transferred to G.S. 105-207 by Session Laws 1971, c. 806, s. 2.

Editor’s Note.

G.S. 105-207 was repealed by Session Laws, 1995, c. 41, s. 1(b).

Article 32. Tax Liens. [Repealed]

§§ 105-413, 105-414. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

Article 33. Time and Manner of Collection. [Repealed]

§§ 105-415 through 105-417. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

Article 33A. Agreements with United States or Other States. [Repealed]

§§ 105-417.1 through 105-417.3. [Transferred]

Transferred to G.S. 105-268.1 through 105-268.3 by Session Laws 1971, c. 806, s. 2.

Article 34. Tax Sales. [Repealed]

Part 1. Sale of Realty.

§§ 105-418 through 105-421. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

Part 2. Refund of Tax Sales Certificates.

§ 105-422. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

Cross References.

For present provisions covering the subject matter of the repealed section, see G.S. 105-355 through 105-378.

§ 105-423. [Repealed]

Repealed by Session Laws 1947, c. 1065, s. 2.

§ 105-423.1. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

Article 35. Sheriff’s Settlement of Taxes. [Repealed]

§ 105-424. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

Subchapter IV. Listing Of Automobiles.

Article 35A. Listing of Automobiles in Certain Counties. [Repealed]

§§ 105-425 through 105-429. [Repealed]

Repealed by Session Laws 1971, c. 806, s. 3.

Subchapter V. Motor Fuel Taxes.

Article 36. Gasoline Tax. [Repealed]

§§ 105-430 through 105-435. [Repealed]

Repealed by Session Laws 1995, c. 390, s. 2.

§ 105-436. [Repealed]

Repealed by Session Laws 1991, c. 193, s. 5.

§ 105-436.1. [Repealed]

Repealed by Session Laws 1985, c. 261, s. 1.

§ 105-437. [Repealed]

Repealed by Session Laws 1963, c. 1169, s. 6.

§§ 105-438 through 105-441.1. [Repealed]

Repealed by Session Laws 1995, c. 390, s. 2.

§ 105-442. [Repealed]

Repealed by Session Laws 1991 (Reg. Sess., 1992), c. 913, s. 3.

§ 105-443. [Repealed]

Repealed by Session Laws 1963, c. 1169, s. 5.

§§ 105-444 through 105-446.3. [Repealed]

Repealed by Session Laws 1995, c. 390, s. 2.

§ 105-446.3.1. [Repealed]

Repealed by Session Laws 1985, c. 261, s. 1.

§ 105-446.4. [Repealed]

Repealed by Session Laws 1977, c. 802, s. 50.10.

§§ 105-446.5 through 105-449A. [Repealed]

Repealed by Session Laws 1995, c. 390, s. 2.

§ 105-449.01. [Repealed]

Repealed by Session Laws 1983 (Regular Session, 1984), c. 1004, s. 1.

Article 36A. Special Fuels Tax. [Repealed]

§§ 105-449.1 through 105-449.27. [Repealed]

Repealed by Session Laws 1995, c. 390, s. 2.

§ 105-449.28. [Repealed]

Repealed by Session Laws 1981, c. 105, s. 4.

§ 105-449.29. [Repealed]

Repealed by Session Laws 1995, c. 390, s. 2.

§§ 105-449.30, 105-449.31. [Repealed]

Repealed by Session Laws 1985 (Regular Session, 1986), c. 937, s. 19.

Editor’s Note.

G.S. 105-449.30 and 105-449.31 were also repealed by Session Laws 1985 (Reg. Sess., 1986), c. 982, s. 15, effective July 15, 1986.

§ 105-449.32. [Repealed]

Repealed by Session Laws 1993 (Reg. Sess., 1994), c. 745, s. 27.

§§ 105-449.33 through 105-449.35. [Repealed]

Repealed by Session Laws 1995, c. 390, s. 2.

§ 105-449.36. [Repealed]

Repealed by Session Laws 1983 (Regular Session, 1984), c. 1004, s. 1.

Article 36B. Tax on Motor Carriers.

§ 105-449.37. Definitions; tax liability; application.

  1. Definitions. —  The following definitions apply in this Article:
    1. International Fuel Tax Agreement. — The Articles of Agreement adopted by the International Fuel Tax Association, Inc., as amended as of December 1, 2018.
    2. Motor carrier. — A person who operates or causes to be operated on any highway in this State a motor vehicle that is a qualified motor vehicle. The term does not include the United States, a state, or a political subdivision of a state.
    3. Motor vehicle. — Defined in G.S. 20-4.01 .
    4. Operations. — The movement of a qualified motor vehicle by a motor carrier, whether loaded or empty and whether or not operated for compensation.
    5. Person. — Defined in G.S. 105-228.90 .
    6. Qualified motor vehicle. — Defined in the International Fuel Tax Agreement.
    7. Secretary. — Defined in G.S. 105-228.90 .
  2. Liability. —  A motor carrier who operates on one or more days of a reporting period is liable for the tax imposed by this Article for that reporting period and is entitled to the credits allowed for that reporting period.
  3. Application. —  A motor carrier who operates a qualified motor vehicle in this State must submit an application, as provided in this Article, and obtain the appropriate license and decals for the vehicle. The Article applies to both an interstate motor carrier subject to the International Fuel Tax Agreement and to an intrastate motor carrier.

History. 1955, c. 823, s. 1; 1973, c. 476, s. 193; 1983, c. 713, s. 55; 1989, c. 7, s. 1; 1991, c. 182, s. 2; c. 487, s. 2; 1991 (Reg. Sess., 1992), c. 913, s. 8; 1993, c. 354, s. 28; 1999-337, s. 36; 2000-140, s. 74; 2008-134, s. 16; 2010-95, s. 27; 2014-3, s. 9.5(b); 2017-39, s. 11; 2020-58, s. 2.9.

Editor’s Note.

Session Laws 2014-3, s. 9.5(a), effective May 29, 2014, rewrote the Article 36B heading, which formerly read “Tax on Carriers Using Fuel Purchased Outside State.”

Effect of Amendments.

Session Laws 2008-134, s. 16, effective January 1, 2009, rewrote subsection (a).

Session Laws 2010-95, s. 27, effective July 17, 2010, substituted “June 1, 2010” for “June 1, 2008” in subdivision (a)(1).

Session Laws 2014-3, s. 9.5(b), effective May 29, 2014, added “application” at the end of the section heading; substituted “July 1, 2013” for “June 1, 2010” in subdivision (a)(1); and added subsection (c).

Session Laws 2017-39, s. 11, effective June 21, 2017, substituted “January 1, 2017” for “July 1, 2013” in subdivision (a)(1); and, in subsection (c), substituted “submit an application,” for “register the vehicle”’ and made a stylistic change.

Session Laws 2020-58, s. 2.9, effective June 30, 2020, substituted “December 1, 2018” for “January 1, 2017” in subdivision (a)(1).

§ 105-449.38. Tax levied.

A road tax for the privilege of using the streets and highways of this State is imposed upon every motor carrier on the amount of motor fuel or alternative fuel used by the carrier in its operations within this State. The tax shall be at the rate established by the Secretary pursuant to G.S. 105-449.80 or G.S. 105-449.136 , as appropriate. This tax is in addition to any other taxes imposed on motor carriers.

History. 1955, c. 823, s. 2; 1969, c. 600, s. 22; 1981, c. 690, s. 3; 1985 (Reg. Sess., 1986), c. 982, s. 16; 1995, c. 390, s. 16; 2001-205, s. 2; 2008-134, s. 17.

Effect of Amendments.

Session Laws 2008-134, s. 17, effective January 1, 2009, made a minor punctuation change.

§ 105-449.39. Credit for payment of motor fuel tax.

Every motor carrier subject to the tax levied by this Article is entitled to a credit on its quarterly return for tax paid by the carrier on fuel purchased in the State. The amount of the credit is determined using the tax rate in effect under G.S. 105-449.80 for the time period covered by the return. To obtain a credit, the motor carrier must furnish evidence satisfactory to the Secretary that the tax for which the credit is claimed has been paid.

If the amount of a credit to which a motor carrier is entitled for a quarter exceeds the motor carrier’s liability for that quarter, the excess is refundable in accordance with G.S. 105-241.7 .

History. 1955, c. 823, s. 3; 1969, c. 600, s. 22; c. 1098; 1973, c. 476, s. 193; 1979, 2nd Sess., c. 1098; 1981, c. 690, s. 3; 1985 (Reg. Sess., 1986), c. 982, s. 17; 1987, c. 315; 1989, c. 692, s. 5.7; 1991, c. 182, s. 3; c. 487, s. 3; 1998-146, s. 1; 1999-337, s. 37; 2005-435, s. 3; 2007-491, s. 40; 2010-95, s. 26(a); 2016-5, s. 4.10(a).

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 2005-435, s. 3, effective September 27, 2005, substituted “carrier in accordance with G.S. 105-266(a)(3)” for “carrier” in the last paragraph.

Session Laws 2007-491, s. 40, effective January 1, 2008, substituted “excess is refundable in accordance with G.S. 105-241.7 ” for “Secretary must refund the excess to the motor carrier in accordance with G.S. 105-266(a)(3)” in the second paragraph. For applicability, see Editor’s note.

Session Laws 2010-95, s. 26(a), effective July 17, 2010, twice substituted “return” for “report” in the first paragraph.

Session Laws 2016-5, s. 4.10(a), effective January 1, 2016, substituted “the tax rate in effect under G.S. 105-449.80 for the time period” for “the flat cents-per-gallon rate plus the variable cents-per-gallon rate of tax in effect during the quarter” in the second sentence of the first paragraph.

§ 105-449.40. Secretary may require bond.

  1. Authority. —  The Secretary may require a motor carrier to furnish a bond when any of the following occurs:
    1. The motor carrier fails to file a return within the time required by this Article.
    2. The motor carrier fails to pay a tax when due under this Article.
    3. After auditing the motor carrier’s records, the Secretary determines that a bond is needed to protect the State from loss in collecting the tax due under this Article.
  2. Amount. —  A bond required of a motor carrier under this section may not be more than the larger of the following amounts:
    1. Five hundred dollars ($500.00).
    2. Four times the motor carrier’s average tax liability or refund for a reporting period.

      A bond must be in the form required by the Secretary.

History. 1955, c. 823, s. 4; 1967, c. 1110, s. 15; 1973, c. 476, s. 193; 1991, c. 487, s. 4; 2010-95, s. 26(b).

Effect of Amendments.

Session Laws 2010-95, s. 26(b), effective July 17, 2010, substituted “return” for “report” in subdivision (a)(1).

§ 105-449.41. [Repealed]

Repealed by Session Laws 2002-108, s. 2, effective January 1, 2003.

§ 105-449.42. Payment of tax.

The tax levied by this Article is due when a motor carrier files a quarterly return under G.S. 105-449.45 . The amount of tax due is calculated on the amount of motor fuel or alternative fuel used by the motor carrier in its operations within this State during the quarter covered by the return.

History. 1955, c. 823, s. 6; 1973, c. 476, s. 193; 1979, 2nd Sess., c. 1086, s. 2; 1983, c. 29, s. 2; 1991, c. 182, s. 4; 1999-337, s. 38; 2010-95, s. 26(c).

Effect of Amendments.

Session Laws 2010-95, s. 26(c), effective July 17, 2010, twice substituted “return” for “report.”

§ 105-449.42A. Leased motor vehicles.

  1. Lessor in Leasing Business. —  A lessor who is regularly engaged in the business of leasing or renting motor vehicles without drivers for compensation is the motor carrier for a leased or rented motor vehicle unless the lessee of the leased or rented motor vehicle gives the Secretary written notice, by filing a return or otherwise, that the lessee is the motor carrier. In that circumstance, the lessee is the motor carrier for the leased or rented motor vehicle.Before a lessee gives the Secretary written notice under this subsection that the lessee is the motor carrier, the lessee and lessor must make a written agreement for the lessee to be the motor carrier. Upon request of the Secretary, the lessee must give the Secretary a copy of the agreement.
  2. Independent Contractor. —  The lessee of a motor vehicle that is leased from an independent contractor is the motor carrier for the leased motor vehicle unless one of the circumstances listed in this subsection applies. If either of these circumstances applies, the lessor is the motor carrier for the leased motor vehicle.
    1. The motor vehicle is leased for fewer than 30 days.
    2. The motor vehicle is leased for at least 30 days and the lessor gives the Secretary written notice, by filing a return or otherwise, that the lessor is the motor carrier. Before a lessor gives the Secretary written notice that the lessor is the motor carrier, the lessor and lessee must make a written agreement for the lessor to be the motor carrier. Upon request of the Secretary, the lessor must give the Secretary a copy of the agreement.
  3. Liability. —  An independent contractor who leases a motor vehicle to another for fewer than 30 days is liable for compliance with this Article and the person to whom the motor vehicle is leased is not liable. Otherwise, both the lessor and lessee of a motor vehicle are jointly and severally liable for compliance with this Article.

History. 1983, c. 29, s. 3; 1985 (Reg. Sess., 1986), c. 826, s. 11; 1991, c. 487, s. 5; 1991 (Reg. Sess., 1992), c. 913, s. 9; 2010-95, s. 26(d).

Effect of Amendments.

Session Laws 2010-95, s. 26(d), effective July 17, 2010, in the first paragraph of subsection (a) and the first sentence of subdivision (b)(2), substituted “return” for “report”; in the introductory paragraph of subsection (b), in the first sentence, substituted “unless one of the circumstances listed in this subsection applies” for “unless either of the following applies,” and added the last sentence; added the last two sentences in subdivision (b)(2); and deleted the last three sentences in subsection (b), which read: “If either of these circumstances applies, the lessor is the motor carrier for the leased motor vehicle. Before a lessor gives the Secretary written notice under subdivision (2) that the lessor is the motor carrier, the lessor and lessee must make a written agreement for the lessor to be the motor carrier. Upon request of the Secretary, the lessor must give the Secretary a copy of the agreement.”

§ 105-449.43. Application of tax proceeds.

Tax revenue collected under this Article and tax refunds or credits allowed under this Article shall be allocated among and charged to the funds and accounts listed in G.S. 105-449.125 in accordance with that section.

History. 1955, c. 823, s. 7; 1981 (Reg. Sess., 1982), c. 1211, s. 3; 1989, c. 692, s. 1.16; 1995, c. 390, s. 17.

§ 105-449.44. How to determine the amount of fuel used in the State; presumption of amount used.

  1. Calculation. —  The amount of motor fuel or alternative fuel a motor carrier uses in its operations in this State for a reporting period is the number of miles the motor carrier travels in this State during that period divided by the calculated miles per gallon for the motor carrier for all qualified motor vehicles during that period.
  2. Presumption. —  The Secretary must check returns filed under this Article against the weigh station records and other records of the Division of Motor Vehicles of the Department of Transportation and the State Highway Patrol of the Department of Public Safety concerning motor carriers to determine if motor carriers that are operating in this State are filing the returns required by this Article. If the records indicate that a motor carrier operated in this State in a quarter and either did not file a return for that quarter or understated its mileage in this State on a return filed for that quarter by at least twenty-five percent (25%), the Secretary may assess the motor carrier for an amount based on the motor carrier’s presumed operations. The motor carrier is presumed to have mileage in this State equal to 10 trips of 450 miles each for each of the motor carrier’s qualified motor vehicles and to have fuel usage of four miles per gallon.
  3. Vehicles. —  The number of qualified motor vehicles of a motor carrier that is licensed under this Article is the number of sets of decals issued to the carrier. The number of qualified motor vehicles of a carrier that is not licensed under this Article is the number of qualified motor vehicles licensed or registered by the motor carrier in the carrier’s base state under the International Registration Plan.

History. 1955, c. 823, s. 8; 1995, c. 390, s. 35; 1999-337, s. 39; 2000-173, s. 12; 2005-435, s. 4; 2008-134, s. 18; 2010-95, s. 26(e); 2011-145, s. 19.1(g); 2017-204, s. 4.4(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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2005-435, s. 4, effective September 27, 2005, rewrote subsection (a).

Session Laws 2008-134, s. 18, effective January 1, 2009, in subsection (a), substituted “motor vehicles” for “vehicles” near the end; rewrote subsection (b); and in subsection (c), substituted “qualified motor vehicles” for “vehicles” all three times it appears, and substituted “sets of decals” for “identification markers” near the end of the first sentence.

Session Laws 2010-95, s. 26(e), effective July 17, 2010, in subsection (b), twice substituted “returns” for “reports” in the first sentence, and twice substituted “return” for “report” in the second sentence.

Session Laws 2011-145, s. 19.1(g), effective January 1, 2012, substituted “Public Safety” for “Crime Control and Public Safety” in the first sentence of subsection (b).

Session Laws 2017-204, s. 4.4(a), effective August 11, 2017, in subsection (c), substituted “licensed” for “registered” in the first and second sentences, and inserted “licensed or” in the second sentence. For applicability, see editor’s note.

§ 105-449.45. Returns of carriers.

  1. Return. —  A motor carrier must report its operations to the Secretary on a quarterly basis unless subsection (b) of this section exempts the motor carrier from this requirement. A quarterly return covers a calendar quarter and is due by the last day in April, July, October, and January. A return must be filed in the form required by the Secretary.
  2. Exemptions. —  A motor carrier is not required to file a quarterly return if any of the following applies:
    1. All the motor carrier’s operations during the quarter were made under a temporary permit issued under G.S. 105-449.49 .
    2. The motor carrier is an intrastate motor carrier, as indicated on the motor carrier’s application for licensure with the Secretary.
  3. Informational Returns. —  A motor carrier must file with the Secretary any informational returns concerning its operations that the Secretary requires.
  4. Failure to File Return.    — A motor carrier that fails to file a return under this section by the required date is subject to a penalty of fifty dollars ($50.00). (d1) Failure to Pay Tax When Due. — A motor carrier that fails to pay a tax when due is subject to a penalty of fifty dollars ($50.00), or ten percent (10%) of the tax due, whichever is greater. The Secretary shall not assess this penalty if the motor carrier files or pays in accordance with G.S. 105-236(a)(4)a. or b.

    (d2) Penalty Waiver. — The Secretary may reduce or waive a penalty as provided under G.S. 105-449.119 .

  5. Interest. —  Interest on overpayments and underpayments of tax imposed on motor carriers under this Article is subject to the interest rate adopted in the International Fuel Tax Agreement.

History. 1955, c. 823, s. 9; 1973, c. 476, s. 193; 1979, 2nd Sess., c. 1086, s. 2; 1981 (Reg. Sess., 1982), c. 1254, s. 2; 1989 (Reg. Sess., 1990), c. 1050, s. 1; 1991, c. 182, s. 5; 1995, c. 17, s. 13.1; 1998-212, s. 29A.14(q); 1999-337, s. 40; 2009-445, s. 31(a); 2010-95, s. 26(f); 2016-5, s. 4.8; 2017-204, s. 4.4(b); 2021-180, s. 42.13E(j).

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. 105-241.13 A.”

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

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2009-445, s. 31(a), effective January 1, 2010, added the last sentence in subsection (a).

Session Laws 2010-95, s. 26(f), effective July 17, 2010, in the section catchline, substituted “Returns” for “Reports”; throughout the section, substituted “return” for “report,” or similar language; and in subsection (c), substituted “Informational Returns” for “Other Reports” and “must file with the Secretary any informational returns” for “must file with the Secretary other reports.”

Session Laws 2016-5, s. 4.8, effective May 11, 2016, added subsection (e).

Session Laws 2017-204, s. 4.4(b), effective August 11, 2017, substituted “licensure” for “registration” in subdivision (b)(2). For applicability, see editor’s note.

Session Laws 2021-180, s. 42.13E(j), effective November 18, 2021, in subsection (d), substituted “Failure to File Return” for “Penalties” in the subsection heading; and added subsections (d1) and (d2).

§ 105-449.46. Inspection of books and records.

The Secretary and his authorized agents and representatives shall have the right at any reasonable time to inspect the books and records of any motor carrier subject to the tax imposed by this Article or to the registration fee imposed by Article 3 of Chapter 20 of the General Statutes.

History. 1955, c. 823, s. 10; 1973, c. 476, s. 193; 2005-435, s. 5.

Effect of Amendments.

Session Laws 2005-435, s. 5, effective September 27, 2005, substituted “Article or to the registration fee imposed by Article 3 of Chapter 20 of the General Statutes” for “Article” at the end of the paragraph.

§ 105-449.47. Licensure of vehicles.

  1. Requirement. —  A motor carrier may not operate or cause to be operated in this State a qualified motor vehicle unless both the motor carrier and at least one qualified motor vehicle are licensed as provided in this subsection. This subsection applies to a motor carrier that operates a recreational vehicle that is used in connection with any business endeavor. A motor carrier that is subject to the International Fuel Tax Agreement must be licensed with the motor carrier’s base state jurisdiction. A motor carrier that is not subject to the International Fuel Tax Agreement must be licensed with the Secretary for purposes of the tax imposed by this Article. (a1) License and Decal. — When the Secretary licenses a motor carrier, the Secretary must issue a license for the motor carrier and a set of decals for each qualified motor vehicle. A motor carrier must keep records of decals issued to it and must be able to account for all decals it receives from the Secretary. Licenses and decals issued by the Secretary are for a calendar year. All decals issued by the Secretary remain the property of the State. The Secretary may revoke a license or a decal when a motor carrier fails to comply with this Article or Article 36C or 36D of this Subchapter.A motor carrier must carry a copy of its license in each motor vehicle operated by the motor carrier when the vehicle is in this State. Unless operating under a temporary permit under G.S. 105-449.49 , a motor vehicle must clearly display one decal on each side of the vehicle at all times. A decal must be affixed to the qualified motor vehicle for which it was issued in the place and manner designated by the authority that issued it.
  2. Exemption. —  This section does not apply to the operation of a qualified motor vehicle that is licensed in another state and is operated temporarily in this State by a public utility, a governmental or cooperative provider of utility services, or a contractor for one of these entities for the purpose of restoring utility services in an emergency outage.

History. 1955, c. 823, s. 11; 1973, c. 746, s. 193; 1983, c. 713, s. 56; 1985 (Reg. Sess., 1986), c. 937, s. 20; 1989, c. 692, s. 6.2; 1991, c. 487, s. 6; 1995, c. 50, s. 5; c. 390, s. 18; 1999-337, s. 41; 2002-108, s. 3; 2004-170, s. 24; 2005-435, s. 6; 2008-134, s. 19; 2014-3, s. 9.5(c); 2017-204, s. 4.4(c); 2020-58, s. 2.10(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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2002-108, s. 3, effective January 1, 2003, redesignated the former second and third paragraphs of subsection (a) as present subsection (a1); and in subsection (a1), inserted “Registration and Identification Marker” at the beginning, and inserted the second sentence.

Session Laws 2004-170, s. 24, effective August 2, 2004, deleted the former fourth sentence which read: “The Secretary may renew a registration or an identification marker without issuing a new registration or identification marker.”

Session Laws 2005-435, s. 6, effective September 27, 2005, in subsection (a1), deleted “withhold or” preceding “revoke a registration” and substituted “Article” for “Article, former Article 36 or 36A of this Subchapter” in the last sentence.

Session Laws 2008-134, s. 19, effective January 1, 2009, rewrote the section.

Session Laws 2014-3, s. 9.5(c), effective May 29, 2014, rewrote subsection (a).

Session Laws 2017-204, s. 4.4(c), effective August 11, 2017, substituted “Licensure” for “Registration” or similar language, in the section heading and throughout the section; substituted “used in connection with any business endeavor” for “considered a qualified motor vehicle” in the second sentence of subsection (a); and deleted “the motor carrier registers” following “motor vehicle” in the first sentence of subsection (a1). For applicability, see editor’s note.

Session Laws 2020-58, s. 2.10(a), effective June 30, 2020, added “Unless operating under a temporary permit under G.S. 105-449.49 ” at the beginning of the second sentence in the second paragraph of subsection (a1).

§ 105-449.47A. Denial of license application and decal issuance.

The Secretary may refuse to license and issue a decal to an applicant that does not meet the requirements set out in G.S. 105-449.69(b) or that has done any of the following:

  1. Had a license issued under Chapter 105 or Chapter 119 of the General Statutes revoked by the Secretary.
  2. Had a license issued by another jurisdiction, pursuant to the International Fuel Tax Agreement, revoked.
  3. Been convicted of fraud or misrepresentation.
  4. Been convicted of any other offense that indicates that the applicant may not comply with this Article if licensed and issued a decal.
  5. Failed to remit payment for a tax debt under Chapter 105 or Chapter 119 of the General Statutes. The term “tax debt” has the same meaning as defined in G.S. 105-243.1 .
  6. Failed to file a return due under Chapter 105 or Chapter 119 of the General Statutes.
  7. Failed to maintain motor vehicle registration on the qualified motor vehicle.

History. 2005-435, s. 7; 2008-134, s. 20; 2009-445, s. 32; 2010-95, s. 28; 2017-204, s. 4.4(d); 2019-169, s. 4.10.

Editor’s Note.

Session Laws 2008-134, s. 20, amended this section in the coded bill drafting format provided by G.S. 120-20.1 . The word “to” was inadvertently stricken from subdivision (2). The error was corrected by Session Laws 2009-445, s. 32.

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2008-134, s. 20, effective January 1, 2009, in the section heading, substituted “decals” for “identification markers”; in the introductory language, substituted “a decal” for “an identification marker”; in subdivision (2), substituted “the International Fuel Tax Agreement” for “to G.S. 105-449.57 ”; and in subdivision (4), substituted “a decal” for “an identification marker.”

Session Laws 2009-445, s. 32, effective August 7, 2009, inserted “to” in subdivision (2).

Session Laws 2010-95, s. 28, effective July 17, 2010, inserted “does not meet the requirements set out in G.S. 105-449.69(b) or that” in the introductory language.

Session Laws 2017-204, s. 4.4(d), effective August 11, 2017, rewrote the section heading; substituted “license” for “registration” or similar language throughout the section; substituted “revoked by the Secretary” for “cancelled by the Secretary for cause” in subdivision (1); and substituted “revoked” for “cancelled for cause” in subdivision (2). For applicability, see editor’s note.

Session Laws 2019-169, s. 4.10, effective July 26, 2019, added subdivision (7).

§ 105-449.47B. Revocation of license.

  1. Revocation.    — The Secretary may revoke a license or a decal when a motor carrier fails to comply with this Article or Article 36C or 36D of this Subchapter after affording the motor carrier an opportunity to have a hearing as provided in this section.
  2. Notice of Proposed Revocation.    — The Secretary must provide a licensee with a notice of proposed revocation that includes all of the following information:
    1. The basis for the proposed revocation. The statement of the basis for the proposed revocation does not limit the Department from changing the basis.
    2. The effective date of the revocation, which must be one of the following:
      1. Forty-five days from the date of the notice of proposed revocation if the licensee does not file a timely request for hearing.
      2. The tenth day after the date an adverse final decision is issued if the adverse final decision is mailed.
      3. The date an adverse final decision is delivered if the adverse final decision is delivered in person.
    3. The circumstances, if any, under which the Secretary will not revoke the license.
    4. An explanation of how the licensee may contest the proposed revocation.
  3. Request for Hearing and Decision.    — A licensee may contest a proposed revocation by filing a written hearing request within 45 days of the date the notice of proposed revocation was mailed, if the notice was delivered by mail, or delivered to the licensee, if the notice was delivered in person. A hearing request is considered filed as provided under G.S. 105-241.11(b) . If the licensee does not file a timely hearing request, the license is revoked as provided in the notice of proposed revocation and the revocation is final and not subject to further administrative or judicial review.
  4. Hearing Procedure.    — The Secretary must give a licensee who filed a timely hearing request in accordance with subsection (c) of this section at least 20 days’ written notice of the date, time, and place of the hearing, unless the Department and the licensee agree to a shorter period. A hearing must be conducted as prescribed by the Secretary. The Secretary must issue a final decision and notify the licensee in writing within 60 days of the hearing. The Department and the licensee may extend this time limit by mutual agreement. Failure to issue a final decision within the required time does not affect the validity of the decision. The final decision must state the basis for the decision and, if the final decision includes revocation of a license or a decal, the effective date of the revocation in accordance with subdivision (b)(2) of this section. The statement of the basis of the revocation does not limit the Department from changing the basis.
  5. Delivery of Notice.    — The Secretary must deliver a notice in accordance with G.S. 105-241.20(b). In lieu of providing notice by United States mail, the Secretary may give notice by email or other electronic means if the licensee has consented to receiving notices via electronic means.
  6. Return of Credentials.    — If the license is revoked, the former licensee shall return to the Secretary, within 10 days of the issuance of the final decision, all licenses and decals previously issued. If the licenses or decals are not returned, the credentials are subject to seizure or removal from the motor vehicle or defacement. If a license or decal is unable to be returned, the licensee must include a written statement of the reasons, satisfactory to the Secretary, why the license or decal cannot be returned.

History. 2021-180, s. 42.13D(b).

Editor's Note.

Session Laws 2021-180, s. 42.13D(e), made this section, as added by Session Laws 2021-180, s. 42.13D(b), effective January 1, 2022, and applicable to summary revocations and non-summary revocations initiated by the Department on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

§ 105-449.48. [Repealed]

Repealed by Session Laws 2006-162, s. 12(c), effective July 24, 2006.

§ 105-449.49. Temporary permits.

  1. Permitting Service. —  Upon application to the Secretary and payment of a fee of fifty dollars ($50.00), a permitting service may obtain a temporary permit authorizing a motor carrier to operate a vehicle in the State for three days without licensing the vehicle in accordance with G.S. 105-449.47 . The permitting service may sell the temporary permit to a motor carrier. A motor carrier to whom a temporary permit has been issued may elect not to report its operation of the vehicle during the three-day period. Fees collected under this subsection are credited to the Highway Fund.
  2. Repealed by Session Laws 2016-5, s. 4.6, effective May 11, 2016.
  3. Licensed Motor Carrier. —  A licensed motor carrier in North Carolina, who is subject to the International Fuel Tax Agreement, may apply for a temporary permit authorizing the motor carrier to operate a qualified motor vehicle in the State for 30 days without a decal. The licensed motor carrier must be in compliance with this Article, and the application must be on a form prescribed by the Secretary and contain information required by the Secretary.
  4. Permit. —  A motor carrier operating under a temporary permit issued pursuant to this section must keep a copy of the permit in the motor vehicle.

History. 1955, c. 823, s. 13; 1973, c. 476, s. 193; 1979, c. 11; 1981 (Reg. Sess., 1982), c. 1254, s. 1; 1983, c. 713, s. 58; 1991, c. 182, s. 6; c. 487, s. 7; 1991 (Reg. Sess., 1992), c. 913, s. 10; 2003-349, s. 10.1; 2006-162, s. 12(d); 2016-5, s. 4.6; 2017-204, s. 4.4(e); 2020-58, s. 2.10(b).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2003-349, s. 10.1, effective January 1, 2004, in the first sentence of the introductory paragraph, substituted “three days” for “20 days” and in the second sentence, substituted “three-day period” for “20-day period.”

Session Laws 2006-162, s. 12(d), effective July 24, 2006, added the subsection designations and subsection catchlines; and, in present subsection (a), inserted “for three days” following “State” and deleted “for not more than three days” at the end of the first sentence and added the last sentence.

Session Laws 2016-5, s. 4.6, effective May 11, 2016, in subsection (a), in the first sentence, substituted “a permitting service” for “a motor carrier” near the beginning and substituted “a motor carrier” for “the carrier” near the middle, and added the second sentence; and deleted former subsection (b) pertaining to refusal to issue a temporary permit.

Session Laws 2017-204, s. 4.4(e), effective August 11, 2017, substituted “licensing” for “registering” in the first sentence of subsection (a). For applicability, see editor’s note.

Session Laws 2020-58, s. 2.10(b), effective June 30, 2020, substituted “Permitting Service” for “Issuance” in the heading of subsection (a); and added subsections (c) and (d).

§ 105-449.50. [Repealed]

Repealed by Session Laws 2008-134, s. 21, effective January 1, 2009.

§ 105-449.51. Violations declared to be misdemeanors.

A person who operates or causes to be operated on a highway in this State a qualified motor vehicle that does not carry a license as required by this Article, does not properly display a decal as required by this Article, or is not licensed in accordance with this Article commits a Class 3 misdemeanor and is punishable by a fine of two hundred dollars ($200.00). Each day’s operation in violation of this section constitutes a separate offense.

History. 1955, c. 823, s. 15; 1973, c. 476, s. 193; 1983, c. 713, s. 59; 1993, c. 539, s. 734; 1994, Ex. Sess., c. 24, s. 14(c); 2005-435, s. 8; 2008-134, s. 22; 2017-204, s. 4.4(f).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2005-435, s. 8, effective January 1, 2006, deleted “only” preceding “be fined” and “no less than ten dollars ($10.00) nor more than” thereafter in the introductory language.

Session Laws 2008-134, s. 22, effective January 1, 2009, inserted “qualified” preceding “motor vehicle,” substituted “a decal” for “an identification marker,” “Article commits” for “Article is guilty of,” and “and is punishable by a fine of” for “and, upon conviction thereof, shall be fined,” deleted “of any provision” following “operation in violation,” and substituted “constitutes a separate” for “shall constitute a separate.”

Session Laws 2017-204, s. 4.4(f), effective August 11, 2017, in the first sentence, substituted “A person” for “Any person,” “license” for “registration card” and “licensed” for “registered.” For applicability, see editor’s note.

§ 105-449.52. Civil penalties applicable to motor carriers.

  1. Penalty. —  A motor carrier who does any of the following is subject to a civil penalty:
    1. Operates in this State or causes to be operated in this State a qualified motor vehicle that either fails to carry the license required by this Article or fails to display a decal in accordance with this Article. The amount of the penalty is one hundred dollars ($100.00).
    2. Is unable to account for a decal the Secretary issues the motor carrier, as required by G.S. 105-449.47 . The amount of the penalty is one hundred dollars ($100.00) for each decal for which the carrier is unable to account.
    3. Displays a decal on a qualified motor vehicle operated by a motor carrier that was not issued to the carrier by the Secretary under G.S. 105-449.47 . The amount of the penalty is one thousand dollars ($1,000) for each decal unlawfully obtained. Both the licensed motor carrier to whom the Secretary issued the decal and the motor carrier displaying the unlawfully obtained decal are jointly and severally liable for the penalty under this subdivision. (a1) Payment. — A penalty imposed under this section is payable to the agency that assessed the penalty. When a qualified motor vehicle is found to be operating without a license or a decal or with a decal the Secretary did not issue for the vehicle, the qualified motor vehicle may not be driven for a purpose other than to park it until the penalty imposed under this section is paid unless the officer that imposes the penalty determines that operating it will not jeopardize collection of the penalty.
  2. Penalty Reduction. —  The Secretary may reduce or waive the penalty as provided under G.S. 105-449.119 .

History. 1955, c. 823, s. 16; 1957, c. 948; 1973, c. 476, s. 193; 1975, c. 716, s. 5; 1981, c. 690, s. 18; 1983, c. 713, s. 60; 1991, c. 42, s. 14; 1991 (Reg. Sess., 1992), c. 913, s. 11; 1998-146, s. 2; 1999-337, s. 43; 2002-108, s. 4; 2004-170, s. 25; 2007-527, s. 16(a); 2008-134, ss. 8, 23; 2014-3, s. 9.8(a); 2017-204, s. 4.4(g).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2002-108, s. 4, effective January 1, 2003, rewrote the section heading and subsection (a).

Session Laws 2004-170, s. 25, effective August 2, 2004, in subdivision (a)(1), substituted “either fails” for “does not” and “fails” for “does not”; and inserted “the Department of Crime Control and Public Safety,” following “Department of Revenue” in the first sentence of the paragraph following subdivision (a)(3).

Session Laws 2007-527, s. 16(a), effective August 31, 2007, redesignated the former second paragraph of subdivision (a)(3) as present subsection (a1); and in subsection (a1), added the subsection heading, and substituted “agency that assessed the penalty” for “Department of Revenue, the Department of Crime Control and Public Safety, or the Division of Motor Vehicles.”

Session Laws 2008-134, s. 8, effective July 28, 2008, in subsection (b), substituted “Review.” for “Hearing.” at the beginning, and substituted “reviewing a penalty” for “protesting a penalty.”

Session Laws 2008-134, s. 23, effective January 1, 2009, in subdivision (a)(1), substituted “a qualified motor vehicle” for “a motor vehicle” and “a decal” for “an identification marker”; in subdivision (a)(2), substituted “a decal” for “identification markers,” “decal for which” for “identification marker,” and “account” for “account for”; in subdivision (a)(3), substituted “a decal on a qualified” for “an identification marker on a,” and substituted “decal” for “an identification marker” three times; and in subsection (a1), substituted “qualified motor vehicle” for “motor vehicle” twice, “a decal” for “an identification marker” twice, “park it until” for “park the motor vehicle until,” and “operating it” for “operation of the motor vehicle.”

Session Laws 2014-3, s. 9.8(a), effective May 29, 2014, rewrote subsection (b).

Session Laws 2017-204, s. 4.4(g), effective August 11, 2017, substituted “license” for “registration card” in subdivision (a)(1) and subsection (a1); and substituted “Penalty Reduction” for “Penalty” in the heading for subsection (b). For applicability, see editor’s note.

§ 105-449.53. [Repealed]

Repealed by Session Laws 1963, c. 1169, s. 6.

§ 105-449.54. Commissioner of Motor Vehicles made process agent of nonresident motor carriers.

By operating a motor vehicle on the highways of this State, a nonresident motor carrier consents to the appointment of the Commissioner of Motor Vehicles as its attorney in fact and process agent for all summonses or other lawful process or notice in any action, assessment, or other proceeding under this Chapter.

History. 1955, c. 823, s. 18; 2004-170, s. 26.

Effect of Amendments.

Session Laws 2004-170, s. 26, effective August 2, 2004, rewrote the section.

§§ 105-449.55, 105-449.56. [Repealed]

Repealed by Session Laws 1991, c. 42, s. 17.

Cross References.

As to enforcement of Subchapter V, see now G.S. 105-269.3 .

§ 105-449.57. Cooperative agreements between jurisdictions.

  1. Authority. —  The Secretary may enter into cooperative agreements with other jurisdictions for exchange of information in administering the tax imposed by this Article. No agreement, arrangement, declaration, or amendment to an agreement is effective until stated in writing and approved by the Secretary or the Secretary’s designee.
  2. Content. —  An agreement may provide for determining the base state for motor carriers, records requirements, audit procedures, exchange of information, persons eligible for tax licensing, defining qualified motor vehicles, determining if bonding is required, specifying reporting requirements and periods, including defining uniform penalty and interest rates for late reporting, determining methods for collecting and forwarding of motor carrier taxes and penalties to another jurisdiction, and any other provisions that will facilitate the administration of the agreement.
  3. Disclosure. —  In accordance with G.S. 105-259 , the Secretary may, as required by the terms of an agreement, forward to officials of another jurisdiction any information in the Department’s possession relative to the administration and collection of a tax imposed on the use of motor fuel or alternative fuel by any motor carrier. The Secretary may disclose to officials of another jurisdiction the location of offices, motor vehicles, and other real and personal property of motor carriers.
  4. Audits. —  An agreement may provide for each jurisdiction to audit the records of motor carriers based in the jurisdiction to determine if the taxes due each jurisdiction are properly reported and paid. Each jurisdiction must forward the findings of the audits performed on motor carriers based in the jurisdiction to each jurisdiction in which the carrier has taxable use of motor fuel or alternative fuel. For motor carriers not based in this State, the Secretary may utilize the audit findings received from another jurisdiction as the basis upon which to propose assessments of taxes against the carrier as though the audit had been conducted by the Secretary. Penalties and interest must be assessed at the rates provided in the agreement.No agreement entered into pursuant to this section may preclude the Department from auditing the records of any motor carrier covered by this Chapter.The provisions of Article 9 of this Chapter apply to any assessment or order made under this section.
  5. Restriction. —  The Secretary or the Secretary’s designee may not enter into any agreement that would increase or decrease taxes and fees imposed under Subchapter V of Chapter 105 of the General Statutes. Any provision to the contrary is void.

History. 1989, c. 667, s. 1; 1993, c. 485, s. 36; 1995 (Reg. Sess., 1996), c. 647, s. 50; 1999-337, s. 42; 2016-5, ss. 4.5(b), 4.7(a), (b).

Effect of Amendments.

Session Laws 2016-5, ss. 4.5(b) and 4.7(a), (b), effective May 11, 2016, added “or the Secretary’s designee” at the end of subsection (a); inserted “administration and collection of a tax imposed on the” in the first sentence of subsection (c); and inserted “or the Secretary’s designee” near the beginning of subsection (e).

§§ 105-449.58, 105-449.59.

Reserved for future codification purposes.

Article 36C. Gasoline, Diesel, and Blends.

Part 1. General Provisions.

§ 105-449.60. Definitions.

The following definitions apply in this Article:

  1. Additive. — A de minimus amount of product that is added or mixed with motor fuel. Examples of an additive include fuel system detergent, an oxidation inhibitor, gasoline antifreeze, or an octane enhancer.
  2. Aviation gasoline. — Fuel blended or produced specifically for use in an aircraft motor.
  3. Biodiesel. — Any fuel or mixture of fuels derived in whole or in part from agricultural products or animal fats or wastes from these products or fats.
  4. Biodiesel provider. — A person who does any of the following:
    1. Produces an average of no more than 500,000 gallons of biodiesel per month during a calendar year. A person who produces more than this amount is a refiner.
    2. Imports biodiesel by means of a transport truck, a railroad tank car, a tank wagon, or a marine vessel.
  5. Blended fuel. — A mixture composed of gasoline or diesel fuel and another liquid, other than an additive, that can be used as a fuel in a highway vehicle.
  6. Blender. — A person who produces blended fuel outside the terminal transfer system.
  7. Bonded importer. — A person, other than a supplier, who imports by transport truck or another means of transfer outside the terminal transfer system motor fuel removed from a terminal located in another state in one or more of the following circumstances:
    1. The state from which the fuel is imported does not require the seller of the fuel to collect motor fuel tax on the removal of the fuel at that state’s rate or the rate of the destination state.
    2. The supplier of the fuel is not an elective supplier.
    3. The supplier of the fuel is not a permissive supplier.
  8. Bulk end-user. — A person who maintains bulk storage for motor fuel and uses part or all of the stored fuel to operate a highway vehicle.
  9. Bulk plant. — A motor fuel storage and distribution facility that is not a terminal and from which motor fuel may be removed at a rack.

    (9a) Bulk storage. — A container or tank used to store bulk purchase of motor fuel or alternative fuel of 42 gallons or more.

  10. Code. — Defined in G.S. 105-228.90 .
  11. Destination state. — The state, territory, or foreign country to which motor fuel is directed for delivery into a storage facility, a receptacle, a container, or a type of transportation equipment for the purpose of resale or use.
  12. Diesel fuel. — Any liquid, other than gasoline, that is suitable for use as a fuel in a diesel-powered highway vehicle. The term includes biodiesel, fuel oil, heating oil, high-sulfur dyed diesel fuel, and kerosene. The term does not include jet fuel.
  13. Distributor. — A person who does one or more of the activities listed in this subdivision. The term does not include a person who sells motor fuel only at retail.
    1. Produces, refines, blends, compounds, or manufactures motor fuel.
    2. Transports motor fuel into a state or exports motor fuel out of a state.
    3. Engages in the distribution of motor fuel primarily by tank car or tank truck or both.
    4. Operates a bulk plant where the person has active motor fuel bulk storage.
  14. Diversion. — The movement of motor fuel to a state other than the destination state indicated on the original bill of lading.
  15. Dyed diesel fuel. — Diesel fuel that meets the dyeing and marking requirements as set out in 26 C.F.R. § 48.4082.1.
  16. Elective supplier. — A supplier that is required to be licensed in this State and that elects to collect the excise tax due this State on motor fuel that is removed by the supplier at a terminal located in another state and has this State as its destination state.
  17. Exempt card or code. — A credit card or an access code that enables the person to whom the card or code is issued to buy motor fuel at retail without paying the motor fuel excise tax on the fuel.
  18. Export. — To obtain motor fuel in this State for sale or other distribution in another state. In applying this definition, motor fuel delivered out-of-state by or for the seller constitutes an export by the seller and motor fuel delivered out-of-state by or for the purchaser constitutes an export by the purchaser.
  19. Fuel alcohol. — Alcohol, methanol, or fuel grade ethanol.
  20. Fuel alcohol provider. — A person who does any of the following:
    1. Produces an average of no more than 500,000 gallons of fuel alcohol per month during a calendar year. A person who produces more than this amount is a refiner.
    2. Imports fuel alcohol by means of a transport truck, a railroad tank car, a tank wagon, or a marine vessel.

      (20a) Fuel grade ethanol. — Ethanol meeting the standard for the American Society Testing Materials Specification D 4806, “Standard Specification for Denatured Fuel Ethanol for Blending with Gasolines for Use as Automotive Spark-Ignition Engine Fuel,” or ethanol, regardless of how it was produced, denatured in accordance with 27 C.F.R. § 19.746 as of January 1, 2021.

  21. Gasohol. — A blended fuel composed of gasoline and fuel alcohol or gasoline and ethanol.
  22. Gasoline. — Any of the following:
    1. All products that are commonly or commercially known or sold as gasoline and are suitable for use as a fuel in a highway vehicle, other than products that have an American Society for Testing Materials octane number of less than 75 as determined by the motor method. The term does not include aviation gasoline.
    2. A petroleum product component of gasoline, such as naptha, reformate, or toluene, listed in Treasury Regulation Section 48-4081-1(c)(3) as of January 1, 2017, that can be blended for use in a motor fuel.
    3. Gasohol.
    4. Fuel alcohol.
  23. Gross gallons. — The total amount of motor fuel measured in gallons, exclusive of any temperature, pressure, or other adjustments.
  24. Highway. — Defined in G.S. 20-4.01(13) .
  25. Highway vehicle. — A self-propelled vehicle that is designed for use on a highway.
  26. Import. — To bring motor fuel into this State by any means of conveyance other than in the fuel supply tank of a highway vehicle. In applying this definition, motor fuel delivered into this State from out-of-state by or for the seller constitutes an import by the seller, and motor fuel delivered into this State from out-of-state by or for the purchaser constitutes an import by the purchaser.
  27. In-State supplier. — Either of the following:
    1. A supplier that is required to have a license and elects not to collect the excise tax due this State on motor fuel that is removed by the supplier at a terminal located in another state and has this State as its destination state.
    2. A supplier that does business only in this State.
  28. Jet fuel. — Kerosene that meets all of the following requirements:
    1. Has a maximum distillation temperature of 400 degrees Fahrenheit at the ten percent (10%) recovery point and a final maximum boiling point of 572 degrees Fahrenheit.
    2. Meets American Society Testing Materials Specification D 1655 and Military Specifications MIL-T-5624P and MIL-T-83133D, Grades JP-5 and JP-8.
  29. Kerosene. — Petroleum oil that is free from water, glue, and suspended matter and that meets the specifications and standards adopted under G.S. 119-26 by the Gasoline and Oil Inspection Board.
  30. Marine vessel. — A ship, boat, or other watercraft used or capable of being used to move in or through a waterway.
  31. Motor fuel. — Gasoline, diesel fuel, and blended fuel.
  32. Motor fuel rate. — The rate of tax set in G.S. 105-449.80 .
  33. Motor fuel transporter. — A person who transports motor fuel by pipeline, transport truck, tank wagon for hire, railroad tank car, or marine vessel.
  34. Net gallons. — The amount of motor fuel measured in gallons when corrected to a temperature of 60 degrees Fahrenheit and a pressure of 14 7/10 pounds per square inch.
  35. Occasional importer. — One or more of the following that imports motor fuel by any means outside the terminal transfer system:
    1. A distributor that imports motor fuel on an average basis of no more than once a month during a calendar year.
    2. A bulk end-user that acquires motor fuel for import from a bulk plant and is not required to be licensed as a bonded importer.
    3. A distributor that imports motor fuel for use in a race car.
  36. Permissive supplier. — An out-of-state supplier that elects, but is not required, to have a supplier’s license under this Article.
  37. Person. — Defined in G.S. 105-228.90 .
  38. Pipeline. — A fuel distribution system that moves motor fuel, in bulk, through a pipe either from a refinery to a terminal or from a terminal to another terminal.
  39. Position holder. — The person who holds the inventory position on the motor fuel in a terminal, as reflected on the records of the terminal operator. A person holds the inventory position on the motor fuel when that person has a contract with the terminal operator for the use of storage facilities and terminaling services for fuel at the terminal. The term includes a terminal operator who owns fuel in the terminal.
  40. Rack. — A mechanism for delivering motor fuel from a refinery, a terminal, or a bulk plant into a transport truck, a railroad tank car, or another means of transfer that is outside the terminal transfer system.
  41. Refiner. — A person who owns, operates, or controls a refinery. The term includes a person who produces an average of more than 500,000 gallons of fuel alcohol or biodiesel a month during a calendar year.
  42. Refinery. — A facility used to process crude oil, unfinished oils, natural gas liquids, or other hydrocarbons into motor fuel and from which fuel may be removed by pipeline or vessel or at a rack. The term does not include a facility that produces only blended fuel or gasohol.
  43. Removal. — A physical transfer other than by evaporation, loss, or destruction. A physical transfer to a transport truck or another means of conveyance outside the terminal transfer system is complete upon delivery into the means of conveyance.
  44. Retailer. — A person who maintains storage facilities for motor fuel and who sells the fuel at retail or dispenses the fuel at a retail location.
  45. Secretary. — Defined in G.S. 105-228.90 .
  46. Supplier. — Any of the following:
    1. A position holder or a person who receives motor fuel pursuant to a two-party exchange.
    2. A fuel alcohol provider.
    3. A biodiesel provider.
    4. Repealed by Session Laws 2017-39, s. 12, effective June 21, 2017.
  47. System transfer. — A transfer of motor fuel within the terminal transfer system.
  48. Tank wagon. — A truck that is not a transport truck and is designed or used to carry at least 1,000 gallons of motor fuel and the motor fuel is owned by the transporter.

    (48a) Tank wagon for hire. — A truck designed or used to carry at least 1,000 gallons of motor fuel and the transporter is compensated for transporting motor fuel owned by another person.

  49. Tank wagon importer. — A person who imports only by means of a tank wagon motor fuel that is removed from a terminal or a bulk plant located in another state.
  50. Tax. — An inspection or other excise tax on motor fuel and any other fee or charge imposed on motor fuel on a per-gallon basis.
  51. Terminal. — A motor fuel storage and distribution facility that is supplied by pipeline or marine vessel, and from which motor fuel, jet fuel, or aviation gasoline may be removed at a rack.
  52. Terminal operator. — A person who owns, operates, or otherwise controls a terminal.
  53. Terminal transfer system. — The motor fuel distribution system consisting of refineries, pipelines, marine vessels, and terminals. The term has the same meaning as “bulk transfer/terminal system” under 26 C.F.R. § 48.4081-1.
  54. Transmix. — Either of the following:
    1. The buffer or interface between two different products in a pipeline shipment.
    2. A mix of two different products within a refinery or terminal that results in an off-grade mixture.
  55. Transport truck. — A tractor trailer designed or used to transport loads of motor fuel over a highway. For the purposes of this definition, a tank wagon for hire is considered a transport truck.
  56. Trustee. — A person who is licensed as a supplier and who receives tax payments from and on behalf of a licensed distributor or licensed importer for remittance to the Secretary.
  57. Two-party exchange. — A transaction in which motor fuel is transferred from one licensed supplier to another licensed supplier pursuant to an exchange agreement under which the supplier that is the position holder agrees to deliver motor fuel to the other supplier or the other supplier’s customer at the rack of the terminal at which the delivering supplier is the position holder.
  58. User. — A person who owns or operates a licensed highway vehicle that has a registered gross vehicle weight of at least 10,001 pounds and who does not maintain storage facilities for motor fuel.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, ss. 1, 2; 1998-146, s. 3; 2000-173, ss. 13(a), 14(a); 2001-414, s. 27; 2002-108, ss. 5, 6; 2003-349, s. 10.2; 2004-170, s. 27; 2006-162, s. 14(a); 2008-134, s. 24; 2017-39, s. 12; 2019-169, s. 4.11; 2021-180, s. 42.13E(k).

Editor’s Note.

Session Laws 1998-146, s. 13, applicable to transactions occurring on or after January 1, 1999, substituted “transaction” for “exchange” in subdivision (31)a., and rewrote subdivision (40). Session Laws 2000-173, s. 13(a) amended subdivisions (31) and (40) to restore the pre-1998 wording.

Session Laws 2004-124, s. 30.9, provides: “Any funds received by the Department of Transportation as a result of the Department of Revenue’s Fuel Tax Action Plan in an amount greater than the costs of administering the program during the 2004-2005 fiscal year shall be distributed equally among the 14 Highway Divisions. One-half of the funds distributed to each Highway Division shall be used for contract resurfacing and the remaining one-half of the funds distributed to each Highway Division shall be used for highway maintenance.

“The Department of Revenue shall submit periodic reports to the Joint Legislative Transportation Oversight Committee and the Joint Legislative Commission on Governmental Operations on the implementation of the Department’s Fuel Tax Action Plan. The initial report shall describe the plan, the steps the Department intends to take to implement the plan, the timetable for implementation of the steps, and the amount of revenue the Department expects to generate. Subsequent reports shall describe the Department’s progress in implementing the plan, the number of newly authorized positions that have been filled, and the amount and source of revenue generated from implementation. The Department shall submit the initial report August 1, 2004. Subsequent reports shall be submitted every three months starting November 1, 2004, until the end of the plan. The Department shall not distribute revenue generated by the Fuel Tax Action Plan until the revenue has been included in a report submitted under this section.”

Session Laws 2004-124, s. 1.2, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2004’.”

Session Laws 2004-124, s. 33.3, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2004-2005 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2004-2005 fiscal year.”

Session Laws 2004-124, s. 33.5, contains a severability clause.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

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.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2002-108, ss. 5 and 6, effective January 1, 2003, recodified former subdivision (1) as subdivision (1e); added subdivisions (1), (1a), (27a), and (27b); added “and biodiesel” in subdivision (7); added “alcohol” in subdivision (12); rewrote subdivision (13); substituted “alcohol” for “grade ethanol” in paragraph (15)d; inserted “by pipeline or who transports motor fuel” in subdivision (22); added paragraphs (31)c and (31)d; and rewrote subdivision (33).

Session Laws 2003-349, s. 10.2, effective January 1, 2004, substituted “is designed” for “has a compartment designed” in subdivision (33).

Session Laws 2004-170, s. 27, effective August 2, 2004, substituted “biodiesel, fuel oil, heating oil, high-sulfur dyed diesel fuel, and kerosene” for “kerosene and biodiesel” in subdivision (7).

Session Laws 2006-162, s. 14(a), effective January 1, 2007, and applicable to motor fuel purchased on or after January 1, 2007, added subdivision (10a). See Editor’s note.

Session Laws 2008-134, s. 24, effective January 1, 2009, rewrote the section.

Session Laws 2017-39, s. 12, effective June 21, 2017, rewrote sub-subdivision (4)b.; inserted subdivision (9a); deleted “from a terminal” following “motor fuel” in subdivision (14); rewrote sub-subdivisions (20)b. and (22)b.; deleted former sub-subdivision (46)d. which read: “A refiner”; and rewrote subdivision (47).

Session Laws 2019-169, s. 4.11, effective July 26, 2019, substituted “bulk storage” for “storage facilities” in subdivision (8); inserted “tank wagon for hire” in subdivision (33); inserted “and the motor fuel is owned by the transporter” at the end of subdivision (48); added subdivision (48a); deleted “has been assigned a terminal control number by the Internal Revenue Service” following “facility that” in subdivision (51); and added the second sentence in subdivision (55).

Session Laws 2021-180, s. 42.13E(k), effective January 1, 2022, added subdivision (20a); and, at the end of subdivision (21), substituted “alcohol or gasoline and ethanol” for “grade ethanol.”

CASE NOTES

Editor’s Note. —

The case below was decided under repealed Article 36 of this chapter.

Tax is payable by the first distributor. In re Sing Oil Co., 263 N.C. 520 , 139 S.E.2d 599, 1965 N.C. LEXIS 1322 (1965).

§ 105-449.61. Tax restrictions; administration.

  1. No Local Tax. —  A county or city may not impose a tax on the sale, distribution, or use of motor fuel, except motor fuel for which a refund of the per gallon excise tax is allowed under G.S. 105-449.105 A or G.S. 105-449.107 .
  2. No Double Tax. —  The tax imposed by this Chapter applies only once on the same motor fuel.
  3. Administration. —  Article 9 of this Chapter applies to this Article.

History. 1995, c. 390, s. 3; 2014-3, s. 9.6.

Effect of Amendments.

Session Laws 2014-3, s. 9.6, effective May 29, 2014, added the exception at the end of subsection (a).

§ 105-449.62. Nature of tax.

This Article imposes a tax on motor fuel to provide revenue for the State’s transportation needs and for the other purposes listed in Part 7 of this Article. The tax is collected from the supplier or importer of the fuel because this method is the most efficient way to collect the tax. The tax is designed, however, to be paid ultimately by the person who consumes the fuel. The tax becomes a part of the cost of the fuel and is consequently paid by those who subsequently purchase and consume the fuel.

History. 1997-60, s. 1.

§§ 105-449.63 through 105-449.64.

Reserved for future codification purposes.

Part 2. Licensing.

§ 105-449.65. List of persons who must have a license.

  1. License. —  A person may not engage in business in this State as any of the following unless the person has a license issued by the Secretary authorizing the person to engage in that business:
    1. A refiner.
    2. A supplier.
    3. A terminal operator.
    4. An importer.
    5. An exporter.
    6. A blender.
    7. A motor fuel transporter who transports motor fuel for hire.
    8. Repealed by Session Laws 1999-438, s. 20, effective August 10, 1999.
    9. Repealed by Session Laws 1999-438, s. 21, effective August 10, 1999.
    10. A distributor who purchases motor fuel from an elective or permissive supplier at an out-of-state terminal for import into this State.
  2. Multiple Activity. —  A person who is engaged in more than one activity for which a license is required must have a separate license for each activity, unless one of the following subdivisions provides otherwise.
    1. Supplier. —  A person who is licensed as a supplier is considered to have a license as a distributor. A person who is licensed as a supplier is considered to have a license as a blender.
    2. Importer. —  A person who is licensed as an occasional importer or a tank wagon importer is not required to obtain a separate license as a distributor unless the importer is also purchasing motor fuel, at the terminal rack, from an elective or permissive supplier who is authorized to collect and remit the tax to the State.
    3. Distributor. —  A person who is licensed as a distributor is not required to obtain a separate license as an importer if the distributor acquires fuel for import only from an elective supplier or a permissive supplier and is not required to obtain a separate license as an exporter.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 3; 1997-60, s. 2; 1999-438, ss. 20, 21; 2003-349, s. 10.3; 2005-435, s. 9; 2006-162, s. 13(a); 2008-134, s. 25; 2017-39, s. 13.

Effect of Amendments.

Session Laws 2003-349, s. 10.3, effective January 1, 2004, added subdivision (a)(10).

Session Laws 2005-435, s. 9, effective January 1, 2006, rewrote the second and third sentences of subsection (b).

Session Laws 2006-162, s. 13(a), effective July 1, 2007, and applicable to motor fuel transported on or after that date, substituted “and who transports fuel is considered to be licensed as motor fuel transporter” for “is not required to obtain a separate license as a motor fuel transporter if the distributor or blender does not transport motor fuel for others for hire” at the end of the last sentence in subsection (b).

Session Laws 2008-134, s. 25, effective January 1, 2009, in subdivision (a)(7), added “who transports motor fuel for hire” at the end; restructured former subsection (b) to include present subdivision (b)(1) through (b)(3); and in subsection (b), substituted “one of the following subdivision” for “this subsection” in the introductory language, in subdivision (b)(1), inserted “Supplier. — A” at the beginning and added the last sentence, in subdivision (b)(2), inserted “Importer. —”, and in subdivision (b)(3), inserted “Distributor. —” and deleted the former last sentence, which read: “A person who is licensed as a distributor or a blender and who transports fuel is considered to be licensed as a motor fuel transporter.”

Session Laws 2017-39, s. 13, effective June 21, 2017, deleted “and is a biodiesel provider” following “licensed as a supplier” in the second sentence of subdivision (b)(1).

§ 105-449.66. Importer licensing.

An applicant for a license as an importer must indicate on the application the type of importer license sought. The types of importers are bonded importer, occasional importer, and tank wagon importer.

A person may not be licensed as more than one type of importer. A bulk end-user that imports motor fuel from a terminal of a supplier that is not an elective or a permissive supplier must be licensed as a bonded importer. A bulk end-user that imports motor fuel from a bulk plant and is not required to be licensed as a bonded importer must be licensed as an occasional importer. A bulk end-user that imports motor fuel only from a terminal of an elective or a permissive supplier is not required to be licensed as an importer.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 4; 1997-60, s. 3; 2008-134, s. 26.

Effect of Amendments.

Session Laws 2008-134, s. 26, effective January 1, 2009, rewrote the section.

§ 105-449.67. List of persons who may obtain a license.

A person who is engaged in business as any of the following may obtain a license issued by the Secretary for that business:

  1. A distributor who is not required to be licensed under G.S. 105-449.65 .
  2. A permissive supplier.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 5; 1997-60, s. 4; 2003-349, s. 10.4.

Effect of Amendments.

Session Laws 2003-349, s. 10.4, effective January 1, 2004, added “who is not required to be licensed under G.S. 105-449.65 ” in subdivision (1).

§ 105-449.68. Restrictions on who can get a license as a distributor.

A bulk end-user of motor fuel may not be licensed as a distributor unless the bulk end-user also acquires motor fuel from a supplier or from another distributor for subsequent sale. This restriction does not apply to a bulk end-user that was licensed as a distributor on January 1, 1996. If a distributor license held by a bulk end-user on January 1, 1996, is subsequently revoked or cancelled, the bulk end-user is subject to the restriction set in this section.

History. 1995, c. 390, s. 3; 2000-173, s. 14(b); 2008-134, s. 27; 2017-204, s. 4.5(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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2008-134, s. 27, effective January 1, 2009, substituted “bulk end-user” for “bulk-end user” throughout the section.

Session Laws 2017-204, s. 4.5(a), effective August 11, 2017, inserted “revoked or” in the last sentence in the section. For applicability, see editor’s note.

§ 105-449.69. How to apply for a license.

  1. General. —  To obtain a license, an applicant must file an application with the Secretary on a form provided by the Secretary. An application must include the applicant’s name, address, federal employer identification number, and any other information required by the Secretary.
  2. Most Licenses. —  An applicant for a license as a refiner, a supplier, a terminal operator, an importer, a blender, or a distributor 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 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 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 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.
  3. Federal Certificate. —  An applicant for a license as a refiner, a supplier, a terminal operator, or a blender must have a federal Certificate of Registry that is issued under § 4101 of the Code and authorizes the applicant to enter into federal tax-free transactions in taxable motor fuel in the terminal transfer system. An applicant that is required to have a federal Certificate of Registry must include the registration number of the certificate on the application for a license under this section.An applicant for a license as an importer, an exporter, or a distributor that has a federal Certificate of Registry issued under § 4101 of the Code must include the registration number of the certificate on the application for a license under this section.
  4. Import Activity. —  An applicant for a license as an importer or as a distributor must list on the application each state from which the applicant intends to import motor fuel and, if required by a state listed, must be licensed or registered for motor fuel tax purposes in that state. If a state listed requires the applicant to be licensed or registered, the applicant must give the applicant’s license or registration number in that state.
  5. Export Activity. —  An applicant for a license as an exporter or as a distributor must list on the application each state to which the applicant intends to export motor fuel received in this State by means of a transfer that is outside the terminal transfer system and, if required by a state listed, must be licensed or registered for motor fuel tax purposes in that state. If a state listed requires the applicant to be licensed or registered, the applicant must give the applicant’s license or registration number in that state.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 6; 2003-349, s. 10.5; 2005-435, s. 10; 2008-134, s. 28; 2017-39, s. 14.

Effect of Amendments.

Session Laws 2003-349, s. 10.5, effective January 1, 2004, deleted the second paragraphs of subsections (d) and (e), relating to the export and import of motor fuel to a state not listed on the license holder’s application.

Session Laws 2005-435, s. 10, effective September 27, 2005, deleted “a bulk-end user of undyed diesel fuel, a retailer of undyed diesel fuel” following “an importer” in subsection (b).

Session Laws 2008-134, s. 28, effective January 1, 2009, substituted “or a blender must” for “a blender, or a permissive supplier must” in the first sentence of subsection (c).

Session Laws 2017-39, s. 14, effective June 21, 2017, deleted the former first sentence of subsection (e).

§ 105-449.69A. Temporary license during disaster response period.

  1. Temporary License. —  The Secretary may grant a temporary license to an applicant to import, export, distribute, or transport motor fuel in this State in response to a state of emergency or a disaster declaration. The terms “state of emergency” and “disaster declaration” have the same meaning as defined in G.S. 166A-19.3 . A temporary license is effective on the date the applicant engages in business in this State and expires 30 days after that date. Prior to the expiration of the temporary license, the licensee may request, on a form prescribed by the Secretary, that the license be extended for an additional 30 days, if the state of emergency or disaster declaration remains in effect. A temporary license issued under this section may not be renewed or a new temporary license granted if the licensee failed to comply with this Article.
  2. Requirements. —  To obtain a temporary license, a person must file an application with the Secretary on a form prescribed by the Secretary within seven calendar days of engaging in business in this State. The application must be filed prior to the termination of the state of emergency or disaster declaration and must include all of the following information:
    1. The legal name of the business and the trade name, if applicable, under which the person will transact business within the State.
    2. The federal identification number of the business or, if such number is unavailable, the Social Security number of the owner.
    3. The location, with a street number address, of the principal office or place of business and the location where records will be made available for inspection.
    4. Any other information required by the Secretary.
  3. The Secretary may issue a temporary license under this section as an importer, exporter, distributor, or transporter without requiring the applicant to file with the Secretary a bond or an irrevocable letter of credit, as otherwise required by G.S. 105-449.72 , and without requiring the applicant to be authorized to transact business in this State with the Secretary of State.

History. 2019-187, s. 2; 2020-58, s. 2.11.

Editor’s Note.

Session Laws 2019-187, s. 3, made this section, as added by Session Laws 2019-187, s. 2, effective August 1, 2019, and applicable to disaster declarations on or after that date.

Effect of Amendments.

Session Laws 2020-58, s. 2.11, effective June 30, 2020, rewrote subsection (a) and the introductory paragraph of subsection (b).

§ 105-449.70. Supplier election to collect tax on out-of-state removals.

  1. Election. —  An applicant for a license as a supplier may elect on the application to collect the excise tax due this State on motor fuel that is removed by the supplier at a terminal located in another state and has this State as its destination state. The Secretary must provide for this election on the application form. A supplier that makes the election allowed by this section is an elective supplier. A supplier that does not make the election allowed by this section is an in-State supplier.A supplier that does not make the election on the application for a supplier’s license may make the election later by completing an election form provided by the Secretary. A supplier that does not make the election may not act as an elective supplier for motor fuel that is removed at a terminal in another state and has this State as its destination state.
  2. Effect. —  A supplier that makes the election allowed by this section agrees to all of the following with respect to motor fuel that is removed by the supplier at a terminal located in another state and has this State as its destination state:
    1. To collect the excise tax due this State on the fuel and to waive any defense that the State lacks jurisdiction to require the supplier to collect the excise tax due this State under this Article on the fuel.
    2. To report and pay the tax due on the fuel in the same manner as if the removal had occurred at a terminal located in this State.
    3. To keep records of the removal of the fuel and submit to audits concerning the fuel as if the removal had occurred at a terminal located in this State.
    4. To report removals of fuel received by a person who is not licensed in the state where the removal occurred.
  3. Limited Jurisdiction. —  A supplier that makes the election allowed by this section acknowledges that the State imposes the requirements listed in subsection (b) of this section on the supplier under its general police power set out in Article 3 of Chapter 119 of the General Statutes to regulate the quality of motor fuel and thereby promote public health and safety. A supplier that makes the election allowed by this section submits to the jurisdiction of the State only for the administration of this Article.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, ss. 7, 8; 2008-134, s. 29.

Effect of Amendments.

Session Laws 2008-134, s. 29, effective January 1, 2009, substituted “in-State supplier” for “in-State-only supplier” at the end of the first paragraph of subsection (a).

§ 105-449.71. Permissive supplier election to collect tax on out-of-state removals.

  1. Election. —  An out-of-state supplier that is not required to have a license under this Part may elect to have a license and thereby become a permissive supplier. An out-of-state supplier that does not make this election may not act as a permissive supplier for motor fuel that is removed at a terminal in another state and has this State as its destination state.
  2. Effect. —  By obtaining a license as a permissive supplier, the permissive supplier agrees to be subject to the same requirements as a supplier and to all of the following with respect to motor fuel that is removed by the permissive supplier at a terminal located in another state and has this State as its destination state:
    1. To collect the excise tax due this State on the fuel and to waive any defense that the State lacks jurisdiction to require the supplier to collect the excise tax due this State under this Article on the fuel.
    2. To report and pay the tax due on the fuel in the same manner as if the removal had occurred at a terminal located in this State.
    3. To keep records of the removal of the fuel and submit to audits concerning the fuel as if the removal had occurred at a terminal located in this State.
    4. To report removals of fuel received by a person who is not licensed in the state where the removal occurred.
  3. Limited Jurisdiction. —  A supplier that makes the election allowed by this section acknowledges that the State imposes the requirements listed in subsection (b) of this section on the supplier under its general police power set out in Article 3 of Chapter 119 of the General Statutes to regulate the quality of motor fuel and thereby promote public health and safety. A supplier that makes the election allowed by this section submits to the jurisdiction of the State only for the administration of this Article.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 9.

§ 105-449.72. Bond or letter of credit required as a condition of obtaining and keeping certain licenses or of applying for certain refunds.

  1. Initial Bond. —  An applicant for a license as a refiner, a terminal operator, a supplier, an importer, a blender, a permissive supplier, or a distributor must file with the Secretary a bond or an irrevocable letter of credit. A bond or an irrevocable letter of credit must be conditioned upon compliance with the requirements of this Article, be payable to the State, and be in the form required by the Secretary. The amount of the bond or irrevocable letter of credit is determined as follows:
    1. For an applicant for a license as any of the following, the amount is two million dollars ($2,000,000):
      1. A refiner.
      2. A terminal operator.
      3. A supplier that is a position holder or a person that receives motor fuel pursuant to a two-party exchange.
      4. A bonded importer.
      5. A permissive supplier.
    2. For an applicant for a license as any of the following, the amount is two times the applicant’s average expected monthly tax liability under this Article, as determined by the Secretary. The amount may not be less than two thousand dollars ($2,000) and may not be more than five hundred thousand dollars ($500,000):
      1. Repealed by Session Laws 2007-527, s. 17(a), effective October 1, 2007.
      2. An occasional importer.
      3. A tank wagon importer.
      4. A distributor.
      5. Repealed by Session Laws 1997-60, s. 5, effective October 5, 1997.
    3. For an applicant for a license as any of the following, a bond is required only if the applicant’s average expected annual tax liability under this Article, as determined by the Secretary, is at least two thousand dollars ($2,000). When a bond is required, the bond amount is the same as under subdivision (2) of this subsection.
      1. A blender.
      2. A supplier that is a fuel alcohol provider or a biodiesel provider but is neither a position holder nor a person that receives motor fuel pursuant to a two-party exchange.
  2. Multiple Activity. —  An applicant for a license as a distributor and as a bonded importer must file only the bond required of a bonded importer. An applicant for two or more of the licenses listed in subdivision (a)(2) or (a)(3) of this section may file one bond that covers the combined liabilities of the applicant under all the activities. A bond for these combined activities may not exceed the maximum amount set in subdivision (a)(2) of this subsection.
  3. Adjustment to Bond. —  When notified to do so by the Secretary, a person that has filed a bond or an irrevocable letter of credit and that holds a license listed in subdivision (a)(2) of this section must file an additional bond or irrevocable letter of credit in the amount requested by the Secretary. The person must file the additional bond or irrevocable letter of credit within 30 days after receiving the notice from the Secretary. The amount of the initial bond or irrevocable letter of credit and any additional bond or irrevocable letter of credit filed by the licensee, however, may not exceed the limits set in subdivision (a)(2) of this section.
  4. Replacements. —  When a licensee files a bond or an irrevocable letter of credit as a replacement for a previously filed bond or letter of credit and the licensee has paid all taxes and penalties due under this Article, the Secretary must take one of the following actions:
    1. Return the previously filed bond or letter of credit.
    2. Notify the person liable on the previously filed bond that the person is released from liability on the bond.
  5. Credit Card Companies. —  The Secretary may require a credit card company to file with the Secretary a bond if the company applies for a refund under G.S. 105-449.105(a) and the Secretary determines after an audit that a bond is needed to protect the State from loss in collecting any additional tax due pursuant to the audit. The bond must be conditioned upon compliance with the requirements of this Article, be payable to the State, and be in the form required by the Secretary. The amount of a bond required under this subsection is two times the average monthly refund due, subject to the minimum and maximum amounts provided in subdivision (a)(2) of this section.
  6. Exemption. —  The requirement to obtain a bond or an irrevocable letter of credit does not apply to a distributor, an importer, or a motor fuel transporter who supplies motor fuel when the market for motor fuel is disrupted and emergency supplies are needed, as identified by an executive order of the Governor.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 10; 1997-60, s. 5; 1998-146, s. 4; 2001-205, s. 5; 2002-108, ss. 7, 8; 2003-349, s. 10.6; 2004-170, s. 28; 2007-527, s. 17(a); 2009-445, s. 33; 2017-204, s. 4.5(b).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2002-108, ss. 7 and 8, effective January 1, 2003, in subdivision (a)(2)a, inserted “or a biodiesel provider”; and in subdivision (d)(2), deleted “and the license holder” following “previously filed bond.”

Session Laws 2003-349, s. 10.6, effective January 1, 2004, substituted “five hundred thousand dollars ($500,000)” for “two hundred fifty thousand dollars ($250,000)” in the last sentence of subdivision (a)(2).

Session Laws 2004-170, s. 28, effective August 2, 2004, inserted “or an irrevocable letter of credit” preceding “must be conditioned” in the introductory language of subsection (a).

Session Laws 2007-527, s. 17(a), effective October 1, 2007, deleted subdivision (a)(2)a; in the introductory language of subdivision (a)(3), substituted “as any of the following,” for “as a blender”; and added sub-subdivisions (a)(3)a. and (a)(3)b.

Session Laws 2009-445, s. 33, effective August 7, 2009, added subsection (f).

Session Laws 2017-204, s. 4.5(b), effective August 11, 2017, substituted “licensee” for “license holder” throughout subsections (c) and (d). For applicability, see editor’s note.

§ 105-449.73. Denial of license application.

The Secretary may refuse to issue a license to an applicant that has done any of the following:

  1. Had a license or registration issued under this Article or former Article 36 or 36A of this Chapter revoked by the Secretary.

    (1a) Had a motor fuel license or registration issued by another state revoked.

  2. Had a federal Certificate of Registry issued under § 4101 of the Code, or a similar federal authorization, revoked.
  3. Been convicted of fraud or misrepresentation.
  4. Been convicted of any other offense that indicates that the applicant may not comply with this Article if issued a license.
  5. Failed to remit payment for a tax debt under Chapter 105 or Chapter 119 of the General Statutes. The term “tax debt” has the same meaning as defined in G.S. 105-243.1 .
  6. Failed to file a return due under Chapter 105 or Chapter 119 of the General Statutes.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 11; 2003-349, s. 10.7; 2005-435, s. 11; 2017-204, s. 4.5(c).

Editor’s Note.

The subsection designation (1a) was assigned by the Revisor of Statutes, the designation in Session Laws 1995 (Reg. Sess., 1996), c. 647, s. 11, having been (2). The remaining subsections designations are unchanged.

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2003-349, s. 10.7, effective January 1, 2004, added subdivisions (5) and (6).

Session Laws 2005-435, s. 11, effective September 27, 2005, rewrote the first paragraph, substituted “a tax debt” for “an overdue tax debt” twice in subdivision (5).

Session Laws 2017-204, s. 4.5(c), effective August 11, 2017, rewrote the section heading; substituted “revoked by the Secretary” for “cancelled by the Secretary for cause” in subdivision (1); and substituted “revoked” for “cancelled for cause” in subdivision (1a). For applicability, see editor’s note.

§ 105-449.74. Issuance of license.

Upon approval of an application, the Secretary must issue a license to the applicant. A supplier’s license must indicate the category of the supplier. An importer’s license must indicate the category of the importer. A licensee must maintain and display a copy of the license issued under this Part in a conspicuous place at each place of business of the licensee. A license is not transferable and remains in effect until revoked or cancelled.

History. 1995, c. 390, s. 3; 2004-170, s. 29; 2008-134, s. 30; 2017-204, s. 4.5(d).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2004-170, s. 29, effective August 2, 2004, deleted “applicant as well as a duplicate copy of the license for each place of business of the” preceding “applicant” in the first sentence; and in the third sentence, inserted “maintain and” preceding “display a” and inserted “copy of the” preceding “license issued.”

Session Laws 2008-134, s. 30, effective January 1, 2009, added the third sentence.

Session Laws 2017-204, s. 4.5(d), effective August 11, 2017, substituted “licensee” for “license holder” twice in the third sentence, and substituted “revoked” for “surrendered” in the last sentence. For applicability, see editor’s note.

§ 105-449.75. Licensee must notify the Secretary of discontinuance of business.

A licensee that stops engaging in this State in the business for which the license was issued must give the Secretary written notice of the change and must surrender the license to the Secretary. The notice must give the date the change takes effect and, if the licensee has transferred the business to another by sale or otherwise, the date of the transfer and the name and address of the person to whom the business is transferred.

The licensee is responsible for all taxes for which the licensee is liable under this Article but are not yet due. If the licensee has transferred the business to another and does not give the notice required by this section, the person to whom the licensee has transferred the business is liable for the amount of any tax the licensee owed the State on the date the business was transferred. The liability of the person to whom the business is transferred is limited to the value of the property acquired from the licensee.

History. 1995, c. 390, s. 3; 2008-134, s. 31; 2017-204, s. 4.5(e).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2008-134, s. 31, effective January 1, 2009, in the second paragraph, substituted “license holder” for “supplier” throughout, substituted “The license holder is responsible for all taxes” for “If the license holder is a supplier, all taxes” at the beginning, and deleted “become due on the date of the change” from the end of the first sentence.

Session Laws 2017-204, s. 4.5(e), effective August 11, 2017, substituted “Licensee” for “License holder” in the section heading and “licensee” for “license holder” throughout the section. For applicability, see editor’s note.

§ 105-449.76. Cancellation or revocation of license.

  1. 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 and 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. (a1) Summary Revocation and Procedure. — The Secretary may summarily revoke a license issued under this Article when the Secretary determines that the licensee is incurring liability for the tax imposed under this Article after failing to pay a tax when due under this Article. The Secretary must send a revoked licensee a notice of the revocation and a notice of hearing. The hearing must be held within 10 days after the date of the notice of revocation unless the revoked licensee requests, before the day of the hearing, that the hearing be rescheduled. Upon receipt of a timely request, the Secretary must reschedule the hearing and provide at least 10 days’ notice of the rescheduled hearing. The revocation is not stayed pending the hearing decision. A notice of hearing under this subsection must be in writing and indicate the date, time, and place of the hearing. A hearing must be conducted as prescribed by the Secretary. The Secretary must issue a final decision and notify the revoked licensee in writing within 10 days of the hearing. The final decision must state the basis for the decision. The statement of the basis of a revocation does not limit the Department from changing the basis.

    (a2) Non-Summary Revocation. — The Secretary may revoke the license of a licensee that commits one or more of the acts listed in G.S. 105-449.120 after affording the licensee an opportunity to have a hearing as provided in subsections (a3) through (b2) of this section.

    (a3) Notice of Proposed Revocation. — The Secretary must provide a licensee with a notice of proposed revocation that includes all of the following information:

    1. The basis for the proposed revocation. The statement of the basis for the proposed revocation does not limit the Department from changing the basis.
    2. The effective date of the revocation, which must be one of the following:
      1. Forty-five days from the date of the notice of proposed revocation if the licensee does not file a timely request for hearing.
      2. The tenth day after the date an adverse final decision is issued if the adverse final decision is mailed.
      3. The date an adverse final decision is delivered if the adverse final decision is delivered in person.
    3. The circumstances, if any, under which the Secretary will not revoke the license.
    4. An explanation of how the licensee may contest the proposed revocation.

      (a4) Request for Hearing and Decision. — A licensee may contest a proposed revocation by filing a written hearing request within 45 days of the date the notice of proposed revocation was mailed, if the notice was delivered by mail, or delivered to the licensee, if the notice was delivered in person. A hearing request is considered filed as provided under G.S. 105-241.11(b) . If the licensee does not file a timely hearing request, the license is revoked as provided in the notice of proposed revocation and the revocation is final and not subject to further administrative or judicial review.

  2. Hearing Procedure.    — The Secretary must give a licensee who filed a timely hearing request in accordance with subsection (a4) of this section at least 20 days’ written notice of the date, time, and place of the hearing, unless the Department and the licensee agree to a shorter period. A hearing must be conducted as prescribed by the Secretary. The Secretary must issue a final decision and notify the licensee in writing within 60 days of the hearing. The Department and the licensee may extend this time by mutual agreement. Failure to issue a final decision within the required time does not affect the validity of the decision. The final decision must state the basis for the decision and, if the final decision includes revocation of the license, the effective date of the revocation in accordance with subdivision (2) of subsection (a3) of this section. The statement of the basis of a revocation does not limit the Department from changing the basis.

    (b1) Delivery of Notice. — The Secretary must deliver a notice in accordance with G.S. 105-241.20(b). In lieu of providing notice by United States mail, the Secretary may give notice by email or other electronic means if the licensee has consented to receiving notices via electronic means.

    (b2) Return of Credentials. — If the license is revoked, the former licensee shall return to the Secretary, within 10 days of the issuance of the final decision, all licenses and decals previously issued. If a license or decal is unable to be returned, the licensee must include a written statement of the reasons, satisfactory to the Secretary, why the license or decal cannot be returned.

  3. 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. 1995, c. 390, s. 3; 2017-204, s. 4.5(f); 2019-6, s. 4.11; 2020-58, s. 2.3(b); 2021-180, s. 42.13D(c).

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. 105-241.13 A.”

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

Session Laws 2021-180, s. 42.13D(e), made the rewriting of this section by Session Laws 2021-180, s. 42.13D(c), effective January 1, 2022, and applicable to summary revocations and non-summary revocations initiated by the Department on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2017-204, s. 4.5(f), effective August 11, 2017, rewrote the section heading; added the subsection designations and headings, substituted “licensee” for “license holder” and “revoke” for “cancel” and similar language throughout the section; and substituted “issue under this Article” for “of a license holder” in subsection (a). For applicability, see editor’s note.

Session Laws 2019-6, s. 4.11, effective March 20, 2019, substituted “licensee and the immediate return of the license to the Secretary” for “licensee” at the end of the first sentence in subsection (a); and substituted “certified mail” for “registered mail” in the last sentence of subsection (b).

Session Laws 2020-58, s. 2.3(b), 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).

Session Laws 2021-180, s. 42.13D(c), rewrote the section. For effective date and applicability, see editor's note.

§ 105-449.77. Records and lists of license applicants and license holders.

  1. 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.
  2. Lists. —  The Secretary must make available to each licensee a list of all the licensees under this Article. The list must state the name, account number, and business address of each licensee on the list. The Secretary must update the list monthly.
  3. Repealed by Session Laws 2002-108, s. 9, effective January 1, 2003.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 12; 1997-60, s. 6; 2002-108, s. 9; 2017-204, s. 4.5(g); 2020-58, s. 2.2(c).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2002-108, s. 9, effective January 1, 2003, rewrote subsection (b); and repealed subsection (c) relating to transporter lists.

Session Laws 2017-204, s. 4.5(g), effective August 11, 2017, substituted “licensee” for “license holder” throughout subsection (b). For applicability, see editor’s note.

Session Laws 2020-58, s. 2.2(c), effective June 30, 2020, in subsection (b), substituted “make available to each licensee a list of all” for “annually give a list to each licensee of all” in the first sentence and rewrote the second sentence.

§§ 105-449.78, 105-449.79.

Reserved for future codification purposes.

Part 3. Tax and Liability.

§ 105-449.80. Tax rate.

  1. Rate. —  For the period that begins on January 1, 2016, and ends on June 30, 2016, the motor fuel excise tax rate is a flat rate of thirty-five cents (35¢) per gallon. For the period that begins on July 1, 2016, and ends on December 31, 2016, the motor fuel excise tax rate is a flat rate of thirty-four cents (34¢) per gallon. For the calendar years beginning on January 1, 2017, the motor fuel excise tax rate is a flat rate of thirty-four cents (34¢) per gallon, multiplied by a percentage. For calendar years beginning on or after January 1, 2018, the motor fuel excise tax rate is the amount for the preceding calendar year, multiplied by a percentage. The percentage is one hundred percent (100%) plus or minus the sum of the following:
    1. The percentage change in population for the applicable calendar year, as estimated under G.S. 143C-2-2 , multiplied by seventy-five percent (75%).
    2. The annual percentage change in the Consumer Price Index for All Urban Consumers, multiplied by twenty-five percent (25%). For purposes of this subdivision, “Consumer Price Index for All Urban Consumers” means the United States city average for energy index contained in the detailed report released in the October prior to the applicable calendar year by the Bureau of Labor Statistics of the United States Department of Labor, or data determined by the Secretary to be equivalent.
  2. Repealed by Session Laws 2015-2, s. 2.2(a), effective January 1, 2016.
  3. Notification. —  The Secretary must notify affected taxpayers of the tax rate to be in effect for each calendar year beginning January 1.

History. 1995, c. 390, s. 3; 2015-2, s. 2.2(a); 2018-5, s. 38.6(f).

Editor’s Note.

Session Laws 2006-66, s. 2.2(g), provides: “There is created in the General Fund a Reserve for the Motor Fuels Tax Ceiling. The sum of twenty-two million nine hundred thirty-three thousand dollars ($22,933,000) is hereby transferred from the Savings Reserve Account to the Reserve for the Motor Fuels Tax Ceiling for the 2006-2007 fiscal year.

“The State Treasurer shall transfer funds reserved to hold harmless the Highway Fund and the Highway Trust Fund from the Reserve for the Motor Fuels Tax Ceiling only if the variable wholesale component of the motor fuel excise tax rate in G.S. 105-449.80 would, without the imposition of the cap imposed by Section 24.3 of this act, exceed twelve and four-tenths cents (12.4¢) a gallon. A transfer required under this subsection must be made on a monthly basis. The amount to be transferred from the Reserve for the Motor Fuels Tax Ceiling to the Highway Fund is the difference between the amount of motor fuel excise tax revenue allocated to the Highway Fund under G.S. 105-449.125 for a month and the amount that would have been allocated to it if the variable wholesale component were not capped at twelve and four-tenths cents (12.4¢) a gallon. The total amount transferred to the Highway Fund under this subsection during fiscal year 2006-2007 may not exceed seventeen million six hundred thousand dollars ($17,600,000). The amount to be transferred from the Reserve for the Motor Fuels Tax Ceiling to the Highway Trust Fund is the difference between the amount of motor fuel excise tax revenue allocated to the Highway Trust Fund under G.S. 105-449.125 for a month and the amount that would have been allocated to it if the variable wholesale component were not capped at twelve and four-tenths cents (12.4¢) a gallon. The total amount transferred to the Highway Trust Fund under this subsection during fiscal year 2006-2007 may not exceed five million seven hundred thousand dollars ($5,700,000).

“Funds remaining in the Reserve for the Motor Fuels Tax Ceiling on June 30, 2007, shall revert to the Savings Reserve Account on June 30, 2007.”

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 2015-2, s. 2.1, provides: “Effective April 1, 2015, and notwithstanding G.S. 105-449.80 , the motor fuel excise tax rate is thirty-six cents (36¢) a gallon.” Session Laws 2015-2, s. 2.5, provides in part that section 2.1 of this act expires January 1, 2016.

For prior similar provisions, see Session Laws 2006-66, s. 24.3(a), Session Laws 2007-323, s. 31.15(a), Session Laws 2009-108, s. 1, Session Laws 2012-142, s. 24.11, as amended by Session Laws 2012-194, s. 61.2, and Session Laws 2013-316, s. 8(a).

Session Laws 2020-91, s. 4.2, provides: “Notwithstanding the rate calculated pursuant to G.S. 105-449.80(a), for the period that begins on January 1, 2021, and ends on December 31, 2021, the motor fuel excise tax rate shall be the greater of thirty-six and one-tenth cents (36.1¢) per gallon or the rate calculated pursuant to G.S. 105-449.80(a). For the period beginning January 1, 2022, the motor fuel tax rate shall be calculated pursuant to the formula set out in G.S. 105-449.80(a) using as the amount for the preceding calendar year the amount that the motor fuel tax rate would have been for the period beginning on January 1, 2021, and ending on December 31, 2021, but for the calculation under this section.”

Effect of Amendments.

Session Laws 2015-2, s. 2.2(a), effective January 1, 2016, rewrote subsection (a); repealed former subsection (b), concerning determination of wholesale price and sales price; and substituted “calendar year beginning January 1” for “six-month period beginning January 1 and July 1” in subsection (c).

Session Laws 2018-5, s. 38.6(f), effective June 12, 2018, added “or data determined by the Secretary to be equivalent” at the end of subdivision (a)(2).

§ 105-449.81. Excise tax on motor fuel.

An excise tax at the motor fuel rate is imposed on motor fuel that is:

  1. Removed from a refinery or a terminal and, upon removal, is subject to the federal excise tax imposed by § 4081 of the Code.
  2. Imported by a system transfer to a refinery or a terminal and, upon importation, is subject to the federal excise tax imposed by § 4081 of the Code.
  3. Imported by a means of transfer outside the terminal transfer system for sale, use, or storage in this State and would have been subject to the federal excise tax imposed by § 4081 of the Code if it had been removed at a terminal or bulk plant rack in this State instead of imported.

    (3a) Repealed by Session Laws 2007-527, s. 38(a), effective January 1, 2008.

    (3b) Fuel grade ethanol or biodiesel fuel if the fuel meets at least one of the following descriptions:

    1. Is produced in this State and is removed from the storage facility at the production location.
    2. Is imported to this State by means of a transport truck, a railroad tank car, a tank wagon, or a marine vessel where ethanol or biodiesel from the vessel is not delivered to a terminal that has been assigned a terminal control number by the Internal Revenue Service.
    3. Repealed by Session Laws 2009-445, s. 34(a), effective January 1, 2010.
  4. Blended fuel made in this State or imported to this State.
  5. Transferred within the terminal transfer system and is subject, upon transfer, to the federal excise tax imposed by section 4081 of the Code or is transferred to a person who is not licensed under this Article as a supplier.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 13; 2004-170, s. 30; 2007-527, s. 38(a); 2008-134, s. 32; 2009-445, s. 34(a); 2014-3, s. 9.7(a); 2017-39, s. 15; 2017-204, s. 6.3(a).

Editor’s Note.

Session Laws 2017-204, s. 6.3(b), provides: “The Department of Revenue is directed to notify taxpayers impacted by this section within 15 days of the legislation being enacted into law that motor fuel tax is not due at the time of importation when that fuel is delivered to a terminal that has been assigned a terminal control number by the Internal Revenue Service.”

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

Effect of Amendments.

Session Laws 2004-170, s. 30, effective August 2, 2004, in subdivision (3a), substituted “alcohol or biodiesel,” for “grade ethanol,” and substituted “if it meets either” for “that meets any.”

Session Laws 2007-527, s. 38(a), effective January 1, 2008, repealed subdivision (3a).

Session Laws 2008-134, s. 32, effective January 1, 2009, added subdivision (3)(b); and in subdivision (5), substituted “system and is subject, upon transfer” for “system and, upon transfer, is subject,” and added “or is transferred to a person who is not licensed under this Article as a supplier.”

Session Laws 2009-445, s. 34(a), effective January 1, 2010, in subdivision (3b)a, deleted “and is not delivered to a terminal in this State” from the end, and made a related change; in subdivision (3b)b, deleted “and is not delivered to a terminal” from the end; and deleted subdivision (3b)c, which read: “Is removed from a terminal.”

Session Laws 2014-3, s. 9.7(a), effective October 1, 2014, substituted “or biodiesel fuel if the fuel meets at least one” for “that meets any” in the introductory language of subdivision (3b).

Session Laws 2017-39, s. 15, effective June 21, 2017, substituted “by means of a transport truck, a railroad tank car, a tank wagon, or a marine vessel” for “outside the terminal transfer system” in subdivision (3b)b.

Session Laws 2017-204, s. 6.3(a), effective August 11, 2017, added “where ethanol or biodiesel from the vessel is not delivered to a terminal that has been assigned a terminal control number by the Internal Revenue Service” at the end of subdivision (3b)b.

CASE NOTES

Editor’s Note. —

The cases below were decided under repealed Article 36 of this chapter.

Excise and Not Property Tax. —

The State gasoline tax is an excise and not a property tax. Stedman v. City of Winston-Salem, 204 N.C. 203 , 167 S.E. 813, 1933 N.C. LEXIS 358 (1933).

Tax imposed by this section is a privilege tax. In re Sing Oil Co., 263 N.C. 520 , 139 S.E.2d 599, 1965 N.C. LEXIS 1322 (1965); In re Newsom Oil Co., 273 N.C. 383 , 160 S.E.2d 98, 1968 N.C. LEXIS 607 (1968).

The word “receipt” means gasoline purchased for resale or for use by the purchasing distributor. In re Sing Oil Co., 263 N.C. 520 , 139 S.E.2d 599, 1965 N.C. LEXIS 1322 (1965).

This section places the burden on the distributor to pay the tax to the Secretary of Revenue. In re Newsom Oil Co., 273 N.C. 383 , 160 S.E.2d 98, 1968 N.C. LEXIS 607 (1968).

Distributor may determine his tax liability by either of two methods. He may compute his liability on his monthly sales, or on his monthly purchases. If he elects to use purchases to determine his tax liability, he is entitled to a tare on his receipts. In re Newsom Oil Co., 273 N.C. 383 , 160 S.E.2d 98, 1968 N.C. LEXIS 607 (1968).

Delivery of gasoline to one oil company on a second’s order constitutes technical possession and receipt by the second. In re Sing Oil Co., 263 N.C. 520 , 139 S.E.2d 599, 1965 N.C. LEXIS 1322 (1965).

Where an oil company had oil delivered to another oil company on its order, it was held to be a distributor under this section and entitled to the tare allowed therein. In re Sing Oil Co., 263 N.C. 520 , 139 S.E.2d 599, 1965 N.C. LEXIS 1322 (1965).

Tax May Be Levied on Political Subdivision. —

Under the provisions of the N.C. Const., Art. V, § 5, the General Assembly is prohibited from levying a property tax on property owned by municipal corporations, but the prohibition does not extend to excise taxes, and under the provisions of this section, a municipality is liable for the gasoline tax on gasoline bought by it in bulk and distributed by it to its various departments for use in its governmental functions. Stedman v. City of Winston-Salem, 204 N.C. 203 , 167 S.E. 813, 1933 N.C. LEXIS 358 (1933).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Mr. Fred W. London, Gasoline Tax Division, N.C. Department of Revenue, 43 N.C. Op. Att'y Gen. 134 (1973) (decided under prior law).

§ 105-449.82. Liability for tax on removals from a refinery or terminal.

  1. Refinery Removal. —  The excise tax imposed by G.S. 105-449.81(1) on motor fuel removed from a refinery in this State is payable by the refiner.
  2. Terminal System Removal. —  The excise tax imposed by G.S. 105-449.81(1) on motor fuel removed by a system transfer from a terminal in this State is payable by the position holder for the fuel. If the position holder is not the terminal operator, the terminal operator is jointly and severally liable for the tax.
  3. Terminal Rack Removal. —  The excise tax imposed by G.S. 105-449.81(1) on motor fuel removed at a terminal rack in this State is payable by the person that first receives the fuel upon its removal from the terminal. If the motor fuel is removed by an unlicensed distributor, the supplier of the fuel is jointly and severally liable for the tax due on the fuel. If the motor fuel is sold by a person who is not licensed as a supplier, as required by this Article, the terminal operator, the person selling the fuel, and the person removing the fuel are jointly and severally liable for the tax due on the fuel. If the motor fuel removed is not dyed diesel fuel but the shipping document issued for the fuel states that the fuel is dyed diesel fuel, the terminal operator, the supplier, and the person removing the fuel are jointly and severally liable for the tax due on the fuel.If the motor fuel is removed for export by an unlicensed exporter, the exporter is liable for tax on the fuel at the motor fuel rate and at the rate of the destination state. A supplier who sells motor fuel to a unlicensed exporter is jointly and severally liable for the tax due on the fuel at the motor fuel rate.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 14; 1997-60, s. 7; 2008-134, s. 33.

Effect of Amendments.

Session Laws 2008-134, s. 33, effective January 1, 2009, rewrote the last sentence of subsection (c), which formerly read: “The liability for the tax at the motor fuel rate applies when the Department assesses the unlicensed exporter for the tax.”

§ 105-449.83. Liability for tax on imports.

  1. By System Transfer. —  The excise tax imposed by G.S. 105-449.81(2) on motor fuel imported by a system transfer to a refinery is payable by the refiner. The excise tax imposed by that subdivision on motor fuel imported by a system transfer to a terminal is payable by the person importing the fuel and by the terminal operator, both of which are jointly and severally liable for payment of the tax due on the fuel.
  2. From Out-of-State Terminal. —  The excise tax imposed by G.S. 105-449.81(3) on motor fuel that is removed from a terminal rack located in another state and has this State as its destination state is payable by the importer of the fuel as follows:
    1. If the importer of the fuel is a licensed supplier in this State and the fuel is removed for the supplier’s own account for use in this State, the tax is payable by the supplier.
    2. If the supplier of the fuel is licensed in this State as an elective supplier or a permissive supplier, the tax is payable to the supplier as trustee.
    3. If no other subdivision of this subsection applies, the tax is payable by the importer when filing a return with the Secretary.
  3. From Out-of-State Bulk Plant. —  The excise tax imposed by G.S. 105-449.81(3) on motor fuel that is removed from a bulk plant located in another state is payable by the person that imports the fuel.

History. 1995, c. 390, s. 3.

§ 105-449.83A. Liability for tax on fuel grade ethanol and biodiesel.

The excise tax imposed by G.S. 105-449.81(3b) on fuel grade ethanol is payable by the refiner or fuel alcohol provider. The excise tax imposed by G.S. 105-449.81(3b) on biodiesel is payable by the refiner or the biodiesel provider.

History. 1995 (Reg. Sess., 1996), c. 647, s. 15; 2008-134, s. 34; 2009-445, s. 34(b); 2014-3, s. 9.7(b).

Editor’s Note.

Session Laws 1995 (Reg. Sess., 1996), c. 647 enacted this section and amended G.S. 105-449.81 . As subsections in G.S. 105-449.81 were redesignated at the direction of the Revisor of Statutes the reference in this section has been changed to be consistent with those changes.

Effect of Amendments.

Session Laws 2008-134, s. 34, effective January 1, 2009, substituted “G.S. 105-449.81(3b)” for “G.S. 105-449.81(3a)” and “is payable by the fuel alcohol provider” for “removed from a storage facility is payable by the fuel alcohol provider. The excise tax imposed by that subdivision on fuel grade ethanol imported to this State is payable by the importer.”

Session Laws 2009-445, s. 34(b), effective August 7, 2009, inserted “refiner or” near the end.

Session Laws 2014-3, s. 9.7(b), effective October 1, 2014, added “and biodiesel” in the section heading; and added the second sentence.

§ 105-449.84. Liability for tax on blended fuel.

  1. On Blender. —  The excise tax imposed by G.S. 105-449.81(4) on blended fuel made in this State is payable by the blender. The number of gallons of blended fuel on which the tax is payable is the difference between the number of gallons of blended fuel made and the number of gallons of previously taxed motor fuel used to make the blended fuel.
  2. On Importer. —  The excise tax imposed by G.S. 105-449.81(4) on blended fuel imported to this State is payable by the importer.
  3. Blends Made at Terminal. —  The following blended fuel is considered to have been made by the supplier of gasoline or undyed diesel fuel used in the blend:
    1. An in-line-blend made by combining a liquid with gasoline or undyed diesel fuel as the fuel is delivered at a terminal rack into the motor fuel storage compartment of a transport truck or a tank wagon.
    2. A kerosene splash-blend made when kerosene is delivered at a terminal into a motor fuel storage compartment of a transport truck or a tank wagon and undyed diesel fuel is also delivered at that terminal into the same storage compartment, if the buyer of the kerosene notified the supplier before or at the time of delivery that the kerosene would be used to make a splash-blend.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 16.

Editor’s Note.

Session Laws 1995 (Reg. Sess., 1996), c. 647, s. 16, changed the references to G.S. 105-449.81(4) to G.S. 105-449.81(5) to be consistent with amendments made to that section; however, as those subsections were redesignated at the direction of the Revisor of Statutes no changes have been made to this section.

§ 105-449.84A. Liability for tax on behind-the-rack transfers.

The excise tax imposed by G.S. 105-449.81(5) on motor fuel that is transferred within the terminal transfer system and is subject to the federal excise tax is payable by the supplier of the fuel, the person receiving the fuel, and the terminal operator of the terminal at which the fuel was transferred, all of whom are jointly and severally liable for the tax. The excise tax imposed by that subdivision on motor fuel that is transferred within the terminal transfer system by a person that is not licensed under this Article as a supplier is payable by the person transferring the motor fuel, the person receiving the motor fuel, and the terminal operation of the terminal at which the fuel was transferred, all of whom are jointly and severally liable for the tax.

History. 1995 (Reg. Sess., 1996), c. 647, s. 17; 2008-134, s. 35.

Editor’s Note.

Session Laws 1995 (Reg. Sess., 1996), c. 647 enacted this section and amended G.S. 105-449.81 . As subsections in G.S. 105-449.81 were redesignated at the direction of the Revisor of Statutes the reference in this section has been changed to be consistent with those changes.

Effect of Amendments.

Session Laws 2008-134, s. 35, effective January 1, 2009, in the first sentence, substituted “fuel that is transferred” for “fuel transferred” near the beginning, and inserted “and is subject to the federal excise tax”; and added the last sentence.

§ 105-449.85. Compensating tax on and liability for unaccounted for motor fuel losses at a terminal.

  1. Tax. —  An excise tax at the motor fuel rate is imposed annually on unaccounted for motor fuel losses at a terminal that exceed one-half of one percent (0.5%) of the number of net gallons removed from the terminal during the year by a system transfer or at a terminal rack. To determine if this tax applies, the terminal operator of the terminal must determine the difference between the following:
    1. The amount of motor fuel in inventory at the terminal at the beginning of the year plus the amount of motor fuel received by the terminal during the year.
    2. The amount of motor fuel in inventory at the terminal at the end of the year plus the amount of motor fuel removed from the terminal during the year.
  2. Liability. —  The terminal operator whose motor fuel is unaccounted for is liable for the tax imposed by this section and is liable for a penalty equal to the amount of tax payable. Motor fuel received by a terminal operator and not shown on an informational return filed by the terminal operator with the Secretary as having been removed from the terminal is presumed to be unaccounted for motor fuel. A terminal operator may establish that it can account for motor fuel received at a terminal but not shown on an informational return as having been removed from the terminal if the motor fuel was lost or part of a transmix.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 18; 2008-134, s. 36.

Effect of Amendments.

Session Laws 2008-134, s. 36, effective January 1, 2009, in subsection (b), added “motor fuel” to the end of the second sentence, and in the third sentence, inserted “it can account for” near the beginning and substituted “if the motor fuel was lost or part of a transmix” for “was lost or part of a transmix and is therefore not unaccounted for” at the end.

§ 105-449.86. Tax on and liability for dyed diesel fuel used to operate certain highway vehicles.

  1. Tax. —  An excise tax at the motor fuel rate is imposed on dyed diesel fuel acquired to operate any of the following:
    1. Repealed by Session Laws 2003-349, s. 10.8, effective January 1, 2004.
    2. A local bus that is allowed by § 4082(b)(3) of the Code to use dyed diesel fuel.
    3. A highway vehicle that is owned by or leased to an educational organization that is not a public school and is allowed by § 4082(b)(1) or (b)(3) of the Code to use dyed diesel fuel.
    4. Repealed by Session Laws 2005-435, s. 12, effective September 27, 2005.
  2. Liability. —  If the distributor of dyed diesel fuel that is taxable under this section is not liable for the tax imposed by this section, the person that acquires the fuel is liable for the tax. The distributor of dyed diesel fuel that is taxable under this section is liable for the tax imposed by this section in the following circumstances:
    1. When the person acquiring the dyed diesel fuel has storage facilities for the fuel and is therefore a bulk end-user of the fuel.
    2. When the person acquired the dyed diesel fuel from a retail outlet of the distributor by using an access card or code indicating that the person’s use of the fuel is taxable under this section.

History. 1995, c. 390, s. 3; 2003-349, s. 10.8; 2005-435, s. 12; 2008-134, s. 37.

Effect of Amendments.

Session Laws 2003-349, s. 10.8, effective January 1, 2004, repealed subdivision (a)(1).

Session Laws 2005-435, s. 11, effective September 27, 2005, rewrote subdivision (a)(2) and deleted former subdivision (a)(4), which read: “A highway vehicle that is owned by or leased to the American Red Cross and is allowed by § 4082 of the Code to use dyed diesel fuel.”

Session Laws 2008-134, s. 37, effective January 1, 2009, substituted “bulk end-user” for “bulk-end user” in subdivision (b)(1).

§ 105-449.87. Backup tax and liability for the tax.

  1. Tax. —  An excise tax at the motor fuel rate is imposed on the following:
    1. Dyed diesel fuel that is used to operate a highway vehicle for a use that is not a nontaxable use under § 4082(b) of the Code.
    2. Motor fuel that was allowed an exemption from the motor fuel tax and was then used for a taxable purpose.
    3. Motor fuel that is used to operate a highway vehicle after an application for a refund of tax paid on the motor fuel is made or allowed under G.S. 105-449.107(a) on the basis that the motor fuel was used for an off-highway purpose.
    4. Repealed by Session Laws 1995 (Regular Session, 1996), c. 647, s. 19.
    5. Motor fuel that, based on its shipping document, is destined for delivery to another state and is then diverted and delivered in this State.
  2. General Liability. —  The operator of a highway vehicle that uses motor fuel that is taxable under subdivisions (a)(1) through (a)(3) of this section is liable for the tax. If the highway vehicle that uses the fuel is owned by or leased to a motor carrier, the motor carrier is jointly and severally liable for the tax. If the end-seller of motor fuel taxable under this section knew or had reason to know that the motor fuel would be used for a purpose that is taxable under this section, the end-seller is jointly and severally liable for the tax. If the Secretary determines that a bulk end-user or retailer used or sold untaxed dyed diesel fuel to operate a highway vehicle when the fuel is dispensed from a storage facility or through a meter marked for nonhighway use, all fuel delivered into that storage facility is presumed to have been used to operate a highway vehicle. An end-seller of dyed diesel fuel is considered to have known or had reason to know that the fuel would be used for a purpose that is taxable under this section if the end-seller delivered the fuel into a storage facility that was not marked as required by G.S. 105-449.123 .
  3. Diverted Fuel. —  The person who authorizes a change in the destination state of motor fuel from the state given on the fuel’s shipping document to North Carolina is liable for the tax due on the motor fuel. If motor fuel is diverted from North Carolina to another state, only the person who authorized the fuel to be diverted is eligible for a refund of the amount of tax paid on the fuel.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 19; 1997-60, s. 8; 1998-146, s. 5; 1999-438, s. 22; 2002-108, s. 10; 2008-134, s. 38.

Effect of Amendments.

Session Laws 2002-108, s. 10, effective January 1, 2003, deleted the second sentence of subdivision (a)(1), relating to dyed diesel fuel; added subdivision (a)(5); in subsection (b), added “General” preceding “Liability,” inserted “subdivisions (a)(1) through (a)(3) of” in the first sentence, and added the last sentence; and rewrote subsection (c).

Session Laws 2008-134, s. 38, effective January 1, 2009, in subsection (b), substituted “end-seller” for “end seller” throughout, and substituted “bulk end-user” for “bulk-end user” in the fourth sentence.

§ 105-449.88. Exemptions from the excise tax.

The excise tax on motor fuel does not apply to the following:

  1. Motor fuel removed, by transport truck or another means of transfer outside the terminal transfer system, from a terminal for export, if the motor fuel is removed by a licensed distributor or a licensed exporter and the supplier of the motor fuel collects tax on it at the rate of the motor fuel’s destination state.

    (1a) Motor fuel removed by transport truck from a terminal for export if the motor fuel is removed by a licensed distributor or licensed exporter, the supplier that is the position holder for the motor fuel sells the motor fuel to another supplier as the motor fuel crosses the terminal rack, the purchasing supplier or its customer receives the motor fuel at the terminal rack for export, and the supplier that is the position holder collects tax on the motor fuel at the rate of the motor fuel’s destination state.

  2. Motor fuel sold to the federal government for its use.
  3. Motor fuel sold to the State for its use.
  4. Motor fuel sold to a local board of education for use in the public school system.
  5. Diesel that is kerosene and is sold to an airport.
  6. Motor fuel sold to a charter school for use for charter school purposes.
  7. Motor fuel sold to a community college for use for community college purposes.
  8. Motor fuel sold to a county or a municipal corporation for its use.
  9. Biodiesel that is produced by an individual for use in a private passenger vehicle registered in that individual’s name pursuant to Chapter 20 of the General Statutes. For the purposes of this subdivision, the term “private passenger vehicle” has the same meaning as in G.S. 20-4.01 .
  10. Motor fuel sold to a hospital authority created under G.S. 131E-17 .
  11. Motor fuel sold to a joint agency created by interlocal agreement pursuant to G.S. 160A-462 to provide fire protection, emergency services, or police protection.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, ss. 20, 21; 1998-98, s. 28; 1998-146, s. 6; 2000-72, s. 2; 2000-173, ss. 13(b), 15; 2001-427, s. 9(a); 2002-108, s. 11; 2007-524, s. 1; 2016-5, s. 5.3(d); 2018-39, s. 1.

Editor’s Note.

Session Law 2018-39, s. 2, made subdivision (11), as added by Session Laws 2018-39, s. 1, effective October 1, 2018, and applicable to purchases made on or after that date.

Effect of Amendments.

Session Laws 2002-108, s. 11, effective January 1, 2003, added subdivision (8).

Session Laws 2007-524, s. 1, effective October 1, 2007, added subdivision (9).

Session Laws 2016-5, s. 5.3(d), effective May 11, 2016, added subdivision (10).

Session Laws 2018-39, s. 1, added subdivision (11). For effective date and applicability, see editor’s note.

§ 105-449.88A. Liability for tax due on motor fuel designated as exempt by the use of cards or codes.

  1. Repealed by Session Laws 2006-162, s. 14(b), effective January 1, 2007, and applicable to motor fuel purchased on or after that date.
  2. Exempt Card or Code. —  An entity that issues an exempt card or code has a duty to determine if the person to whom it is issued is exempt from the motor fuel excise tax. An entity that issues an exempt card or code to a person who is not exempt from tax is liable for tax due on motor fuel the person purchases at retail by use of the exempt card or code. If a supplier authorizes another entity to issue an exempt card or code to a person who is not exempt from tax, the supplier and the entity that issued the card are jointly and severally liable for tax due on motor fuel the person purchases at retail by use of the exempt card or code.
  3. Card Holder. —  A person to whom an exempt card or code is issued is liable for any tax due on fuel purchased with the card or code for a purpose that is not exempt. A person who misuses an exempt card or code by purchasing fuel with the card or code for a purpose that is not exempt is liable for the tax due on the fuel.

History. 1997-60, s. 9; 2001-205, s. 4; 2006-162, s. 14(b).

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2006-162, s. 14(b), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, deleted former (a) concerning exempt cards at rack; in subsection (b), substituted “Card or Code” for “Cards at Retail” in the subsection catchline and deleted the former first sentence which read: “An ‘exempt card or code’ is a credit card or an access code that enables the person to whom the card or code is issued to buy motor fuel at retail without paying the motor fuel excise tax on the fuel”; in the first sentence of subsection (c), substituted “code is issued” for “exempt access card is issued for use at a terminal or at retail” near the beginning and inserted “or code” near the end.

§ 105-449.89. Restrictions on removal of motor fuel from terminal.

  1. By Bulk End-User. —  An out-of-state bulk end-user may not remove motor fuel from a terminal in this State for use in the state in which the bulk end-user is located unless the bulk end-user is licensed under this Article as an exporter. An out-of-state bulk end-user that is not licensed under this Article may remove motor fuel from a bulk plant in this State.
  2. To Marine Vessel. —  A supplier may not transfer motor fuel from a terminal to a marine vessel unless the person to whom the supplier transfers the motor fuel is licensed as a supplier.

History. 1995 (Reg. Sess., 1996), c. 647, s. 22; 1997-60, s. 10; 2008-134, s. 39.

Effect of Amendments.

Session Laws 2008-134, s. 39, effective January 1, 2009, rewrote the section heading which formerly read: “Removals by out-of-state bulk-end user”; designated the previously existing provisions as subsection (a); in subsection (a), inserted “By Bulk End-User. —” at the beginning, and substituted “bulk end-user” for “bulk-end user” throughout; and added subsection (b).

Part 4. Payment and Reporting.

§ 105-449.90. When tax return and payment are due.

  1. Filing Periods. —  The excise tax imposed by this Article is payable when a return is due. A return is due annually or monthly, as specified in this section. A return must be filed with the Secretary and be in the form required by the Secretary.An annual return is due within 45 days after the end of each calendar year. An annual return covers tax liabilities that accrue in the calendar year preceding the date the return is due.A monthly return of a person other than an occasional importer is due within 22 days after the end of each month. A monthly return of an occasional importer is due by the 3rd of each month. A monthly return covers tax liabilities that accrue in the calendar month preceding the date the return is due.
  2. Annual Filers. —  A terminal operator must file an annual return for the compensating tax imposed by G.S. 105-449.85 .
  3. Repealed by Session Laws 2006-162, s. 14(c), effective January 1, 2007, and applicable to motor fuel purchased on or after that date.
  4. Monthly Filers on 22nd. —  The following persons must file a monthly return by the 22nd of each month:
    1. A refiner.
    2. A supplier.
    3. A bonded importer.
    4. A blender.
    5. A tank wagon importer.
    6. A person that incurred a liability under G.S. 105-449.86 during the preceding month for the tax on dyed diesel fuel used to operate certain highway vehicles.
    7. A person that incurred a liability under G.S. 105-449.87 during the preceding month for the backup tax on motor fuel.
  5. Monthly Filers on 3rd. —  An occasional importer must file a monthly return by the third day of each month. An occasional importer is not required to file a return if all the motor fuel imported by the importer in a reporting period was removed at a terminal located in another state and the supplier of the fuel is an elective supplier or a permissive supplier.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 23; 1997-60, s. 11; 2006-162, s. 14(c); 2019-6, s. 4.12.

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2006-162, s. 14(c), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, in subsection (a), substituted “annually” for “annually, quarterly,” near the beginning of the second sentence, and deleted the former third paragraph which read: “A quarterly return is due by the last day of the month that follows the end of a calendar quarter. A quarterly return covers tax liabilities that accrue in the calendar quarter preceding the date the return is due”; and deleted former subsection (c) which read: “Quarterly Filers. A licensed importer that removes fuel at a terminal rack of a permissive or an elective supplier and a licensed distributor must file a quarterly return under G.S. 105-449.94 to reconcile exempt sales.”

Session Laws 2019-6, s. 4.12, effective March 20, 2019, substituted “return” for “return, however” in the second sentence of subsection (e).

§ 105-449.90A. Payment by supplier of destination state tax collected on exported motor fuel.

Tax collected by a supplier on exported motor fuel is payable by the supplier to the destination state. Payments of destination state tax are due to the destination state on the date set by the law of the destination state.

History. 1995 (Reg. Sess., 1996), c. 647, s. 24; 2005-435, s. 13.

Effect of Amendments.

Session Laws 2005-435, s. 13, effective September 27, 2005, rewrote the section.

§ 105-449.91. Remittance of tax to supplier.

  1. Distributor. —  A distributor must remit tax due on motor fuel removed at a terminal rack to the supplier of the fuel. A licensed distributor has the right to defer the remittance of tax to the supplier, as trustee, until the date the trustee must pay the tax to this State or to another state. The time when an unlicensed distributor must remit tax to a supplier is governed by the terms of the contract between the supplier and the unlicensed distributor.
  2. Exporter. —  A licensed exporter must remit tax due on motor fuel removed at a terminal rack to the supplier of the fuel. The time when a licensed exporter must remit tax to a supplier is governed by the law of the destination state of the exported motor fuel.
  3. Importer. —  A licensed importer must remit tax due on motor fuel removed at a terminal rack of a permissive or an elective supplier to the supplier of the fuel. A licensed importer that removes fuel from a terminal rack of a permissive or an elective supplier has the right to defer the remittance of tax to the supplier until the date the supplier must pay the tax to this State.
  4. General. —  A person who removes motor fuel at a terminal rack and is not subject to another subsection in this section must remit tax due on the motor fuel to the supplier of the fuel. The time the person must remit tax to a supplier is governed by the terms of the contract between the supplier and the person.The method by which a person must remit tax to a supplier under this section is governed by the terms of the contract between the supplier and that person. G.S. 105-449.76 governs the cancellation of a license of a distributor, an exporter, and an importer.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 25; 1997-60, s. 12; 2008-134, s. 40.

Effect of Amendments.

Session Laws 2008-134, s. 40, effective January 1, 2009, in subsection (b), substituted “a licensed exporter” for “an exporter” twice; in subsection (d), added the first paragraph, and rewrote the first sentence of the second paragraph, which formerly read: “The method by which a distributor, a licensed exporter, or a licensed importer must remit tax to a supplier is governed by the terms of the contract between the supplier and the distributor, exporter, or licensed importer and the supplier.”

§ 105-449.92. Notice to suppliers of cancellation, revocation, or reissuance of certain licenses; effect of notice.

  1. Notice to Suppliers. —  If the Secretary cancels or revokes a distributor’s license, an exporter’s license, or an importer’s license, the Secretary must notify all suppliers of the cancellation or revocation. If the Secretary issues a license to a distributor, an exporter, or an importer whose license was cancelled or revoked, the Secretary must notify all suppliers of the issuance.
  2. Effect of Notice. —  A supplier that sells motor fuel to a distributor after receiving notice from the Secretary that the Secretary has cancelled or revoked the distributor’s license is jointly and severally liable with the distributor for any tax due on motor fuel the supplier sells to the distributor after receiving the notice. This joint and several liability does not apply to excise tax due on motor fuel sold to a previously unlicensed distributor after the supplier receives notice from the Secretary that the Secretary has issued another license to the distributor.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 26; 1997-60, s. 13; 2017-204, s. 4.5(h).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2017-204, s. 4.5(h), effective August 11, 2017, inserted “revocation” in the section heading; in subsection (a), inserted “or revokes” and “or revocation” in the first sentence; and inserted “or revoked” in the first sentence of subsection (b). For applicability, see editor’s note.

§ 105-449.93. Percentage discount for licensed distributors and some licensed importers.

  1. Repealed by Session Laws 2006-162, s. 14(d), effective January 1, 2007, and applicable to motor fuel purchased on or after that date.
  2. Percentage Discount. —  A licensed distributor that pays the tax due a supplier by the date the supplier must pay the tax to the State may deduct from the amount due a discount of one percent (1%) of the amount of tax payable. A licensed importer that removes motor fuel from a terminal rack of a permissive or an elective supplier and that pays the tax due the supplier by the date the supplier must pay the tax to the State may deduct from the amount due a discount of the same amount allowed a licensed distributor. The discount covers the expense of furnishing a bond and losses due to shrinkage or evaporation. A supplier may not directly or indirectly deny this discount to a licensed distributor or licensed importer that pays the tax due the supplier by the date the supplier must pay the tax to the State.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 27; 2006-162, s. 14(d).

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2006-162, s. 14(d), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, deleted “Exempt sale deduction and” at the beginning of the section catchline; deleted former subsection (a) which read: “Deduction. A license holder listed below may deduct from the amount of tax otherwise payable to a supplier the amount calculated on motor fuel the license holder received from the supplier and resold to a governmental unit whose purchases of motor fuel are exempt from the tax under G.S. 105-449.88 if, when removing the fuel, the license holder used an access card or code specified by the supplier to notify the supplier of the license holder’s intent to resell the fuel in an exempt sale: (1) A licensed distributor. (2) A licensed importer that removed the motor fuel from a terminal rack of a permissive or an elective supplier.”

§ 105-449.94. [Repealed]

Repealed by Session Laws 2006-162, s. 14(e), effective January 1, 2007, and applicable to motor fuels purchased on or after that date.

§ 105-449.95.

Recodified as G.S. 105-449.105 B by Session Laws 2009-445, s. 35(a), effective January 1, 2010.

§ 105-449.96. Information required on return filed by supplier.

A return of a supplier must list all of the following information and any other information required by the Secretary:

  1. The number of gallons of tax-paid motor fuel received by the supplier during the month, sorted by type of fuel.
  2. The number of gallons of motor fuel removed at a terminal rack during the month from the account of the supplier, sorted by type of fuel.
  3. The number of gallons of motor fuel removed during the month for export, sorted by type of fuel.
  4. The number of gallons of motor fuel removed during the month at a terminal located in another state for destination to this State, as indicated on the shipping document for the fuel, sorted by type of fuel.
  5. The number of gallons of motor fuel the supplier sold during the month to a governmental unit whose use of fuel is exempt from tax, sorted by type of fuel.
  6. The amount of discounts allowed under G.S. 105-449.93(b) on motor fuel sold during the month to licensed distributors or licensed importers.
  7. The number of gallons of motor fuel the supplier exchanged during the month with another licensed supplier pursuant to a two-party exchange agreement, sorted by type of fuel.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 30; 1997-60, s. 14; 2005-435, s. 14; 2008-134, s. 41.

Effect of Amendments.

Session Laws 2005-435, s. 14, effective September 27, 2005, added subdivision (7).

Session Laws 2008-134, s. 41, effective January 1, 2009, rewrote the section.

§ 105-449.97. Deductions and discounts allowed a supplier when filing a return.

  1. Taxes Not Remitted. —  When a supplier files a return, the supplier may deduct from the amount of tax payable with the return the amount of tax any of the following licensees owes the supplier but failed to remit to the supplier:
    1. A licensed distributor.
    2. A licensed importer that removed the motor fuel on which the tax is due from a terminal of an elective or a permissive supplier.
    3. Repealed by Session Laws 1995, c. 647, s. 32.A supplier is not liable for tax a licensee listed in this subsection owes the supplier but fails to pay. If a listed licensee pays tax owed to a supplier after the supplier deducts the amount on a return, the supplier must promptly remit the payment to the Secretary.
  2. Administrative Discount. —  A supplier that files a timely return and sends a timely payment may deduct from the amount of tax payable with the return an administrative discount of one-tenth of one percent (0.1%) of the amount of tax payable to this State as the trustee, not to exceed eight thousand dollars ($8,000) a month. The discount covers expenses incurred in collecting taxes on motor fuel.
  3. Percentage Discount. —  A supplier that sells motor fuel directly to an unlicensed distributor or to the bulk end-user, the retailer, or the user of the fuel may take the same percentage discount on the fuel that a licensed distributor may take under G.S. 105-449.93(b) when making deferred payments of tax to the supplier.
  4. Taxes Paid on Exempt Retail Sales. —  When filing a return, a supplier that issues or authorizes the issuance of an exempt card or code to a person that enables the person to buy motor fuel without paying tax on the fuel may deduct the amount of excise tax imposed on fuel purchased with the exempt card or code. The amount of excise tax imposed on fuel purchased with an exempt card or code is the amount that was imposed on the fuel when it was delivered to the retailer of the fuel.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, ss. 31, 32; 1997-60, s. 15; 1999-438, s. 23; 2000-173, s. 14(c); 2006-162, s. 14(f); 2008-134, s. 42; 2017-204, s. 4.5(i).

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2006-162, s. 14(f), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, in subsection (d), deleted “an exempt access” before “code to a person,” “at retail” following “buy motor fuel” and “retail” before “card or code” at the end of the first sentence and in the second sentence deleted “at retail” after “fuel purchased” and “retail” after “with an exempt.”

Session Laws 2008-134, s. 42, effective January 1, 2009, substituted “bulk end-user” for “bulk-end user” in subsection (c).

Session Laws 2017-204, s. 4.5(i), effective August 11, 2017, in subsection (a), substituted “licensees” for “license holders” in the introductory language, and substituted substituted “licensee” for “license holder” in the closing paragraph. For applicability, see editor’s note.

§ 105-449.98. Duties of supplier concerning payments by distributors, exporters, and importers.

  1. As Fiduciary. —  A supplier has a fiduciary duty to remit to the Secretary the amount of tax paid to the supplier by a licensed distributor, licensed exporter, or licensed importer. A supplier is liable for taxes paid to the supplier by a licensed distributor, licensed exporter, or licensed importer.
  2. Notice of Fuel Received. —  A supplier must notify a licensed distributor, a licensed exporter, or a licensed importer that received motor fuel from the supplier during a reporting period of the number of taxable gallons received. The supplier must give this notice after the end of each reporting period and before the licensee must remit to the supplier the amount of tax due on the fuel.
  3. Notice to Department. —  A supplier of motor fuel at a terminal must notify the Department within 10 business days after a return is due of any licensed distributors, licensed exporters, or licensed importers that did not pay the tax due the supplier when the supplier filed the return. The notice must be transmitted to the Department in the form required by the Department.
  4. Payment Application. —  A supplier that receives a payment of tax from a licensed distributor, a licensed exporter, or a licensed importer may not apply the payment to a debt that person owes the supplier for motor fuel purchased from the supplier.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 33; 1997-60, s. 16; 2017-204, s. 4.5(j).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2017-204, s. 4.5(j), effective August 11, 2017, substituted “licensee” for “license holder” in the last sentence of subsection (b). For applicability, see editor’s note.

§ 105-449.99. Returns and discounts of importers.

  1. Return. —  A monthly return of a bonded importer, an occasional importer, or a tank wagon importer must contain the following information concerning motor fuel imported during the period covered by the return:
    1. The number of gallons of imported motor fuel acquired from a supplier that collected the excise tax due this State on the fuel.
    2. The number of gallons of imported motor fuel acquired from a supplier that did not collect the excise tax due this State on the fuel, listed by source state, supplier, and terminal.
    3. The import authorization number of each import that is reported under subdivision (2) of this subsection and was removed from a terminal.
    4. For an occasional importer or a tank wagon importer, the number of gallons of imported motor fuel acquired from a bulk plant, listed by bulk plant.
  2. Discounts. —  An importer may not deduct an administrative discount from the amount remitted with a return. An importer that imports motor fuel received from an elective supplier or a permissive supplier may deduct the percentage discount allowed by G.S. 105-449.93(b) when remitting tax to the supplier, as trustee, for payment to the State. An importer that imports motor fuel received from a supplier that is not an elective supplier or a permissive supplier may not deduct the percentage discount allowed by G.S. 105-449.93(b) when filing a return for the tax due.

History. 1995, c. 390, s. 3.

§ 105-449.100. Terminal operator to file informational return showing changes in amount of motor fuel at the terminal.

  1. Requirement. —  A terminal operator must file a monthly informational return with the Secretary that shows the amount of motor fuel received or removed from the terminal during the month. A terminal operator must report all motor fuel removed from an out-of-state terminal that has this State as its destination state.
  2. Content. —  The return is due on the date a monthly return is due under G.S. 105-449.90 . The return must contain the following information and any other information required by the Secretary:
    1. The number of gallons of motor fuel received in inventory at the terminal during the month and each position holder for the fuel, sorted by type of fuel.
    2. The number of gallons of motor fuel removed from inventory at the terminal during the month and, for each removal, the position holder for the fuel and the destination state of the fuel, sorted by type of fuel.
    3. The number of gallons of motor fuel gained or lost at the terminal during the month.
    4. The number of gallons of motor fuel in inventory at the beginning of each month and at the end of each month.
  3. Due Date. —  The return is due on the date a monthly return is due under G.S. 105-449.90 .

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 34; 2006-162, s. 15(a); 2008-134, s. 43.

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2006-162, s. 15(a), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, substituted “on the same date as a monthly return due under G.S. 105-449.90 ” for “by the 25th day of the month following the month covered by the return” at the end of the first sentence of the introductory paragraph.

Session Laws 2008-134, s. 43, effective January 1, 2009, designated the former first sentence as present subsection (a) and the former second sentence as present subsection (b); in subsection (a), added “Requirement. —” and the second sentence; in subsection (b), added “Content. —” and substituted “date a monthly return is due” for “same date as a monthly return due,” added “sorted by type of fuel” to the end of both subdivisions (b)(1) and (b)(2), and added subdivision (b)(4); and added subsection (c).

§ 105-449.101. Motor fuel transporter to file informational return showing deliveries of motor fuel.

  1. Requirement. —  A motor fuel transporter that is required to be licensed under this Article must file a monthly informational return with the Secretary that shows motor fuel transported in this State by the transporter during the month.
  2. Content. —  The return required by this section must contain the following information and any other information required by the Secretary:
    1. The name and address of each person from whom the transporter received motor fuel outside the State for delivery in the State, the amount of motor fuel received, the date the motor fuel was received, and the destination state of the fuel.
    2. The name and address of each person from whom the transporter received motor fuel in the State for delivery outside the State, the amount of motor fuel delivered, the date the motor fuel was delivered, and the destination state of the fuel.
    3. The name and address of each person from whom the transporter received motor fuel in the State for delivery in the State, the amount of motor fuel received, the date the motor fuel was received, and the destination state of the fuel.
  3. Due Date. —  The return required by this section is due on the date a monthly return is due under G.S. 105-449.90 .

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 35; 2002-108, s. 12; 2006-162, ss. 13(b), 15(b); 2008-134, s. 44.

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2002-108, s. 12, effective January 1, 2003, substituted “motor fuel transporter ... from this State” for “person that transports, by pipeline, marine vessel, railroad tank car, or transport truck, motor fuel that is being imported into this State or exported from this State” in the first sentence in subsection (a).

Session Laws 2006-162, s. 13(b), effective July 1, 2007, and applicable to motor fuel transported on or after that date, deleted “imported or exported” preceding “motor fuel” in the section catchline; in subsection (a), in the first sentence, deleted “that imports motor fuel into this State or exports motor fuel from this State” following “transporter” at the beginning and substituted “transported in this State” for “received or delivered for import or export”, and deleted the former last sentence which read: “This requirement does not apply to a distributor that is not required to be licensed as a motor fuel transporter”; and added subdivision (b)(3).

Session Laws 2006-162, s. 15(b), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, deleted “is due by the 25th day of the month following the month covered by the return. The return” following “by this section” at the beginning of the first sentence of subsection (b) and added subsection (c).

Session Laws 2008-134, s. 44, effective January 1, 2009, in subsection (a), inserted “that is required to be licensed under this Article”; and in subsection (c), substituted “date a monthly return is due” for “same date as a monthly return due.”

§ 105-449.102. Distributor to file return showing exports from a bulk plant.

  1. Requirement. —  A distributor that exports motor fuel from a bulk plant located in this State must file a monthly return with the Secretary that shows the exports. The return serves as a claim for refund by the distributor for tax paid to this State on the exported motor fuel.
  2. Content. —  The return must contain the following information and any other information required by the Secretary:
    1. The number of gallons of motor fuel exported during the month.
    2. The destination state of the motor fuel exported during the month.
    3. A certification that the distributor has paid to the destination state of the motor fuel exported during the month, or will pay on a timely basis, the amount of tax due that state on the fuel.
  3. Due Date. —  The return is due on the date a monthly return is due under G.S. 105-449.90 .

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 36; 2006-162, s. 15(c); 2008-134, s. 45.

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2006-162, s. 15(c), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, substituted “on the same date as a monthly return due under G.S. 105-449.90 ” for “by the 25th day of the month following the month covered by the return” at the end of the second sentence in (a).

Session Laws 2008-134, s. 45, effective January 1, 2009, in subsection (a), substituted “Requirement” for “Return” at the beginning, and deleted the former second sentence, which read: “The return is due on the same date as a monthly return due under G.S. 105-449.90 ”; and added subsection (c).

§ 105-449.103. [Repealed]

Reserved for future codification purposes.

§ 105-449.104. Use of name and account number on return.

When a transaction with a person licensed under this Article is required to be reported on a return, the return must state the licensee’s name and the account number used by the Department to identify the licensee. The name of a licensee and the licensee’s account number is stated on the lists compiled under G.S. 105-449.77 .

History. 1995 (Reg. Sess., 1996), c. 647, s. 37; 2017-204, s. 4.5(k).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2017-204, s. 4.5(k), effective August 11, 2017, substituted “licensee” for “license holder” twice, and substituted “licensee’s” for “license holder’s” twice. For applicability, see editor’s note.

Part 5. Refunds.

§ 105-449.105. Monthly refunds for tax paid on exempt fuel, lost fuel, and accidental mixes that result in fuel unsuitable for highway use.

  1. Exempt Fuel. —  An entity whose use of motor fuel is exempt from tax may obtain a monthly refund of any motor fuel excise tax the entity pays on its motor fuel. A person who sells motor fuel to an entity whose use of motor fuel is exempt from tax may obtain a monthly refund of any motor fuel excise tax the person pays on motor fuel it sells to the entity. A credit card company that issues a credit card to an entity whose use of motor fuel is exempt from tax may obtain a monthly refund of any motor fuel excise tax the company pays on motor fuel the entity purchases using the credit card.A person may obtain a monthly refund of tax paid by the person on exported fuel, including fuel whose shipping document shows this State as the destination state but was diverted to another state in accordance with the diversion procedures established by the Secretary. An out-of-state bulk end-user is not allowed a refund on fuel exported from a bulk plant unless the bulk end-user is licensed as an exporter.
  2. Lost Fuel. —  A supplier, an importer, or a distributor that loses tax-paid motor fuel due to damage to a conveyance transporting the motor fuel, fire, a natural disaster, an act of war, or an accident may obtain a monthly refund for the tax paid on the fuel.
  3. Accidental Mixes. —  A person that accidentally combines any of the following may obtain a monthly refund for the amount of tax paid on the fuel:
    1. Dyed diesel fuel with tax-paid motor fuel.
    2. Gasoline with diesel fuel.
    3. Undyed diesel fuel with dyed kerosene.
  4. Repealed by Session Laws 1998-98, s. 29.
  5. Refund Amount. —  The amount of a refund allowed under this section is the amount of excise tax paid, less the amount of any discount allowed on the fuel under G.S. 105-449.93 .

History. 1995, c. 390, s. 3; c. 523, ss. 32.1, 32.2; 1995 (Reg. Sess., 1996), c. 647, s. 38; 1997-6, s. 12; 1997-60, s. 17; 1998-98, s. 29; 2000-173, s. 16; 2001-205, s. 3; 2008-134, s. 46.

Effect of Amendments.

Session Laws 2008-134, s. 46, effective January 1, 2009, rewrote the section heading, which formerly read: “Refunds upon application for tax paid on exempt fuel, lost fuel, and fuel unsalable for highway use”; in subsection (a), inserted “monthly” preceding “refund” throughout, and added the last sentence; and in subsections (b) and (c), inserted “monthly” preceding “refund” both times it appears.

Legal Periodicals.

For survey of 1982 law on taxation, see 61 N.C.L. Rev. 1217 (1983).

§ 105-449.105A. Monthly refunds for kerosene.

  1. Refund for Undyed Kerosene Sold to an End User for Non-Highway Use. —  A distributor who sells kerosene to an end user for one of the purposes listed in this subsection may obtain a monthly refund for the excise tax the distributor paid on the kerosene, less the amount of any discount allowed on the kerosene under G.S. 105-449.93 , if the distributor dispenses the kerosene into a storage facility of the end user that contains fuel used only for one of those purposes and the storage facility is installed in a manner that makes use of the fuel for any other purpose improbable.
    1. Heating.
    2. Drying crops.
    3. A manufacturing process.
  2. Liability. —  If the Secretary determines that the Department overpaid a distributor by refunding more tax to the distributor than is due under this section, the distributor is liable for the amount of the overpayment.

History. 1998-146, s. 8; 2000-173, s. 17; 2001-205, s. 6; 2006-162, s. 14(g); 2008-134, ss. 47, 48; 2010-95, s. 29(a).

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2006-162, s. 14(g), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, added subdivision (a)(3).

Session Laws 2008-134, ss. 47 and 48, effective January 1, 2009, in the introductory paragraph of subsection (a), inserted “monthly” preceding “refund”; and in subdivision (a)(1), substituted “end-user” for “end user” twice.

Session Laws 2010-95, s. 29(a), effective January 1, 2011, rewrote subsection (a); and deleted the former last sentence in subsection (b), which read: “This liability applies regardless of whether the actions of a retailer of kerosene contributed to the overpayment.”

§ 105-449.105B. Monthly hold harmless refunds for licensed distributors and some licensed importers.

If a licensed distributor or licensed importer purchases motor fuel from a licensed supplier during a month and the discount the distributor or importer receives under G.S. 105-449.93(b) on the motor fuel is less than the amount the distributor or importer would have received during that month if the distributor or importer had been allowed a discount on taxable gasoline purchased by the distributor or importer from a supplier under the following schedule, the distributor or importer is allowed a monthly refund of the difference:

Amount of Gasoline Purchased Percentage Each Month Discount First 150,000 gallons 2% Next 100,000 gallons 1 1/2% Amount over 250,000 gallons 1%.

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In determining the amount of discounts a distributor or importer received under G.S. 105-449.93(b) for motor fuel purchased in a month, a distributor or importer is considered to have received the amount of any discounts the distributor or importer could have received under that subsection but did not receive because the distributor or importer failed to pay the tax due to the supplier by the date the supplier had to pay the tax to the State.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 29; 1997-6, s. 11; 2009-445, s. 35(a); 2010-95, s. 30.

Editor’s Note.

Session Laws 2009-445, s. 35(a), recodified former G.S. 105-449.95 as G.S. 105-449.105 B, effective January 1, 2010, and applicable to motor fuel purchased on or after that date.

This section was amended by Session Laws 2009-445, s. 35(a), in the coded bill drafting format provided by G.S. 120-20.1 . In the first paragraph, the word “quarter” was not shown as struck through. The word “quarter” was subsequently deleted by Session Laws 2010-95, s. 30.

Effect of Amendments.

Session Laws 2009-445, s. 35(a), effective January 1, 2010, and applicable to motor fuel purchased on or after that date, recodified former G.S. 105-449.95 as this section; and rewrote the section.

Session Laws 2010-95, s. 30, effective July 17, 2010, deleted “quarter” from the beginning.

§ 105-449.106. Quarterly refunds for nonprofit organizations, taxicabs, and special mobile equipment.

  1. Nonprofits. —  A nonprofit organization listed below that purchases and uses motor fuel may receive a quarterly refund, for the excise tax paid during the preceding quarter, at a rate equal to the tax rate in effect under G.S. 105-449.80 for the time period for which the refund is claimed, less one cent (1¢) per gallon.An application for a refund allowed under this subsection must be made in accordance with this Part and must be signed by the chief executive officer of the organization. The chief executive officer of a nonprofit organization is the president of the organization or another officer of the organization designated in the charter or bylaws of the organization.Any of the following entities may receive a refund under this subsection:
    1. Repealed by Session Laws 2002-108, s. 13, effective January 1, 2003.
    2. A private, nonprofit organization that transports passengers under contract with or at the express designation of a unit of local government.
    3. A volunteer fire department.
    4. A volunteer rescue squad.
    5. A sheltered workshop recognized by the Department of Health and Human Services.
  2. Repealed by 2014-100, s. 34.6(a), effective for taxable years beginning on or after January 1, 2015.
  3. Special Mobile Equipment. —  A person who purchases and uses motor fuel for the off-highway operation of special mobile equipment registered under Chapter 20 of the General Statutes may receive a quarterly refund, for the excise tax paid during the preceding quarter, at a rate equal to the tax rate in effect under G.S. 105-449.80 for the time period for which the refund is claimed, less the amount of sales and use tax due on the fuel under this Chapter, as determined in accordance with G.S. 105-449.107(c). An application for a refund must be made in accordance with this Part.

History. 1995, c. 390, s. 3; 1997-6, s. 13; 1997-443, s. 11A.118(a); 1999-438, s. 24; 2002-108, s. 13; 2005-435, s. 15; 2006-162, s. 16(a); 2010-95, s. 31(a), (b); 2014-3, s. 9.10(a); 2014-100, s. 34.6(a); 2016-5, s. 4.10(b).

Effect of Amendments.

Session Laws 2002-108, s. 13, effective January 1, 2003, in subsection (a), deleted “Government and” preceding “Nonprofits” at the beginning of the first paragraph, deleted “local governmental entity or a” preceding “nonprofit” in the first sentence of the first paragraph, substituted “organization” for “entity” in the first sentence of the second paragraph, and repealed subdivision (a)(1).

Session Laws 2005-435, s. 15, effective September 27, 2005, deleted “certain local governmental entitities” following “Quarterly refunds for” in the section catchline.

Session Laws 2006-162, s. 16(a), effective July 24, 2006, inserted “or privilege tax” near the end of the first sentence in subsection (c).

Session Laws 2010-95, s. 31(a), effective July 17, 2010, in subsection (b), deleted “as defined in G.S. 20.87(1)” following the first occurrence of “taxicab” in the first sentence, and added the next-to-last sentence.

Session Laws 2010-95, s. 31(b), effective October 1, 2010, and applicable to motor fuel purchased on or after that date, substituted “and uses motor fuel for the off-highway operation of special mobile equipment registered under Chapter 20 of the General Statutes” for “and uses motor fuel to operate special mobile equipment off-highway” in the first sentence of subsection (c).

Session Laws 2014-3, s. 9.10(a), effective May 29, 2014, deleted “or privilege tax” preceding “due on the fuel” in the first sentence of subsection (c).

Session Laws 2014-100, s. 34.6(a), effective for taxable years beginning on or after January 1, 2015, repealed subsection (b).

Session Laws 2016-5, s. 4.10(b), effective January 1, 2016, substituted “the tax rate in effect under G.S. 105-449.80 for the time period” for “the amount of the flat cents-per-gallon rate plus the variable cents-per-gallon rate in effect during the quarter” in the first paragraph of subsection (a); and substituted “the tax rate in effect under G.S. 105-449.80 for the time period” for “the flat cents-per-gallon rate plus the variable cents-per-gallon rate in effect during the quarter” in the first sentence of subsection (c).

OPINIONS OF ATTORNEY GENERAL

Gasoline purchased by county board of education on behalf of extension unit of community college system located in county for use in adult driver education program is not exempt from gasoline tax. See opinion of Attorney General to Mr. Fred W. London, N.C. Department of Revenue, 40 N.C. Op. Att'y Gen. 835 (1969) (decided under prior law).

See opinion of Attorney General to Mr. Leon M. Killian, III, 41 N.C. Op. Att'y Gen. 306 (1971) (decided under prior law).

See opinion of Attorney General to Mr. Luther J. Britt, Jr., 41 N.C. Op. Att'y Gen. 585 (1971) (decided under prior law).

§ 105-449.107. Annual refunds for off-highway use and use by certain vehicles with power attachments.

  1. Off-Highway. —  A person who purchases and uses motor fuel for a purpose other than to operate a licensed highway vehicle may receive an annual refund for the excise tax the person paid on fuel used during the preceding calendar year. The amount of refund allowed is the tax rate in effect under G.S. 105-449.80 for the time period less the amount of sales and use tax due on the fuel under this Chapter. An application for a refund allowed under this section must be made in accordance with this Part.
  2. Certain Vehicles. —  A person who purchases and uses motor fuel in one of the vehicles listed below may receive an annual refund for the amount of fuel consumed by the vehicle:
    1. A concrete mixing vehicle.
    2. A solid waste compacting vehicle.
    3. A bulk feed vehicle that delivers feed to poultry or livestock and uses a power takeoff to unload the feed.
    4. A vehicle that delivers lime or fertilizer in bulk to farms and uses a power takeoff to unload the lime or fertilizer.
    5. A tank wagon that delivers alternative fuel, as defined in G.S. 105-449.130 , or motor fuel or another type of liquid fuel into storage tanks and uses a power takeoff to make the delivery.
    6. A commercial vehicle that delivers and spreads mulch, soils, composts, sand, sawdust, and similar materials and that uses a power takeoff to unload, blow, and spread the materials.
    7. A commercial vehicle that uses a power takeoff to remove and dispose of septage and for which an annual fee is required to be paid to the Department of Environmental Quality under G.S. 130A-291.1 .
    8. A sweeper.The amount of refund allowed is thirty-three and one-third percent (33 1/3%) of the tax rate in effect under G.S. 105-449.80 for the time period for which the refund is claimed less the amount of sales and use tax due on the fuel under this Chapter. An application for a refund allowed under this section must be made in accordance with this Part. This refund is allowed for the amount of fuel consumed by the vehicle in its mixing, compacting, or unloading operations, as distinguished from propelling the vehicle, which amount is considered to be one-third of the amount of fuel consumed by the vehicle.
  3. Sales Tax Amount. —  Article 5 of Subchapter I of this Chapter determines the amount of State sales and use tax to be deducted under this section from a motor fuel excise tax refund. Articles 39, 40, and 42 of Subchapter VIII of this Chapter and the Mecklenburg First 1% Sales Tax Act determine the amount of local sales and use tax to be deducted under this section from a motor fuel excise tax refund. The cents-per-gallon cost of motor fuel used to calculate the amount of State and local sales and use tax deducted from a claim for refund for each taxable period equals the average of the United States city average price of finished motor gasoline and No. 2 diesel fuel for resale in the “Consumer Price Index Detailed Reports” published by the Bureau of Labor Statistics of the United States Department of Labor or data determined by the Secretary to be equivalent. The average is computed by weighting the cost of finished motor gasoline and No. 2 diesel fuel by the proportion of tax collected on each under this Article for the taxable period, rounding to the nearest one-tenth of a cent (1/10¢). If the cents-per-gallon cost is exactly between two-tenths of a cent (2/10¢), the average is rounded up to the higher of the two.

History. 1995, c. 390, s. 3; 1997-6, s. 14; 1997-423, s. 4; 2001-408, s. 1; 2005-377, s. 1; 2006-162, s. 16(b); 2014-3, s. 9.10(b); 2015-2, ss. 2.2(b), 2.3; 2015-6, s. 2.25; 2015-241, s. 14.30(u); 2016-5, ss. 4.9(a), 4.10(c).

Editor’s Note.

Session Laws 2015-6, s. 2.25, effective April 9, 2015, repealed Session Laws 2015-2, s. 2.3, which would have amended subsection (c) of this section, effective January 1, 2016.

Effect of Amendments.

Session Laws 2005-377, s. 1, effective September 8, 2005, and applicable to motor fuel and alternative fuel consumed on or after January 1, 2006, added subdivisions (b)(7) and (b)(8).

Session Laws 2006-162, s. 16(b), effective July 24, 2006, inserted “or privilege tax” near the end of the second sentence in subsection (a) and at the end of the first sentence of the undesignated paragraph in subsection (b), and added the second sentence of subsection (c).

Session Laws 2014-3, s. 9.10(b), effective May 29, 2014, deleted “or privilege tax” preceding “due on the fuel” in the second sentence of subsection (a) and in the first sentence of the last paragraph of subsection (b); and rewrote the first and second sentences in subsection (c).

Session Laws 2015-2, s. 2.2(b), effective January 1, 2016, deleted the former last sentence in subsection (c), which read: “The sales price and the cost price of motor fuel to be used in determining the amount to deduct is the average of the wholesale prices used under G.S. 105-449.80 to determine the excise tax rates in effect for the two six-month periods of the year for which the refund is claimed.”

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 subdivision (b)(7).

Session Laws 2016-5, s. 4.9(a), effective January 1, 2016, added the last three sentences in subsection (c).

Session Laws 2016-5, s. 4.10(c), effective January 1, 2016, substituted “the tax rate in effect under G.S. 105-449.80 for the time period” for “the amount of the flat cents-per-gallon rate in effect during the year for which the refund is claimed plus the average of the two variable cents-per-gallon rates in effect during that year” in the second sentence of subsection (a); and substituted “the tax rate in effect under G.S. 105-449.80 for the time period for which the refund is claimed” for “the following: the sum of the flat cents-per-gallon rate in effect during the year for which the refund is claimed and the average of the two variable cents-per-gallon rates in effect during that year” in the last paragraph of subsection (b).

§ 105-449.108. When an application for a refund is due.

  1. Due Dates. —  The due dates of applications for refunds are as follows:

    Click to view

  2. Requirements. —  An application for a refund allowed under this Part must be filed with the Secretary and be in the form required by the Secretary. The application must state that the applicant has paid for the fuel for which a refund is claimed or that payment for the fuel has been secured to the seller’s satisfaction. An application for an annual refund must state whether or not the applicant has filed a North Carolina income tax return for the preceding taxable year.
  3. Repealed by Session Laws 1998-146, s. 10, effective September 18, 1998.
  4. Late Application. —  A refund applied for more than three years after the date the application is due is barred.

Refund Period Due Date Annual April 15 after the end of the year Quarterly Last day of the month after the end of the quarter Monthly 22nd day after the end of the month

History. 1995, c. 390, s. 3; 1997-6, s. 15; 1998-146, s. 10; 1998-212, s. 29A.14(r); 2008-134, s. 49; 2010-95, s. 32.

Effect of Amendments.

Session Laws 2008-134, s. 49, effective January 1, 2009, in subsection (a), deleted “Upon Application” from the “Refund Period” column, and deleted “Last day of the month after the month in which tax was paid or the event occurred that is the basis of the refund” from the “Due Date” column.

Session Laws 2010-95, s. 32, effective July 17, 2010, rewrote subsection (b).

§ 105-449.109. [Repealed]

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

§ 105-449.110. Review of refund application and payment of refund.

  1. Decision. —  Upon determining that an application for refund is correct, the Secretary must issue the applicant a warrant upon the State Treasurer for the amount of the refund. If the Secretary determines that an application for refund is incorrect, the Secretary must send the applicant a proposed denial of the request for a refund. The provisions of Article 9 of this Chapter apply to the procedure for requesting a review of proposed denial of a refund sought under this Article.
  2. Interest. —  The rate of interest payable on a refund is the rate set in G.S. 105-241.21 . Interest accrues on a refund from the date that is 90 days after the later of the following:
    1. The date the application for refund was filed.
    2. The date the application for refund was due.

History. 1995, c. 390, s. 3; 1998-98, s. 30; 2007-491, s. 44(1)a; 2017-204, s. 4.5(l).

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 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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 491, s. 44(1)a., effective January 1, 2008, substituted “G.S. 105-241.21” for “G.S. 105-241.1(i)” in subsection (b). For applicability, see Editor’s note.

Session Laws 2017-204, s. 4.5( l ), effective August 11, 2017, rewrote subsection (a). For applicability, see editor’s note.

§§ 105-449.111 through 105-449.113.

Reserved for future codification purposes.

§ 105-449.114. Authority for agreement with Eastern Band of Cherokee Indians.

  1. By virtue of an Act of June 4, 1924, Pub. L. No.  68-191, Ch. 253, 43 Stat. 370, Congress and the United States courts have recognized the Eastern Band of Cherokee Indians as possessing sovereign legal rights over their members and their trust lands.
  2. The following definitions apply in this act:
    1. Chief. — The Principal Chief of the Eastern Band of the Cherokee Indians.
    2. Council. — The Tribal Council of the Eastern Band of the Cherokee Indians.
    3. Tribe. — The Eastern Band of the Cherokee Indians.
  3. Notwithstanding any other provision of law concerning refunds of motor fuels and alternative fuels taxes, the Department of Revenue may enter into a memorandum of understanding or an agreement with the Eastern Band of Cherokee Indians to make refunds of motor fuels and alternative fuels taxes to the Tribe in its collective capacity on behalf of its members who reside on or engage in otherwise taxable transactions within Cherokee trust lands. The memorandum or agreement shall be approved by the Council and signed by the Chief on behalf of the Tribe and shall be signed by the Secretary of Revenue on behalf of Department of Revenue. The memorandum or agreement may not affect the right of an individual member of the Tribe to a refund and shall provide for deduction of amounts refunded to individual members of the Tribe from the amounts to be refunded to the Tribe on behalf of all members. The memorandum or agreement may be effective for a definite or indefinite period, as specified in the agreement.

History. 1989, c. 753, ss. 1-3; 1991, c. 193, s. 6; 2002-108, s. 14.

Editor’s Note.

Session Laws 1989, c. 753, ss. 1-3, as amended by Session Laws 1991, c. 193, s. 6, were codified as this section at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2002-108, s. 14, effective January 1, 2003, substituted “alternative” for “special” twice in subsection (c).

Part 6. Enforcement and Administration.

§ 105-449.115. Shipping document required to transport motor fuel by railroad tank car or transport truck.

  1. Issuance. —  A person may not transport motor fuel by railroad tank car or transport truck unless the person has a shipping document for its transportation that complies with this section. A refiner, a terminal operator, a fuel alcohol provider, a biodiesel provider, and the operator of a bulk plant must give a shipping document to the person who operates a railroad tank car or a transport truck into which motor fuel is loaded at the terminal rack or bulk plant rack.
  2. Content. —  A shipping document is a permanent record that must contain the following information and any other information required by the Secretary:
    1. Identification, including address, of the terminal or bulk plant from which the motor fuel was received.

      (1a) The type of motor fuel loaded.

    2. The date the motor fuel was loaded.
    3. The gross gallons loaded if the motor fuel is loaded onto a transport truck, and the gross pounds loaded if the motor fuel is loaded onto a railroad tank car.

      (3a) The motor fuel transporter for the motor fuel.

    4. The destination state of the motor fuel, as represented by the purchaser of the motor fuel or the purchaser’s agent.
    5. If the document is issued by a refiner or a terminal operator, the document must be machine printed. If the motor fuel is loaded onto a transport truck, the document must contain the following information:
      1. The net gallons loaded.
      2. A tax responsibility statement indicating the name of the supplier that is responsible for the tax due on the motor fuel.
  3. Reliance. —  A person who issues a shipping document may rely on the representation made by the purchaser of motor fuel or the purchaser’s agent concerning the destination state of the motor fuel. A purchaser is liable for any tax due as a result of the purchaser’s diversion of fuel from the represented destination state.
  4. Duties of Transporter.    — A person to whom a shipping document was issued must do all of the following:
    1. Carry the shipping document in the conveyance for which it was issued when transporting the motor fuel described in it.
    2. Show the shipping document to a law enforcement officer upon request when transporting the motor fuel described in it.

      (2a) Maintain a copy of the shipping document at a centralized place of business for at least three years from the date of delivery.

    3. Deliver motor fuel described in the shipping document to the destination state designated on it unless the person, in a manner prescribed by the Secretary, does all of the following:
      1. Notifies the Secretary before transporting the motor fuel into a state other than the state designated on the shipping document.
      2. Receives from the Secretary a confirmation number authorizing the shipment of motor fuel to a state other than the state designated on the shipping document.
      3. Contemporaneously notes on the shipping document the change in destination state and the confirmation number received from the Secretary.
    4. Upon delivery, provide a copy of the shipping document to the person to whom the motor fuel is delivered.
  5. Duties of Person Receiving Shipment. —  A person to whom motor fuel is delivered by railroad tank car or transport truck may only accept delivery of the motor fuel if the destination state shown on the shipping document for the motor fuel is North Carolina or has been changed to North Carolina in accordance with subdivision (3) of subsection (d) of this section. The person must maintain a copy of the shipping document for at least three years from the date of delivery and must maintain a copy of the shipping document at the place of business where the motor fuel was delivered for 90 days from the date of delivery. A person who accepts delivery of motor fuel in violation of this subsection is jointly and severally liable for any tax due on the fuel.
  6. Sanctions Against Transporter. —  The acts listed in this subsection are grounds for a civil penalty. The penalty is payable to the agency that assessed the penalty and is payable by the person in whose name the conveyance is registered, if the conveyance is a transport truck, and is payable by the person responsible for the movement of motor fuel in the conveyance, if the conveyance is a railroad tank car. The amount of the penalty is five thousand dollars ($5,000). A penalty imposed under this subsection is in addition to any motor fuel tax assessed. The grounds for a civil penalty are:
    1. Transporting motor fuel in a railroad tank car or transport truck without a shipping document or with a false or an incomplete shipping document.
    2. Delivering motor fuel to a destination state other than that shown on the shipping document.
  7. Penalty Defense. —  Compliance with the conditions set out in this subsection is a defense to a civil penalty imposed under subsection (f) of this section as a result of the delivery of fuel to a state other than the destination state printed on the shipping document for the fuel. The Secretary must waive a penalty imposed against a person under that subsection if the person establishes a defense under this subsection. The conditions for the defense are:
    1. The person notified the Secretary of the diversion and received a confirmation number for the diversion before the imposition of the penalty.
    2. Tax was timely paid on the diverted fuel, unless the person is a motor fuel transporter.
  8. Sanctions.  —  The Secretary may assess a civil penalty of five thousand dollars ($5,000) against a person who intentionally issues a shipping document that does not satisfy the requirements of subsection (b) of this section.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, ss. 39, 40; 2002-108, s. 15; 2003-349, s. 10.9; 2005-435, s. 16; 2007-527, ss. 16(b), 18(a); 2008-134, s. 50; 2009-445, s. 36(a); 2014-3, s. 9.9(a); 2017-39, s. 16; 2019-169, s. 4.12; 2021-180, s. 42.13E(l).

Editor’s Note.

Session Laws 2007-527, s. 18(b), provides that the amendments to this section by s. 18(a) are applicable to penalties assessed on or after August 31, 2007 and to refund requests that have not been finally determined as of that date.

This section was amended by Session Laws 2009-445, s. 36(a), in the coded bill drafting format provided by G.S. 120-20.1 . In subsection (b), the words “issued by” following “A shipping document” were not struck through in the 2009 act. The section has been set out in the form above at the direction of the Revisor of Statutes.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2002-108, s. 15, effective January 1, 2003, rewrote the last paragraph in subsection (f).

Session Laws 2003-349, s. 10.9, effective January 1, 2004, in subsection (b), deleted “must be machine printed and” following “bulk plant” and in subdivision (b)(5), inserted “the document must be machine printed and it must contain.”

Session Laws 2005-435, s. 16, effective January 1, 2006, substituted “Department of Crime Control and Public Safety” for “Department of Transportation, Division of Motor Vehicles” in subsection (f); and added subsections (g) and (h). Subsection (g) is effective September 27, 2005, and applicable to penalties imposed on or after January 1, 2005.

Session Laws 2007-527, ss. 16(b), 18(a), effective August 31, 2007, in subsection (f), deleted “payable to the Department of Crime Control and Public Safety or the Department of Revenue” following “penalty” in the first paragraph, and substituted “The penalty is payable to the agency that assessed the penalty and is payable” for “The penalty imposed under this subsection is payable” in the second paragraph; rewrote subdivision (g)(1); and in subdivision (g)(2), added “unless the person is a motor fuel transporter.” For applicability, see Editor’s note.

Session Laws 2008-134, s. 50, effective January 1, 2009, added subdivisions (b)(1a) and (b)(3a).

Session Laws 2009-445, s. 36(a), effective January 1, 2010, in subsection (a), substituted “refiner, a terminal operator, a fuel alcohol provider, and” for “terminal operator and”; in subsection (b), deleted “a terminal operator or the operator of a bulk plant” following “shipping document”; in subdivision (b)(3), added “if the motor fuel is loaded onto a transport truck, and the gross pounds loaded if the motor fuel is loaded onto a railroad tank car” at the end; in subdivision (b)(5), inserted “refiner or a” and substituted “printed. If the motor fuel is loaded onto a transport truck, the document” for “printed and it”; in subsection (c); substituted “person who issues a shipping document” for “terminal operator or bulk plant operator” in the first sentence; rewrote subsection (f); and in subsection (h), substituted “Sanctions” for “Sanctions Against Terminal Operator” and “person” for “terminal operator.”

Session Laws 2014-3, s. 9.9(a), effective October 1, 2014, substituted “is a permanent record that” for “issued by” in the introductory language of subsection (b).

Session Laws 2017-39, s. 16, effective June 21, 2017, inserted “in a manner designated by the Secretary” in sub-subdivisions (d)(3)a. and (d)(3)b.

Session Laws 2019-169, s. 4.12, effective July 26, 2019, inserted “a biodiesel provider” in the second sentence of subsection (a).

Session Laws 2021-180, 42.13E( l ), effective January 1, 2022, added subdivision (d)(2a); rewrote subdivision (d)(3); substituted “Upon delivery, provide a copy of the shipping document to the person” for “Give a copy of the shipping document to the distributor or other person” in subdivisions (d)(4); and rewrote subsection (e).

§ 105-449.115A. Shipping document required to transport fuel by tank wagon.

  1. Issuance. —  A person who operates a tank wagon into which motor fuel is loaded at the terminal must comply with the document requirements in G.S. 105-449.115(b). A person who operates a tank wagon into which motor fuel is loaded from some other source must have an invoice, bill of sale, or shipping document containing the following information and any other information required by the Secretary:
    1. The name and address of the person from whom the motor fuel was received.
    2. The date the fuel was loaded.
    3. The type of fuel.
    4. The gross number of gallons loaded.
    5. The destination state of the fuel.
  2. Duties of Transporter.    — A person to whom an invoice, bill of sale, or shipping document was issued must do all of the following:
    1. Carry the invoice, bill of sale, or shipping document in the conveyance for which it is issued when transporting the motor fuel described in it.
    2. Show the invoice, bill of sale, or shipping document upon request when transporting the motor fuel described in it.
    3. Maintain a copy of the invoice, bill of sale, or shipping document at a centralized place of business for at least three years from the date of delivery.
    4. Deliver motor fuel described in the shipping document to the state designated on it unless the person, in a manner prescribed by the Secretary, does all of the following:
      1. Notifies the Secretary before transporting the motor fuel into a state other than the state designated on the shipping document.
      2. Receives from the Secretary a confirmation number authorizing the shipment of motor fuel to a state other than the state designated on the shipping document.
      3. Contemporaneously notes on the shipping document the change in destination state and the confirmation number received from the Secretary.
    5. Upon delivery, provide a copy of the shipping document to the person to whom the motor fuel is delivered.

      (b1) Duties of Person Receiving Shipment. — A person to whom motor fuel is delivered by tank wagon may only accept delivery of the motor fuel if the destination state shown on the shipping document for the motor fuel is North Carolina or has been changed to North Carolina in accordance with subdivision (4) of subsection (b) of this section. The person must maintain a copy of the shipping document for at least three years from the date of delivery and must maintain a copy of the shipping document at the place of business where the motor fuel was delivered for 90 days from the date of delivery. A person who accepts delivery of motor fuel in violation of this subsection is jointly and severally liable for any tax due on the fuel.

  3. Sanctions. —  Transporting motor fuel in a tank wagon without an invoice, bill of sale, or shipping document containing the information required by this section is grounds for a civil penalty. The penalty is payable to the agency that assessed the penalty and is payable by the person in whose name the tank wagon is registered. The amount of the penalty is one thousand dollars ($1,000). A penalty imposed under this subsection is in addition to any motor fuel tax assessed.

History. 2002-108, s. 16; 2005-435, s. 17; 2007-527, s. 16(c); 2019-169, s. 4.13; 2021-180, s. 42.13E(m).

Editor's Note.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2005-435, s. 17, effective September 27, 2005, rewrote subsection (a); added subdivision (b)(3); and substituted “Department of Crime Control and Public Safety” for “Department of Transportation, Division of Motor Vehicles” in the introductory language of subsection (c).

Session Laws 2007-527, s. 16(c), effective August 31, 2007, in subsection (c), substituted “civil penalty. The penalty is payable to the agency that assessed the penalty and is payable” for “civil penalty payable to the Department of Crime Control and Public Safety or the Department of Revenue. The penalty imposed under this subsection is payable.”

Session Laws 2019-169, s. 4.13, effective July 26, 2019, added subdivision (a)(5).

Session Laws 2021-180, s. 42.13E(m), effective January 1, 2022, in subdivision (b)(3), substituted “Maintain” for “Keep”; and added subdivisions (b)(4) and (b)(5) and subsection (b1).

§ 105-449.116. [Repealed]

Repealed by Session Laws 1999-438, s. 25, effective August 10, 1999.

§ 105-449.117. Penalties for highway use of dyed diesel or other non-tax-paid fuel.

  1. Violation. —  It is unlawful to use dyed diesel fuel or other non-tax-paid fuel in a highway vehicle that is licensed or required to be licensed under Chapter 20 of the General Statutes unless that use is allowed under section 4082 of the Code. It is unlawful to use motor fuel or alternative fuel in a highway vehicle that is licensed or required to be licensed under Chapter 20 of the General Statutes unless the tax imposed by this Article or Article 36D of this Chapter and the tax imposed by Article 3 of Chapter 119 of the General Statutes have been paid. A person who violates this section is guilty of a Class 1 misdemeanor and is liable for a civil penalty.
  2. Civil Penalty. —  The civil penalty is payable to the agency that assessed the penalty and is payable by the person in whose name the highway vehicle is registered. The amount of the penalty depends on the amount of fuel in the supply tank of the highway vehicle. The penalty is the greater of one thousand dollars ($1,000) or five times the amount of motor fuel tax payable on the fuel in the supply tank. A penalty imposed under this section is in addition to any motor fuel tax assessed.
  3. Enforcement. —  The Secretary or a person designated by the Secretary may conduct investigations to identify violations of this Article. It is not a valid defense to a violation of this Article that the State is exempt from the tax imposed by this Article.

History. 1995, c. 390, s. 3; 1997-60, s. 19; 2003-349, s. 10.10; 2007-527, s. 16(d); 2008-134, s. 51.

Effect of Amendments.

Session Laws 2003-349, s. 10.10, effective January 1, 2004, designated the former first and second undesignated paragraphs as present subsections (a) and (b); added subsection headings to present subsections (a) and (b); and added subsection (c).

Session Laws 2007-527, s. 16(d), effective August 31, 2007, in subsection (b), substituted “agency that assessed the penalty” for “Department of Transportation, Division of Motor Vehicles, or the Department of Revenue.”

Session Laws 2008-134, s. 51, effective January 1, 2009, in subsection (a), inserted “or other non-tax-paid fuel” in the first sentence, and in the second sentence, substituted “motor fuel or alternative” for “undyed diesel” and “Article or Article 36D of this Chapter and the tax imposed by Article 3 of Chapter 119 of the General Statutes have been paid” for “Article has been paid.”

§ 105-449.118. Civil penalty for buying or selling non-tax-paid motor fuel.

A person who dispenses non-tax-paid motor fuel into the supply tank of a highway vehicle or who allows non-tax-paid motor fuel to be dispensed into the supply tank of a highway vehicle is subject to a civil penalty of two hundred fifty dollars ($250.00) per occurrence.

The penalty is payable to the agency that assessed the penalty. Failure to pay a penalty imposed under this section is grounds under G.S. 20-88.01(b) to withhold or revoke the registration plate of the motor vehicle into which the motor fuel was dispensed.

History. 1995, c. 390, s. 3; 2002-108, s. 17; 2007-527, s. 16(e).

Effect of Amendments.

Session Laws 2002-108, s. 17, effective January 1, 2003, in the first paragraph, added “of two hundred fifty dollars ($250.00) per occurrence” at the end of the first sentence, and deleted the second sentence, reading “The penalty is based on the amount of motor fuel dispensed and is set at the following amounts,” along with the table showing the penalty per number of gallons dispensed.

Session Laws 2007-527, s. 16(e), effective August 31, 2007, substituted “agency that assessed the penalty” for “Department of Transportation, Division of Motor Vehicles, or the Department of Revenue” in the second paragraph.

§ 105-449.118A. Civil penalty for refusing to allow the taking of a motor fuel sample.

A person who refuses to allow the taking of a motor fuel sample is subject to a civil penalty of one thousand dollars ($1,000). The penalty is payable to the agency that assessed the penalty. If the refusal is for a sample to be taken from a vehicle, the penalty is payable by the person in whose name the vehicle is registered. If the refusal is for a sample to be taken from any other storage tank or container, the penalty is payable by the owner of the container.

History. 1995 (Reg. Sess., 1996), c. 647, s. 41; 2007-527, s. 16(f).

Effect of Amendments.

Session Laws 2007-527, s. 16(f), effective August 31, 2007, in the second sentence, substituted “agency that assessed the penalty” for “Department of Transportation, Division of Motor Vehicles, or the Department of Revenue.”

§ 105-449.119. Review of civil penalty assessment.

A person who denies liability for a penalty imposed under this Part may request the Secretary to waive the penalty. The Secretary may reduce or waive a penalty as provided in Article 9 of this Chapter.

History. 1995, c. 390, s. 3; 1999-337, s. 44; 2007-491, s. 41; 2014-3, s. 9.8(b).

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. 41, effective January 1, 2008, substituted “Review of” for “Hearing on” in the section catchline; and rewrote the section. For applicability, see Editor’s note.

Session Laws 2014-3, s. 9.8(b), effective May 29, 2014, rewrote the section, which formerly read: “A person who denies liability for a penalty imposed under this Part must pay the penalty and file a request for a Departmental review of the penalty. The request must be filed within the time set in G.S. 105-241.11 for requesting a Departmental review of a proposed assessment. The procedures in Article 9 of this Chapter for review of a proposed assessment apply to the review of the penalty. The date the penalty was imposed is considered the date the notice of proposed assessment was delivered to the taxpayer.”

§ 105-449.120. Acts that are misdemeanors.

  1. Class 1. —  A person who commits any of the following acts is guilty of a Class 1 misdemeanor:
    1. Fails to obtain a license 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 or under former Article 36 or 36A of this Chapter. Failure to comply with a requirement of a supplier to remit tax payable to the supplier by electronic funds transfer is considered a failure to make a timely payment. (3a) Repealed by Session Laws 2006-162, s. 17, effective January 1, 2007, and applicable to motor fuel purchased on or after that date.
    4. Makes a false statement in an application, a return, or a statement required under this Article.
    5. Makes a false statement in an application for a refund.
    6. Fails to keep records as required under this Article.
    7. Refuses to allow the Secretary or a representative of the Secretary to examine the person’s books and records concerning motor fuel.
    8. Fails to disclose the correct amount of motor fuel sold or used in this State.
    9. Fails to file a replacement bond or an additional bond as required under this Article.
    10. Fails to show or give a shipping document as required under this Article.
    11. Willfully refuses to allow a licensed distributor, a licensed exporter, or a licensed importer to defer payment of tax to the supplier, as required by G.S. 105-449.91 .
    12. Willfully refuses to allow a licensed distributor or a licensed importer to take the discount allowed by G.S. 105-449.93 when remitting tax to the supplier.
  2. Class 2. —  A person who commits any of the following acts is guilty of a Class 2 misdemeanor:
    1. Knowingly dispenses non-tax-paid motor fuel into the supply tank of a highway vehicle.
    2. Knowingly allows non-tax-paid fuel to be dispensed into the supply tank of a highway vehicle.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 42; 1997-60, s. 20; 2006-162, s. 17.

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2006-162, s. 17, effective January 1, 2007, and applicable to motor fuel purchased on or after that date, deleted subdivision (a)(3a), which read: “Willfully fails to pay a tax collected on behalf of a destination state to that state when it is due.”

§ 105-449.121. Record-keeping requirements; inspection authority.

  1. What Must Be Kept. —  A person who is subject to audit under subsection (b) of this section must keep a record of all shipping documents or other documents used to determine information the person provides in a return or to determine the person’s motor fuel transactions. The records must be kept for three years from the due date of the return to which the records apply or, if the records apply to a transaction not required to be reported in a return, for three years from the date of the transaction.
  2. Inspection. —  The Secretary or a person designated by the Secretary may do any of the following to determine tax liability under this Article:
    1. Audit a person who is required to have or elects to have a license under this Article.
    2. Audit a distributor, a retailer, a bulk end-user, or a motor fuel user that is not licensed under this Article.
    3. Examine a tank or other equipment used to make, store, or transport motor fuel, diesel dyes, or diesel markers.
    4. Take a sample of a product from a vehicle, a tank, or another container in a quantity sufficient to determine the composition of the product.
    5. Stop a vehicle for the purpose of taking a sample of motor fuel from the vehicle.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 43; 2000-173, s. 18; 2008-134, s. 52; 2009-445, s. 37.

Effect of Amendments.

Session Laws 2008-134, s. 52, effective January 1, 2009, deleted “a distributor or” preceding “a person who” in subdivision (b)(1).

Session Laws 2009-445, s. 37, effective August 7, 2009, substituted “bulk end-user” for “bulk-end user” in subdivision (b)(2).

§ 105-449.122. Equipment requirements.

  1. Metered Pumps. —  All motor fuel dispensed at retail must be dispensed from metered pumps that indicate the total amount of fuel measured through the pumps. Each pump must be marked to indicate the type of motor fuel dispensed.
  2. Truck Equipment. —  A highway vehicle that transports diesel fuel in a tank that is separate from the fuel supply tank of the vehicle may not have a connection from the transporting tank to the motor or to the supply tank of the vehicle.

History. 1995, c. 390, s. 3; 1997-60, s. 21.

§ 105-449.123. Marking requirements for dyed fuel storage facilities.

  1. Requirements.    — A person who is a retailer of dyed motor fuel or who stores both dyed and undyed motor fuel for use by that person or another person must mark the storage facility for the dyed motor fuel as provided in this subsection and in a manner that clearly indicates the fuel is not to be used to operate a highway vehicle. The storage facility must be marked “Dyed Diesel, Nontaxable Use Only, Penalty For Taxable Use” or “Dyed Kerosene, Nontaxable Use Only, Penalty for Taxable Use” or a similar phrase that clearly indicates the fuel is not to be used to operate a highway vehicle. The marking requirements are:
    1. The storage tank of the storage facility must be marked if the storage tank is visible.
    2. The fillcap or spill containment box of the storage facility must be marked.
    3. The dispensing device that serves the storage facility must be marked.
    4. The retail pump or dispensing device at any level of the distribution system must comply with the marking requirements.

      (a1) Penalty. — A person who fails to mark the storage facility as required by subsection (a) of this section is subject to a civil penalty of two hundred fifty dollars ($250.00). Each inspection that results in a finding of noncompliance constitutes a separate and distinct offense.

  2. Exception.    — The marking requirements of this section do not apply to a storage facility that contains fuel used only for one of the purposes listed in G.S. 105-449.105 A(a)(1) and is installed in a manner that makes use of the fuel for any other purpose improbable.

History. 1997-60, s. 22; 2001-205, s. 7; 2003-349, s. 10.11; 2004-170, s. 31; 2005-435, s. 18; 2021-180, s. 42.13E(n).

Editor's Note.

Session Laws 2021-180, s. 42.13E(o), made the amendments to this section by Session Laws 2021-180, s. 42.13E(n), effective January 1, 2022, and applicable to penalties assessed on or after that date.

Session Laws 2021-180, s. 1.1, provides: “This act shall be known as the ‘Current Operations Appropriations Act of 2021.’”

Session Laws 2021-180, s. 43.7, is a severability clause.

Effect of Amendments.

Session Laws 2003-349, s. 10.11, effective January 1, 2004, in subsection (a), in the present first sentence, substituted “in a manner that clearly indicates the fuel” for “as follows with the phrase ‘Dyed Diesel’, ‘For Nonhighway Use’, or a similar phrase that clearly indicates the diesel fuel” and added the present last sentence; and added subdivision (a)(4).

Session Laws 2004-170, s. 31, effective August 2, 2004, in subsection (a), substituted “motor” for “diesel” throughout, and inserted “as follows” preceding “in a manner.”

Session Laws 2005-435, s. 18, effective January 1, 2006, added the last two sentences in subsection (a).

Session Laws 2021-180, s. 42.13E(n), in subsection (a), substituted “provided in this subsection and” for “follows” in the first sentence, and substituted “The marking requirements are:” for the former last two sentences, which read: “A person who intentionally fails to mark the storage facility as required by this section is subject to a civil penalty equal to the excise tax at the motor fuel rate on the inventory held in the storage tank at the time of the violation. If the inventory cannot be determined, then the penalty is calculated on the capacity of the storage tank.” For effective date and applicability, see editor's note.

§ 105-449.124.

Reserved for future codification purposes.

Part 7. Use of Revenue.

§ 105-449.125. Distribution of tax revenue among various funds and accounts.

  1. Distribution to Funds. —  The Secretary shall allocate the amount of revenue collected under this Article from an excise tax of one-half cent (1/2¢) a gallon to the following funds and accounts in the percentages indicated:

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  2. (Effective until July 1, 2021) Distribution of Remaining Revenue. —  The Secretary shall allocate the remaining excise tax revenue collected under this Article, including any revenue that is allocated but not distributed under subsection (a) of this section, as follows:
    1. Eighty-one percent (81%) to the Highway Fund.
    2. Nineteen percent (19%) to the Highway Trust Fund.

      (b) (Effective July 1, 2021 until July 1, 2022) Distribution of Remaining Revenue. — The Secretary shall allocate the remaining excise tax revenue collected under this Article, including any revenue that is allocated but not distributed under subsection (a) of this section, as follows:

      (1) Eighty percent (80%) to the Highway Fund.

      (2) Twenty percent (20%) to the Highway Trust Fund.

      (b) (Effective July 1, 2022) Distribution of Remaining Revenue. — The Secretary shall allocate the remaining excise tax revenue collected under this Article, including any revenue that is allocated but not distributed under subsection (a) of this section, as follows:

      (1) Seventy-five percent (75%) to the Highway Fund.

      (2) Twenty-five percent (25%) to the Highway Trust Fund.

  3. Accounting. —  The Secretary shall charge a proportionate share of a refund allowed under this Article to each fund or account to which revenue collected under this Article is credited. The Secretary shall credit revenue or charge refunds to the appropriate funds or accounts on a monthly basis.

Fund or Account Amount Commercial Leaking Petroleum Underground Storage Tank Cleanup Fund Sixty-two and one-half percent (62.5%) Water and Air Quality Account Twenty-eight and one-tenth percent (28.1%).

History. 1995, c. 390, s. 3; 2015-241, s. 29.27B(a), (b); 2016-5, s. 4.11(a), (b); 2016-94, s. 14.3; 2020-91, s. 4.6(a)-(c).

Subsection (b) Set Out Three Times

The first version of subsection (b) set out above is effective until July 1, 2021, and applicable to excise tax revenue collected by the Department on or after that date. The second version of subsection (b) set out above is effective until July 1, 2022, and applicable to excise tax revenue collected by the Department on or after that date. The third version of subsection (b) set out above is effective July 1, 2022, and applicable to excise tax revenue collected by the Department on or after that date.

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. 2.2(g), provides: “There is created in the General Fund a Reserve for the Motor Fuels Tax Ceiling. The sum of twenty-two million nine hundred thirty-three thousand dollars ($22,933,000) is hereby transferred from the Savings Reserve Account to the Reserve for the Motor Fuels Tax Ceiling for the 2006-2007 fiscal year.

“The State Treasurer shall transfer funds reserved to hold harmless the Highway Fund and the Highway Trust Fund from the Reserve for the Motor Fuels Tax Ceiling only if the variable wholesale component of the motor fuel excise tax rate in G.S. 105-449.80 would, without the imposition of the cap imposed by Section 24.3 of this act, exceed twelve and four-tenths cents (12.4¢) a gallon. A transfer required under this subsection must be made on a monthly basis. The amount to be transferred from the Reserve for the Motor Fuels Tax Ceiling to the Highway Fund is the difference between the amount of motor fuel excise tax revenue allocated to the Highway Fund under G.S. 105-449.125 for a month and the amount that would have been allocated to it if the variable wholesale component were not capped at twelve and four-tenths cents (12.4¢) a gallon. The total amount transferred to the Highway Fund under this subsection during fiscal year 2006-2007 may not exceed seventeen million six hundred thousand dollars ($17,600,000). The amount to be transferred from the Reserve for the Motor Fuels Tax Ceiling to the Highway Trust Fund is the difference between the amount of motor fuel excise tax revenue allocated to the Highway Trust Fund under G.S. 105-449.125 for a month and the amount that would have been allocated to it if the variable wholesale component were not capped at twelve and four-tenths cents (12.4¢) a gallon. The total amount transferred to the Highway Trust Fund under this subsection during fiscal year 2006-2007 may not exceed five million seven hundred thousand dollars ($5,700,000).

“Funds remaining in the Reserve for the Motor Fuels Tax Ceiling on June 30, 2007, shall revert to the Savings Reserve Account on June 30, 2007.”

Session Laws 2006-66, s. 24.3(a), provides: “Notwithstanding G.S. 105-449.80(a), for the period July 1, 2006, through June 30, 2007, the variable wholesale component of the motor fuel excise tax rate may not exceed twelve and four-tenths cents (12.4¢) a gallon.”

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 2014-100, s. 2.2(f), provides: “Notwithstanding G.S. 105-449.125 , one million dollars ($1,000,000) of the revenue collected by the Secretary of Revenue from the motor fuel excise tax levied under Part 7 of Article 36C of Chapter 105 of the General Statutes that would otherwise be credited to the Water and Air Quality Account shall be credited to the State’s General Fund.”

Session Laws 2014-100, s. 14.18(b), provides: “Notwithstanding G.S. 105-449.125 , the funds credited to the Wildlife Resources Fund and the Shallow Draft Navigation Channel Dredging and Lake Maintenance Fund for the first quarter of calendar year 2014 shall be distributed no later than September 15, 2014. Notwithstanding G.S. 105-449.125 , the funds credited to the Wildlife Resources Fund and the Shallow Draft Navigation Channel Dredging and Lake Maintenance Fund for the last quarter of calendar year 2014 shall be allocated to the Highway Trust Fund.”

Session Laws 2014-100, s. 14.18(c), provides: “Notwithstanding G.S. 105-449.125 , in addition to the funds credited under G.S. 105-449.126 , the Secretary of Revenue shall also credit the sum of one million six hundred seventy-seven thousand one hundred thirty-four dollars ($1,677,134) to the Shallow Draft Navigation Channel Dredging and Lake Maintenance Fund for the 2014-2015 fiscal year no later than November 15, 2014. The funds distributed shall be from the funds collected under Article 36C of Chapter 105 of the General Statutes from the effective date of this act until November 15, 2014.”

Session Laws 2014-100, s. 1.1, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2014.’ ”

Session Laws 2014-100, s. 38.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2014-2015 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2014-2015 fiscal year.”

Session Laws 2014-100, s. 38.7, is a severability clause.

Effect of Amendments.

Session Laws 2015-241, s. 29.27B(a), in the language following the table, substituted “seventy-one percent (71%)” for “seventy-five percent (75%)” and “twenty-nine percent (29%)” for “twenty-five percent (25%).” For effective date and applicability, see editor’s note.

Session Laws 2015-241, s. 29.27B(b), deleted the former second row in the table which read: “Noncommercial Leaking Petroleum Underground Storage Tank Cleanup Fund” and “Three thirty-seconds”. For effective date and applicability, see editor’s note.

Session Laws 2016-5, s. 4.11(a), effective July 1, 2016, designated the previously existing provisions as subsections (a) through (c), and added the subsection headings; and rewrote subsection (b).

Session Laws 2016-94, s. 14.3, effective July 1, 2016, in subsection (a), in the introductory paragraph, substituted “percentages” for “fraction,” and, in the form, substituted “Sixty-two and one-half percent (62.5%)” for “Nineteen thirty-seconds” and substituted “Twenty-eight and one-tenth percent (28.1%)” for “Five-sixteenths.”

Session Laws 2020-91, s. 4.6(a), effective July 1, 2020, and applicable to excise tax revenue collected by the Department on or after that date, substituted “Eighty-one percent (81%)” for “Seventy-one percent (71%)” in subdivision (b)(1); and substituted “Nineteen percent (19%)” for “Twenty-nine percent (29%)” in subdivision (b)(2).

Session Laws 2020-91, s. 4.6(b), effective July 1, 2021, and applicable to excise tax revenue collected by the Department on or after that date, substituted “Eighty percent (80%)” for “Eighty-one percent (81%)” in subdivision (b)(1); and substituted “Twenty percent (20%)” for “Nineteen percent (19%)” in subdivision (b)(2).

Session Laws 2020-91, s. 4.6(c), effective July 1, 2022, and applicable to excise tax revenue collected by the Department on or after that date, substituted “Seventy-five percent (75%)” for “Eighty percent (80%)” in subdivision (b)(1); and substituted “Twenty-five percent (25%)” for “Twenty percent (20%)” in subdivision (b)(2).

§ 105-449.126. Distribution of part of Highway Fund allocation to Wildlife Resources Fund and Shallow Draft Navigation Channel Dredging and Aquatic Weed Fund.

  1. The Secretary shall credit to the Wildlife Resources Fund one-sixth of one percent (1/6 of 1%) of the amount that is allocated to the Highway Fund under G.S. 105-449.125 and is from the excise tax on motor fuel. Revenue credited to the Wildlife Resources Fund under this section may be used only for the boating and water safety activities described in G.S. 75A-3(c) . The Secretary must credit revenue to the Wildlife Resources Fund on a quarterly basis. The Secretary must make the distribution within 45 days of the end of each quarter.
  2. The Secretary shall credit to the Shallow Draft Navigation Channel Dredging and Aquatic Weed Fund one percent (1%) of the amount that is allocated to the Highway Fund under G.S. 105-449.125 and is from the excise tax on motor fuel. Revenue credited to the Shallow Draft Navigation Channel Dredging and Aquatic Weed Fund under this section may be used only for the dredging activities described in G.S. 143-215.73 F. The Secretary shall credit revenue to the Shallow Draft Navigation Channel Dredging and Aquatic Weed Fund on a quarterly basis. The Secretary must make the distribution within 45 days of the end of each quarter.

History. 1995, c. 390, s. 3; c. 507, s. 18.16; 2013-360, s. 14.22(g); 2014-100, s. 14.18(a); 2015-241, s. 29.4(a); 2016-94, s. 14.12(d).

Editor’s Note.

Session Laws 2013-360, s. 14.22(i), provides: “Nothing in this section shall affect the validity, term, or cost of any certificate of number or certificate of title issued prior to October 1, 2013.”

Session Laws 2013-360, s. 1.1, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2013.’ ”

Session Laws 2013-360, s. 38.2, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2013-2015 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2013-2015 fiscal biennium.”

Session Laws 2013-360, s. 38.5 is a severability clause.

Session Laws 2014-100, s. 14.18(b), provides: “Notwithstanding G.S. 105-449.125 , the funds credited to the Wildlife Resources Fund and the Shallow Draft Navigation Channel Dredging and Lake Maintenance Fund for the first quarter of calendar year 2014 shall be distributed no later than September 15, 2014. Notwithstanding G.S. 105-449.125 , the funds credited to the Wildlife Resources Fund and the Shallow Draft Navigation Channel Dredging and Lake Maintenance Fund for the last quarter of calendar year 2014 shall be allocated to the Highway Trust Fund.”

Session Laws 2014-100, s. 14.18(c), provides: “Notwithstanding G.S. 105-449.125 , in addition to the funds credited under G.S. 105-449.126 , the Secretary of Revenue shall also credit the sum of one million six hundred seventy-seven thousand one hundred thirty-four dollars ($1,677,134) to the Shallow Draft Navigation Channel Dredging and Lake Maintenance Fund for the 2014-2015 fiscal year no later than November 15, 2014. The funds distributed shall be from the funds collected under Article 36C of Chapter 105 of the General Statutes from the effective date of this act until November 15, 2014.”

Session Laws 2014-100, s. 1.1, provides: “This act shall be known as ‘The Current Operations and Capital Improvements Appropriations Act of 2014.’ ”

Session Laws 2014-100, s. 38.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2014-2015 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2014-2015 fiscal year.”

Session Laws 2014-100, s. 38.7, is a severability clause.

Session Laws 2015-241, s. 29.4(b), provides: “If the amount of revenue budgeted in this act for the 2015-2016 fiscal year for a transfer under G.S. 105-449.126(b), as amended by subsection (a) of this section, to the Shallow Draft Navigation Channel Dredging and Lake Maintenance Fund is not realized, the Department of Revenue shall transfer to the Fund the amount necessary to fully fund the amount budgeted in this act.”

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. 33.4, provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2015-2017 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2015-2017 fiscal biennium.”

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

Effect of Amendments.

Session Laws 2013-360, s. 14.22(g), effective October 1, 2013, added “and Shallow Draft Navigation Channel and Lake Dredging Fund” in the section heading; redesignated the formerly undesignated provisions of this section as subsection (a); and added subsection (b).

Session Laws 2014-100, s. 14.18(a), effective for quarters beginning on or after January 1, 2014, substituted “Dredging and Lake Maintenance Fund” for “and Lake Dredging Fund” in the section heading and throughout the section; substituted “a quarterly basis” for “an annual basis” throughout the section; and added the last sentence in subsections (a) and (b).

Session Laws 2015-241, s. 29.4(a), effective July 1, 2015, substituted “one percent (1%)” for “one-sixth of one percent (1/6 of 1%)” in the first sentence of subsection (b).

Session Laws 2016-94, s. 14.12(d), effective July 1, 2016, substituted “Aquatic Weed Fund” for “Lake Maintenance Fund” in the section heading and throughout subsection (b).

§ 105-449.127. [Repealed]

Repealed by Session Laws 2006-162, s. 12(c), effective July 24, 2006.

§§ 105-449.128, 105-449.129.

Reserved for future codification purposes.

Article 36D. Alternative Fuel.

§ 105-449.130. Definitions.

The following definitions apply in this Article:

  1. Alternative fuel. — A combustible gas or liquid that can be used to generate power to operate a highway vehicle and that is not subject to tax under Article 36C of this Chapter.

    (1a) Bulk end-user. — A person who maintains storage facilities for alternative fuel and uses part or all of the stored fuel to operate a highway vehicle.

    (1f) Diesel gallon equivalent of liquefied natural gas. — The energy equivalent of 6.06 pounds of liquefied natural gas.

    (1g) Gas gallon equivalent of compressed natural gas. — The energy equivalent of 5.66 pounds of compressed natural gas.

    (1h) Gas gallon equivalent of liquefied propane gas. — The energy equivalent of 5.75 pounds of liquefied propane gas.

  2. Highway. — Defined in G.S. 105-449.60 .
  3. Highway vehicle. — Defined in G.S. 105-449.60 .
  4. Motor fuel. — Defined in G.S. 105-449.60 .
  5. Motor fuel rate. — Defined in G.S. 105-449.60 .
  6. Provider of alternative fuel. — A person who does one or more of the following:
    1. Acquires alternative fuel for sale or delivery to a bulk end-user or a retailer.
    2. Maintains storage facilities for alternative fuel, part or all of which the person uses or sells to someone other than a bulk end-user or a retailer to operate a highway vehicle.
    3. Sells alternative fuel and uses part of the fuel acquired for sale to operate a highway vehicle by means of a fuel supply line from the cargo tank of the vehicle to the engine of the vehicle.
    4. Imports alternative fuel to this State, by a means other than the usual tank or receptacle connected with the engine of a highway vehicle, for use by that person to operate a highway vehicle.
  7. Retailer. — A person who maintains storage facilities for alternative fuel and who sells the fuel at retail or dispenses the fuel at a retail location to operate a highway vehicle.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 44; 2008-134, s. 53; 2014-4, s. 30(a), (b); 2015-224, s. 1.

Editor’s Note.

The subdivision designations (1a), (6), and (7) were assigned by the Revisor of Statutes, the designations in Session Laws 1995 (Reg. Sess., 1996), c. 647, s. 44, having been (2), (7), and (8), respectively. The remaining subdivision designations are unchanged.

Effect of Amendments.

Session Laws 2008-134, s. 53, effective January 1, 2009, in subdivisions (1a) and (6), substituted “bulk end-user” for “bulk-end user” throughout; and in subdivision (2), substituted “G.S. 105-449.60” for “G.S. 20-4.01(13).”

Session Laws 2014-4, s. 30(a), (b), effective January 1, 2015, added subdivisions (1f) and (1g).

Session Laws 2015-224, s. 1, effective January 1, 2016, added subdivision (1h).

§ 105-449.131. List of persons who must have a license.

A person may not engage in business in this State as any of the following unless the person has a license issued by the Secretary authorizing the person to engage in that business:

  1. A provider of alternative fuel.
  2. A bulk end-user.
  3. A retailer.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 45; 2008-134, s. 54.

Effect of Amendments.

Session Laws 2008-134, s. 54, effective January 1, 2009, substituted “bulk end-user” for “bulk-end user” in subdivision (2).

§ 105-449.132. How to apply for a license.

To obtain a license, an applicant must file an application with the Secretary on a form provided by the Secretary. An application must include the applicant’s name, address, federal employer identification number, and any other information required by the Secretary. An applicant must meet the requirements for obtaining a license set out in G.S. 105-449.69(b) .

History. 1995, c. 390, s. 3; 1998-146, s. 11.

§ 105-449.133. Bond or letter of credit required as a condition of obtaining and keeping certain licenses.

  1. Who Must Have Bond. —  The following applicants for a license must file with the Secretary a bond or an irrevocable letter of credit:
    1. An alternative fuel provider.
    2. A retailer or a bulk end-user that intends to store highway and nonhighway alternative fuel in the same storage facility.
  2. Amount. —  The amount of the bond is the amount that would be required if the fuel the applicant intended to provide or store was motor fuel rather than alternative fuel. An applicant that is also required to file a bond or an irrevocable letter of credit under G.S. 105-449.72 to obtain a license as a distributor of motor fuel may file a single bond or irrevocable letter of credit under that section for the combined amount.A bond filed under this subsection must be conditioned upon compliance with this Article, be payable to the State, and be in the form required by the Secretary. The Secretary may require a bond issued under this subsection to be adjusted in accordance with the procedure set out in G.S. 105-449.72 for adjusting a bond filed by a distributor of motor fuel.

History. 1995, c. 390, s. 3; 1997-60, s. 23; 2008-134, s. 55.

Effect of Amendments.

Session Laws 2008-134, s. 55, effective January 1, 2009, substituted “bulk end-user” for “bulk-end user” in subdivision (a)(2).

§ 105-449.134. Denial, revocation, or cancellation of license.

The Secretary may deny an application for a license or cancel or revoke a license under this Article for the same reasons that the Secretary may deny an application for a license or cancel or revoke a license under Article 36C of this Chapter. The procedure in Article 36C for cancelling or revoking a license applies to the cancellation or revocation of a license under this Article.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 46; 2017-204, s. 4.6(a); 2020-58, s. 2.12.

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2017-204, s. 4.6(a), effective August 11, 2017, inserted “revocation” in the section heading; inserted “or revoke” twice in the first sentence; and, in the last sentence, substituted “revoking” for “cancelling” and “revocation” for “cancellation.” For applicability, see editor’s note.

Session Laws 2020-58, s. 2.12, effective June 30, 2020, added “cancelling or” and “cancellation or” in the last sentence.

§ 105-449.135. Issuance of license; notification of changes.

  1. Issuance. —  The Secretary must issue a license to each applicant whose application is approved. A license is not transferable and remains in effect until revoked or cancelled.
  2. Notice. —  A licensee that stops engaging in this State in the business for which the license was issued must give the Secretary written notice of the change and must surrender the license. The notice must give the date the change takes effect and, if the licensee has transferred the business to another by sale or otherwise, the date of the transfer and the name and address of the person to whom the business is transferred.All taxes for which the licensee is liable under this Article but are not yet due become due on the date of the change. If the licensee transfers the business to another and does not give the notice required by this section, the person to whom the business was transferred is liable for the amount of any tax the licensee owed the State on the date the business was transferred. The liability of the person to whom the business is transferred is limited to the value of the property acquired from the licensee.

History. 1995, c. 390, s. 3; 2017-204, s. 4.6(b).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2017-204, s. 4.6(b), effective August 11, 2017, substituted “licensee” for “license holder” throughout the section; and substituted “revoked” for “surrendered” in subsection (a). For applicability, see editor’s note.

§ 105-449.136. Tax on alternative fuel.

  1. Rate. —  A tax at the motor fuel rate is imposed on liquid alternative fuel used to operate a highway vehicle by means of a vehicle supply tank that stores fuel only for the purpose of supplying fuel to operate the vehicle. The tax on liquefied natural gas is imposed on each diesel gallon equivalent of liquefied natural gas. The tax on liquefied propane gas is imposed on each gas gallon equivalent of liquefied propane gas. A tax at the equivalent of the motor fuel rate is imposed on all other alternative fuel used to operate a highway vehicle. The tax on compressed natural gas is imposed on each gas gallon equivalent of compressed natural gas. The Secretary must determine the equivalent rate for all other non-liquid alternative fuels.
  2. Administration. —  The exemptions from the tax on motor fuel in G.S. 105-449.88 apply to the tax imposed by this section. The refunds for motor fuel tax allowed by Part 5 of Article 36C of this Chapter apply to the tax imposed by this section, except that the refund allowed by G.S. 105-449.107(b) for certain vehicles that use power takeoffs does not apply to a vehicle whose use of alternative fuel is taxed on the basis of miles driven. The proceeds of the tax imposed by this section must be allocated in accordance with G.S. 105-449.125 .

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 47; 2009-445, s. 38; 2014-4, s. 30(c); 2015-224, s. 2.

The section above is effective January 1, 2015. For this section as effective until January 1, 2015, see the preceding section, also numbered G.S. 105-449.136 .

Effect of Amendments.

Session Laws 2009-445, s. 38, effective August 7, 2009, substituted “G.S. 105-449.88” for “G.S. 105-449.88 (2), (3), and (4)” in the fourth sentence.

Session Laws 2014-4, s. 30(c), effective January 1, 2015, added the subsection designations and headings; and rewrote subsection (a).

Session Laws 2015-224, s. 2, effective January 1, 2016, added the third sentence in subsection (a).

§ 105-449.137. Liability for and payment of the tax.

  1. Liability. —  A bulk end-user or retailer that stores highway and nonhighway alternative fuel in the same storage facility is liable for the tax imposed by this Article. The tax payable by a bulk end-user or retailer applies when fuel is withdrawn from the storage facility. The alternative fuel provider that sells or delivers alternative fuel is liable for the tax imposed by this Article on all other alternative fuel.
  2. Payment. —  The tax imposed by this Article is payable when a return is due. A return is due on the same date as a monthly return due under G.S. 105-449.90 . A monthly return covers liabilities that accrue in the calendar month preceding the date the return is due. A return must be filed with the Secretary and must be in the form and contain the information required by the Secretary.

History. 1995, c. 390, s. 3; 1997-60, s. 24; 2006-162, s. 15(d); 2008-134, s. 56.

Editor’s Note.

Session Laws 2006-162, s. 33, provides, in part, that: “An exempt card or code will not be valid for sales of motor fuel at the terminal rack on or after January 1, 2007.”

Effect of Amendments.

Session Laws 2006-162, s. 15(d), effective January 1, 2007, and applicable to motor fuel purchased on or after that date, substituted “on the same date as a monthly return due under G.S. 105-449.90 ” for “monthly within 25 days after the end of each month” at the end of the second sentence in subsection (b).

Session Laws 2008-134, s. 56, effective January 1, 2009, substituted “bulk end-user” for “bulk-end user” twice in subsection (a).

§ 105-449.138. Requirements for bulk end-users and retailers.

  1. Informational Return. —  A bulk end-user and a retailer must file a quarterly informational return with the Secretary. A quarterly return covers a calendar quarter and is due by the last day of the month that follows the quarter covered by the return.The return must give the following information and any other information required by the Secretary:
    1. The amount of alternative fuel received during the quarter.
    2. The amount of alternative fuel sold or used during the quarter.
  2. Storage. —  A bulk end-user or a retailer may store highway and nonhighway alternative fuel in separate storage facilities or in the same storage facility. If highway and nonhighway alternative fuel are stored in separate storage facilities, the facility for the nonhighway fuel must be marked in accordance with the requirements set by G.S. 105-449.123 for dyed diesel storage facilities. If highway and nonhighway alternative fuel are stored in the same storage facility, the storage facility must be equipped with separate metering devices for the highway fuel and the nonhighway fuel. If the Secretary determines that a bulk end-user or retailer used or sold alternative fuel to operate a highway vehicle when the fuel was dispensed from a storage facility or through a meter marked for nonhighway use, all fuel delivered into that storage facility is presumed to have been used to operate a highway vehicle.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 48; 1997-60, s. 25; 2008-134, s. 57.

Effect of Amendments.

Session Laws 2008-134, s. 57, effective January 1, 2009, substituted “bulk end-user” for “bulk-end user” in the section heading and throughout the section.

§ 105-449.139. Miscellaneous provisions.

  1. Records. —  A licensee must keep a record of all documents used to determine the information provided in a return filed under this Article. The records must be kept for three years from the due date of the return to which the records apply. The records are open to inspection during business hours by the Secretary or a person designated by the Secretary.
  2. Violations. —  The offenses listed in subdivisions (1) through (9) of G.S. 105-449.120 apply to this Article. In applying those offenses to this Article, references to “this Article” are to be construed as references to Article 36D and references to “motor fuel” are to be construed as references to alternative fuel.
  3. Lists. —  The Secretary must make available a list of licensed alternative fuel providers to each licensed bulk end-user and licensed retailer. The Secretary must also make available a list of licensed bulk end-users and licensed retailers to each licensed alternative fuel provider. A list must state the name, account number, and business address of each licensee on the list. The Secretary must update the lists required under this section annually.

History. 1995, c. 390, s. 3; 1995 (Reg. Sess., 1996), c. 647, s. 49; 2008-134, s. 58; 2017-204, s. 4.6(c); 2020-58, s. 2.2(d).

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. 105-241.13 A.”

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

Effect of Amendments.

Session Laws 2008-134, s. 58, effective January 1, 2009, substituted “bulk end-user” for “bulk-end user” twice in subsection (c).

Session Laws 2017-204, s. 4.6(c), effective August 11, 2017, substituted “licensee” for “license holder” throughout the section. For applicability, see editor’s note.

Session Laws 2020-58, s. 2.2(d), effective June 30, 2020, in subsection (c), substituted “make available a list” for “also give a list” in the first and second sentences, and substituted “update the lists required under this section annually” for “send an annual update of a list to each licensee, as appropriate” in the last sentence.

Subchapter VI. Tax Research.

Article 37. Tax Research. [Repealed]

§§ 105-450 through 105-457. [Repealed]

Repealed by Session Laws 1991, c. 10, s. 3.

Cross References.

As to preparation of reports concerning taxes by the Secretary of Revenue, see now G.S. 105-256 .

Editor’s Note.

Repealed G.S. 105-450 to 105-452, 105-454, and 105-457 were previously repealed by Session Laws 1973, c. 476, s. 193.

Subchapter VII. Payments Received From Tennessee Valley Authority in Lieu of Taxes.

Article 38. Equitable Distribution between Local Governments.

§ 105-458. Apportionment of payments in lieu of taxes between local units.

The payments received by the State and local governments from the Tennessee Valley Authority in lieu of taxes under section 13 of the Act of Congress creating it, and as amended, shall be apportioned between the local governments in which the property is owned or an operation is carried on, on the basis of each local government’s percentage of the total value of the Authority’s property in the State, determined as hereinafter provided: Provided, however, that the minimum annual payment to any local government from said fund, including the amounts paid direct to said local government by the Authority, shall not be less than the amount of annual actual tax loss to such local government based upon the two-year average on said property next prior to it being taken over by the Authority.

History. 1941, c. 85, s. 1; 1959, c. 1060; 2009-569, s. 1.

Local Modification.

Graham and Swain: 2012-62.

State Payment in Lieu of Taxes Study Commission.

Session Laws 2013-340, ss. 3.1 through 3.9, provide: “3.1 There is established the State Payment in Lieu of Taxes Study Commission. The Commission shall consist of 13 members appointed as follows:

“(1) Three members of the House of Representatives appointed by the Speaker of the House of Representatives.

“(2) Three members of the Senate appointed by the President Pro Tempore of the Senate.

“(3) The Secretary of Revenue or the Secretary’s designee.

“(4) Three members of the public appointed by the Speaker of the House of Representatives, two based on the recommendation of the North Carolina Association of County Commissioners and one based on the recommendation of the North Carolina League of Municipalities.

“(5) Three members of the public appointed by the President Pro Tempore of the Senate, two based on the recommendation of the North Carolina Association of County Commissioners and one based on the recommendation of the North Carolina League of Municipalities.

“3.2. The Speaker of the House of Representatives and the President Pro Tempore of the Senate shall each designate a cochair. The Commission may meet at any time upon the joint call of the cochairs. A quorum of the Commission shall be a majority of its members. No action may be taken except by a majority vote at a meeting at which a quorum is present.

“3.3. Vacancies on the Commission shall be filled by the same appointing authority that made the initial appointment.

“3.4. Subject to the approval of the Legislative Services Commission, the Commission may meet in the Legislative Building or the Legislative Office Building.

“3.5. The Legislative Services Commission, through the Legislative Services Officer, shall assign professional staff to assist the Commission in its work. The House of Representatives’ and the Senate’s Director of Legislative Assistants shall assign clerical support staff to the Commission, and the expenses relating to the clerical employees shall be borne by the Commission.

“3.6. The Commission, while in the discharge of its official duties, may exercise all powers provided for under G.S. 120-19 and G.S. 120-19.1 through G.S. 120-19 .4. The Commission may contract for professional, clerical, or consultant services as provided by G.S. 120-32.02 .

“3.7. Members of the Commission shall receive subsistence and travel expenses at the rates set forth in G.S. 120-3.1 , 138-5, or 138-6, as appropriate.

“3.8. The Commission shall study issues relating to the development of a State payment in lieu of taxes for State properties, including wildlife and game lands. The Commission may consider any other issues deemed relevant.

“3.9. The Commission may submit an interim report on the results of its study, including any proposed legislation, to the members of the Senate and the House of Representatives at any time by filing a copy of the report with the Office of the President Pro Tempore of the Senate, the Office of the Speaker of the House of Representatives, and the Legislative Library. The Commission shall submit a final report on the results of its study, including any proposed legislation, to the members of the Senate and the House of Representatives, prior to the convening of the 2015 General Assembly, by filing a copy of the report with the Office of the President Pro Tempore of the Senate, the Office of the Speaker of the House of Representatives, and the Legislative Library. The Committee shall terminate upon the convening of the 2015 General Assembly or upon the filing of its final report, whichever occurs first.”

Effect of Amendments.

Session Laws 2009-569, s. 1, effective October 1, 2009, substituted “each local government’s percentage of the total value of the Authority’s property in the State” for “the percentage of loss of taxes to each” near the middle.

§ 105-459. Proration of T.V.A. funds.

The Department of Revenue shall determine each year, on the basis of current tax laws, the allocation of the Authority’s valuation among the local governments in the same manner as if the property owned or operated by the Authority were owned or operated by a privately owned public utility. The Department of Revenue and the Treasurer of the State of North Carolina shall then prorate the funds received from the Authority by the State and local governments between the local governments upon the basis of the foregoing calculations.

History. 1941, c. 85, s. 2; 1959, c. 1060; 1973, c. 476, s. 193; 2009-569, s. 2.

Effect of Amendments.

Session Laws 2009-569, s. 2, effective October 1, 2009, rewrote the section.

§ 105-460. Distribution of funds by State Treasurer.

The Treasurer of the State of North Carolina shall then ascertain the payments to be made to the local governments upon the basis of the provisions of G.S. 105-459 and he is authorized and directed to distribute the same between the local governments in accordance with the foregoing provisions of G.S. 105-459 . The Treasurer of the State of North Carolina is further authorized and directed to pay said sums to the local governments each month or so often as he shall receive payments from the Authority, but not more often than once each month, after first deducting from any sum to be paid a local government such amount as has theretofore been paid direct to said local government by the Authority for the same period: Provided, however, that the minimum annual payment to any local government from said fund shall not be less than the average annual tax on the property taken by the Authority for the two years next preceding the taking.

History. 1941, c. 85, s. 3; 1959, c. 1060.

§ 105-461. Duty of finance officer, etc.

The finance officer or other proper officer of each local government to which this Subchapter is applicable shall certify each month to the Treasurer of the State of North Carolina a statement of the amount received by the local government direct from the Authority.

No local government shall be entitled to receive its distributive share of said fund from the Treasurer of the State of North Carolina until the foregoing information has been properly furnished. If any such local government shall fail to furnish the information herein required within 10 days from and after receipt by it from the Department of Revenue of request for the same, forwarded by registered mail, then and in that event it shall be barred from participating in the benefits provided for the period for which the same is requested.

History. 1941, c. 85, s. 4; 1973, c. 476, s. 193; 2009-569, s. 3.

Effect of Amendments.

Session Laws 2009-569, s. 3, effective October 1, 2009, substituted “finance officer” for “county accountant” in the section heading and first sentence of the section; deleted former subdivision (1) which read: “Certify to the Department of Revenue and the Treasurer of the State of North Carolina the tax rate fixed by the governing body of such local government immediately upon the fixing of the same”; deleted the former subdivision (2) designation; and made minor stylistic changes.

§ 105-462. Local units entitled to benefits; prerequisite for payments.

Any local governments within the State in which the Authority now or may hereafter own property or carry on an operation shall be entitled to the benefits arising under this Subchapter: Provided, however, that no payment shall be made to them by the Treasurer of the State of North Carolina until such time as such local governments shall have certified to the Department of Revenue and the Treasurer of the State of North Carolina the average annual tax loss it has sustained by the taking of said property for the two years immediately preceding the taking thereof: Provided, further, that in the event of any disagreement between said local governments and the Treasurer of the State of North Carolina as to such annual tax loss, then the same shall be determined by the Department of Revenue, and its decision thereon shall be final.

History. 1941, c. 85, s. 5; 1973, c. 476, s. 193.

Subchapter VIII. Local Government Sales And Use Tax.

Editor’s Note.

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.”

Article 39. First One-Cent (1¢) Local Government Sales and Use Tax.

§ 105-463. Short title.

This Article shall be known as the First One-Cent (1¢) Local Government Sales and Use Tax Act.

History. 1971, c. 77, s. 2; 2002-123, s. 7(b).

Editor’s Note.

Session Laws 1991, c. 689, s. 320(a) provides: “Approval under the Local Government Sales and Use Tax Act, Article 39 of Chapter 105 of the General Statutes, or under the Mecklenburg County Sales and Use Tax Act, Chapter 1096 of the 1967 Session Laws, as amended, of one percent (1%) local sales and use taxes in addition to the three percent (3%) State sales and use taxes constitutes approval of one percent (1%) local sales and use taxes in addition to the four percent (4%) States sales and use taxes.”

Section 352 of Session Laws 1991, c. 689 provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 1991-93 biennium, the textual provisions of Titles I, II and III of this act shall apply only to funds appropriated for and activities occurring during the 1991-93 biennium.”

Session Laws 2012-74, s. 7, provides: “For purchases made on or after July 1, 2012, but before July 1, 2013, a company located at a ports facility for waterborne commerce that purchases specialized equipment to be used at the facility to unload or process bulk cargo to make it suitable for delivery to and use by manufacturing facilities is allowed a refund of all local sales and use taxes paid and a portion of State sales and use taxes paid on the purchases as provided in this section. The portion of the State sales and use taxes that may be refunded is equal to the excess of the State sales and use taxes paid over the amount that would have been due had the taxpayer been subject to tax on the eligible property as if it were mill machinery under Article 5F of Chapter 105 of the General Statutes. A request for a refund under this section must be in writing and must include any information and documentation required by the Secretary. A request for a refund under this section must be made on or after July 1, 2013, and is due before January 1, 2014. Refunds applied for after the due date are barred. Taxes for which a refund is allowed under this section are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .”

CASE NOTES

The sales tax and the use tax may often bring about the same result but they are different in conception. They are assessments upon different transactions and are bottomed on distinguishable taxable events. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The purpose of North Carolina’s sales and use tax scheme is two-fold. The primary purpose is, of course, to generate revenue for the State. The sales tax is, in effect, a tax imposed upon the retail merchant as a privilege tax for the right to engage in that business. The tax is, however, designed to be passed on to the consumer. The second purpose of the sales and use tax scheme is to equalize the tax burden on all State residents. This is achieved through imposition of the use tax in certain situations where the sales tax is not applicable. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The chief function of the Sales and Use Tax Act is to prevent the evasion of a sales tax by persons purchasing tangible personal property outside of North Carolina for storage, use or consumption within the State. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The use tax does not impermissibly burden interstate commerce since it is a tax imposed on the enjoyment of goods after the sale has already spent its interstate character. It is designed to complement the sales tax and to reach transactions which cannot constitutionally be subject to a sales tax. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

The North Carolina use tax can be constitutionally assessed against a newspaper which enjoys protection under U.S. Const., Amend. XIV. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211 , 322 S.E.2d 155, 1984 N.C. LEXIS 1794 (1984).

For case in which former local option sales and use tax act was held unconstitutional for lack of uniformity, see Hajoca Corp. v. Clayton, 277 N.C. 560 , 178 S.E.2d 481, 1971 N.C. LEXIS 1053 (1971) (considering former G.S. 105-164 to 105-164.58) .

§ 105-464. Purpose and intent.

It is the purpose of this Article to afford the counties and municipalities of this State with opportunity to obtain an added source of revenue with which to meet their growing financial needs by providing all counties of the State with authority to levy a one percent (1%) sales and use tax as hereinafter provided.

History. 1971, c. 77, s. 2.

§ 105-465. County election as to adoption of local sales and use tax.

The board of elections of any county, upon the written request of the board of county commissioners, or upon receipt of a petition signed by qualified voters of the county equal in number to at least fifteen percent (15%) of the total number of votes cast in the county, at the last preceding election for the office of Governor, shall call a special election for the purpose of submitting to the voters of the county the question of whether a one percent (1%) sales and use tax will be levied.

The special election shall be held under the same rules applicable to the election of members of the General Assembly.

The county board of elections shall prepare ballots for the special election. The question presented on the ballot shall be “FOR one percent (1%) local sales and use tax on items subject to State sales and use tax at the general State rate and on food” or “AGAINST one percent (1%) local sales and use tax on items subject to State sales and use tax at the general State rate and on food”.

The county board of elections shall fix the date of the special election on a date permitted by G.S. 163-287 , except that the special election shall not be held within one year from the date of the last preceding special election under this section.

History. 1971, c. 77, s. 2; 1981, c. 560, s. 2; 1991, c. 689, s. 315; 1996, 2nd Ex. Sess., c. 13, s. 1.2; 2013-381, s. 10.8; 2017-6, s. 3; 2018-146, ss. 3.1(a), (b), 6.1.

Re-recodification; Technical and Conforming Changes.

Session Laws 2017-6, s. 3, provides, in part: “The Revisor of Statutes shall recodify Chapter 138A of the General Statutes, Chapter 120C of the General Statutes, as well as Chapter 163 of the General Statutes, as amended by this act, into a new Chapter 163A of the General Statutes to be entitled ‘Elections and Ethics Enforcement Act,’ as enacted by Section 4 of this act. The Revisor may also recodify into the new Chapter 163A of the General Statutes other existing statutory laws relating to elections and ethics enforcement that are located elsewhere in the General Statutes as the Revisor deems appropriate.” The Revisor was further authorized to make additional technical and conforming changes to catchlines, internal citations, and other references throughout the General Statutes to effectuate this recodification. Pursuant to this authority, the Revisor of Statutes substituted “G.S. 163A-1592” for “G.S. 163-287” in the last paragraph.

Session Laws 2018-146, ss. 3.1(a), (b) and 6.1, repealed Session Laws 2017-6, s. 3, and authorized the Revisor of Statutes to re-recodify Chapter 163A into Chapters 163, 138A, and 120C and to revert the changes made by the Revisor pursuant to Session Laws 2017-6, s. 3. Pursuant to this authority, the Revisor of Statutes reverted the change to the reference in the last paragraph.

Editor’s Note.

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. 1.7, provides: “Approval under Article 39, 40, or 42 of Chapter 105 of the General Statutes or under the Mecklenburg County Sales and Use Tax Act, Chapter 1096 of the 1967 Session Laws, as amended, of local sales and use taxes on items subject to State sales and use tax at the general State rate constitutes approval of local sales and use taxes on food.”

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.”

Effect of Amendments.

Session Laws 2013-381, s. 10.8, effective January 1, 2014, deleted the former second and third sentences of the second paragraph, and in the fourth paragraph, inserted “on a date permitted by G.S. 163-287 ,” and deleted “on the date or within 60 days of any biennial election for county officers, nor” following “shall not be held.” For applicability, see editor’s note.

§ 105-466. Levy of tax.

  1. In the event a majority of those voting in a special election held pursuant to G.S. 105-465 shall approve the levy of the local sales and use tax, the board of county commissioners may, by resolution, proceed to levy the tax.
  2. In addition, the board of county commissioners may, in the event no election has been held within five years under the provisions of G.S. 105-465 in which the tax has been defeated, after not less than 10 days’ public notice and after a public hearing held pursuant thereto, by resolution, impose and levy the local sales and use tax to the same extent and with the same effect as if the levy of the tax had been approved in an election held pursuant to G.S. 105-465 . (b1) If the board of commissioners of a county has imposed the local sales and use tax authorized by this Article and any or all of the taxes authorized by Articles 40 and 42 of this Chapter, with or without a special election, and the county subsequently becomes part of a consolidated city-county, the taxes shall continue in effect unless and until repealed by the governing board of the consolidated city-county.
  3. Collection of the tax, and liability therefor, must begin and continue only on and after the first day of a calendar quarter, as set by the board of county commissioners in the resolution levying the tax. The county must give the Secretary at least 90 days advance notice of a new tax levy or tax rate change. The applicability of a new tax or a tax rate change to purchases from printed catalogs becomes effective on the first day of a calendar quarter after a minimum of 120 days from the date the Secretary notifies the seller that receives orders by means of a catalog or similar publication of the new tax or tax rate change. A local rate increase may only be effective on the first day of a calendar quarter after a minimum of 60 days’ notice to sellers by the Secretary.
  4. Upon adoption of a resolution levying the tax, the board of county commissioners shall immediately deliver a certified copy of the resolution to the Secretary, accompanied by a certified statement from the county board of elections, if applicable, setting forth the results of any special election approving the tax in the county. Upon receipt of these documents, the Secretary shall collect and administer the tax as provided in this Article.

History. 1971, c. 77, s. 2; 1973, c. 302; c. 476, s. 193; 1977, c. 372, s. 1; 1993, c. 485, s. 22; 1995, c. 461, s. 16; 2000-120, s. 12; 2001-414, s. 28; 2003-284, s. 45.10; 2010-95, s. 12; 2016-5, s. 3.17(b).

Local Modification.

Burke: 1977, c. 372, s. 2.

Editor’s Note.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

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 2010-95, s. 44, provides: “Notwithstanding the provisions of G.S. 105-466(c), as amended by Section 12 of this act, during the 2010 calendar year a tax levied under Article 46 of Chapter 105 of the General Statutes may become effective on the first day of any calendar quarter so long as the county gives the Secretary at least 75 days advance notice of the new tax levy.”

Effect of Amendments.

Session Laws 2003-284, s. 45.10, effective July 15, 2003, added the last sentence in subsection (c).

Session Laws 2010-95, s. 12, effective July 17, 2010, substituted “first day of a calendar quarter” for “first day of the month of either January or July” in the first sentence of subsection (c).

Session Laws 2016-5, s. 3.17(b), effective May 11, 2016, in subsection (c), deleted the former second sentence, which read: “In no event may the tax be imposed, or the tax rate changed, earlier than the first day of the second succeeding calendar month after the date of the adoption of the resolution,” and added the last sentence.

§ 105-467. Scope of sales tax.

  1. Sales Tax. —  The sales tax that may be imposed under this Article is limited to a tax at the rate of one percent (1%) of the following:
    1. A retailer’s net taxable sales and gross receipts that are subject to the general rate of sales tax imposed by the State under G.S. 105-164.4 except the tax does not apply to the sales price of an item taxable under G.S. 105-164.4 (a)(1a).
    2. through (4) Repealed by Session Laws 2011-330, s. 45, effective June 27, 2011. (5) The sales price of food that is not otherwise exempt from tax pursuant to G.S. 105-164.13 but is exempt from the State sales and use tax pursuant to G.S. 105-164.13 B.

      (5a) The sales price of a bundled transaction that includes food subject to tax under subdivision (5) of this subsection, if the price of the food exceeds ten percent (10%) of the price of the bundle. A retailer must determine the price of food in a bundled transaction in accordance with G.S. 105-164.4D.

      (5b) Repealed by Session Laws 2013-3.4(c), effective July 1, 2014, and applicable to purchases made on or after that date.

      (6), (7) Repealed by Session Laws 2011-330, s. 45, effective June 27, 2011.

      (8) The presumed sales price of an item of tangible personal property under G.S. 105-164.12 B.

  2. Exemptions and Refunds. —  The State exemptions and exclusions contained in Article 5 of Subchapter I of this Chapter, except for the exemption for food in G.S. 105-164.13 B, apply to the local sales and use tax authorized to be levied and imposed under this Article. The State refund provisions contained in G.S. 105-164.14 and G.S. 105-164.14 A apply to the local sales and use tax authorized to be levied and imposed under this Article. A refund of an excessive or erroneous State sales tax collection allowed under G.S. 105-164.11 and a refund of State sales tax paid on a rescinded sale or cancelled service contract under G.S. 105-164.11 A apply to the local sales and use tax authorized to be levied and imposed under this Article. The aggregate annual local refund amount allowed an entity under G.S. 105-164.14(b) for the State’s fiscal year may not exceed thirteen million three hundred thousand dollars ($13,300,000).Except as provided in this subsection, a taxing county may not allow an exemption, exclusion, or refund that is not allowed under the State sales and use tax. A local school administrative unit and a joint agency created by interlocal agreement among local school administrative units pursuant to G.S. 160A-462 to jointly purchase food service-related materials, supplies, and equipment on their behalf is allowed an annual refund of sales and use taxes paid by it under this Article on direct purchases of items. Sales and use tax liability indirectly incurred by the entity as part of a real property contract for real property that is owned or leased by the entity and is a capital improvement for use by the entity is considered a sales or use tax liability incurred on direct purchases by the entity for the purpose of this subsection. The refund allowed under this subsection does not apply to purchases of electricity, telecommunications service, ancillary service, piped natural gas, video programming, or a prepaid meal plan. A request for a refund is due in the same time and manner as provided in G.S. 105-164.14(c). Refunds applied for more than three years after the due date are barred.
  3. Sourcing. —  The sourcing principles in Article 5 of Subchapter I of this Chapter apply in determining whether the local sales tax applies to a transaction.

History. 1971, c. 77, s. 2; 1983 (Reg. Sess., 1984), c. 1097, s. 9; 1987, c. 557, s. 7; c. 832, s. 4; 1989, c. 692, s. 3.7; 1991, c. 689, s. 316; 1996, 2nd Ex. Sess., c. 13, s. 1.3; 1998-98, s. 30.1; 1998-171, s. 9; 2001-347, s. 2.15; 2001-414, s. 29; 2001-424, s. 34.16(b); 2001-430, s. 13; 2001-487, s. 67(e); 2002-16, s. 12; 2002-159, s. 61; 2005-276, s. 33.23; 2006-66, s. 7.20(a); 2006-162, s. 32; 2007-244, s. 6; 2007-368, s. 2; 2008-107, s. 28.12(c); 2010-166, s. 3.8; 2011-330, s. 45; 2013-316, ss. 3.1(c), 3.4(c), (d); 2013-414, s. 49(b); 2014-3, ss. 6.1(i), 8.2(b); 2015-259, s. 4.2(f); 2016-5, s. 3.8(b); 2016-94, s. 38.5(n); 2017-204, s. 2.9(c); 2019-169, s. 3.3(t).

Editor’s Note.

Section 105-164.13C, referred to in subsection (b), was repealed by Session Laws 2013-316, s. 3.4(a), effective July 1, 2014.

Effect of Amendments.

Session Laws 2005-276, s. 33.23, effective January 1, 2006, added subdivision (a)(7).

Session Laws 2006-66, s. 7.20(a), effective July 1, 2005, and applicable to sales made on or after that date, in subsection (b), inserted the exception at the beginning of the second sentence and added the last five sentences.

Session Laws 2006-162, s. 32, effective January 1, 2007, substituted “electricity, telecommunications service, and ancillary service” for “electricity and telecommunications service” at the end of the third sentence in subsection (b).

Session Laws 2007-244, s. 6, effective October 1, 2007, added subdivision (a)(5a).

Session Laws 2007-368, s. 2, effective October 1, 2007, and applicable to sales made on or after that date, added subdivision (a)(5b).

Session Laws 2008-107, s. 28.12(c), effective July 16, 2008, and applicable to sales made on or after that date, substituted “tax holidays contained in G.S. 105-164.13 C and G.S. 105-164.13 D” for “tax holiday contained in G.S. 105-164.13C” in the first sentence of subsection (b).

Session Laws 2010-166, s. 3.8, effective July 1, 2010, inserted “through G.S. 105-164.14 B” in the first sentence of subsection (b).

Session Laws 2011-330, s. 45, effective June 27, 2011, rewrote subsection (a).

Session Laws 2013-316, s. 3.1(c), effective January 1, 2014, added “except the tax does not apply to the sales price of a manufactured home or a modular home” at the end of subdivision (a)(1). For applicability, see editor’s note.

Session Laws 2013-316, s. 3.4(c), (d), effective July 1, 2014, deleted subdivision (a)(5b); and in subsection (b), deleted “the State sales and use tax holidays contained in G.S. 105-164.13 C and G.S. 105-164.13 D, and the State refund provisions contained in G.S. 105-164.14 through G.S. 105-164.14 B” following “G.S. 105-164.13,” in the first sentence, added the present second and third sentences and redesignated the remainder as the present second paragraph; in the second paragraph, deleted the former fourth sentence, and substituted “in the same time and manner as provided in G.S. 105-164.14” for “within six months after the end of the entity’s fiscal year.” For applicability, see editor’s note.

Session Laws 2013-414, s. 49(b), effective August 23, 2013, deleted the former first sentence in subsection (c), which read: “The local sales tax authorized to be imposed and levied under this Article applies to taxable transactions by retailers who place of business is located within the taxing county.”

Session Laws 2014-3, s. 6.1(i), effective October 1, 2014, added the present third sentence in the first paragraph of subsection (b). See Editor’s note for applicability.

Session Laws 2014-3, s. 8.2(b), effective July 1, 2014, in the second paragraph of subsection (b), deleted “other than electricity, telecommunications service, and ancillary service” at the end of the second sentence, inserted the present third-to-last sentence, and substituted “G.S. 105-164.14(c)” for “G.S. 105-164.14” in the next-to-last sentence. See Editor’s note for applicability.

Session Laws 2015-259, s. 4.2(f), effective October 1, 2015, substituted “an item taxable under G.S. 105-164.4(a)(1a)” for “a manufactured home or a modular home” at the end of subdivision (a)(1). For applicability, see Editor’s note.

Session Laws 2016-5, s. 3.8(b), effective May 11, 2016, added subdivision (a)(8).

Session Laws 2016-94, s. 38.5(n), effective July 1, 2016, inserted “and G.S. 105-164.27 A” in the first sentence of the first paragraph of subsection (b). See editor’s note for applicability.

Session Laws 2017-204, s. 2.9(c), effective August 11, 2017, in subsection (b), in the first paragraph, substituted “Article 5 of Subchapter I of this Chapter, except for the exemption for food in G.S. 105-164.13 B” for “G.S. 105-164.13 and G.S. 105-164.27 A,” “and G.S. 105-164.14 A” for “through G.S. 105-164.14 B” in the first sentence, and “the State’s fiscal year” for “a fiscal year” in the last sentence, in the second paragraph, substituted “as part of a real property contract for real property” for “on building materials, supplies, fixtures, and equipment that become a part of or annexed to any building or structure” and “a capital improvement” for “being erected, altered, or repaired”; and substituted “Article 5 of Subchapter I of this Chapter” for “G.S. 105-164.4B” in subsection (c).

Session Laws 2019-169, s. 3.3(t), effective July 26, 2019, substituted “items” for “tangible personal property and services” in the second sentence of the second paragraph of subsection (b).

Legal Periodicals.

For survey of 1978 law on taxation, see 57 N.C.L. Rev. 1142 (1979).

CASE NOTES

Editor’s Note. —

Some of the cases cited below were decided under former G.S. 105-89.1.

Local Sales Tax Not Precluded by Exemption from State Tax. —

The limitation, in subdivision (1), of local sales tax to sales “subject to” the State sales tax refers not to those transactions for which a State sales tax is actually assessed, but to any transaction described in (former) G.S. 105-164.4(1) without regard to whether the transaction might be exempted or excluded from taxation by the operation of G.S. 105-164.13 . Thus, exemption from State sales tax does not preclude the assessment of a local sales tax. Gregory Poole Equipment Co. v. Coble, 38 N.C. App. 483, 248 S.E.2d 378, 1978 N.C. App. LEXIS 2223 (1978), aff'd, 297 N.C. 19 , 252 S.E.2d 729, 1979 N.C. LEXIS 1111 (1979).

Municipal Tax on Operators of Gasoline Pumps. —

The provision authorizing counties, cities and towns to levy a license tax on each place of business located therein, not in excess of one fourth of that levied by the State, does not preclude a city from levying a tax on operators of gasoline pumps located on sidewalks along certain streets between the curb and the property line when such city tax is levied in the nature of a permit in the exercise of regulatory police power. State v. Evans, 205 N.C. 434 , 171 S.E. 640, 1933 N.C. LEXIS 582 (1933).

Retail sales of used tangible personal property were subject to the local government sales tax when such property, having been accepted in trade by the vendor as a credit or part payment on the sales price of new property that was exempt from local sales tax under the provisions of G.S. 105-467 by virtue of delivery to a purchaser at a point outside the taxing county by the vendor or his agent or by a common carrier, was sold at retail and delivered to the purchaser within the taxing county in which the taxpayer had a place of business. Gregory Poole Equipment Co. v. Coble, 38 N.C. App. 483, 248 S.E.2d 378, 1978 N.C. App. LEXIS 2223 (1978), aff'd, 297 N.C. 19 , 252 S.E.2d 729, 1979 N.C. LEXIS 1111 (1979).

A retailer doing business in a county that imposes the one percent local government sales tax must collect that tax when it sells and delivers within that county used tangible personal property previously accepted in trade as part payment on the sales price of new property that was delivered outside the county. Gregory Poole Equip. Co. v. Coble, 297 N.C. 19 , 252 S.E.2d 729, 1979 N.C. LEXIS 1111 (1979).

No Exemption for Insurance Companies for Local Use Taxes. —

Under G.S. 105-467 and G.S. 105-468 , exemptions from local use taxes are explicitly limited to and made dependent on the existence of codified exemptions from the State sales and use taxes, and in G.S. 105-164.13 , the legislature has meticulously set forth approximately 50 exemptions and exclusions to the states sales and use taxes, many of which are sub-categorized by industry, but nowhere in G.S. 105-164.13 are insurance companies exempted from State sales and use tax; thus, local use taxes are generally applicable, and the North Carolina General Assembly did not intend to make them inapplicable to insurance companies. Proposed Assessments of Additional Sales & Use Tax v. Jefferson-Pilot Ins. Co., 161 N.C. App. 558, 589 S.E.2d 179, 2003 N.C. App. LEXIS 2274 (2003).

OPINIONS OF ATTORNEY GENERAL

See opinion of Attorney General to Honorable I. L. Clayton, Commissioner of Revenue, 40 N.C.A.G. 881 (1970), issued under former G.S. 105-164.51.

§ 105-468. Scope of use tax.

The use tax authorized by this Article is a tax at the rate of one percent (1%) of the purchase price of an item or transaction that is not sold in the taxing county but is for storage, use, or consumption in the taxing county and sourced in accordance with Article 5 of Subchapter I of this Chapter. The tax applies to the same items that are subject to tax under G.S. 105-467 . The collection and administration of this tax shall be in accordance with Article 5 of Subchapter I of this Chapter.

Where a local sales or use tax was due and has been paid on an item or transaction by the purchaser in another taxing county within the State, or where a local sales or use tax was due and has been paid in a taxing jurisdiction outside the State where the purpose of the tax is similar in purpose and intent to the tax which may be imposed pursuant to this Article, the tax paid may be credited against the tax imposed under this section by a taxing county upon the same property or transaction. If the amount of sales or use tax so paid is less than the amount of the use tax due the taxing county under this section, the purchaser shall pay to the Secretary an amount equal to the difference between the amount so paid in the other taxing county or jurisdiction and the amount due in the taxing county. The Secretary may require such proof of payment in another taxing county or jurisdiction as is deemed to be necessary. The use tax levied under this Article is not subject to credit for payment of any State sales or use tax not imposed for the benefit and use of counties and municipalities. No credit shall be given under this section for sales or use taxes paid in a taxing jurisdiction outside this State if that taxing jurisdiction does not grant similar credit for sales taxes paid under this Article.

History. 1971, c. 77, s. 2; 1973, c. 476, s. 193; 1979, 2nd Sess., c. 1100, s. 2; 1989, c. 692, s. 3.8; 1991, c. 689, s. 317; 1996, 2nd Ex. Sess., c. 13, s. 1.4; 2012-79, s. 1.10; 2013-414, s. 49(a); 2016-5, s. 3.7(b); 2017-204, s. 2.9(d).

Editor’s Note.

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

Effect of Amendments.

Session Laws 2012-79, s. 1.10, effective June 26, 2012, in the first sentence of the third paragraph, inserted “was due and”, substituted “purchaser in” for “purchaser, either in”, and inserted “where a local sales or use tax was due and has been paid.”

Session Laws 2013-414, s. 49(a), effective August 23, 2013, added the last sentence in the first paragraph, and deleted the former second paragraph.

Session Laws 2016-5, s. 3.7(b), effective May 11, 2016, substituted “purchase price” for “cost price” in the first sentence of the first paragraph.

Session Laws 2017-204, s. 2.9(d), effective August 11, 2017, in the first paragraph, rewrote the first sentence, and substituted “Subchapter I of this Chapter” for “Chapter 105 of the General Statutes” in the last sentence; and, in the first sentence of the second paragraph, substituted “on an item or transaction” for “with respect to tangible personal property,” and added “or transaction” at the end.

CASE NOTES

No Exemption for Insurance Companies for Local Use Taxes. —

Under G.S. 105-467 and G.S. 105-468 , exemptions from local use taxes are explicitly limited to and made dependent on the existence of codified exemptions from the State sales and use taxes, and in G.S. 105-164.13 , the legislature has meticulously set forth approximately 50 exemptions and exclusions to the states sales and use taxes, many of which are sub-categorized by industry, but nowhere in G.S. 105-164.13 are insurance companies exempted from State sales and use tax; thus, local use taxes are generally applicable, and the North Carolina General Assembly did not intend to make them inapplicable to insurance companies. Proposed Assessments of Additional Sales & Use Tax v. Jefferson-Pilot Ins. Co., 161 N.C. App. 558, 589 S.E.2d 179, 2003 N.C. App. LEXIS 2274 (2003).

§ 105-468.1. Certain building materials exempt from sales and use taxes.

The provisions of this Article shall not be applicable with respect to any items purchased for the purpose of fulfilling a real property contract for a capital improvement entered into or awarded, or entered into or awarded pursuant to any bid made, before the effective date of the tax imposed by a taxing county when, absent the provisions of this section, the items would otherwise be subject to tax under the provisions of this Article.

History. 1971, c. 77, s. 3; 2017-204, s. 2.4(e); 2019-169, s. 3.3(u).

Editor’s Note.

Session Laws 2017-204, s. 2.13, provides: “Except as otherwise provided, Sections 2.1 through 2.8 of this part become effective retroactively to January 1, 2017, and apply to sales and purchases made on or after that date. Any amendments made in Sections 2.1 through 2.8 of this part that increase sales or use tax liability are effective when this act becomes law. The remainder of this part is effective when it becomes law.”

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

Effect of Amendments.

Session Laws 2017-204, s. 2.4(e), substituted “any tangible personal property or digital property” for “any building materials,” “a real property contract for a capital improvement” for “any lump sum or unit price contract,” and “such property” for “such building materials.” For effective date and applicability, see editor’s note.

Session Laws 2019-169, s. 3.3(u), effective July 26, 2019, substituted “items” for “tangible personal property or digital property” near the beginning; and substituted “the items” for “such property” near the end.

§ 105-469. Secretary to collect and administer local sales and use tax.

  1. The Secretary shall collect and administer a tax levied by a county pursuant to this Article. As directed by G.S. 105-164.13 B, taxes levied by a county on food are administered as if they were levied by the State under Article 5 of this Chapter. The references in this section to Article 39 of this Chapter and Chapter 1096 of the 1967 Session Laws and Articles 40 and 42 of this Chapter do not include the adjustments made pursuant to G.S. 105-524 . The Secretary must, on a monthly basis, distribute local taxes levied on food to the taxing counties as follows:
    1. The Secretary must allocate one-half of the net proceeds on a per capita basis according to the most recent annual population estimates certified to the Secretary by the State Budget Officer. The Secretary must then adjust the amount allocated to each county as provided in G.S. 105-486(b). The Secretary must include one-half of the amount allocated under this subdivision in the distribution made under Article 40 of this Chapter and must include the remaining one-half in the distribution made under Article 42 of this Chapter.
    2. The Secretary must allocate the remaining net proceeds proportionately to each taxing county based upon the amount of sales tax on food collected in the taxing county in the 1997-1998 fiscal year under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws relative to the total amount of sales tax on food collected in all taxing counties in the 1997-1998 fiscal year under Article 39 of this Chapter and under Chapter 1096 of the 1967 Session Laws. The Secretary must include the amount allocated under this subdivision in the distribution made under Article 39 of this Chapter.
  2. The Secretary shall require retailers who collect use tax on sales to North Carolina residents to ascertain the county of residence of each buyer and provide that information to the Secretary along with any other information necessary for the Secretary to allocate the use tax proceeds to the correct taxing county.

History. 1971, c. 77, s. 2; 1973, c. 476, s. 193; 1993, c. 485, s. 23; 1996, 2nd Ex. Sess., c. 14, s. 12; 2003-284, s. 45.11(a); 2003-416, s. 27(a); 2004-170, s. 32; 2005-435, s. 41; 2015-268, s. 10.1(e2).

Editor’s Note.

Session Laws 2003-284, s. 45.1, provides: “The Streamlined Sales and Use Tax Agreement is an historic multistate agreement designed to simplify and modernize sales and use tax collection and administration. The states and businesses involved in the Streamlined Sales Tax Project recognize that a simplified and uniform system saves businesses compliance and audit costs, while also saving states administrative costs and improving voluntary compliance, which should increase state collections. To participate in the Agreement, North Carolina must amend or modify some of its sales and use tax law to conform to the simplifications and uniformity in the Agreement. This part [Part XLV of Session Laws 2003-284] makes those necessary changes.”

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.

Effect of Amendments.

Session Laws 2003-284, s. 45.11.(a), effective October 1, 2003, added the last two sentences in subsection (a).

Session Laws 2003-416, s. 27.(a), effective October 1, 2003, rewrote subsection (a).

Session Laws 2004-170, s. 32, effective August 2, 2004, in subdivision (a)(2), inserted “or under Chapter 1096 of the 1967 Session Laws” following “of this Chapter,” and added “and under Chapter 1096 of the 1967 Session Laws” at the end of the subdivision.

Session Laws 2005-435, s. 41, effective September 27, 2005, added the last sentence in subdivisions (a)(1) and (a)(2).

Session Laws 2015-268, s. 10.1(e2), added the second sentence in the introductory paragraph of subsection (a). For effective date and applicability, see Editor’s note.

§ 105-470. [Repealed]

Repealed by Session Laws 1991, c. 689, s. 318.

§ 105-471. Retailer to collect sales tax.

Every person liable for tax in a taxing county shall on and after the levy of the tax herein authorized collect the one percent (1%) local sales tax provided by this Article. A person is required to collect a local use tax on a transaction if a local sales tax does not apply to the transaction in accordance with G.S. 105-164.8(c) .

The tax to be collected under this Article shall be collected as a part of the sales price of an item or transaction subject to tax in accordance with G.S. 105-467 . The tax shall be stated and charged separately from the sales price or purchase price and shall be shown separately on the sales record, except as provided in G.S. 105-164.7 , and shall be paid by the purchaser to the person liable for the tax as trustee for and on account of the State or county wherein the tax is imposed. It is the intent and purpose of this Article that the local sales and use tax herein authorized to be imposed and levied by a taxing county shall be added to the sales price and that the tax shall be passed on to the purchaser instead of being borne by the person liable for the tax. The Secretary of Revenue shall design the necessary forms for filing returns and instructions to insure the full collection from a person liable for this tax, and the Secretary may adapt the present form used for the reporting and collecting of the State sales and use tax to this purpose.

History. 1971, c. 77, s. 2; 1973, c. 476, s. 193; 2016-5, s. 3.7(c); 2017-204, s. 2.9(e); 2018-5, s. 38.5(w).

Editor’s Note.

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

Effect of Amendments.

Session Laws 2016-5, s. 3.7(c), effective May 11, 2016, substituted “purchase price” for “cost price” twice in the second paragraph.

Session Laws 2017-204, s. 2.9(e), effective August 11, 2017, added the last sentence of the first paragraph; and rewrote the first sentence in the second paragraph.

Session Laws 2018-5, s. 38.5(w), effective June 12, 2018, in the first paragraph, substituted “person liable for tax” for “retailer whose place of business is” in the first sentence, and substituted “A person” for “A retailer” in the second sentence; and in the last paragraph, substituted “the sales record, except as provided in G.S. 105-164.7 , and shall be paid by the purchaser to the person liable for the tax as trustee” for “the retailer’s sales record and shall be paid by the purchaser to the retailer as trustee” in the second sentence, substituted “person liable for tax” for “retailer” at the end of third sentence, and in the last sentence, substituted “design the necessary” for “design, print and furnish to all retailers in a taxing county in which he shall collect and administer the tax the necessary” and substituted “from a person liable for this tax” for “from retailers.”

§ 105-472. Disposition and distribution of taxes collected.

  1. County Allocation. —  The Secretary shall, on a monthly basis, allocate to each taxing county for which the Secretary collects the tax the net proceeds of the tax collected in that county under this Article. For the purpose of this section, “net proceeds” means the gross proceeds of the tax collected in each county under this Article less taxes refunded, the cost to the State of collecting and administering the tax in the county as determined by the Secretary, and other deductions that may be charged to the county. If the Secretary collects local sales or use taxes in a month and the taxes cannot be identified as being attributable to a particular taxing county, the Secretary shall allocate the taxes among the taxing counties in proportion to the amount of taxes collected in each county under this Article during that month and shall include them in the monthly distribution. Amounts collected by electronic funds transfer payments are included in the distribution for the month in which the return that applies to the payment is received.
  2. Distribution Between Counties and Cities. —  The Secretary shall divide the amount allocated to each taxing county among the county and its municipalities in accordance with the method determined by the county. The board of county commissioners shall, by resolution, choose one of the following methods of distribution:
    1. Per Capita Method. —  The net proceeds of the tax collected in a taxing county shall be distributed to that county and to the municipalities in the county on a per capita basis according to the total population of the taxing county, plus the total population of the municipalities in the county. In the case of a municipality located in more than one county, only that part of its population living in the taxing county is considered its “total population”. In order to make the distribution, the Secretary shall determine a per capita figure by dividing the amount allocated to each taxing county by the total population of that county plus the total population of all municipalities in the county. The Secretary shall then multiply this per capita figure by the population of the taxing county and by the population of each municipality in the county; each respective product shall be the amount to be distributed to the county and to each municipality in the county. To determine the population of each county and each municipality, the Secretary shall use the most recent annual estimate of population certified by the State Budget Officer.
    2. Ad Valorem Method. —  The net proceeds of the tax collected in a taxing county shall be distributed to that county and the municipalities in the county in proportion to the total amount of ad valorem taxes levied by each on property having a tax situs in the taxing county during the fiscal year next preceding the distribution. For purposes of this section, the amount of the ad valorem taxes levied by a county or municipality includes ad valorem taxes levied by the county or municipality in behalf of a taxing district and collected by the county or municipality. In addition, the amount of taxes levied by a county includes ad valorem taxes levied by a merged school administrative unit described in G.S. 115C-513 in the part of the unit located in the county. In computing the amount of tax proceeds to be distributed to each county and municipality, the amount of any ad valorem taxes levied but not substantially collected shall be ignored. Each county and municipality receiving a distribution of the proceeds of the tax levied under this Article shall in turn immediately share the proceeds with each district in behalf of which the county or municipality levied ad valorem taxes in the proportion that the district levy bears to the total levy of the county or municipality. Any county or municipality that fails to provide the Department of Revenue with information concerning ad valorem taxes levied by it adequate to permit a timely determination of its appropriate share of tax proceeds collected under this Article may be excluded by the Secretary from each monthly distribution with respect to which the information was not provided in a timely manner, and those tax proceeds shall then be distributed only to the remaining counties or municipalities, as appropriate. For the purpose of computing the distribution of the tax under this subsection to any county and the municipalities located in the county for any month with respect to which the property valuation of a public service company is the subject of an appeal and the Department of Revenue is restrained by law from certifying the valuation to the county and the municipalities in the county, the Department shall use the last property valuation of the public service company that has been certified.The board of county commissioners in each taxing county shall, by resolution adopted during the month of April of each year, determine which of the two foregoing methods of distribution shall be in effect in the county during the fiscal year following the succeeding fiscal year. In order for the resolution to be effective, a certified copy of it must be delivered to the Secretary in Raleigh within 15 calendar days after its adoption. If the board fails to adopt a resolution choosing a method of distribution not then in effect in the county, or if a certified copy of the resolution is not timely delivered to the Secretary, the method of distribution then in effect in the county shall continue in effect for the following fiscal year. The method of distribution in effect on the first of July of each fiscal year shall apply to every distribution made during that fiscal year. (b1) Repealed by Session Laws 2008-134, s. 14(b), effective July 28, 2008.
  3. Municipality Defined. —  As used in this Article, the term “municipality” means “city” as defined in G.S. 153A-1 .
  4. 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 are open to the public. The previous sentence becomes effective with respect to distribution of funds on or after July 1, 1999.

History. 1971, c. 77, s. 2; 1973, c. 476, s. 193; c. 752; 1979, c. 12, s. 1; 1979, 2nd Sess., c. 1137, s. 49; 1981, c. 4, s. 2; 1985 (Reg. Sess., 1986), c. 934, s. 2; 1991, c. 325, s. 8; 1993, c. 485, s. 24; 1999-458, s. 6; 2001-427, s. 13(a); 2001-487, s. 118(b); 2002-72, s. 5; 2003-349, s. 5; 2004-203, s. 5(j); 2007-323, s. 31.16.3(d); 2008-134, s. 14(b); 2021-124, s. 1.

Local Modification.

Burke: 1983, c. 273, 1983 (Reg. Sess., 1984), c. 1034, s. 127; 1985, c. 326; Onslow: 2009-18, s. 2; Pender: 1993 (Reg. Sess., 1994), c. 577, s. 1, 2003-416, s. 14; Roanoke Rapids: 1973, c. 3.

Editor’s Note.

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.

Session Laws 2007-323, s. 31.16.3(d), which added subsection (b1), effective October 1, 2008, and applicable to distributions for months beginning on or after that date, was repealed by Session Laws 2008-134, s. 14(b), effective July 28, 2008.

Effect of Amendments.

Session Laws 2001-427, s. 13(a), as amended by Session Laws 2001-487, s. 118(b), and by Session Laws 2002-72, s. 5, effective July 1, 2003, and applicable to amounts collected on or after that date, substituted “monthly” for “quarterly” twice in subsection (a); and in subdivision (b)(2), substituted “monthly” for “quarterly” in the next-to-last sentence and substituted “any month” for “any quarter” in the last sentence.

Session Laws 2002-72, s. 5, effective August 12, 2002, substituted “105-472” for “105-472(a)” in the introductory language of Session Laws 2001-427, s. 13(a), which amends this section effective July 1, 2003.

Session Laws 2003-349, s. 5, effective July 1, 2003, added the present last sentence in subsection (a).

Session Laws 2004-203, s. 5(j), effective July 1, 2003, substituted “Budget Officer” for “Planning Officer” in the last sentence of subdivision (b)(1).

Session Laws 2007-323, s. 31.16.3(d), effective October 1, 2008, and applicable to distributions for months beginning on or after that date, added subsection (b1).

Session Laws 2021-124, s. 1, effective August 30, 2021, substituted “fiscal year following the succeeding fiscal year” for “next succeeding fiscal year” in the last paragraph of subsection (b).

CASE NOTES

Constitutionality. —

Per capita distribution offends neither the State Constitution nor the federal Constitution. Town of Beech Mt. v. County of Watauga, 324 N.C. 409 , 378 S.E.2d 780, 1989 N.C. LEXIS 255 , cert. denied, 493 U.S. 954, 110 S. Ct. 365, 107 L. Ed. 2d 351, 1989 U.S. LEXIS 5274 (1989).

Construction with Other Provisions. —

Since distribution of the residual sales taxes under subdivision (b)(2) is dependent upon the levy of ad valorem taxes within a taxing district, it does not appear that it was the intent of the legislature for G.S. 115C-430 to supersede subdivision (b)(2); therefore, the trial court properly concluded that the two statutes were not in conflict. Banks v. County of Buncombe, 128 N.C. App. 214, 494 S.E.2d 791, 1998 N.C. App. LEXIS 17 , aff'd, 348 N.C. 687 , 500 S.E.2d 666, 1998 N.C. LEXIS 320 (1998).

Per capita method of distribution of local sales and use tax revenues to municipalities does not burden the right of interstate travel and deprive out-of-state residents of their privileges and immunities under U.S. Const., Art. IV, § 2, since this section does not treat nonresidents any differently than it treats residents of this State. Town of Beech Mt. v. County of Watauga, 91 N.C. App. 87, 370 S.E.2d 453, 1988 N.C. App. LEXIS 720 (1988), aff'd, 324 N.C. 409 , 378 S.E.2d 780, 1989 N.C. LEXIS 255 (1989), cert. denied, 493 U.S. 954, 110 S. Ct. 365, 107 L. Ed. 2d 351, 1989 U.S. LEXIS 5274 (1989).

Per capita method of distribution of local sales and use tax revenues to municipalities provides a reasonable means of returning revenues in an amount proportionate to those from whom they were collected; therefore, this method of revenue distribution is constitutionally valid and survives the rational basis test under the Equal Protection Clause of the United States Constitution. Town of Beech Mt. v. County of Watauga, 91 N.C. App. 87, 370 S.E.2d 453, 1988 N.C. App. LEXIS 720 (1988), aff'd, 324 N.C. 409 , 378 S.E.2d 780, 1989 N.C. LEXIS 255 (1989), cert. denied, 493 U.S. 954, 110 S. Ct. 365, 107 L. Ed. 2d 351, 1989 U.S. LEXIS 5274 (1989).

Individuals owning a second or vacation home for less than half a year are not a suspect class such that this section is subject to strict scrutiny. Town of Beech Mt. v. County of Watauga, 91 N.C. App. 87, 370 S.E.2d 453, 1988 N.C. App. LEXIS 720 (1988), aff'd, 324 N.C. 409 , 378 S.E.2d 780, 1989 N.C. LEXIS 255 (1989), cert. denied, 493 U.S. 954, 110 S. Ct. 365, 107 L. Ed. 2d 351, 1989 U.S. LEXIS 5274 (1989).

§ 105-473. Repeal of levy.

  1. The board of elections of any county, upon the written request of the board of county commissioners thereof, or upon receipt of a petition signed by qualified voters of the county equal in number to at least fifteen percent (15%) of the total number of votes cast in the county at the last preceding election for the office of Governor, shall call a special election for the purpose of submitting to the voters of the county the question of whether the levy of a one percent (1%) sales and use tax theretofore levied should be repealed.The special election shall be held under the same rules and regulations applicable to the election of members of the General Assembly.The county board of elections shall prepare ballots for the special election which shall contain the words “FOR repeal of the one percent (1%) local sales and use tax levy,” and the words “AGAINST repeal of the one percent (1%) local sales and use tax levy,” with appropriate squares so that each voter may designate his vote by his cross (X) mark.The county board of elections shall fix the date of the special election on a date permitted by G.S. 163-287 ; provided, however, that the special election shall not be held within one year from the date of the last preceding special election held under this section.
  2. In the event a majority of those voting in a special election held pursuant to this section shall approve the repeal of the levy, the board of county commissioners shall, by resolution, proceed to terminate the levy and the imposition of the tax in the taxing county unless and until the tax is levied again as provided in G.S. 105-466(a).
  3. In addition, the board of county commissioners may, by resolution and without the necessity of an election proceed to terminate the levy and the imposition of the tax in the taxing county if the tax was levied under the provisions of G.S. 105-466(b).
  4. No termination of taxes levied and imposed under this Article shall be effective until the end of the fiscal year in which the repeal election was held.
  5. The board of county commissioners, upon adoption of said resolution, shall cause a certified copy of the resolution to be delivered immediately to the Secretary of Revenue, accompanied by a certified statement from the county board of elections, if applicable, setting forth the results of any special election approving the repeal of the tax in the county.
  6. No liability for any tax levied under this Article which shall have attached prior to the effective date on which a levy is terminated shall be discharged as a result of such termination, and no right to a refund of tax or otherwise, which shall have accrued prior to the effective date on which a levy is terminated shall be denied as a result of such termination.

History. 1971, c. 77, s. 2; 1973, c. 476, s. 193; 1981, c. 560, s. 2; 1995, c. 461, s. 17; 2013-381, s. 10.9; 2017-6, s. 3; 2018-146, ss. 3.1(a), (b), 6.1.

Re-recodification; Technical and Conforming Changes.

Session Laws 2017-6, s. 3, provides, in part: “The Revisor of Statutes shall recodify Chapter 138A of the General Statutes, Chapter 120C of the General Statutes, as well as Chapter 163 of the General Statutes, as amended by this act, into a new Chapter 163A of the General Statutes to be entitled ‘Elections and Ethics Enforcement Act,’ as enacted by Section 4 of this act. The Revisor may also recodify into the new Chapter 163A of the General Statutes other existing statutory laws relating to elections and ethics enforcement that are located elsewhere in the General Statutes as the Revisor deems appropriate.” The Revisor was further authorized to make additional technical and conforming changes to catchlines, internal citations, and other references throughout the General Statutes to effectuate this recodification. Pursuant to this authority, the Revisor of Statutes substituted “G.S. 163A-1592” for “G.S. 163-287” in subsection (a).

Session Laws 2018-146, ss. 3.1(a), (b) and 6.1, repealed Session Laws 2017-6, s. 3, and authorized the Revisor of Statutes to re-recodify Chapter 163A into Chapters 163, 138A, and 120C and to revert the changes made by the Revisor pursuant to Session Laws 2017-6, s. 3. Pursuant to this authority, the Revisor of Statutes reverted the change to the reference in subsection (a).

Effect of Amendments.

Session Laws 2013-381, s. 10.9, effective January 1, 2014, in subsection (a), deleted the former second and third sentences of the second paragraph, and in the fourth paragraph, inserted “on a date permitted by G.S. 163-287 ,” and deleted “on the day of any biennial election for county officers, nor within 60 days thereof nor” following “shall not be held.” For applicability, see editor’s note.

§ 105-474. Definitions; construction of Article; remedies and penalties.

The definitions set forth in Article 5 of Subchapter I of this Chapter shall apply to this Article insofar as such definitions are not inconsistent with the provisions of this Article, and all other provisions of Articles 5 and 9 of Subchapter I of this Chapter as the same relate to the North Carolina Sales and Use Tax Act shall be applicable to this Article unless such provisions are inconsistent with the provisions of this Article. The administrative interpretations made by the Secretary of Revenue with respect to the North Carolina Sales and Use Tax Act, to the extent not inconsistent with the provisions of this Article, may be uniformly applied in the construction and interpretation of this Article. It is the intention of this Article that the provisions of this Article and the provisions of the North Carolina Sales and Use Tax Act, insofar as practicable, shall be harmonized.

The provisions with respect to remedies and penalties applicable to the North Carolina Sales and Use Tax Act, as contained in Articles 5 and 9 of Subchapter I of this Chapter, shall be applicable in like manner to the tax authorized to be levied and collected under this Article, to the extent that the same are not inconsistent with the provisions of this Article.

History. 1971, c. 77, s. 2; 1973, c. 476, s. 193; 2017-204, s. 2.9(f).

Editor’s Note.

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

Effect of Amendments.

Session Laws 2017-204, s. 2.9(f), effective August 11, 2017, substituted “Articles 5 and 9 of Subchapter I of this Chapter” for “Article 5 and of Article 9 of Subchapter 1, Chapter 105 of the General Statutes” throughout the section; and substituted “Article 5 of Subchapter I of this Chapter” for “G.S. 105-164.3” in the first sentence of the first paragraph.

Legal Periodicals.

For survey of 1978 law on taxation, see 57 N.C.L. Rev. 1142 (1979).

§§ 105-475 through 105-479.

Reserved for future codification purposes.

Article 40. First One-Half Cent (1/2¢) Local Government Sales and Use Tax.

§ 105-480. Short title.

This Article shall be known as the First One-Half Cent (1/2¢) Local Government Sales and Use Tax Act.

History. 1983, c. 908, s. 1; 2002-123, s. 8(b).

Editor’s Note.

Session Laws 1991, c. 689, s. 320(b) provides: “Approval under the Supplemental Local Government Sales and Use Tax Act, Article 40 of Chapter 105 of the General Statutes, on one-half percent (1/2%) local sales and use taxes in addition to the one percent (1%) local sales and use taxes and three percent (3%) State sales and use taxes constitutes approval of one-half percent (1/2%) local sales and use taxes in addition to the one percent (1%) local sales and use taxes and the four percent (4%) States sales and use taxes.”

Section 352 of Session Laws 1991, c. 689 provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 1991-93 biennium, the textual provisions of Titles I, II and III of this act shall apply only to funds appropriated for and activities, occurring during the 1991-93 biennium.”

Session Laws 2012-74, s. 7, provides: “For purchases made on or after July 1, 2012, but before July 1, 2013, a company located at a ports facility for waterborne commerce that purchases specialized equipment to be used at the facility to unload or process bulk cargo to make it suitable for delivery to and use by manufacturing facilities is allowed a refund of all local sales and use taxes paid and a portion of State sales and use taxes paid on the purchases as provided in this section. The portion of the State sales and use taxes that may be refunded is equal to the excess of the State sales and use taxes paid over the amount that would have been due had the taxpayer been subject to tax on the eligible property as if it were mill machinery under Article 5F of Chapter 105 of the General Statutes. A request for a refund under this section must be in writing and must include any information and documentation required by the Secretary. A request for a refund under this section must be made on or after July 1, 2013, and is due before January 1, 2014. Refunds applied for after the due date are barred. Taxes for which a refund is allowed under this section are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .”

§ 105-481. Purpose and intent.

It is the purpose of this Article to afford the counties and cities of this State an opportunity to obtain an added source of revenue with which to meet their growing financial needs, and to reduce their reliance on other revenues, such as the property tax, by providing all counties of the State that are subject to this Article with authority to levy one-half percent (1/2%) sales and use taxes.

History. 1983, c. 908, s. 1.

§ 105-482. Limitations.

This Article applies only to counties that levy one percent (1%) sales and use taxes under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws.

History. 1983, c. 908, s. 1; 1993, c. 485, s. 25.

Editor’s Note.

Session Laws 1996, Second Extra Session, c. 13, ss. 1.5 and 1.6, amend Session Laws 1967, c. 1096, referred to in this section.

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. 1.7, provides: “Approval under Article 39, 40, or 42 of Chapter 105 of the General Statutes or under the Mecklenburg County Sales and Use Tax Act, Chapter 1096 of the 1967 Session Laws, as amended, of local sales and use taxes on items subject to State sales and use tax at the general State rate constitutes approval of local sales and use taxes on food.”

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.”

§ 105-483. Levy and collection of additional taxes.

Any county subject to this Article may levy one-half percent (1/2%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Except as provided in this Article, the adoption, levy, collection, distribution, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Article, references to “this Article” mean Article 40 of this Chapter. The exemption for building materials in G.S. 105-468.1 does not apply to taxes levied under this Article.

History. 1983, c. 908, s. 1; 1993, c. 485, s. 26.

§ 105-484. Form of ballot.

  1. The form of the question to be presented on a ballot for a special election concerning the additional taxes authorized by this Article shall be: “FOR additional one-half percent (1/2%) local sales and use taxes” or “AGAINST additional one-half percent (1/2%) local sales and use taxes.”
  2. The form of the question to be presented on a ballot for a special election concerning the repeal of any additional taxes levied pursuant to this Article shall be: “FOR repeal of the additional one-half percent (1/2%) local sales and use taxes” or “AGAINST repeal of the additional one-half percent (1/2%) local sales and use taxes.”

History. 1983, c. 908, s. 1.

§ 105-485. [Repealed]

Repealed by Session Laws 1991, c. 689, s. 318.

§ 105-486. Distribution of additional taxes.

  1. County Allocation. —  The Secretary shall, on a monthly basis, allocate the net proceeds of the additional one-half percent (1/2%) sales and use taxes levied under this Article to the taxing counties on a per capita basis according to the most recent annual population estimates certified to the Secretary by the State Budget Officer.
  2. Adjustment. —

    The Secretary shall then adjust the amount allocated to each county under subsection (a) by multiplying the amount by the appropriate adjustment factor set out in the table below. If, after applying the adjustment factors, the resulting total of the amounts allocated is greater or lesser than the net proceeds to be distributed, the amount allocated to each county shall be proportionally adjusted to eliminate the excess or shortage.

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  3. Distribution Between Counties and Cities. —  The amount allocated to each taxing county shall then be divided among the county and its municipalities in accordance with the method by which the one percent (1%) sales and use taxes levied in that county pursuant to Article 39 of this Chapter or Chapter 1096 of the 1967 Session Laws are distributed.
  4. 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 are open to the public. The previous sentence becomes effective with respect to distribution of funds on or after July 1, 1999.

County Adjustment Factor Dare 1.49 Brunswick 1.17 Orange 1.15 Carteret and Durham 1.14 Avery 1.12 Moore 1.11 Transylvania 1.10 Chowan, McDowell, and Richmond 1.09 Pitt and New Hanover 1.07 Beaufort, Perquimans, Buncombe, and Watauga 1.06 Cabarrus, Jackson, and Surry 1.05 Alleghany, Bladen, Robeson, Washington, Craven, Henderson, Onslow, and Vance 1.04 Gaston, Granville, and Martin 1.03 Alamance, Burke, Caldwell, Chatham, Duplin, Edgecombe, Haywood, Swain, and Wilkes 1.02 Hertford, Union, Stokes, Yancey, Halifax, Rockingham, and Cleveland 1.01 Alexander, Anson, Johnston, Northampton, Pasquotank, Person, Polk, and Yadkin 1.00 Catawba, Harnett, Iredell, Pamlico, Pender, Randolph, Stanly, and Tyrrell 0.99 Cherokee, Cumberland, Davidson, Graham, Hyde, Macon, Rutherford, Scotland, and Wilson 0.98 Ashe, Bertie, Franklin, Hoke, Lincoln, Montgomery, and Warren 0.97 Wayne, Clay, Madison, Sampson, Wake, Lee, and Forsyth 0.96 Caswell, Gates, Mitchell, and Greene 0.95 Currituck and Guilford 0.94 Davie and Nash 0.93 Rowan and Camden 0.92 Jones 0.90 Mecklenburg 0.89 Lenoir 0.88 Columbus 0.81

History. 1983, c. 908, s. 1; 1985 (Reg. Sess., 1986), c. 906, s. 2; 1987, c. 832, s. 6; 1987 (Reg. Sess., 1988), c. 1082, s. 2; 1999-458, s. 7; 2001-427, s. 13(b), (c).

Editor’s Note.

Session Laws 1996, Second Extra Session, c. 13, ss. 1.5 and 1.6, amend Session Laws 1967, c. 1096, referred to in this section.

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. 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.”

Effect of Amendments.

Session Laws 2001-427, ss. 13(b) and (c), effective July 1, 2003, and applicable to amounts collected on or after that date, in subsection (a) substituted “monthly” for “quarterly”; and in subsection (c) deleted the former last sentence, relating to pro rata distribution of a share of taxes not collected in a county for a full quarter because of the levy or repeal of the taxes.

§ 105-487. Use of additional tax revenue by counties.

  1. Except as provided in subsection (c), forty percent (40%) of the revenue received by a county from additional one-half percent (1/2%) sales and use taxes levied under this Article during the first five fiscal years in which the additional taxes are in effect in the county and thirty percent (30%) of the revenue received by a county from these taxes  after the first five fiscal years in which the taxes are in effect in the county may be used by the county only for public school capital outlay purposes as defined in G.S. 115C-426(f) or to retire any indebtedness incurred by the county for these purposes.
  2. Repealed by Session Laws 1998-98, s. 31, effective August 14, 1998.
  3. The Local Government Commission may, upon petition by a county, authorize the county to use part or all its tax revenue, otherwise required by subsection (a) of this section to be used for public school capital needs, for any lawful purpose. The petition shall be in the form of a resolution adopted by the Board of County Commissioners and transmitted to the Local Government Commission. The petition shall demonstrate that the county can provide for its public school capital needs without restricting the use of part or all of the designated amount of the additional one-half percent (1/2%) sales and use tax revenue for that purpose.In making its decision, the Local Government Commission shall consider information contained in the petition concerning not only the public school capital needs, but also the other capital needs of the petitioning county. The Commission may also consider information from sources other than the petition. The Commission shall issue a written decision on each petition stating the findings of the Commission concerning the public school capital needs of the petitioning county and the percentage of revenue otherwise restricted by subsection (a) of this section that may be used by the petitioning county for any lawful purpose.Decisions of the Commission allowing counties to use a percentage of their tax revenue that would otherwise be restricted under subsection (a) of this section for any lawful purpose are final and shall continue in effect until the restrictions imposed by that subsection expire. A county whose petition is denied, in whole or in part, by the Commission may subsequently submit a new petition to the Commission.
  4. For purposes of determining the number of fiscal years in which one-half percent (1/2%) sales and use taxes levied under this Article have been in effect in a county, these taxes are considered to be in effect only from the effective date of the levy of these taxes and are considered to be in effect for a full fiscal year during the first year in which these taxes were in effect, regardless of the number of months in that year in which the taxes were actually in effect.
  5. A county may expend part or all of the revenue restricted for public school capital needs pursuant to subsection (a) of this section in the fiscal year in which the revenue is received, or the county may place part or all of this revenue in a capital reserve fund and shall specifically identify this revenue in accordance with Chapter 159 of the General Statutes.

History. 1983, c. 908, s. 1; 1993, c. 255, ss. 1, 3; 1998-98, s. 31; 1998-186, s. 1; 2009-395, s. 1.

Local Modification.

Burke County: 1985, c. 326.

Editor’s Note.

Session Laws 2018-5, s. 38.10(h), provides: “A municipality that is holding sales and use tax revenue distributed to it that is restricted for water and sewage capital outlay purposes, as required under G.S. 105-487(b) and G.S. 105-504 , repealed effective August 14, 1998, under S.L. 1998-98, may use the restricted revenue as follows:

“(1) A municipality that does not own or operate a water or sewer system may use part or all of the restricted sales and use tax revenue for any lawful purpose upon adoption of a resolution. A municipality that adopts a resolution releasing the sales and use tax revenue from the repealed restriction pursuant to this subdivision must provide written notice to the Secretary of the Local Government Commission that the funds are unrestricted within 30 days of the adoption of the resolution.

“(2) A municipality that owns or operates a water or sewer system must use the revenue for its restricted purpose. The municipality may petition the Local Government Commission to waive part or all of the restriction, as allowed under G.S. 105-487(c).”

Effect of Amendments.

Session Laws 2009-395, s. 1, effective January 1, 2010, and applicable to sales made on or after that date, substituted “after the first five” for “in the next 23” near the middle of subsection (a).

Article 41. Alternative Local Government Sales and Use Taxes. [Repealed]

§§ 105-488 through 105-494. [Repealed]

Repealed by Session Laws 1991, c. 689, s. 318.

Article 42. Second One-Half Cent (1/2¢) Local Government Sales and Use Tax.

§ 105-495. Short title.

This Article shall be known as the Second One-Half Cent (1/2¢) Local Government Sales and Use Tax Act.

History. 1985 (Reg. Sess., 1986), c. 906, s. 1; 2002-123, s. 9(b).

Editor’s Note.

Session Laws 1991, c. 689, s. 320(c) provides: “Approval under the Additional Supplemental Local Government Sales and Use Tax Act, Article 42 of Chapter 105 of the General Statutes, of one-half percent (1/2%) local sales and use taxes in addition to the one and one-half percent (11/2%) local sales and use taxes and three percent (3%) States sales and use taxes constitutes approval of one-half percent (1/2%) local sales and use taxes in addition to the one and one-half percent (11/2%) local sales and use taxes and the four percent (4%) State sales and use taxes.”

Section 352 of Session Laws 1991, c. 689 provides: “Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 1991-93 biennium, the textual provisions of Titles I, II and III of this act shall apply only to funds appropriated for and activities, occurring during the 1991-93 biennium.”

Session Laws 2012-74, s. 7, provides: “For purchases made on or after July 1, 2012, but before July 1, 2013, a company located at a ports facility for waterborne commerce that purchases specialized equipment to be used at the facility to unload or process bulk cargo to make it suitable for delivery to and use by manufacturing facilities is allowed a refund of all local sales and use taxes paid and a portion of State sales and use taxes paid on the purchases as provided in this section. The portion of the State sales and use taxes that may be refunded is equal to the excess of the State sales and use taxes paid over the amount that would have been due had the taxpayer been subject to tax on the eligible property as if it were mill machinery under Article 5F of Chapter 105 of the General Statutes. A request for a refund under this section must be in writing and must include any information and documentation required by the Secretary. A request for a refund under this section must be made on or after July 1, 2013, and is due before January 1, 2014. Refunds applied for after the due date are barred. Taxes for which a refund is allowed under this section are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .”

§ 105-496. Purpose and intent.

It is the purpose of this Article to afford the counties and cities of this State an opportunity to obtain an added source of revenue with which to meet their growing financial needs, and to reduce their reliance on other revenues, such as the property tax and federal revenue sharing, by providing all counties of the State that are subject to this Article with authority to levy one-half percent (1/2%) sales and use taxes.

History. 1985 (Reg. Sess., 1986), c. 906, s. 1.

§ 105-497. Limitations.

This Article applies only to counties that levy one percent (1%) sales and use taxes under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws and also levy one-half percent (1/2%) local sales and use taxes under Article 40 of this Chapter.

History. 1985 (Reg. Sess., 1986), c. 906, s. 1.

Editor’s Note.

Session Laws 1996, Second Extra Session, c. 13, ss. 1.5 and 1.6, amend Session Laws 1967, c. 1096, referred to in this section.

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. 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.”

§ 105-498. Levy and collection of additional taxes.

Any county subject to this Article may levy one-half percent (1/2%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Except as provided in this Article, the adoption, levy, collection, distribution, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Article, references to “this Article” mean Article 42 of this Chapter. The exemption for building materials in G.S. 105-468.1 does not apply to taxes levied under this Article.

History. 1985 (Reg. Sess., 1986), c. 906, s. 1; 1993, c. 485, s. 27.

Editor’s Note.

Session Laws 1996, Second Extra Session, c. 13, s. 1.7, provides: “Approval under Article 39, 40, or 42 of Chapter 105 of the General Statutes or under the Mecklenburg County Sales and Use Tax Act, Chapter 1096 of the 1967 Session Laws, as amended, of local sales and use taxes on items subject to State sales and use tax at the general State rate constitutes approval of local sales and use taxes on food.”

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. 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.”

§ 105-499. Form of ballot.

  1. The form of the question to be presented on a ballot for a special election concerning the additional taxes authorized by this Article shall be: “FOR one-half percent (1/2%) local sales and use taxes in addition to the current one and one-half percent (11/2%) local sales and use taxes” or “AGAINST one-half percent (1/2%) local sales and use taxes in addition to the current one and one-half percent (11/2%) local sales and use taxes.”
  2. The form of the question to be presented on a ballot for a special election concerning the repeal of any additional taxes levied pursuant to this Article shall be: “FOR repeal of the additional one-half percent (1/2%) local sales and use taxes, thus reducing local sales and use taxes to one and one-half percent (11/2%)” or “AGAINST repeal of the additional one-half percent (1/2%) local sales and use taxes, thus reducing local sales and use taxes to one and one-half percent (11/2%).”

History. 1985 (Reg. Sess., 1986), c. 906, s. 1.

§ 105-500. [Repealed]

Repealed by Session Laws 1991, c. 689, s. 318.

§ 105-501. Distribution of additional taxes.

  1. Method. —  The Secretary must, on a monthly basis, allocate to each taxing county the net proceeds of the additional one-half percent (1/2%) sales and use taxes collected in that county under this Article. If the Secretary collects taxes under this Article in a month and the taxes cannot be identified as being attributable to a particular taxing county, the Secretary must allocate the net proceeds of these taxes among the taxing counties in proportion to the amount of taxes collected in each county under this Article in that month.The Secretary must divide and distribute the funds allocated to a taxing county each month under this section between the county and the municipalities located in the county in accordance with the method by which the one percent (1%) sales and use taxes levied in that county pursuant to Article 39 of this Chapter or Chapter 1096 of the 1967 Session Laws are distributed. 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 are open to the public.
  2. Deductions. —  The costs incurred by the State to provide the functions listed in this subsection that support local governments are deductible from the collections to be allocated each month for distribution.
    1. The Department’s cost of the following for the preceding month must be deducted and credited to the Department:
      1. The Local Government Division.
      2. The Property Tax Commission.

        (1a) The Department of State Treasurer’s costs for personnel and operations of the Local Government Commission.

    2. One-twelfth of the costs of the following for the preceding fiscal year must be deducted and credited to the General Fund:
      1. The School of Government at the University of North Carolina at Chapel Hill in operating a training program in property tax appraisal and assessment.
      2. Repealed by Session Laws 2011-145, s. 27.1(b), effective July 1, 2012.
      3. Seventy percent (70%) of the expenses of the Department of Revenue in performing the duties imposed by Article 2D of this Chapter.

History. 1985 (Reg. Sess., 1986), c. 906, s. 1; 1987, c. 832, s. 8; 1987 (Reg. Sess., 1988), c. 1082, s. 4; 1995, c. 41, s. 4; c. 370, s. 1; 1999-458, s. 9; 2001-427, s. 13(d); 2002-126, s. 30D(a); 2006-264, s. 29(f); 2007-323, s. 31.16.4(b); 2010-31, s. 26.1(a); 2011-145, s. 27.1(a), (b).

Local Modification.

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

Editor’s Note.

Session Laws 1996, Second Extra Session, c. 13, ss. 1.5 and 1.6, amend Session Laws 1967, c. 1096, referred to in this section.

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. 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.”

G.S. 105-275.2, referred to in subdivision (1), was repealed effective July 1, 2002.

Effect of Amendments.

Session Laws 2006-264, s. 29(f), effective August 27, 2006, substituted “School of Government at the University of North Carolina at Chapel Hill” for “Institute of Government” in subdivision (3).

Session Laws 2007-323, s. 31.16.4(b), effective October 1, 2009, and applicable to distributions for months beginning on or after October 1, 2009, rewrote this section.

Session Laws 2010-31, s. 26.1(a), effective July 1, 2010, rewrote subsection (b).

Session Laws 2011-145, s. 27.1(a), effective July 1, 2011, rewrote sub-subdivision (b)(1)a., which formerly read: “Performing the duties imposed by Article 15 of this Chapter”; and added subdivision (b)(1a).

Session Laws 2011-145, s. 27.1(b), effective July 1, 2012, deleted sub-subdivision (b)(2)b., which read: “The personnel and operations provided by the Department of State Treasurer for the Local Government Commission.”

§ 105-502. Use of additional tax revenue by counties.

  1. Restriction. —  The county must use sixty percent (60%) of the amount of revenue specified in this subsection for public school capital outlay purposes as defined in G.S. 115C-426(f) or to retire any indebtedness incurred by the county for these purposes during the period beginning five years prior to the date the taxes took effect:
    1. The amount of revenue the county receives under this Article.
    2. If the amount allocated to the county under G.S. 105-486 is greater than the amount allocated to the county under G.S. 105-501(a), the difference between the two amounts.
  2. Exception. —  The Local Government Commission may, upon petition by a county, authorize a county to use part or all of the revenue, otherwise required by subsection (a) to be used for public school capital outlay purposes, for any lawful purpose. The petition must be in the form of a resolution adopted by the Board of County Commissioners and transmitted to the Local Government Commission. The petition must demonstrate that the county can provide for its public school capital needs without restricting the use of part or all of the specified revenue for these purposes.In making its decision, the Local Government Commission must consider information in the petition concerning not only the public school capital needs but also the other capital needs of the petitioning county. The Commission may consider information from sources other than the petition. The Commission must issue a written decision on each petition stating the findings of the Commission concerning the public school capital needs of the petitioning county and the percentage of revenue otherwise restricted by subsection (a) that may be used by the petitioning county for any lawful purpose.Decisions of the Commission allowing counties to use a percentage of the revenue that would otherwise be restricted under subsection (a) for any lawful purpose are final and continue in effect until the restrictions expire. A county whose petition is denied, in whole or in part, by the Commission may subsequently submit a new petition to the Commission.
  3. Reserve Fund. —  A county may expend part or all of the revenue restricted for public school capital needs pursuant to subsection (a) in the fiscal year in which the revenue is received, or the county may place part or all of this revenue in a capital reserve fund. A county must specifically identify revenue placed in a reserve fund in accordance with Chapter 159 of the General Statutes.
  4. Taxes in Effect. —  For purposes of this section in determining the number of fiscal years in which one-half percent (1/2%) sales and use taxes levied under this Article have been in effect in a county, these taxes are considered to be in effect only from the effective date of the levy of these taxes and are considered to be in effect for a full fiscal year during the first year in which these taxes were in effect, regardless of the number of months in that year in which the taxes were actually in effect.

History. 1985 (Reg. Sess., 1986), c. 906, s. 1; 1987, c. 622, s. 11; 1993, c. 255, ss. 2, 4; 1998-186, s. 2; 2008-134, s. 13(a); 2009-395, s. 2.

Effect of Amendments.

Session Laws 2008-134, s. 13(a), effective October 1, 2009, and applicable to distributions for months beginning on or after that date, rewrote the section.

Session Laws 2009-395, s. 2, effective January 1, 2010, and applicable to sales made on or after that date, substituted “The county” for “For the first 25 fiscal years in which taxes levied under this Article by a county are in effect, the county” at the beginning of the introductory language of subsection (a).

§ 105-503.

Recodified as G.S. 115C-440.1 by Session Laws 1995 (Regular Session, 1996), c. 666, s. 4.

§ 105-504. [Repealed]

Repealed by Session Laws 1998-98, s. 32, effective August 14, 1998.

§ 105-505.

Reserved for future codification purposes.

Article 43. Local Government Sales and Use Taxes for Public Transportation.

Part 1. General.

§ 105-506. Short title; purpose.

This Article is the Local Government Public Transportation Sales Tax Act and may be cited by that name. This Article gives the counties and transportation authorities of this State an opportunity to obtain an additional source of revenue with which to meet their needs for financing local public transportation systems. It provides them with authority to levy sales and use taxes. All such taxes must be approved in a referendum.

History. 1997-417, s. 1; 2009-527, s. 2(a), (b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-505 by Session Laws 1997-417, s. 1, as amended by Session Laws 2009-527, s. 2(b) and was renumbered as this section at the direction of the Revisor of Statutes.

Session Laws 1997-417, s. 7, as amended by Session Laws 2009-527, s. 2(c), provides: “A tax levied under Article 43 of Chapter 105 of the General Statutes does not apply to construction materials purchased to fulfill a lump sum or unit price contract entered into or awarded before the effective date of the levy or entered into or awarded pursuant to a bid made before the effective date of the levy when the construction materials would otherwise be subject to the tax levied under Article 43 of Chapter 105 of the General Statutes.”

Session Laws 2012-74, s. 7, provides: “For purchases made on or after July 1, 2012, but before July 1, 2013, a company located at a ports facility for waterborne commerce that purchases specialized equipment to be used at the facility to unload or process bulk cargo to make it suitable for delivery to and use by manufacturing facilities is allowed a refund of all local sales and use taxes paid and a portion of State sales and use taxes paid on the purchases as provided in this section. The portion of the State sales and use taxes that may be refunded is equal to the excess of the State sales and use taxes paid over the amount that would have been due had the taxpayer been subject to tax on the eligible property as if it were mill machinery under Article 5F of Chapter 105 of the General Statutes. A request for a refund under this section must be in writing and must include any information and documentation required by the Secretary. A request for a refund under this section must be made on or after July 1, 2013, and is due before January 1, 2014. Refunds applied for after the due date are barred. Taxes for which a refund is allowed under this section are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .”

§ 105-506.1. Definitions.

The definitions in G.S. 105-164.3 and the following definitions apply in this Article:

  1. Board of trustees. — The governing body of a transportation authority.
  2. Net proceeds. — Gross proceeds less the cost of administering and collecting the tax.
  3. Public transportation system. — Any combination of real and personal property established for purposes of public transportation. The systems may include one or more of the following: structures, improvements, buildings, equipment, vehicle parking or passenger transfer facilities, railroads and railroad rights-of-way, rights-of-way, bus services, shared-ride services, high-occupancy vehicle facilities, car-pool and vanpool programs, voucher programs, telecommunications and information systems, integrated fare systems, and the interconnected bicycle and pedestrian infrastructure that supports public transportation, bus lanes, and busways. The term does not include, however, streets, roads, or highways except to the extent they are dedicated to public transportation vehicles or to the extent they are necessary for access to vehicle parking or passenger transfer facilities.
  4. Transportation authority. — For the purposes of Parts 3 and 4 of this Article, a regional public transportation authority created pursuant to Article 26 of Chapter 160A of the General Statutes; and for the purposes of Parts 3 and 5 of this Article, a regional transportation authority created pursuant to Article 27 of Chapter 160A of the General Statutes.

History. 1997-417, s. 1; 2009-527, s. 2(a), (b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-505 by Session Laws 1997-417, s. 1, as amended by Session Laws 2009-527, s. 2(b) and was renumbered as this section at the direction of the Revisor of Statutes.

§ 105-506.2. Exemption of food.

A tax levied under this Article does not apply to the sales price of food that is exempt from tax pursuant to G.S. 105-164.13 B or to the sales price of a bundled transaction taxable pursuant to G.S. 105-467(a)(5a).

History. 1997-417, s. 1; 2008-134, s. 74(a); 2009-527, s. 2(a), (b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-505 by Session Laws 1997-417, s. 1, as amended by Session Laws 2009-527, s. 2(b) and was renumbered as this section at the direction of the Revisor of Statutes.

Session Laws 2008-134, s. 74(a), added G.S. 105-506.2 to Article 43 as enacted by Session Laws 1997-417, s. 1.

Part 2. Mecklenburg County.

§ 105-507. Limitations.

A county may not levy a tax under this Part unless the county or at least one unit of local government in the county operates a public transportation system. In addition, a county may not levy a tax under this Part unless it has developed a financial plan and distributed it to each unit of local government in the county that operates a local public transportation system. The financial plan must provide for equitable allocation of the net proceeds distributed to the county in consideration of the identified needs of local public transportation systems in the county, countywide human service transportation systems, and expansion of public transportation service to unserved areas in the county.

History. 1997-417, s. 1; 2009-527, s. 2(a), (b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

§ 105-507.1. Local election on adoption of sales and use tax.

  1. Resolution. —  The board of commissioners of a county may direct the county board of elections to conduct an advisory referendum within the county on the question of whether a local sales and use tax at the rate of one-half percent (1/2%) may be levied in accordance with this Part. The election shall be held in accordance with the procedures of G.S. 163-287 . The board of commissioners shall hold a public hearing on the question at least 30 days before the date the election is to be held.
  2. Ballot Question. —  The form of the question to be presented on a ballot for a special election concerning the levy of a tax authorized by this Article shall be:

    “[ ] FOR [ ] AGAINST One-half percent (1/2%) local sales and use taxes, in addition to the current local sales and use taxes, to be used only for public transportation systems.”

History. 1997-417, s. 1; 2009-527, s. 2(a), (b); 2013-381, s. 10.10; 2017-6, s. 3; 2018-146, ss. 3.1(a), (b), 6.1.

Re-recodification; Technical and Conforming Changes.

Session Laws 2017-6, s. 3, provides, in part: “The Revisor of Statutes shall recodify Chapter 138A of the General Statutes, Chapter 120C of the General Statutes, as well as Chapter 163 of the General Statutes, as amended by this act, into a new Chapter 163A of the General Statutes to be entitled ‘Elections and Ethics Enforcement Act,’ as enacted by Section 4 of this act. The Revisor may also recodify into the new Chapter 163A of the General Statutes other existing statutory laws relating to elections and ethics enforcement that are located elsewhere in the General Statutes as the Revisor deems appropriate.” The Revisor was further authorized to make additional technical and conforming changes to catchlines, internal citations, and other references throughout the General Statutes to effectuate this recodification. Pursuant to this authority, the Revisor of Statutes substituted “G.S. 163A-1592” for “G.S. 163-287” in subsection (a).

Session Laws 2018-146, ss. 3.1(a), (b) and 6.1, repealed Session Laws 2017-6, s. 3, and authorized the Revisor of Statutes to re-recodify Chapter 163A into Chapters 163, 138A, and 120C and to revert the changes made by the Revisor pursuant to Session Laws 2017-6, s. 3. Pursuant to this authority, the Revisor of Statutes reverted the change to the reference in subsection (a).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-505 by Session Laws 1997-417, s. 1, as amended by Session Laws 2009-527, s. 2(b) and was renumbered as this section at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2013-381, s. 10.10, effective January 1, 2014, deleted “on a date jointly agreed upon by the boards and shall be held” following “shall be held” in the second sentence of subsection (a). For applicability, see editor’s note.

§ 105-507.2. Levy and collection of sales and use tax.

If the majority of those voting in a referendum held pursuant to G.S. 105-507.1 vote for the levy of the tax, the board of commissioners of the county may, by resolution, levy one-half percent (1/2%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Except as provided in this Part, the adoption, levy, collection, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Part, references to “this Article” mean “Part 1 of Article 43 of Chapter 105 of the General Statutes”.

History. 1997-417, s. 1; 2008-134, s. 74(b); 2009-527, s. 2(a), (b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-505 by Session Laws 1997-417, s. 1, as amended by Session Laws 2009-527, s. 2(b) and was renumbered as this section at the direction of the Revisor of Statutes.

§ 105-507.3. Distribution and use of taxes.

  1. Distribution. —

    The Secretary shall, on a monthly basis, allocate to each taxing county the net proceeds of the tax levied under this Part by that county. If the Secretary collects taxes under this Part in a month and the taxes cannot be identified as being attributable to a particular taxing county, the Secretary shall allocate these taxes among the taxing counties, in proportion to the amount of taxes collected in each county under this Part in that month and shall include them in the monthly distribution.

    The Secretary shall distribute the net proceeds of the tax levied by a county on a per capita basis among the county and the units of local government in the county that operate public transportation systems. No proceeds shall be distributed to a county that does not operate a public transportation system or to a unit of local government that does not operate a public transportation system.

  2. Use. —  A county must allocate the net proceeds distributed to it in accordance with its financial plan adopted pursuant to G.S. 105-507 and use the net proceeds only for financing, constructing, operating, and maintaining local public transportation systems. Any other unit of local government may use the net proceeds distributed to it under this Part only for financing, constructing, operating, and maintaining local public transportation systems. Every unit of government shall use the net proceeds to supplement and not to supplant or replace existing funds or other resources for public transportation systems.

History. 1997-417, s. 1; 2001-427, s. 13(f); 2009-527, s. 2(a), (b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-505 by Session Laws 1997-417, s. 1, as amended by Session Laws 2009-527, s. 2(b) and was renumbered as this section at the direction of the Revisor of Statutes.

§ 105-507.4. Applicability.

This Part applies only to Mecklenburg County.

History. 1997-417, s. 1; 2009-527, s. 2(a), (b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

Session Laws 1997-417, s. 1(a), was recodified as G.S. 105-510.1 by Session Laws 2009-527, s. 2(a). It was subsequently renumbered as this section at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2009-527, s. 2(b), effective August 27, 2009, substituted “This Part” for “This section” at the beginning.

Part 3. Transportation Authorities.

§ 105-508. Special districts.

  1. Authority. —  A transportation authority may create a special district as provided in Parts 4 and 5 of this Article. A special district is subject to the provisions of this Part as well as the Part under which it was created. A special district created under this Article is a local government body corporate and politic and has the power to carry out the purposes of the Part under which it is established.
  2. Governance. —  The following entity shall serve ex officio as the governing board and be responsible for budget adoption and the operation and management of the transit services provided by the district:
    1. The board of trustees of the transportation authority, if the special district consists of multiple counties. If the special district is expanded under G.S. 105-509(d) or G.S. 105-510(d) to include more than one county, then the board of trustees of the transportation authority shall become the governing board of the district beginning on the first day of the next fiscal year after expansion of the district.
    2. The county board of commissioners, if the special district consists of one county. The board may contract with the transportation authority as needed.
  3. Filing Requirement. —  The transportation authority creating a special district shall name it and file with the Secretary of State the documents creating the district, and shall also file notice of the addition to and removal from the district of any counties, or of the abolition of the special district.

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 2009-527, s. 7, made this Part effective August 27, 2009.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.5 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

Session Laws 1997-417, s. 7, as amended by Session Laws 2009-527, s. 2(c), provides: “A tax levied under Article 43 of Chapter 105 of the General Statutes does not apply to construction materials purchased to fulfill a lump sum or unit price contract entered into or awarded before the effective date of the levy or entered into or awarded pursuant to a bid made before the effective date of the levy when the construction materials would otherwise be subject to the tax levied under Article 43 of Chapter 105 of the General Statutes.”

§ 105-508.1. Limitations.

A transportation authority may not levy a tax under Part 4 or 5 of this Article unless:

  1. It operates a public transportation system.
  2. It has developed a financial plan and distributed it to each unit of local government located within its territorial jurisdiction. The plan must be approved by the board of commissioners of each county in the district prior to the levy of the tax. If the board of commissioners of a county in a multicounty district does not adopt the plan, the transportation authority may remove that county from the district, and no tax may be levied in that county under this Part. The financial plan must provide for equitable use of the net proceeds within or to benefit the special district created under Part 4 or Part 5 of this Article and consider (i) the identified needs of local public transportation systems in the district, (ii) human service transportation systems within the district, and (iii) expansion of public transportation systems to underserved areas of the district. The financial plan must also be approved by all Metropolitan Planning Organizations under Article 16 of Chapter 136 of the General Statutes whose jurisdiction includes any of the area of the special district. The plan may be revised from time to time. An interlocal agreement between the transportation authority and all the counties in the special district may require periodic review and approval of the financial plan.
  3. The tax is approved by the voters.

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.6 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

§ 105-508.2. Distribution and use of taxes.

  1. Distribution. —  The Secretary shall, on a monthly basis, allocate to each special district the net proceeds of the tax levied under this Part within the special tax district, to be used for the benefit of that district.
  2. Use. —  A special district must expend the net proceeds distributed to it in accordance with its financial plan adopted pursuant to G.S. 105-508.1 and use the net proceeds only for financing, constructing, operating, and maintaining public transportation systems. The special district shall use the net proceeds to supplement and not to supplant or replace existing funds or other resources for public transportation systems.

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.7 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

Part 4. Regional Public Transportation Authority (Triangle).

§ 105-509. Local election on adoption of sales and use tax — regional public transportation authority.

  1. Special District. —  A regional public transportation authority may create a special district that consists of the entire area of one or more counties within its territorial jurisdiction and may levy on behalf of the special district the tax authorized in this section. The proceeds of a tax levied under this section may be used only for the benefit of the special district and only for the purposes provided in this Article. If a referendum in a district fails in all the counties in the district, the transportation authority may abolish the special district.
  2. Resolution. —  The board of trustees of the regional public transportation authority may, if all of the conditions listed in this subsection have been met, direct the respective county board or boards of elections to conduct an advisory referendum within the special district on the question of whether a local sales and use tax at the rate of one-half percent (1/2%) may be levied within the district in accordance with this Part. The tax may not be levied without voter approval. The election shall be held on a date jointly agreed upon by the authority, the county board or boards of commissioners, and the county board or boards of elections and shall be held on a date permitted by and in accordance with the procedures of G.S. 163-287 . The conditions are as follows:
    1. The board of trustees has obtained approval to conduct a referendum by a vote of the following:
      1. A majority vote of each of the county boards of commissioners within the special district, if it is a multicounty special district.
      2. A majority of the county board of commissioners within the special district, if it is a single-county special district.
    2. A public hearing is held on the question by the board or boards of commissioners at least 30 days before the date the election is to be held.
  3. Ballot Question. —  The form of the question to be presented on a ballot for a special election concerning the levy of a tax authorized by this Article shall be:

    “[ ] FOR [ ] AGAINST One-half percent (1/2%) local sales and use taxes, in addition to the current local sales and use taxes, to be used only for public transportation systems.”

  4. Expansion. —  If a special district created under this Part does not include all the counties in the territorial jurisdiction of a transportation authority, it may be expanded to include an additional whole county or counties by joint action of the board of trustees of the transportation authority and the board of commissioners of the county or boards of commissioners of the counties to be added, with the approval of the voters in the county or counties to be added. The procedure for expansion of a district is the same as for the initial creation of the district, but the referendum shall be held separately within each of the counties to be added.

History. 2009-527, s. 2(b); 2013-381, s. 10.11; 2017-6, s. 3; 2018-146, ss. 3.1(a), (b), 6.1.

Re-recodification; Technical and Conforming Changes.

Session Laws 2017-6, s. 3, provides, in part: “The Revisor of Statutes shall recodify Chapter 138A of the General Statutes, Chapter 120C of the General Statutes, as well as Chapter 163 of the General Statutes, as amended by this act, into a new Chapter 163A of the General Statutes to be entitled ‘Elections and Ethics Enforcement Act,’ as enacted by Section 4 of this act. The Revisor may also recodify into the new Chapter 163A of the General Statutes other existing statutory laws relating to elections and ethics enforcement that are located elsewhere in the General Statutes as the Revisor deems appropriate.” The Revisor was further authorized to make additional technical and conforming changes to catchlines, internal citations, and other references throughout the General Statutes to effectuate this recodification. Pursuant to this authority, the Revisor of Statutes substituted “G.S. 163A-1592” for “G.S. 163-287” in subsection (b).

Session Laws 2018-146, ss. 3.1(a), (b) and 6.1, repealed Session Laws 2017-6, s. 3, and authorized the Revisor of Statutes to re-recodify Chapter 163A into Chapters 163, 138A, and 120C and to revert the changes made by the Revisor pursuant to Session Laws 2017-6, s. 3. Pursuant to this authority, the Revisor of Statutes reverted the change to the reference in subsection (b).

Editor’s Note.

Session Laws 2009-527, s. 7, made this Part effective August 27, 2009.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This Part was enacted as Part 3A of Article 43 by Session Laws 2009-527, s. 2(b), and was renumbered as Part 4 at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.8 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

Session Laws 1997-417, s. 7, as amended by Session Laws 2009-527, s. 2(c), provides: “A tax levied under Article 43 of Chapter 105 of the General Statutes does not apply to construction materials purchased to fulfill a lump sum or unit price contract entered into or awarded before the effective date of the levy or entered into or awarded pursuant to a bid made before the effective date of the levy when the construction materials would otherwise be subject to the tax levied under Article 43 of Chapter 105 of the General Statutes.”

Effect of Amendments.

Session Laws 2013-381, s. 10.11, effective January 1, 2014, in subsection (b), inserted “on a date permitted by and” in the third sentence, and deleted the former fourth sentence, which read “An election to authorize the levy of a tax under this Part may be held only on one of the following dates: (i) Tuesday after the first Monday of November in the even-numbered year, the date of the general election under G.S. 163-1 , (ii) the date of the primary election in the even-numbered year under G.S. 163-1(b) , (iii) Tuesday after the first Monday in November of the odd-numbered year, or (iv) a date in September or October of the odd-numbered year as listed in G.S. 163-279(a)(2), (3), or (4) but only if at least one municipality in the county is holding a primary or election on that date.” For applicability, see editor’s note.

§ 105-509.1. Levy and collection of sales and use tax — regional public transportation authority.

If the majority of those voting in a referendum held pursuant to G.S. 105-509 vote for the levy of the tax, the transportation authority may, by resolution, levy one-half percent (1/2%) local sales and use taxes within the special district, in addition to any other State and local sales and use taxes levied pursuant to law. In determining the results of the election in a multicounty district, all the counties of the district shall be considered to be one unit but also must receive a majority vote in each county, except that if the referendum is passed in one or more but not all of the counties, the counties in which the referendum was not approved are removed from the special district upon certification of the election result and the county or counties that approved the referendum shall remain in the special district. Except as provided in this Part, the adoption, levy, collection, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Article, references to “this Article” mean “Part 4 of Article 43 of Chapter 105 of the General Statutes.” Any repeal of the tax shall be done by the same procedure as its enactment under this section, and in a multicounty district a petition for repeal under G.S. 105-473 shall be judged by the total votes in all the counties in the district.

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.9 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

Part 5. Regional Transportation Authority (Triad).

§ 105-510. Local election on adoption of sales and use tax — regional transportation authority.

  1. Special District. —  A regional transportation authority may create a special district that consists of the entire area of one or two counties within its territorial jurisdiction and may levy on behalf of the special district the tax authorized in this section. The special district may not include counties other than Forsyth and Guilford. The proceeds of a tax levied under this section may be used only for the benefit of the special district and only for the purposes provided in this Article. If a referendum in a district fails, the transportation authority may abolish the special district.
  2. Resolution. —  The board of trustees of the regional transportation authority may, if all of the conditions listed in this subsection have been met, direct the respective county board or boards of elections to conduct an advisory referendum within the special district on the question of whether a local sales and use tax at the rate of one-half percent (1/2%) may be levied within the district in accordance with this Part. The tax may not be levied without voter approval. The election shall be held on a date jointly agreed upon by the authority, the county board or boards of commissioners, and the county board or boards of elections and shall be held on a date permitted by and in accordance with the procedures of G.S. 163-287 . The conditions are as follows:
    1. The board of trustees has obtained approval to conduct a referendum by a vote of the following:
      1. A majority vote of both of the county boards of commissioners within the special district, if it is a multicounty special district.
      2. A majority of the county board of commissioners within the special district, if it is a single-county special district.
    2. A public hearing is held on the question by the board or boards of commissioners at least 30 days before the date the election is to be held.
  3. Ballot Question. —  The form of the question to be presented on a ballot for a special election concerning the levy of a tax authorized by this Article shall be:

    “[ ] FOR [ ] AGAINST One-half percent (1/2%) local sales and use taxes, in addition to the current local sales and use taxes, to be used only for public transportation systems.”

  4. Expansion. —  If a special district created under this Part does not include both of the eligible counties under subsection (a) of this section, it may be expanded to include the other county by joint action of the board of trustees of the transportation authority and the board of commissioners of the county to be added, with the approval of the voters in the county to be added. The procedure for expansion of the district is the same as for the initial creation of the district, but the referendum shall be held separately in the county to be added.

History. 2009-527, s. 2(b); 2013-381, s. 10.12; 2017-6, s. 3; 2018-146, ss. 3.1(a), (b), 6.1.

Re-recodification; Technical and Conforming Changes.

Session Laws 2017-6, s. 3, provides, in part: “The Revisor of Statutes shall recodify Chapter 138A of the General Statutes, Chapter 120C of the General Statutes, as well as Chapter 163 of the General Statutes, as amended by this act, into a new Chapter 163A of the General Statutes to be entitled ‘Elections and Ethics Enforcement Act,’ as enacted by Section 4 of this act. The Revisor may also recodify into the new Chapter 163A of the General Statutes other existing statutory laws relating to elections and ethics enforcement that are located elsewhere in the General Statutes as the Revisor deems appropriate.” The Revisor was further authorized to make additional technical and conforming changes to catchlines, internal citations, and other references throughout the General Statutes to effectuate this recodification. Pursuant to this authority, the Revisor of Statutes substituted “G.S. 163A-1592” for “G.S. 163-287” in subsection (b).

Session Laws 2018-146, ss. 3.1(a), (b) and 6.1, repealed Session Laws 2017-6, s. 3, and authorized the Revisor of Statutes to re-recodify Chapter 163A into Chapters 163, 138A, and 120C and to revert the changes made by the Revisor pursuant to Session Laws 2017-6, s. 3. Pursuant to this authority, the Revisor of Statutes reverted the change to the reference in subsection (b).

Editor’s Note.

Session Laws 2009-527, s. 7, made this Part effective August 27, 2009.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This Part was enacted as Part 3B of Article 43 by Session Laws 2009-527, s. 2(b), and was renumbered as Part 5 at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.10 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

Session Laws 1997-417, s. 7, as amended by Session Laws 2009-527, s. 2(c), provides: “A tax levied under Article 43 of Chapter 105 of the General Statutes does not apply to construction materials purchased to fulfill a lump sum or unit price contract entered into or awarded before the effective date of the levy or entered into or awarded pursuant to a bid made before the effective date of the levy when the construction materials would otherwise be subject to the tax levied under Article 43 of Chapter 105 of the General Statutes.”

Effect of Amendments.

Session Laws 2013-381, s. 10.12, effective January 1, 2014, in subsection (b), inserted “on a date permitted by and” in the third sentence, and deleted the former fourth sentence, which read “An election to authorize the levy of a tax under this Part may be held only on one of the following dates: (i) Tuesday after the first Monday of November in the even-numbered year, the date of the general election under G.S. 163-1 , (ii) the date of the primary election in the even-numbered year under G.S. 163-1(b) , (iii) Tuesday after the first Monday in November of the odd-numbered year, or (iv) a date in September or October of the odd-numbered year as listed in G.S. 163-279(a)(2), (3), or (4) but only if at least one municipality in the county is holding a primary or election on that date.” For applicability, see editor’s note.

§ 105-510.1. Levy and collection of sales and use tax — regional transportation authority.

If the majority of those voting in a referendum held pursuant to G.S. 105-510 vote for the levy of the tax, the transportation authority may, by resolution, levy one-half percent (1/2%) local sales and use taxes within the special district, in addition to any other State and local sales and use taxes levied pursuant to law. In determining the results of the election in a multicounty district, all the counties of the district shall be considered to be one unit but also must receive a majority vote in each county, except that if the referendum is passed in one but not both of the counties, the county in which the referendum was not approved is removed from the special district upon certification of the election result and the county that approved the referendum shall remain in the special district. Except as provided in this Part, the adoption, levy, collection, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Article, references to “this Article” mean “Part 5 of Article 43 of Chapter 105 of the General Statutes.” Any repeal of the tax shall be done by the same procedure as its enactment under this section, and in a multicounty district a petition for repeal under G.S. 105-473 shall be judged by the total votes in all the counties in the district.

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 2009-527, s. 7, made this Part effective August 27, 2009.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997- 417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009- 527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.1 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

Part 6. Other Counties.

§ 105-511. Applicability.

This Part applies only in counties other than Durham, Forsyth, Guilford, Mecklenburg, Orange, or Wake.

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 2009-527, s. 7, made this Part effective August 27, 2009.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This Part was enacted as Part 4 of Article 43 by Session Laws 2009-527, s. 2(b), and was renumbered as Part 6 at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.12 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

Session Laws 1997-417, s. 7, as amended by Session Laws 2009-527, s. 2(c), provides: “A tax levied under Article 43 of Chapter 105 of the General Statutes does not apply to construction materials purchased to fulfill a lump sum or unit price contract entered into or awarded before the effective date of the levy or entered into or awarded pursuant to a bid made before the effective date of the levy when the construction materials would otherwise be subject to the tax levied under Article 43 of Chapter 105 of the General Statutes.”

§ 105-511.1. Limitations.

A county may not levy a tax under this Part unless the county or at least one unit of local government in the county operates a public transportation system. As used in this Part, operation of a public transportation system includes a contract or interlocal agreement for operation of the public transportation system by another county or municipality, or by a transportation authority created under (i) a municipal charter; or (ii) Article 25, 26, or 27 of Chapter 160A of the General Statutes. As used in this Part, operation of a public transportation system also includes a contract with a private entity for operation of the public transportation system.

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.13 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

§ 105-511.2. Local election on adoption of sales and use tax.

  1. Resolution. —  The board of commissioners of a county may direct the county board of elections to conduct an advisory referendum within the county on the question of whether a local sales and use tax at the rate of one-quarter percent (1/4%) may be levied in accordance with this Part. The election shall be held on a date jointly agreed upon by the boards and shall be held on a date permitted by and in accordance with the procedures of G.S. 163-287 . The board of commissioners shall hold a public hearing on the question at least 30 days before the date the election is to be held.
  2. Ballot Question. —  The form of the question to be presented on a ballot for a special election concerning the levy of a tax authorized by this Article shall be:

    “[ ] FOR [ ] AGAINST One-quarter percent (1/4%) local sales and use taxes, in addition to the current local sales and use taxes, to be used only for public transportation systems.”

History. 2009-527, s. 2(b); 2013-381, s. 10.13; 2017-6, s. 3; 2018-146, ss. 3.1(a), (b), 6.1.

Re-recodification; Technical and Conforming Changes.

Session Laws 2017-6, s. 3, provides, in part: “The Revisor of Statutes shall recodify Chapter 138A of the General Statutes, Chapter 120C of the General Statutes, as well as Chapter 163 of the General Statutes, as amended by this act, into a new Chapter 163A of the General Statutes to be entitled ‘Elections and Ethics Enforcement Act,’ as enacted by Section 4 of this act. The Revisor may also recodify into the new Chapter 163A of the General Statutes other existing statutory laws relating to elections and ethics enforcement that are located elsewhere in the General Statutes as the Revisor deems appropriate.” The Revisor was further authorized to make additional technical and conforming changes to catchlines, internal citations, and other references throughout the General Statutes to effectuate this recodification. Pursuant to this authority, the Revisor of Statutes substituted “G.S. 163A-1592” for “G.S. 163-287” in subsection (a).

Session Laws 2018-146, ss. 3.1(a), (b) and 6.1, repealed Session Laws 2017-6, s. 3, and authorized the Revisor of Statutes to re-recodify Chapter 163A into Chapters 163, 138A, and 120C and to revert the changes made by the Revisor pursuant to Session Laws 2017-6, s. 3. Pursuant to this authority, the Revisor of Statutes reverted the change to the reference in subsection (a).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.14 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2013-381, s. 10.13, effective January 1, 2014, in subsection (a), inserted “on a date permitted by and” in the second sentence, and deleted the former third sentence, which read “An election to authorize the levy of a tax under this Part may be held only on one of the following dates: (i) Tuesday after the first Monday of November in the even-numbered year, the date of the general election under G.S. 163-1 , (ii) the date of the primary election in the even-numbered year under G.S. 163-1(b) , (iii) Tuesday after the first Monday in November of the odd-numbered year, or (iv) a date in September or October of the odd-numbered year as listed in G.S. 163-279(a)(2), (3), or (4) but only if at least one municipality in the county is holding a primary or election on that date.” For applicability, see editor’s note.

§ 105-511.3. Levy and collection of sales and use tax.

If the majority of those voting in a referendum held pursuant to this Part vote for the levy of the tax, the board of commissioners of the county may, by resolution, levy one-quarter percent (1/4%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Except as provided in this Part, the adoption, levy, collection, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Part, references to “this Article” mean “Part 6 of Article 43 of Chapter 105 of the General Statutes.”

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.15 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

§ 105-511.4. Distribution and use of taxes.

  1. Distribution. —  The Secretary shall, on a monthly basis, allocate to each taxing county the net proceeds of the tax levied under this Part by that county. If the Secretary collects taxes under this Part in a month and the taxes cannot be identified as being attributable to a particular taxing county, the Secretary shall allocate these taxes among the taxing counties, in proportion to the amount of taxes collected in each county under this Part in that month and shall include them in the monthly distribution.The Secretary shall distribute the net proceeds of the tax levied by a county on a per capita basis among the county and the units of local government in the county that operate a public transportation system as follows:
    1. To the county based on the population of the county that is not in an incorporated area, and to the municipalities within the county based on the population of that municipality that is located within that county. To determine the population of each county and each municipality, the Secretary shall use the most recent annual estimate of population certified by the State Budget Officer.
    2. Notwithstanding subdivision (1) of this subsection, if a municipality to which funds are to be allocated neither operates nor contracts for the operation of a public transportation system, the population of that municipality shall be excluded from the calculations of subdivision (1) of this subsection.
    3. Notwithstanding subdivision (1) of this subsection, if a county to which funds are to be allocated neither operates nor contracts for the operation of a public transportation system, the population of that county not in an incorporated area shall be excluded from the calculations of subdivision (1) of this subsection.If a county or a municipality that does not receive an allocation of funds on account of subdivision (2) or (3) of this subsection begins to operate or contract for the operation of a public transportation system, that county or municipality shall begin receiving funds beginning the first day of July that is more than 30 days thereafter.
  2. A county or municipality may use funds received under this Part only for financing, constructing, operating, and maintaining public transportation systems. Every unit of government shall use funds to supplement and not to supplant or replace existing funds or other resources for public transportation systems.

History. 2009-527, s. 2(b).

Editor’s Note.

Session Laws 1997-417, s. 1(b), as amended by Session Laws 2009-527, s. 2(b), has been codified as Article 43, Parts 1 and 2 at the direction of the Revisor of Statutes, effective August 27, 2009. Initially, Session Laws 1997-417, s. 1(a) provided that s. 1(b) would apply to Mecklenburg County only. Session Laws 2009-527, s. 2(a), recodified Session Laws 1997-417, s. 1(a) as G.S. 105-510.1 (subsequently renumbered as G.S. 105-507.4 ), making only Part 2 of Article 43 applicable to Mecklenburg County. Session Laws 2009-527, s. 2(b) enacted Parts 3 through 5 of this Article, effective August 27, 2009, and those Parts were also applicable to certain localities only. However, because of the general applicability of certain portions of the act, the entire act has been codified at the direction of the Revisor of Statutes.

This section was enacted as G.S. 105-510.16 by Session Laws 2009-527, s. 2(b), and was renumbered as this section at the direction of the Revisor of Statutes.

§§ 105-512 through 105-514.

Reserved for future codification purposes.

Article 44. Local Government Hold Harmless and Allocation Provisions.

§§ 105-515 through 105-520. [Repealed]

Repealed by Session Laws 2007-323, s. 31.16.4(a), effective October 1, 2009, and applicable to sales occurring on or after that date.

Editor’s Note.

Session Laws 2007-323, s. 31.16.4(f), effective October 1, 2009, rewrote the Article 44 heading, which formerly read “Third One-Half Cent (1/2¢) Local Government Sales and Use Tax.”

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.

Session Laws 2015-241, s. 32.19(a), effective July 1, 2016, and applicable to local option sales taxes collected on or after that date and distributed to counties and cities on or after September 1, 2016, amended the Article 44 heading, which had read “Local Government Hold Harmless Provisions.”

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.

§ 105-521. [Repealed]

Repealed by Session Laws 2016-5, s. 5.2, effective May 11, 2016.

History. 2001-424, s. 34.14(a); 2003-284, s. 37.1; 2003-349, s. 6; 2004-124, s. 6.3; 2007-323, s. 31.16.3(c); 2013-360, s. 6.17; repealed by 2016-5, s. 5.2, effective May 11, 2016.

Editor’s Note.

Former G.S. 105-521 pertained to transitional local government held harmless for repealed reimbursements.

§ 105-522. City hold harmless for repealed local taxes.

  1. Definitions. —  The following definitions apply in this section:
    1. Eligible municipality. — A municipality that was incorporated on or before October 1, 2008, and receives a distribution of sales and use taxes under G.S. 105-472 .
    2. Hold harmless amount. — The sum of the following amounts allocated for distribution to a municipality for a month. The references in this subdivision to Article 39 of this Chapter and Chapter 1096 of the 1967 Session Laws and Articles 40 and 42 of this Chapter do not include the adjustment made pursuant to G.S. 105-524 . The amounts are as follows:
      1. The amount of sales and use tax revenue allocated under G.S. 105-486 . This calculation determines the effect of repealing a one-half percent (1/2%) sales and use tax distributed on a per capita basis.
      2. An amount determined by subtracting twenty-five percent (25%) of the amount of sales and use tax revenue allocated under G.S. 105-472 or Chapter 1096 of the 1967 Session Laws from fifty percent (50%) of the amount of sales and use tax revenue allocated under G.S. 105-486 . This calculation determines the effect of distributing a one-quarter percent (.25%) tax on the basis of point of origin instead of on a per capita basis.
  2. Requirement. —  A county is required to hold the eligible municipalities in the county harmless from the repeal of the local sales and use taxes formerly imposed under this Article. The Secretary must add an eligible municipality’s hold harmless amount to the amount distributed to the municipality under this Subchapter. To obtain the revenue for the hold harmless distribution, the Secretary must reduce each county’s monthly allocation under G.S. 105-472(b) or under Chapter 1096 of the 1967 Session Laws by the hold harmless amounts for the municipalities in that county.

History. 2007-323, ss. 31.16.3(f), 31.16.4(c); 2007-345, s. 14.4(a); 2008-134, ss. 14(a), 15(c), (f), (g); 2015-268, s. 10.1(e3).

Editor’s Note.

Session Laws 2007-323, s. 31.16.4(c), which amended subsection (a), effective October 1, 2009, and applicable to distributions for months beginning on or after that date, was repealed by Session Laws 2008-134, s. 15(c), effective July 28, 2008.

Session Laws 2007-323, s. 31.16.4(e), which was repealed by Session Laws 2008-134, s. 15(e), effective July 28, 2008, provided: “For fiscal year 2009-2010, the repealed sales tax amount determined under G.S. 105-522(2)(a)(2)b, as enacted by this section, and G.S. 105-523(a)(2)b, as enacted by this section, is calculated based on twenty-five percent (25%) of the amount distributed to a municipality or county under Article 39 of Chapter 105 of the General Statutes or Chapter 1096 of the 1967 Session Laws on or after October 1, 2009, less the amount distributed to the municipality or county on the basis of point of origin under repealed G.S. 105-520(a) in October, November, and December of 2009.”

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 2007-345, s. 14.4(a), which amended subdivision (a)(2), effective October 1, 2009, and applicable to distributions for months beginning on or after that date, was repealed by Session Laws 2008-134, s. 15(f), effective July 28, 2008.

“For fiscal year 2009-2010, the hold harmless amount determined for a municipality under G.S. 105-522 and the repealed sales tax amount determined for a county under G.S. 105-523 is reduced by the amount distributed in October, November, and December of 2009 to the municipality or county on the basis of point of origin under repealed G.S. 105-520(a).”

Effect of Amendments.

Session Laws 2007-323, s. 31.16.4(c), effective October 1, 2009, and applicable to distributions for months beginning on or after October 1, 2009, in subdivision (a)(2), added “the sum of the following:” at the beginning of the introductory paragraph, designated the former provisions of subdivision (a)(2) as subdivision (a)(2)a., and added subdivisions (a)(2)b. and (a)(2)c.

Session Laws 2007-345, s. 14.4(a), effective October 1, 2009, and applicable to distributions for months beginning on or after that date, inserted “distributed to a municipality for the month” in subdivision (a)(2); deleted “Chapter to the municipality for a month” in subdivision (a)(2)a.; in subdivision (a)(2)c., substituted “by subtracting twenty-five percent (25%) of the amount of sales and use tax revenue distributed under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws from fifty percent (50%) of the amount distributed under Article 40 of this Chapter” for “under sub-subdivision a. of this subdivision subtracted from the amount determined under sub-subdivision b. of this subdivision” in the first sentence, and deleted the last sentence.

Session Laws 2008-134, s. 14(a), effective October 1, 2008, and applicable to distributions for months beginning on or after that date, in subdivision (a)(2), substituted “allocated under G.S. 105-486 for distribution to a municipality” for “distributed under Article 40 of this Chapter to the municipality for a month, other than revenue from the sale of food that is subject to local tax but is exempt from State tax under G.S. 105-164.13 B”; and in subsection (b), substituted “otherwise allocated to the municipality for distribution under” for “distributed to the municipality under” in the second sentence, and substituted “the amount otherwise allocated to a county for distribution under Article 39 of this Subchapter” for “each county’s monthly allocation under G.S. 105-472(b)” in the third sentence.

Session Laws 2008-134, s. 15(g), effective October 1, 2009, and applicable to distributions for months beginning on or after that date, rewrote subdivision (a)(2).

Session Laws 2015-268, s. 10.1(e3), added the last sentence of subdivision (a)(2). For effective date and applicability, see Editor’s note.

§ 105-523. County hold harmless for repealed local taxes.

  1. Intent. —  It is the intent of the General Assembly that each county be held harmless from the exchange of a portion of the local sales and use taxes for the State’s agreement to assume the responsibility for the non-administrative costs of Medicaid.
  2. Definitions. —  The following definitions apply in this section:
    1. City hold harmless amount. — The hold harmless amount determined under G.S. 105-522 for the eligible municipalities in a county.
    2. Hold harmless threshold. — The amount of a county’s Medicaid service costs and Medicare Part D clawback payments assumed by the State under G.S. 108A-54 for the fiscal year. A county’s Medicaid service costs for fiscal years 2008-2009, 2009-2010, and 2010-2011 are determined without regard to the changes made to the Federal Medical Assistance Percentage by section 5001 of the American Recovery and Reinvestment Act of 2009.
    3. Repealed sales tax amount. — The sum of the following amounts allocated for distribution to a county for a month. The references in this subdivision to Article 39 of this Chapter and Chapter 1096 of the 1967 Session Laws and Articles 40 and 42 of this Chapter do not include the adjustment made pursuant to G.S. 105-524 . The amounts are as follows:
      1. The amount of sales and use tax revenue allocated under G.S. 105-486 . This calculation determines the effect of repealing a one-half percent (1/2%) sales and use tax distributed on a per capita basis.
      2. An amount determined by subtracting twenty-five percent (25%) of the amount of sales and use tax revenue allocated under G.S. 105-472 or Chapter 1096 of the 1967 Session Laws from fifty percent (50%) of the amount of sales and use tax revenue allocated under G.S. 105-486 . This calculation determines the effect of distributing a one-quarter percent (.25%) tax on the basis of point of origin instead of on a per capita basis.
  3. Requirement. —  If a county’s repealed sales tax amount plus its city hold harmless amount for a fiscal year exceeds the county’s hold harmless threshold for that fiscal year, the State is required to hold the county harmless for the difference by paying the amount of the difference to the county. The Secretary must withhold from sales and use tax collections under Article 5 of this Chapter the amount needed to make the county hold harmless payments required by this section.
  4. Method. —  The Secretary must estimate a county’s repealed sales tax amount, city hold harmless amount, and hold harmless threshold for a fiscal year to determine if the county is eligible for a hold harmless payment. The Secretary must send to an eligible county with the distribution made under G.S. 105-472 for March of that year an amount equal to ninety percent (90%) of its estimated hold harmless payment. At the end of each fiscal year, the Secretary must determine each county’s hold harmless payment for that year. The Secretary must send by August 15 the remainder of the county’s hold harmless payment for the fiscal year that ended on June 30. The Secretary of the Department of Health and Human Services must give the Secretary of Revenue the data needed to determine a county’s hold harmless threshold by February 24th of each year, and the data needed for the final calculation of each county’s hold harmless threshold by July 24th of each year.

History. 2007-323, s. 31.16.4(d); 2007-345, s. 14.4(b); 2008-134, s. 15(a), (d), (f), (h); 2009-399, s. 4(a); 2010-95, s. 14; 2014-100, s. 37.2(a)-(d); 2015-268, s. 10.1(e4).

Editor’s Note.

“For fiscal year 2009-2010, the hold harmless amount determined for a municipality under G.S. 105-522 and the repealed sales tax amount determined for a county under G.S. 105-523 is reduced by the amount distributed in October, November, and December of 2009 to the municipality or county on the basis of point of origin under repealed G.S. 105-520(a).”

Effect of Amendments.

Session Laws 2007-323, s. 31.16.4(d), effective October 1, 2009, and applicable to distributions for months beginning on or after October 1, 2009, rewrote subdivision (b)(2).

Session Laws 2007-345, s. 14.4(b), effective October 1, 2009, and applicable to distributions for months beginning on or after that date, added “distributed to a county for the month” at the end of the introductory paragraph, deleted “to a county” following “distributed” in sub-subdivision (b)(2)a., and rewrote sub-subdivision (b)(2)c.

Session Laws 2008-134, s. 15(a), effective October 1, 2008, and applicable to distributions for months beginning on or after that date, rewrote subsection (b); in subsection (c), inserted “plus its city hold harmless amount” near the beginning, and inserted “county” near the end of the second sentence; and in subsection (d), substituted “tax amount, city hold harmless amount ” for “tax amount” in the first sentence, and substituted “each county’s hold harmless payment” for “the difference between a county’s repealed sales tax amount and its hold harmless threshold” near the end of the third sentence.

Session Laws 2008-134, s. 15(h), effective October 1, 2009, and applicable to distributions for months beginning on or after that date, rewrote subdivision (b)(3).

Session Laws 2008-134, s. 4(a), effective July 31, 2009, and applicable to distributions for months beginning or after October 1, 2008, added the second sentence in subdivision (b)(2).

Session Laws 2010-95, s. 14, effective July 17, 2010, in the last sentence of subsection (d), substituted “Secretary of the Department of Health and Human Services” for “Secretary of the Department of Human Resources” and added “by February 24th of each year, and the data needed for the final calculation of each county’s hold harmless threshold by July 24th of each year” at the end.

Session Laws 2014-100, s. 37.2(a), effective July 1, 2014, substituted “three hundred seventy-five thousand dollars ($375,000)” for “five hundred thousand dollars ($500,000)” in subsection (a) and subdivision (b)(2).

Session Laws 2014-100, s. 37.2(b), effective July 1, 2015, substituted “two hundred fifty thousand dollars ($250,000)” for “three hundred seventy-five thousand dollars ($375,000)” in subsection (a) and subdivision (b)(2).

Session Laws 2014-100, s. 37.2(c), effective July 1, 2016, substituted “one hundred twenty-five thousand dollars ($125,000)” for “two hundred fifty thousand dollars ($250,000)” in subsection (a) and subdivision (b)(2).

Session Laws 2014-100, s. 37.2(d), effective July 1, 2017, in subsection (a), substituted “be held harmless” for “benefit by at least one hundred twenty-five thousand dollars ($125,000)”; and in subdivision (b)(2), substituted “fiscal year.” for “fiscal year, less one hundred twenty-five thousand dollars ($125,000).”

Session Laws 2015-268, s. 10.1(e4), added the last sentence of subdivision (b)(3). For effective date and applicability, see Editor’s note.

§ 105-524. Distribution of additional sales tax revenue for economic development, public education, and community colleges.

  1. Purpose. —  The purpose of this section is to address sales tax leakage that results from the different revenue-raising capacity of local option sales taxes in each taxing jurisdiction. The amount to be distributed is determined under subsection (b) of this section. The amount each county may receive is determined by the county’s allocation percentage under subsection (c) of this section. The General Assembly must periodically review the allocation percentages.
  2. Distribution Amount. —  The Secretary must calculate a distribution amount in conformity with this section. The Secretary must deduct this amount, in equal installments, proportionately from the collections to be allocated each month for distribution under Article 39 and Chapter 1096 of the 1967 Session Laws and Articles 40 and 42 of this Chapter, excluding the revenue allocated under G.S. 105-469 .For the fiscal year beginning July 1, 2016, the distribution amount is eighty-four million eight hundred thousand dollars ($84,800,000). For fiscal years beginning on or after July 1, 2017, the distribution amount is the amount for the preceding year, adjusted by the same percentage of this amount as the percentage change of the total collection of local sales and use taxes levied under Article 39 of this Chapter and Chapter 1096 of the 1967 Session Laws and Articles 40 and 42 of this Chapter for the preceding fiscal year.
  3. County Allocation. —

    The Secretary must, on a monthly basis, allocate to each taxing county an amount equal to one-twelfth of the distribution amount calculated under subsection (b) of this section multiplied by the appropriate allocation percentage. If, after applying the allocation percentages in this section, the resulting total of the amounts allocated is greater or lesser than the net proceeds to be distributed, the amount allocated to each county shall be proportionally adjusted to eliminate the excess or shortage. The allocation percentages are as follows:

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  4. Use of Funds. —  The amount allocated to a taxing county under this section must be divided among the county and its municipalities in accordance with the method by which the one percent (1%) sales and use taxes levied in that county pursuant to Article 39 of this Chapter or Chapter 1096 of the 1967 Session Laws are distributed. The county must use the revenue it receives under this section for economic development, public education, and community college purposes.
  5. Repealed by Session Laws 2016-94, s. 38.5(o), effective for fiscal years beginning on or after July 1, 2016.
  6. Taxing County. —  For purposes of this section, the term “taxing county” means a county that levies the first one-cent (1¢) sales and use tax under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws, the first one-half cent (1/2¢) local sales and use tax under Article 40 of this Chapter, and the second one-half cent (1/2¢) local sales and use tax under Article 42 of this Chapter.
  7. Adjustments. —  The adjustments made under this section to Article 39 of this Chapter and Chapter 1096 of the 1967 Session Laws and Articles 40 and 42 of this Chapter shall not be included in the calculations made under G.S. 105-469 , 105-522, and 105-523.

County Allocation Percentage Alamance 0.00% Alexander 1.69% Alleghany 0.31% Anson 0.96% Ashe 0.62% Avery 0.00% Beaufort 0.17% Bertie 0.94% Bladen 1.03% Brunswick 0.00% Buncombe 0.00% Burke 2.19% Cabarrus 0.00% Caldwell 1.72% Camden 0.48% Carteret 0.00% Caswell 1.35% Catawba 0.00% Chatham 1.58% Cherokee 0.24% Chowan 0.26% Clay 0.32% Cleveland 1.43% Columbus 2.63% Craven 1.01% Cumberland 0.06% Currituck 0.00% Dare 0.00% Davidson 4.96% Davie 1.14% Duplin 1.97% Durham 0.00% Edgecombe 1.86% Forsyth 0.00% Franklin 2.44% Gaston 1.96% Gates 0.68% Graham 0.31% Granville 1.87% Greene 1.20% Guilford 0.00% Halifax 0.76% Harnett 5.17% Haywood 0.05% Henderson 0.68% Hertford 0.47% Hoke 2.58% Hyde 0.03% Iredell 0.00% Jackson 0.00% Johnston 3.26% Jones 0.63% Lee 0.37% Lenoir 1.56% Lincoln 1.74% Macon 0.00% Madison 1.03% Martin 0.31% McDowell 0.68% Mecklenburg 0.00% Mitchell 0.29% Montgomery 1.05% Moore 0.00% Nash 1.16% New Hanover 0.00% Northampton 0.94% Onslow 1.10% Orange 0.33% Pamlico 0.40% Pasquotank 0.02% Pender 1.69% Perquimans 0.50% Person 0.74% Pitt 0.16% Polk 0.74% Randolph 4.27% Richmond 0.54% Robeson 3.00% Rockingham 2.18% Rowan 3.90% Rutherford 1.63% Sampson 2.10% Scotland 0.83% Stanly 1.04% Stokes 1.99% Surry 0.00% Swain 0.32% Transylvania 0.16% Tyrrell 0.15% Union 4.35% Vance 0.36% Wake 0.00% Warren 1.01% Washington 0.33% Watauga 0.00% Wayne 2.27% Wilkes 1.55% Wilson 0.39% Yadkin 1.31% Yancey 0.52%.

History. 2015-241, s. 32.19(b); 2015-268, s. 10.1(e1); 2016-94, s. 38.5(o).

Editor’s Note.

Session Laws 2015-241, s. 32.19(b), made this section effective July 1, 2016, and applicable to local option sales taxes collected on or after that date and distributed to counties and cities on or after September 1, 2016.

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 2016-94, s. 1.2, provides: “This act shall be known as the ‘Current Operations and Capital Improvements Appropriations Act of 2016.’ ”

Session Laws 2016-94, s. 39.7, is a severability clause.

Effect of Amendments.

Session Laws 2015-268, s. 10.1(e1), rewrote subsection (b); in the introductory language of subsection (c), substituted “appropriate allocation percentage.” for “following appropriate allocation percentage:” and added the second sentence; rewrote subdivisions (e)(1) and (2) and added subsection (g). For effective date and applicability, see Editor’s note.

§§ 105-532 through 105-534.

Reserved for future codification purposes.

Editor’s Note.

Session Laws 2004-123, s. 1, created a new article authorizing imposition of a local government sales and use tax. The session law was not signed by the Governor. The act is noted below at the direction of the Revisor of Statutes.

Session Laws 2005-276, s. 33.33, amends Session Laws 2004-123, s.1, by adding a new section, to read: “Section 3.1. This act applies to Dare County only.”

“Local Government Sales and Use Tax for Beach Nourishment “105-525. Short title.

“This Article is the Local Government Sales and Use Tax for Beach Nourishment Act.

“105-526. Limitations.

“This Article applies only to counties that levy the first one-cent (1¢) sales and use tax under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws, the first one-half cent (1/2¢) local sales and use tax under Article 40 of this Chapter, the second one-half cent (1/2¢) local sales and use tax under Article 42 of this Chapter, and the third one-half cent (1/2¢) local sales and use tax under Article 44 of this Chapter.

“105-527. Definitions.

“The following definitions apply in this Article:

“(1) Beach nourishment. —

“The placement of sand, from other sand sources, on a beach or dune by mechanical means and other associated activities that are in conformity with the North Carolina Coastal Management Program, or which have otherwise been authorized by the General Assembly, along the North Carolina shorelines and connecting inlets for the purpose of widening the beach to benefit public recreational use and mitigating damage and erosion from storms to inland property and transportation routes. The term includes expenditures for the following:

“a. Costs directly associated with qualifying for projects either contracted through the U.S. Army Corps of Engineers or otherwise permitted by all appropriate federal and State agencies.

“b. The nonfederal share of the costs required to construct these projects.

“c. The costs associated with providing enhanced public beach access.

“d. The costs of associated nonhardening activities such as the planting of vegetation, the building of dunes, and the placement of sand fences.

“(2) Net proceeds. —

“Defined in G.S. 105-472 .

“105-528. Levy.

“The board of commissioners of a county may, by resolution, levy one percent (1%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Before adopting a resolution under this section, the board of commissioners must give at least 10 days’ public notice of its intent to adopt the resolution and must hold a public hearing on the issue of adopting the resolution.

“105-529. Administration of taxes.

“Except as provided in this Article, the adoption, levy, collection, administration, and repeal of these additional taxes must be in accordance with Article 39 of this Chapter. A tax levied under this Article does not apply to the sales price of food that is exempt from tax pursuant to G.S. 105-164.13 B.

“105-530. Expiration.

“A tax levied under this Article expires eight years after the effective date of its levy. A county’s authorization to levy a tax under this Article expires eight years after the effective date of the first tax a county levies under this Article, even if the tax has not remained in effect for the entire eight-year period. The expiration of a tax pursuant to this Article does not affect the rights or liabilities of a county, a taxpayer, or another person arising under the expired tax; nor does it affect the right to any refund or credit of a tax that would otherwise have been available under the expired tax before its expiration.

“If the Secretary receives a valid request for a refund of a tax levied under this Article after the tax has expired and the net proceeds have been distributed, the Secretary shall draw the refund from the taxing county’s share of the net proceeds of the tax it levies under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws, as applicable.

“105-531. Distribution and use of taxes.

“(a) Distribution. —

“The Secretary shall, on a monthly basis, distribute to each taxing county for which the Secretary collects the tax the net proceeds of the tax collected in that county under this Article. If the Secretary collects local sales or use taxes in a month and the taxes cannot be identified as being attributable to a particular taxing county, the Secretary shall allocate the taxes among the taxing counties in proportion to the amount of taxes collected in each county under this Article during that month and shall include them in the monthly distribution. Amounts collected by electronic funds transfer payments are included in the distribution for the month in which the return that applies to the payment is received.

“(b) Use. —

“A county may use the net proceeds of a tax levied under this Article only for beach nourishment.”

Session Laws 2004-123, s. 4, makes this Article effective July 18, 2004.

Session Laws 2004-123, s. 2, provides: “A tax levied under Article 45 of Chapter 105 of the General Statutes, as enacted by this part, does not apply to construction materials purchased to fulfill a lump-sum or unit-price contract entered into or awarded before the effective date of the levy or entered into or awarded pursuant to a bid made before the effective date of the levy when the construction materials would otherwise be subject to the tax levied under Article 45 of Chapter 105 of the General Statutes.”

Session Laws 2004-123, s. 3, provides: “Section 2 of Chapter 449 of the 1985 Session Laws, as amended by Chapter 177 of the 1991 Session Laws, S.L. 2001-347, and S.L. 2001-439, reads as rewritten:

“ ‘Sec. 2. Definitions. The definitions in G.S. 105-164.3 apply in this act. In addition, the following definitions apply in this act:

“(1) Net proceeds. Gross proceeds less the cost to the county of administering and collecting the tax.

“(2) Prepared food and beverages. The term has the same meaning as the term ‘prepared food‘ in G.S. 105-164.3 .

“(3) Beach nourishment. The term has the same meaning as in G.S. 105-527.’ ”

Session Laws 2012-189, ss. 1, 2, provide: “SECTION 1. The Revenue Laws Study Committee may study whether municipalities should be granted the authority to levy a local option sales tax for the purpose of providing dedicated funding for beach nourishment and other natural resources preservation and report its findings, together with any recommended legislation, to the 2013 Regular Session of the General Assembly upon its convening.

“SECTION 2. The Revenue Laws Study Committee may study the taxation and valuation of leasehold interests in exempt real property and report its findings, together with any recommended legislation, to the 2013 Regular Session of the General Assembly upon its convening.”

Article 46. One-Quarter Cent (1/4¢) County Sales and Use Tax.

§ 105-535. Short title.

This Article is the One-Quarter Cent (1/4¢) County Sales and Use Tax Act.

History. 2007-323, s. 31.17(b).

Editor’s Note.

Session Laws 2007-323, s. 31.17(d), made this Article effective July 31, 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.

Session Laws 2010-95, s. 44, provides: “Notwithstanding the provisions of G.S. 105-466(c), as amended by Section 12 of this act, during the 2010 calendar year a tax levied under Article 46 of Chapter 105 of the General Statutes may become effective on the first day of any calendar quarter so long as the county gives the Secretary at least 75 days advance notice of the new tax levy.”

Session Laws 2012-74, s. 7, provides: “For purchases made on or after July 1, 2012, but before July 1, 2013, a company located at a ports facility for waterborne commerce that purchases specialized equipment to be used at the facility to unload or process bulk cargo to make it suitable for delivery to and use by manufacturing facilities is allowed a refund of all local sales and use taxes paid and a portion of State sales and use taxes paid on the purchases as provided in this section. The portion of the State sales and use taxes that may be refunded is equal to the excess of the State sales and use taxes paid over the amount that would have been due had the taxpayer been subject to tax on the eligible property as if it were mill machinery under Article 5F of Chapter 105 of the General Statutes. A request for a refund under this section must be in writing and must include any information and documentation required by the Secretary. A request for a refund under this section must be made on or after July 1, 2013, and is due before January 1, 2014. Refunds applied for after the due date are barred. Taxes for which a refund is allowed under this section are not an overpayment of tax and do not accrue interest as provided in G.S. 105-241.21 .”

§ 105-536. Limitations.

This Article applies only to counties that levy the first one-cent (1¢) sales and use tax under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws, the first one-half cent (1/2¢) local sales and use tax under Article 40 of this Chapter, and the second one-half cent (1/2¢) local sales and use tax under Article 42 of this Chapter.

History. 2007-323, s. 31.17(b).

Editor’s Note.

Session Laws 2010-95, s. 44, provides: “Notwithstanding the provisions of G.S. 105-466(c), as amended by Section 12 of this act, during the 2010 calendar year a tax levied under Article 46 of Chapter 105 of the General Statutes may become effective on the first day of any calendar quarter so long as the county gives the Secretary at least 75 days advance notice of the new tax levy.”

§ 105-537. Levy.

  1. Authority. —  If the majority of those voting in a referendum held pursuant to this Article vote for the levy of the tax, the board of county commissioners may, by resolution and after 10 days’ public notice, levy a local sales and use tax at a rate of one-quarter percent (0.25%).
  2. Vote. —  The board of county commissioners may direct the county board of elections to conduct an advisory referendum on the question of whether to levy a local sales and use tax in the county as provided in this Article. The election shall be held in accordance with the procedures of G.S. 163-287 , except that the election shall not be held within one year from the date of the last preceding election under this section.
  3. Ballot Question. —  The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be:

    Click to view

  4. Repealed by Session Laws 2014-3, s. 14.22, effective May 29, 2014.

‘‘[ ] FOR [ ] AGAINST Local sales and use tax at the rate of one-quarter percent (0.25%) in addition to all other State and local sales and use taxes.’’

History. 2007-323, s. 31.17(b); 2013-381, s. 10.14; 2014-3, s. 14.22; 2017-6, s. 3; 2018-146, ss. 3.1(a), (b), 6.1; 2019-169, s. 3.8(a).

Re-recodification; Technical and Conforming Changes.

Session Laws 2017-6, s. 3, provides, in part: “The Revisor of Statutes shall recodify Chapter 138A of the General Statutes, Chapter 120C of the General Statutes, as well as Chapter 163 of the General Statutes, as amended by this act, into a new Chapter 163A of the General Statutes to be entitled ‘Elections and Ethics Enforcement Act,’ as enacted by Section 4 of this act. The Revisor may also recodify into the new Chapter 163A of the General Statutes other existing statutory laws relating to elections and ethics enforcement that are located elsewhere in the General Statutes as the Revisor deems appropriate.” The Revisor was further authorized to make additional technical and conforming changes to catchlines, internal citations, and other references throughout the General Statutes to effectuate this recodification. Pursuant to this authority, the Revisor of Statutes substituted “G.S. 163A-1592” for “G.S. 163-287” in subsection (b).

Session Laws 2018-146, ss. 3.1(a), (b) and 6.1, repealed Session Laws 2017-6, s. 3, and authorized the Revisor of Statutes to re-recodify Chapter 163A into Chapters 163, 138A, and 120C and to revert the changes made by the Revisor pursuant to Session Laws 2017-6, s. 3. Pursuant to this authority, the Revisor of Statutes reverted the change to the reference in subsection (b).

Editor’s Note.

Session Laws 2019-169, s. 3.8(b), made the amendment to subsection (b) of this section by Session Laws 2019-169, s. 3.8(a), effective July 1, 2019, and applicable to elections held on or after July 1, 2019.

Effect of Amendments.

Session Laws 2013-381, s. 10.14, effective January 1, 2014, deleted “on a date jointly agreed upon by the board of county commissioners and the board of elections and shall be held” following “shall be held” in the second sentence of subsection (b). For applicability, see editor’s note.

Session Laws 2014-3, s. 14.22, deleted subsection (d), which read: “Limitation. A tax levied under this Article may not be in effect in a county at the same time as a tax levied under Article 60 of this Chapter.”

Session Laws 2019-169, s. 3.8, added “except that the election shall not be held within one year from the date of the last preceding election under this section” at the end of subsection (b). For effective date and applicability, see editor’s note.

§ 105-538. Administration of taxes.

The Secretary shall, on a monthly basis, allocate to each taxing county the net proceeds of the tax levied under this Article. If the Secretary collects taxes under this Article in a month and the taxes cannot be identified as being attributable to a particular taxing county, the Secretary must allocate the net proceeds of these taxes among the taxing counties in proportion to the amount of taxes collected in each county under this Article in that month. For purposes of this Article, the term “net proceeds” has the same meaning as defined in G.S. 105-472 .

Except as provided in this Article, the adoption, levy, collection, administration, and repeal of these additional taxes must be in accordance with Article 39 of this Chapter. G.S. 105-468.1 is an administrative provision that applies to this Article. A tax levied under this Article does not apply to the sales price of food that is exempt from tax pursuant to G.S. 105-164.13 B or to the sales price of a bundled transaction taxable pursuant to G.S. 105-467(a)(5a). The Secretary shall not divide the amount allocated to a county between the county and the municipalities within the county.

History. 2007-323, s. 31.17(b); 2007-345, s. 14.5(a); 2008-134, s. 75; 2009-445, s. 18; 2016-5, s. 3.21.

Editor’s Note.

Session Laws 2010-95, s. 44, provides: “Notwithstanding the provisions of G.S. 105-466(c), as amended by Section 12 of this act, during the 2010 calendar year a tax levied under Article 46 of Chapter 105 of the General Statutes may become effective on the first day of any calendar quarter so long as the county gives the Secretary at least 75 days advance notice of the new tax levy.”

Effect of Amendments.

Session Laws 2007-345, s. 14.5(a), effective July 1, 2007, added the second sentence.

Session Laws 2008-134, s. 75, effective July 28, 2008, substituted “G.S. 105-466(c)” for “G.S. 105-467(c)” in the last sentence.

Session Laws 2009-445, s. 18, effective August 7, 2009, added “or to the sales price of a bundled transaction taxable pursuant to G.S. 105 467(a)(5a)” at the end of the second sentence, and deleted the former last sentence, which read: “Notwithstanding the provisions of G.S. 105 466(c), during the 2008 calendar year a tax levied under this Article may become effective on the first day of any calendar quarter so long as the county gives the Secretary at least 60 days’ advance notice of the new tax levy.”

Session Laws 2016-5, s. 3.21, effective May 11, 2016, added the first paragraph.

§§ 105-539 through 105-549.

Reserved for future codification purposes.

Subchapter IX. Multicounty Taxes.

Article 50. Regional Transit Authority Vehicle Rental Tax.

§ 105-550. Definitions.

The definitions in G.S. 105-164.3 and the following definitions apply in this Article:

  1. Authority. — A regional public transportation authority or a regional transportation authority created pursuant to Article 26 or Article 27 of Chapter 160A of the General Statutes.
  2. Long-term lease or rental. — Defined in G.S. 105-187.1 .
  3. Motorcycle. — Defined in G.S. 20-4.01 .
  4. Repealed by Session Laws 1998-98, s. 33, effective August 14, 1998.
  5. Public transportation system. — Any combination of real and personal property established for purposes of public transportation. The systems may include one or more of the following: structures, improvements, buildings, equipment, vehicle parking or passenger transfer facilities, railroads and railroad rights-of-way, rights-of-way, bus services, shared-ride services, high-occupancy vehicle facilities, car-pool and vanpool programs, voucher programs, telecommunications and information systems, integrated fare systems, bus lanes, and busways. The term does not include, however, streets, roads, or highways except to the extent they are dedicated to public transportation vehicles or to the extent they are necessary for access to vehicle parking or passenger transfer facilities.
  6. Short-term lease or rental. — Defined in G.S. 105-187.1 .
  7. U-drive-it vehicle. — Defined in G.S. 20-4.01 .

History. 1997-417, s. 3; 1998-98, s. 33; 1999-452, s. 26; 2019-69, s. 4.

Editor’s Note.

Session Laws 2006-162, s. 30, as amended by Session Laws 2009-527, s. 2(h), amended Part 3 of S.L. 1997-417, by adding a section to read: “3.1. A county authorized to impose a tax under Part 2 of Article 43 of Chapter 105 of the General Statutes is considered an authority under Article 50 of Chapter 105 of the General Statutes, as enacted by Section 3 of this of this act, and the board of commissioners of that county is considered the board of trustees of the authority under Article 50. G.S. 105-554 of Article 50 does not apply to the proceeds of a tax imposed by county considered an authority under this section. The proceeds of a tax imposed by a county considered an authority under this section must be transferred to the largest city in that county operating a public transportation system. The proceeds of a tax imposed by a county considered an authority under this section must be transferred to the largest city in that county operating a public transportation system and used only for financing, constructing, operating, and maintaining a public transportation system. The proceeds may supplant existing funds allocated for a public transportation system. The term ‘public transportation system’ has the same meaning as defined in G.S. 105-506.1 .”

Session Laws 2019-69, s. 6, made the amendment to subdivision (6) of this section by Session Laws 2019-69, s. 4, effective October 1, 2019, and applicable to vehicle subscription agreements entered into on or after that date.

Effect of Amendments.

Session Laws 2019-69, s. 4, rewrote subsection (6), which formerly read: “Short-term lease or rental. — A lease or rental that is not a long-term lease or rental.” For effective date and applicability, see editor’s note.

§ 105-551. Tax on gross receipts authorized.

  1. Tax. —  The board of trustees of an Authority may levy a privilege tax on a retailer who is engaged in the business of leasing or renting U-drive-it vehicles or motorcycles based on the gross receipts derived by the retailer from the short-term lease or rental of these vehicles. The tax rate must be a percentage and may not exceed five percent (5%). A tax levied under this section applies to short-term leases or rentals made by a retailer whose place of business or inventory is located within the territorial jurisdiction of the Authority. This tax is in addition to all other taxes.
  2. Restrictions. —  The board of trustees of an Authority may not levy a tax under this section or increase the tax rate of a tax levied under this section until all of the following requirements have been met:
    1. The board of trustees has held a public hearing on the tax or the increase in the tax rate after giving at least 10 days’ notice of the hearing.
    2. If the Authority has a special tax board, the special tax board has adopted a resolution approving the levy of the tax or the increase in the tax rate.
    3. The board of commissioners of each county included in the territorial jurisdiction of the Authority has adopted a resolution approving the levy of the tax or the increase in the tax rate.
  3. Special Tax District. —  If a regional transportation authority created under Article 27 of Chapter 160A of the General Statutes has not levied the tax under this section or has levied the tax at a rate of less than five percent (5%), it may create a special district that consists of the entire area of one or more counties within its territorial jurisdiction and may levy on behalf of the special district the tax authorized in this section. The rate of tax levied within the special district may not, when combined with the rate levied within the entire territorial jurisdiction of the authority, exceed five percent (5%). The regional transportation authority may not levy or increase a tax within the special district unless the board of commissioners of each county in the special district has adopted a resolution approving the levy or increase.A special district created pursuant to this subsection is a body corporate and politic and has the power to carry out the purposes of this subsection. The board of trustees of the regional transportation authority created under Article 27 of Chapter 160A of the General Statutes shall serve, ex officio, as the governing body of a special district it creates pursuant to this subsection. The proceeds of a tax levied under this subsection may be used only for the benefit of the special district and only for the purposes provided in G.S. 105-554 . Except as provided in this subsection, a tax levied under this subsection is governed by the provisions of this Article.

History. 1997-417, s. 3; 1998-98, s. 34; 1999-445, s. 3; 1999-452, s. 27.

OPINIONS OF ATTORNEY GENERAL

In pursuance of implementing a tax under the statute, the Board of County Commissioners does not have authority to add provisions or amend in any way the request that may come to them from a regional transportation authority to levy the five percent tax on rental vehicles. See opinion of Attorney General to Commissioner Trudy Wade, Guilford Board of County Commissioners, 2002 N.C. AG LEXIS 9 (1/17/02).

§ 105-552. Collection and administration of gross receipts tax.

  1. Effective Date. —  A tax or a tax increase levied under this Article becomes effective on the date set by the board of trustees in the resolution levying the tax or the tax increase. The effective date must be the first day of a month and may not be earlier than the first day of the second month after the board of trustees adopts the resolution.
  2. Collection. —  A tax levied by an Authority under this Article shall be collected by the Authority but shall otherwise be administered in the same manner as the optional gross receipts tax levied by G.S. 105-187.5 . Like the optional gross receipts tax, a tax levied under this Article is to be added to the lease or rental price of a U-drive-it vehicle or motorcycle and thereby be paid by the person to whom it is leased or rented.A tax levied under this Article applies regardless of whether the retailer who leases or rents the U-drive-it vehicle or motorcycle has elected to pay the optional gross receipts tax on the lease or rental receipts from the vehicle. A tax levied under this Article must be paid to the Authority that levied the tax by the date an optional gross receipts tax would be payable to the Secretary of Revenue under G.S. 105-187.5 if the retailer who leases or rents the U-drive-it vehicle or motorcycle had elected to pay the optional gross receipts tax.
  3. Penalties and Remedies. —  The penalties and remedies that apply to local sales and use taxes levied under Subchapter VIII of this Chapter apply to a tax levied under this Article. The board of trustees of an Authority may exercise any power the Secretary of Revenue or a board of county commissioners may exercise in collecting local sales and use taxes.

History. 1997-417, s. 3; 1998-98, s. 35; 1999-452, s. 28.

§ 105-553. Exemptions and refunds.

No exemptions are allowed from a tax levied under this Article. No refunds are allowed for a tax lawfully levied under this Article.

History. 1997-417, s. 3.

§ 105-554. Use of tax proceeds.

An Authority that levies a tax under this Article may use the proceeds of the tax for any purpose for which the Authority is authorized to use funds. An Authority shall use the tax proceeds to supplement and not to supplant or replace existing funds or other resources for public transportation systems. Authorized purposes for which an Authority may use funds include the following:

  1. Pledging funds in connection with the financing of a public transportation system or any part of a public transportation system.
  2. Paying a note, bond, or other obligation entered into by the Authority pursuant to Article 26 or Article 27 of Chapter 160A of the General Statutes.

History. 1997-417, s. 3.

§ 105-555. Repeal of tax or decrease in tax rate.

The board of trustees of an Authority may repeal a tax levied under this Article or decrease the tax rate of a tax levied under this Article. The same restrictions that apply to the levy of a tax or an increase in a tax rate under this Article apply to the repeal of the tax or a decrease in the tax rate.

A tax repeal or a tax decrease becomes effective on the date set by the board of trustees in the resolution repealing or decreasing the tax. The effective date must be on the first day of a month and may not be earlier than the first day of the second month after the board of trustees adopts the resolution. Repeal or decrease of a tax levied under this Article does not affect the rights or liabilities of an Authority, a taxpayer, or another person arising before the repeal or decrease.

History. 1997-417, s. 3.

§§ 105-556 through 105-559.

Reserved for future codification purposes.

Article 51. Regional Transit Authority Registration Tax.

§ 105-560. Definitions.

  1. Authority. — Any of the following:
    1. A public transportation authority created pursuant to Article 25 of Chapter 160A of the General Statutes that includes two or more counties.
    2. A regional public transportation authority created pursuant to Article 26 of Chapter 160A of the General Statutes.
    3. A regional transportation authority created pursuant to Article 27 of Chapter 160A of the General Statutes.
  2. Board of trustees. — The governing body of an Authority.
  3. Public transportation system. — Defined in G.S. 105-550 .

History. 1997-417, s. 4.

§ 105-561. Authority registration tax authorized.

  1. Tax Authorized. —  The board of trustees of an Authority may, by resolution, levy an annual license tax in accordance with this Article upon any motor vehicle with a tax situs within its territorial jurisdiction. The purpose of the tax levied under this Article is to raise revenue for capital and operating expenses of an Authority in providing public transportation systems. The rate of tax levied under this Article must be a full dollar amount, but may not exceed eight dollars ($8.00) a year.
  2. Restrictions. —  The board of trustees of an Authority may not levy a tax under this Article or increase the tax rate until all of the following requirements have been met:
    1. The board of trustees has held a public hearing on the tax or the increase in the tax rate after giving at least 10 days’ notice of the hearing.
    2. If the Authority has a special tax board, the special tax board has adopted a resolution approving the levy of the tax or the increase in the tax rate.
    3. Except where the levy or increase in tax is necessary for debt service on bonds or notes that each of the boards of county commissioners had previously approved under G.S. 159-51 , the board of commissioners of each county included in the territorial jurisdiction of the Authority has adopted a resolution approving the levy of the tax or the increase in the tax rate.
  3. Resolutions. —  The board of trustees and the board of county commissioners, upon adoption of a resolution pursuant to this section, shall cause a certified copy of the resolution to be delivered immediately to the Authority and to the Division of Motor Vehicles.
  4. Special Tax District. —  If a regional transportation authority created under Article 27 of Chapter 160A of the General Statutes or a regional public transportation authority created under Article 26 of Chapter 160A of the General Statutes has not levied the tax under this section or has levied the tax at a rate of less than eight dollars ($8.00), it may create a special district that consists of the entire area of one or more counties within its territorial jurisdiction and may levy on behalf of the special district the tax authorized in this section. The rate of tax levied within the special district may not, when combined with the rate levied within the entire territorial jurisdiction of the authority; exceed eight dollars ($8.00). The regional transportation authority may not levy or increase a tax within the special district unless the board of commissioners of each county in the special district has adopted a resolution approving the levy or increase.A special district created pursuant to this subsection is a body corporate and politic and has the power to carry out the purposes of this subsection. The board of trustees of the regional transportation authority created under Article 27 of Chapter 160A of the General Statutes or a regional public transportation authority created under Article 26 of Chapter 160A of the General Statutes shall serve, ex officio, as the governing body of a special district it creates pursuant to this subsection. The proceeds of a tax levied under this subsection may be used only for the benefit of the special district and only for the purposes provided in G.S. 105-564 . Except as provided in this subsection, a tax levied under this subsection is governed by the provisions of this Article.

History. 1997-417, s. 4; 1999-445, s. 4; 2009-527, s. 3(a)-(d); 2013-414, s. 50.

Effect of Amendments.

Session Laws 2009-527, s. 3(a) and (c), effective August 27, 2009, substituted “seven dollars ($7.00) a year” for “five dollars ($5.00) a year” at the end of subsection (a); and substituted “seven dollars ($7.00)” for “five dollars ($5.00)” twice in the first paragraph of subsection (d).

Session Laws 2009-527, ss. 3(b) and 3(d), effective July 1, 2010, substituted “eight dollars ($8.00) a year” for “seven dollars ($7.00) a year” at the end of subsection (a); and substituted “eight dollars ($8.00)” for “seven dollars ($7.00)” twice in the first paragraph of subsection (d).

Session Laws 2013-414, s. 50, effective August 23, 2013, inserted “or a regional public transportation authority created under Article 26 of Chapter 160A of the General Statutes” in the first and second paragraphs of subsection (d).

§ 105-562. Collection and scope.

  1. Collection. —  A tax or a tax increase levied under this Article becomes effective on the date set by the board of trustees in the resolution levying the tax or the tax increase. The effective date must be the first day of a month and may not be earlier than the first day of the sixth calendar month after the board of trustees adopts the resolution. To the extent the tax applies to vehicles whose tax situs is in a county the entire area of which is within the jurisdiction of the Authority, the Division of Motor Vehicles shall collect and administer the tax. To the extent the tax applies to vehicles whose tax situs is in a county that is only partially within the jurisdiction of the county, the Authority shall collect and administer the tax. The Authority may contract with one or more local governments in its jurisdiction to collect the tax on its behalf.Upon receipt of the resolutions under G.S. 105-561 , the Division of Motor Vehicles shall proceed to collect and administer the tax as provided in this Article. The tax is due at the same time and subject to the same restrictions as in G.S. 20-87(1), (2), (4), (5), (6), and (7) and G.S. 20-88 . The Division of Motor Vehicles may adopt rules to carry out its responsibilities under this Article.
  2. Scope. —  Only vehicles required to pay a tax under G.S. 20-87(1), (2), (4), (5), (6), and (7) and G.S. 20-88 shall be subject to the tax provided by this Article. Taxes shall be prorated in accordance with G.S. 20-95 .
  3. Tax Situs. —  The tax situs of a motor vehicle for the purpose of this Article is its ad valorem tax situs. If the vehicle is exempt from ad valorem tax, its tax situs for the purpose of this Article is the ad valorem tax situs it would have if it were not exempt from ad valorem tax.
  4. Any tax or tax increase levied under this Article applicable to a motor vehicle sold or leased by a motor vehicle dealer, as defined in G.S. 20-286(11), is only applicable to a motor vehicle sale or lease made on or after the effective date of the tax or tax increase regardless of the date of submission of a title and registration application for the motor vehicle to the Division of Motor Vehicles. No tax or tax increase levied under this Article applies to a motor vehicle sale or lease made prior to the effective date of the tax or tax increase.

History. 1997-417, s. 4; 2009-527, s. 5(a); 2018-42, s. 6.

Editor’s Note.

Session Laws 2018-42, s. 9, made subsection (d) of this section, as added by Session Laws 2018-42, s. 6, effective June 22, 2018, and applicable to any tax or tax increase with an effective date on or after that date.

Effect of Amendments.

Session Laws 2009-527, s. 5(a), effective August 27, 2009, substituted “sixth calendar month” for “third calendar month” in the second sentence of the first paragraph of subsection (a).

Session Laws 2018-42, s. 6, added subsection (d). For effective date and applicability, see editor’s note.

§ 105-563. Modification or repeal of tax.

The Board of Trustees may, by resolution, repeal the levy of the tax under this Article or decrease the amount of the tax, under the same procedures and subject to the same limitations as provided in G.S. 105-561 . A tax repeal or a tax decrease becomes effective on the date set by the board of trustees in the resolution repealing or decreasing the tax. The effective date must be on the first day of a month and may not be earlier than the first day of the sixth calendar month after the board of trustees adopts the resolution. Repeal or decrease of a tax levied under this Article does not affect the rights or liabilities of an Authority, a taxpayer, or another person arising before the repeal or decrease.

History. 1997-417, s. 4; 2009-527, s. 5(b).

Effect of Amendments.

Session Laws 2009-527, s. 5(b), effective August 27, 2009, substituted “sixth calendar month” for “third calendar month” in the third sentence.

§ 105-564. Distribution and use of proceeds.

The Authority shall retain the net proceeds of taxes it collects under this Article. Taxes collected by the Division of Motor Vehicles under this Article shall be credited to a special fund and the net proceeds disbursed quarterly to the appropriate Authority. Interest credited to the fund shall be disbursed quarterly to the Highway Fund to reimburse the Division of Motor Vehicles for the cost of collecting and administering the tax.

An Authority that levies a tax under this Article may use the proceeds of the tax for any purpose for which the Authority is authorized to use funds. An Authority shall use the tax proceeds to supplement and not to supplant or replace existing funds or other resources for public transportation systems.

History. 1997-417, s. 4.

§§ 105-565 through 105-569.

Reserved for future codification purposes.

Article 52. County Vehicle Registration Tax.

§ 105-570. County Vehicle Registration Tax; shared with municipalities.

  1. A county is considered an authority under Article 51 of this Chapter, and the board of commissioners of that county is considered the board of trustees of the authority under Article 51, except that the maximum tax that may be levied by a county under this Article is seven dollars ($7.00) per year.
  2. A county may not levy a tax under this Article unless the county or at least one unit of local government in the county operates a public transportation system.
  3. Any tax levied under this Article shall, after the receipt of those funds from the Division of Motor Vehicles, be retained or distributed by the county on a per capita basis as it receives those funds as follows:
    1. Pro rata (i) retained by the county based on the population of the county that is not in an incorporated area, and (ii) distributed to the municipalities within the county based on the population of that municipality that is located within that county. To determine the population of each county and municipality, the county shall use the most recent annual estimate of population certified by the State Budget Officer.
    2. Notwithstanding subdivision (1) of this subsection, if a municipality to which funds are to be distributed does not operate a public transportation system, the population of that municipality shall be excluded from the calculations of subdivision (1) of this subsection and no distribution shall be made to that municipality.
    3. Notwithstanding subdivision (1) of this subsection, if a county for which funds are to be retained does not operate a public transportation system, the population of that county not in an incorporated area shall be excluded from the calculations of subdivision (1) of this subsection, and the county shall not retain any funds.If a county that does not retain funds or a municipality that does not receive an allocation of funds on account of subdivision (2) or (3) of this subsection begins to operate a public transportation system, that county or municipality shall begin retaining or receiving funds beginning the first day of July that is more than 30 days thereafter.
  4. The proceeds of a tax imposed under this Article may be used by that county or municipality only to operate a public transportation system, including financing, constructing, operating, and maintaining that public transportation system. The term “public transportation system” has the same meaning as defined in G.S. 105-506.1 .
  5. As used in this section, operation of a public transportation system includes a contract or interlocal agreement for operation of the public transportation system by another county or municipality, or by a transportation authority created under (i) a municipal charter; or (ii) Article 25, 26, or 27 of Chapter 160A of the General Statutes. As used in this section, operation of a public transportation system also includes a contract with a private entity for operation of the public transportation system.
  6. An interlocal agreement under this section may also deal with allocation of funds between a municipality and county for operation by the county of a human services public transportation system within the municipality when the municipality also operates a public transportation system.
  7. This Article is supplemental to Article 51 of this Chapter.
  8. Any tax or tax increase levied under this Article applicable to a motor vehicle sold or leased by a motor vehicle dealer, as defined in G.S. 20-286(11), is only applicable to a motor vehicle sale or lease made on or after the effective date of the tax or tax increase regardless of the date of submission of a title and registration application for the motor vehicle to the Division of Motor Vehicles. No tax or tax increase levied under this Article applies to a motor vehicle sale or lease made prior to the effective date of the tax or tax increase.

History. 2009-527, s. 4; 2018-42, s. 7.

Editor’s Note.

The number of this section was assigned by the Revisor of Statutes, the number in Session Laws 2009-527, s. 4, having been G.S. 105-557.

Session Laws 2018-42, s. 9, made subsection (h) of this section, as added by Session Laws 2018-42, s. 7, effective June 22, 2018, and applicable to any tax or tax increase with an effective date on or after that date.

Effect of Amendments.

Session Laws 2018-42, s. 7, added subsection (h). For effective date and applicability, see editor’s note.

§§ 105-571 through 105-599.

Reserved for future codification purposes.

Subchapter X. Local Option County Taxes.

Article 60. Land Transfer Tax. [Repealed]

§§ 105-600 through 105-604. [Repealed]

Repealed by Session Laws 2011-18, s. 1, effective March 31, 2011.

History. Ss. 105-600—105-604; 2007-323, s. 31.17(a); repealed by 2011-18, s. 1, effective March 31, 2011.

Editor’s Note.

Former G.S. 105-600 pertained to the County Land Transfer Tax Act. Former G.S. 105-601 pertained to a levy of local land transfer tax. Former G.S. 105-602 pertained to the scope of tax. Former G.S. 105-603 pertained to administration and use of the tax. Former G.S. 105-604 pertained to the repeal or reduction of the tax.