NORTH CAROLINA
DEPARTMENT OF REVENUE
TAX LAW
CHANGES
2008
NORTH CAROLINA DEPARTMENT OF REVENUE 2008 TAX LAW CHANGES
OFFICE OF THE ASSISTANT SECRETARY
FOR
TAX ADMINISTRATION
501 N. Wilmington Street
PO Box 871
Raleigh, NC 27602- 0871
i
INTRODUCTION
This year, yet again, we saw a number of major tax policy decisions at the General
Assembly. On the individual income front, the North Carolina Earned Income Tax Credit
( EITC) was increased from 3.5% to 5.0% of the federal EITC. Publicly- traded partnerships
were also exempted from the informational return and payment requirements previously
found in G. S. 105- 154( c) and ( d). The overall cap on payments under the Qualified
Business Venture Tax Credit was increased from $ 7.0 to $ 7.5 million. The state- level gift tax
was also repealed, but only applies to gifts made after January 1, 2009.
There was also a great deal of activity related to tax credits. Both the State Port and
Film Industry credits were modified and extended, while the credit for investment by small
business employers in their employees’ health benefits was also extended. In addition, a
section was added to Article 3B to provide a tax credit to biodiesel providers that produce at
least 100,000 gallons of biodiesel during a taxable year. Sunset dates for the Mill
Rehabilitation Tax Credit, the Research and Development Tax Credit, and the Low- Income
Housing Tax Credits were also extended. However, one should check the new sunset dates
carefully as those dates vary from credit to credit.
While the policy decisions noted above are significant to affected taxpayers, much of
the tax discussion at the General Assembly this year focused on sales tax issues. Included
as provisions in the final budget document, the legislature this year passed the “ Small
Business Protection Act.” This legislation provided substantial, retroactive relief to taxpayers
with liabilities related to what the General Assembly deemed to be “ complex sales tax
issues.” In addition, new requirements were added for the Department of Revenue related
to the documentation of some types of oral advice, and new authority was granted to the
Secretary to reduce taxpayer liabilities when such liabilities create an “ unjust result.”
Many other technical and more complex changes were made and are documented in
the pages of this guide. I hope you find this information of value to you in your work related
to North Carolina’s tax laws.
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Table of
Contents
INTRODUCTION
SECTION 1 – PERSONAL TAXES
Estate Tax
G. S. 105- 32.2( b) – Modify Estate Tax Law 1
Individual Income Tax
G. S. 105- 134.2( a) – Repeal of the 8.25%
Tax Rate 1
G. S. 105- 134.6( b)( 17a) – Future Deduction for
Special Accelerated Depreciation Add- Back 1
G. S. 105- 134.6( b)( 19) – Tax Deduction for the
Sale of a Manufactured Home Community to
Manufactured Homeowners 2
G. S. 105- 134.6( c) ( 5b) – Addition to Federal
Taxable Income for Amounts Donated to
Nonprofit Organization or Unit of State or
Local Government to Enable the Nonprofit or
Government Unit to Acquire Renewable Energy
Property 2
G. S. 105- 134.6( c) ( 8a) – Special Accelerated
Depreciation Add- Back 2
G. S. 105- 151.22 – State Ports Tax Credit
Reporting Requirements Amended and Tax
Credit Extended 2
G. S. 105- 151.29 – Expand Film Industry
Credit and Extend Sunset 3
G. S. 105- 151.31 – Refundable Earned
Income Tax Credit 3
G. S. 105- 154( e) – Publicly Traded Partnerships 4
G. S. 105- 163.012( b) – Increase Qualified
Business Venture Tax Credit Cap 4
Gift Tax
G. S. 105- 188 – Repeal Gift Tax Law 4
SECTION 2 – CORPORATE,
EXCISE AND INSURANCE TAX
Privilege Taxes
G. S. 105- 41( a)( 12) – Home Inspector Privilege
License 5
G. S. 14- 344.1 – Internet Sale of Admission
Tickets in Excess of Printed Price 5
Tobacco Products Tax
G. S. 105- 113.39 – Refund of Unsaleable Other
Tobacco Product 6
Alcoholic Beverage License and
Excise Taxes
G. S. 105- 113.81A – Increase in Wine Tax
Proceeds Earmarked for Grape Growers
Council 6
Franchise Tax
G. S. 105- 114( b)( 2) – Definition of Corporation
Expanded 6
G. S. 105- 114.1( a)( 5) – Conforming Change 7
G. S. 105- 122( a) – Technical Change 7
G. S. 105- 122 – Revenue Laws Study Committee
Studies 7
G. S. 105- 125( b) – Captive REITs 7
Tax Credits for New and Expanding
Businesses
G. S. 105- 129.2A( a4) – Technical Change 8
Business and Energy Tax Credits
G. S. 105- 129.16E( d) – Sunset for Small Business
Employee Health Benefits 8
G. S. 105- 129.16F – New Tax Credit for Biodiesel
Producers 8
G. S. 105- 129.16G – Clarifying Change 8
G. S. 105- 129.16H – Credit for Donations to a
Nonprofit Organization for Acquisition of
Renewable Energy Property; Expansion 9
Low- Income Housing Tax Credits
G. S. 105- 129.45 – Sunset 9
Research and Development
G. S. 105- 129.51( b) – Sunset 10
Mill Rehabilitation Tax Credit
G. S. 105- 129.70 – Clarifying and Technical
Changes 10
G. S. 105- 129.71( a) and G. S. 105- 129.72( a) –
Clarifying and Technical Changes 10
G. S. 105- 129.75 – Sunset 10
iii
Corporation Income Tax
G. S. 105- 130.5( a)( 15) – Technical Change 11
G. S. 105- 130.5( a)( 15a) – 50% First Year Bonus
Depreciation Add- Back 11
G. S. 105- 130.5( a)( 20) – Addition for Donation to
Nonprofit for Renewable Energy Property;
Expansion 11
G. S. 105- 130.5( b)( 11) – Clarifying Change 11
G. S. 105- 130.5( b)( 21a) – Future Deduction for
50% First Year Accelerated Depreciation
Add- Back 12
G. S. 105- 130.5( b)( 24) – Subtraction for Qualified
Sale of Manufactured Home Community 12
G. S. 105- 130.16( a) – Conforming Change 12
G. S. 105- 130.17( b) – Due Date 12
G. S. 105- 130.41( c1) – State Ports Tax Credit
Reporting Requirements 12
G. S. 105- 130.41( d) – State Ports Tax Credit
Sunset 13
G. S. 105- 130.47( a) – Film Industry Credit
Expansion 13
G. S. 105- 130.47( j) – NC Film Office Notification
and Acknowledgement 13
G. S. 105- 130.47( k) – Film Industry Credit Sunset 13
Insurance Gross Premiums Tax
G. S. 58- 6- 25 – Insurance Regulatory Charge 14
G. S. 105- 228.5( d)( 3) – Adjustment to the Rate of
the Additional Gross Premiums Tax on
Property Coverage Contracts 14
G. S. 105- 228.5B ( effective until June 30, 2010) –
Conforming Change 14
G. S. 105- 228.5B ( effective June 30, 2010) –
Technical Change 14
SECTION 3 – SALES AND USE
TAX
Sales and Use Tax
G. S. 105- 164.3( 8g) – Definition of “ Energy Star
Qualified Product” 15
G. S. 105- 164.4( a) – Increase in State Sales Tax
Rate 15
G. S. 105- 164.4( a)( 1j) – Tax on Electricity Sold to
Manufacturers and Farmers 15
G. S. 105- 164.4B( d)( 2) – Sourcing of Direct Mail 16
G. S. 105- 164.13 – Exemptions and Exclusions 16
G. S. 105- 164.13B( a) – State Sales Tax Exemption
for Certain Bakery Items 17
G. S. 105- 164.13C( a) – Change in 2008 Sales Tax
Holiday 17
G. S. 105- 164.13D – New Sales and Use Tax
Holiday for Energy Star Qualified Products 17
G. S. 105- 164.14( a1) – Refunds to Interstate
Passenger Air Carriers Extended 18
G. S. 105- 164.14( b) – Refunds to Certain 501( c)( 3)
Organizations 18
G. S. 105- 164.14( b) – Refunds to University
Affiliated Nonprofit Organizations 18
G. S. 105- 164.14( j) – Refunds to Certain Industrial
Facilities 19
G. S. 105- 164.14( l) – Refunds to Motorsports
Racing Teams or Motorsports Sanctioning
Bodies Extended 19
G. S. 105- 164.16( e) – Simultaneous State and
Local Changes 19
G. S. 105- 164.29( d) – Revocation of Certificate of
Registration 19
G. S. 105- 164.38( c) – Transferee Liability 20
G. S. 105- 164.44I( b) – Revision to Video
Programming and Telecommunications Tax
Distribution for Supplemental PEG Channel
Support 20
G. S. 105- 164.44I( e) – Revision to Use of
Proceeds from Supplemental PEG Channel
Support 20
G. S. 105- 164.44J – Supplemental PEG Channel
Support 20
Chapter 323 of the 2007 Session Laws – Transfer
for Wildlife Resources Commission 21
Local Sales and Use Tax
G. S. 105- 467( b) – Exemption for Products Sold
During New Sales Tax Holiday 21
G. S. 105- 472( b1) – First One Percent Local Tax
Distribution 21
G. S. 105- 501 – Distribution of Second One- Half
Percent Local Sales and Use Tax 21
G. S. 105- 502 – Use of Additional Tax Revenue by
Counties 21
iv
G. S. 105- 520 – Distribution of Third One- Half
Percent Local Tax 22
G. S. 105- 515 through 105- 520 – Third One- Half
Percent Local Sales and Use Tax Repealed 22
G. S. 105- 521 – Hold Harmless for Repealed
Reimbursements 22
G. S. 105- 522 – City Hold Harmless for Repealed
Local Taxes 22
G. S. 105- 522( a)( 2) – City Hold Harmless for
Repealed Local Taxes 23
G. S. 105- 522( a)( 2) – City Hold Harmless for
Repealed Local Taxes Amended 23
G. S. 105- 523 – County Hold Harmless for
Repealed Local Taxes 24
G. S. 105- 523( b)( c)( d) – County Hold Harmless for
Repealed Local Taxes Amended 24
G. S. 105- 523( b)( 3) – County Hold Harmless for
Repealed Local Taxes 25
Chapter 323 of the 2007 Session Laws –
Reduction of Third One- Half Percent Local
Sales and Use Tax 25
Chapter 323 of the 2007 Session Laws – Hold
Harmless 25
Chapter 323 of the 2007 Session Laws – Article
44 Title 25
Chapter 1096 of the 1967 Session Laws, as
Amended – Mecklenburg First One Percent
Local Tax Distribution 26
Chapter 1096 of the 1967 Session Laws, as
Amended – Exemption for Products Sold During
New Sales Tax Holiday 26
Highway Use Tax – Article 5A
G. S. 105- 187.10( b) – Collection of Unpaid
Highway Use Tax 26
Manufacturing Fuel and Certain
Machinery and Equipment – Article
5F
G. S. 105- 187.51A – Privilege Tax on
Manufacturing Fuel 26
G. S. 105- 187.51B – Privilege Tax on Industrial
Machinery Refurbishing Companies 27
Solid Waste Disposal Tax – Article 5G
G. S. 105- 187.60 – Definitions 27
G. S. 105- 187.61 – Tax Imposed 27
G. S. 105- 187.62 – Administration of Tax 28
G. S. 105- 187.62 – Administration of Tax Amended 28
G. S. 105- 187.63 – Use of Tax Proceeds 28
G. S. 105- 187.63 – Use of Tax Proceeds Amended 29
Local Occupancy Taxes
G. S. 153A- 155( c) - County Occupancy Tax Due
on Certain Bundled Transactions 29
G. S. 160A- 215( c) - City Occupancy Tax Due on
Certain Bundled Transactions 29
SECTION 4 – PROPERTY TAX
Property Tax
G. S. 105- 273 – Definitions 31
G. S. 105- 275( 29) – Nonprofit Historic Preservation
Property 31
G. S. 105- 275( 31e) – Leasehold Interest in Exempt
Real Property 31
G. S. 105- 275( 42a) – Taxation of Heavy
Equipment 31
G. S. 105- 275( 44) – Taxation of Drugs Given as
Free Samples 32
G. S. 105- 275( 45) – Taxation of Solar Electric
Systems 32
G. S. 105- 277.1B – Property Tax Homestead
Circuit Breaker 32
G. S. 105- 277.1C – Provide a Property Tax
Exclusion for Honorably Discharged Disabled
Veterans and Their Surviving Spouses 32
G. S. 105- 277.1D – Uniform Provisions for
Payment of Deferred Taxes 32
G. S. 105- 277.1d( a) – Deferred Tax Programs 33
G. S. 105- 277.2 – Present Use Value Property
Changes 33
G. S. 105- 277.3 – Wildlife Exception 33
G. S. 105- 277.3( d1) – Easements on Qualified
Conservation Lands Previously Appraised at
Use Value 34
G. S. 105- 277.15 – Taxation of Wildlife
Conservation Land 34
G. S. 105- 277.16 – Taxation of Low- Income
Housing Property 34
v
G. S. 105- 282.1 – Application for Exemption and
Exclusion 35
G. S. 105- 286 – Time for General Reappraisal of
Real Property 35
G. S. 105- 330 – Combined Motor Vehicle
Registration and Property Tax System Changes 35
G. S. 105- 365.1 – When and Against Whom
Collection Remedies May Be Used 35
G. S. 153A- 156.1 – Heavy Equipment Gross
Receipts Tax in Lieu of Property Tax 36
G. S. 160A- 215.2 – Heavy Equipment Gross
Receipts Tax in Lieu of Property Tax 36
SECTION 5 – MOTOR FUELS TAX
Motor Fuels Tax
G. S. 105- 449.37( a) – Definitions 37
G. S. 105- 449.38 – Technical 37
G. S. 105- 449.44 – Clarifying 37
G. S. 105- 449.47 – Technical 37
G. S. 105- 449.47A – Technical 37
G. S. 105- 449.50 – Repealed 37
G. S. 105- 449.51 – Technical 38
G. S. 105- 449.52 – Technical 38
G. S. 105- 449.52( b) – Conforming 38
G. S. 105- 449.60 – Definitions 38
G. S. 105- 449.65 – License Requirement 38
G. S. 105- 449.66 – Conforming 38
G. S. 105- 449.68 – Technical 38
G. S. 105- 449.69( c) – Technical 38
G. S. 105- 449.70( a) – Technical 39
G. S. 105- 449.74 – Conforming 39
G. S. 105- 449.75 – Clarifying 39
G. S. 105- 449.81 – Taxation of Fuel Grade Ethanol 39
G. S. 105- 449.82( c) – Imposition of Tax on
Unlicensed Exporters 39
G. S. 105- 449.83A – Clarifying 39
G. S. 105- 449.84A – Imposition of Tax on
Unlicensed Suppliers 39
G. S. 105- 449.85 – Technical 39
G. S. 105- 449.86( b) – Technical 39
G. S. 105- 449.87( b) – Technical 40
G. S. 105- 449.89 – Restrictions and Technical 40
G. S. 105- 449.91 – Conforming 40
G. S. 105- 449.96 – Technical 40
G. S. 105- 449.97( c) – Technical 40
G. S. 105- 449.100 – Conforming 40
G. S. 105- 449.101 – Clarifying 40
G. S. 105- 449.102 – Conforming 40
G. S. 105- 449.105 – Denial of Refund 41
G. S. 105- 449.105A( a) – Clarifying 41
G. S. 105- 449.105A( a)( 1) – Technical 41
G. S. 105- 449.108( a) – Conforming 41
G. S. 105- 449.115( b) – Clarifying 41
G. S. 105- 449.117( a) – Conforming 41
G. S. 105- 449.121( b) – Technical 41
G. S. 105- 449.130 – Definitions 41
G. S. 105- 449.131 – Technical 41
G. S. 105- 449.133( a) – Technical 42
G. S. 105- 449.137( a) – Technical 42
G. S. 105- 449.138 – Technical 42
G. S. 105- 449.139( c) – Technical 42
G. S. 105- 119.15 – Definitions 42
G. S. 105- 119.18( a) – Clarifying 42
SECTION 6 – GENERAL
ADMINISTRATION
General
G. S. 105- 228.90( b)( 1b) – Reference to the Internal
Revenue Code Updated 43
G. S. 105- 241.11( a) – Clarifying Change 43
G. S. 105- 241.14( c) – Clarifying Change 43
G. S. 105- 241.22( 1) – Clarifying Change 44
G. S. 105- 242.2 – Technical Change 44
G. S. 105- 249.2( b) – Technical Change 44
G. S. 105- 251 – Technical and Clarifying Changes 44
G. S. 105- 259 – Disclosure 44
vi
G. S. 105- 259( b)( 5d) — Secrecy Required of
Officials; Penalty for Violation 45
G. S. 105- 259( b)( 38) – Disclosure 45
G. S. 105- 263 – Extensions of Time for Filing a
Report or Return 45
G. S. 105- 264.1 – Secretary’s Interpretation 45
G. S. 150B- 31.1( d) – Clarifying 45
SECTION 7 – SMALL BUSINESS
PROTECTION ACT
Small Business Protection Act
G. S. 105- 237.1 – Compromise of Liability 46
G. S. 105- 244.2 – Reduction of Certain Sales Tax
Assessments Against Small Businesses 47
G. S. 105- 258.2 – Taxpayer Conversations ( All
Taxes) 48
G. S. 105- 258.2 – Taxpayer Conversations ( Sales
Tax) 49
G. S. 105- 264 – Effect of Secretary’s Interpretation 49
Session Law 2008- 107 – Plan for Recording
Telephone Calls 49
Session Law 2008- 107 – Study of Issues by
Revenue Laws Study Committee 49
Session Law 2008- 107 – Department of Revenue
to Report on Customer Service Improvement
Initiatives 50
PERSONAL TAXES
1
G. S. 105- 32.2( b) –
Modify Estate Tax
Law
G. S. 105- 134.2( a) –
Repeal of the 8.25%
Tax Rate
G. S. 105- 134.6( b)
( 17a)- Future
Deduction for Special
Accelerated
Depreciation Add-
Back
ESTATE TAX
This subsection was amended to modify the formula for calculating the
estate tax when property is located in a state other than North Carolina
and the decedent was a resident of this State at the time of death. The
amount of estate tax imposed under this section is now reduced by an
amount computed by multiplying the state death tax credit that would
have been allowed against the federal taxable estate as of December
31, 2001 by a fraction, the numerator of which is the gross value of the
estate that has a tax situs in another state and the denominator of
which is the value of the decedent’s gross estate. Under prior law, the
amount of tax due was reduced by the lesser of the amount of death
tax paid the other state or the fraction described above.
( Effective July 16, 2008 and applies retroactively to the estates of
decedents for which the statute of limitations for claiming a refund had
not expired as of December 28, 2007; HB 2436, ss. 28.17 ( a) and ( b);
S. L. 08- 107.)
INDIVIDUAL INCOME TAX
This subsection was amended by Session Law 2006- 66 to repeal the
8.25% individual income tax rate that applied to higher income
taxpayers in two phases. The rate was reduced to 8% for tax years
beginning on or after January 1, 2007 and to 7.75% for tax years
beginning on or after January 1, 2008.
( SB 1741, ss. 24.2 ( a), ( b), and ( c), S. L. 2006- 66.)
This subdivision was added to provide a deduction from future income
tax returns for the 50% additional first- year depreciation deduction
required to be added to federal taxable income under G. S. 105-
134.6( c)( 8a). A taxpayer may deduct 20% of the total amount of
accelerated depreciation added to federal taxable income in the tax
year 2008 in each of the first five taxable years beginning on or after
January 1, 2009.
( Effective for taxable years beginning on or after January 1, 2008; HB
2436, s. 28.1. ( h), S. L. 08- 107.)
SECTION 1
2
G. S. 105- 134.6( b)( 19)
- Tax Deduction for
the Sale of a
Manufactured Home
Community to
Manufactured
Homeowners
G. S. 105- 134.6( c)( 5b)
- Addition to Federal
Taxable Income for
Amounts Donated to
Nonprofit
Organization or Unit
of State or Local
Government to
Enable the Nonprofit
or Government Unit
to Acquire Renewable
Energy Property
G. S. 105- 134.6( c)( 8a)
– Special Accelerated
Depreciation Add-
Back
G. S. 105- 151.22 –
State Ports Tax
Credit Reporting
Requirements
Amended and Tax
Credit Extended
This subdivision was added to provide a deduction from federal
taxable income for 5% of the gross purchase price of a qualified sale of
a manufactured home community. To qualify, the sale must be a one-time
event to a group composed of a majority of the community’s
leaseholders or to a nonprofit organization that represents the group of
leaseholders and notice of the sale must be given to the NC Housing
Finance Agency pursuant to G. S. 42- 14.3.
( Effective for taxable years beginning on or after January 1, 2008, and
expires for taxable years beginning on or after January 1, 2015; HB
2436, s. 28.27( b), S. L. 08- 107.)
This subdivision was added by the 2007 Legislature to require a
taxpayer who claimed a tax credit under G. S. 105- 129.16H for a
donation to a nonprofit organization for acquisition or lease of
renewable energy property to make an addition to federal taxable
income for the amount of the donation. The 2008 Legislature
amended this subdivision to conform to the amendment to G. S. 105-
129.16H that expanded the credit to include donations to State or local
governments.
( Effective for taxable years beginning on or after January 1, 2008; HB
2436, s. 28.25( c), S. L. 08- 107.)
This subdivision was added to require a taxpayer to add to federal
taxable income a percentage of the 50% first- year bonus depreciation
deduction allowed for federal income tax purposes under Section
168( k) of the Internal Revenue Code under the Economic Stimulus Act
of 2008. The applicable percentage is 85% of the bonus depreciation
for the tax year 2008. Any taxpayer who claimed the bonus
depreciation for federal purposes for the tax year 2007 and whose
North Carolina return also reflected that deduction must also add back
85% of the deduction claimed for the tax year 2007 on the 2008 tax
return. This adjustment does not result in a difference in basis of the
affected assets for State and federal income tax purposes.
( Effective for taxable years beginning on or after January 1, 2008; HB
2436, s. 28.1. ( f), S. L. 08- 107.)
This subsection was amended to expand the information the
Department is required to publish by May 1 of each year concerning
the State Ports Tax Credit. Additional information includes the amount
of charges attributable to imports and the amount of charges
attributable to exports.
This subsection was amended to extend the sunset of the credit to
taxable years beginning on or after January 1, 2014 from January 1,
2009.
( Effective July 16, 2008; HB 2436, ss. 28.5. ( c) and ( d); S. L. 08- 107.)
3
G. S. 105- 151.29 –
Expand Film Industry
Credit and Extend
Sunset
G. S. 105- 151.31 –
Refundable Earned
Income Tax Credit
This section was amended to expand the expenses of a production
company that qualify for the credit. Under prior law, compensation
paid to a highly compensated individual ( defined as an individual who
directly or indirectly receives compensation in excess of one million
dollars) was not a qualifying expense. As amended, compensation up
to one million dollars constitutes a qualifying expense. Amounts in
excess of one million dollars are non- qualifying. Additionally, the cost
of production- related insurance coverage constitutes a qualifying
expense as long as the coverage is not purchased from a related
member as defined for corporate income tax purposes.
Former subsection ( j) was recodified as subsection ( k). New
subsection ( j) was added to require a taxpayer to notify the Division of
Tourism, Film, and Sports Development Division of the Department of
Commerce of its intent to claim a credit and to provide the following
information to claim a credit:
• The title of the production
• The name of the production company
• A financial contact for the production company
• The proposed dates of which the production company plans to
begin filming
• Any other information required by the Division.
Productions receiving production credits must acknowledge in the
production credits both the NC Film Office and the regional film office
responsible for the geographic area in which the filming occurred.
( Effective for taxable years beginning on or after January 1, 2008; HB
2436, ss. 28.24( a), ( j), and ( k); S. L. 08- 107.)
This section was added by the 2007 Session Laws to provide a State
earned income tax credit to an individual who claims an earned income
tax credit under Section 32 of the Internal Revenue Code. The credit
is 3.5% of the amount of the earned income tax credit the individual
qualified for on the federal return.
If the credit exceeds the tax liability reduced by the sum of all credits
allowable, the excess is refunded to the taxpayer. Section 3507 of the
Internal Revenue Code, Advance Payment of Earned Income Credit,
does not apply to the State earned income tax credit.
A nonresident or part- year resident is allowed a prorated credit based
on the percentage of the taxpayer's total income that is taxable for
North Carolina income tax purposes.
( Effective for taxable years beginning on or after January 1, 2008, and
expires for taxable years beginning on or after January 1, 2013; HB
1473, ss. 31.4( a) and ( b); S. L. 07- 323.)
4
G. S. 105- 154( e) –
Publicly Traded
Partnerships
G. S. 105- 163.012( b)
– Increase Qualified
Business Venture Tax
Credit Cap
G. S. 105- 188 –
Repeal Gift Tax Law
This subsection was subsequently amended by the 2008 Session
Laws to increase the earned income tax credit from 3.5% to 5% of the
amount of credit the individual qualified for under Section 32 of the
Code. This change is effective for taxable years beginning on or after
January 1, 2009.
( Effective for taxable years beginning on or after January 1, 2009; HB
2436, s. 28.9. ( a), S. L. 08- 107.)
This subsection was added to provide an exception to the information
return and payment requirements under G. S. 105- 154( c) and ( d) for a
publicly traded partnership that is described in Section 7704( c) of the
Code. The information return 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), and the payment requirements do
not apply.
( Effective for taxable years beginning on or after January 1, 2008; HB
2436, s. 28.8. ( a), S. L. 08- 107.)
This subsection was amended to increase the total amount of all tax
credits allowed to taxpayers under G. S. 105- 163.011 for investments
made in a calendar year from $ 7,000,000 to $ 7,500,000.
( Effective for investments made on or after January 1, 2008; HB 2436,
s. 28.26. ( a), S. L. 08- 107.)
GIFT TAX
The gift tax was repealed effective for gifts made on or after January 1,
2009.
( Effective January 1, 2009 and applies to gifts made on or after that
date; HB 2436, s. 28.18. ( a), S. L. 08- 107.)
CORPORATE, EXCISE AND
INSURANCE TAX
5
G. S. 105- 41( a)( 12) –
Home Inspector
Privilege License
G. S. 14- 344.1 –
Internet Sale of
Admission Tickets in
Excess of Printed Price
PRIVILEGE TAXES
This subdivision was added to impose an annual privilege license
on home inspectors licensed by the North Carolina Home Inspector
Licensure Board, a division of the NC Department of Insurance,
under Article 9F of Chapter 143. Although the State privilege
license is due by July 1, 2008, home inspectors will have until
October 1, 2008 to obtain the privilege license without interest or
penalty. The tax for the license is $ 50. Cities that impose a license
tax on home inspectors may collect the tax for fiscal year 2008-
2009 but will be prohibited from doing so on or after July 1, 2009.
( Effective August 9, 2008 and applies to taxable years beginning on
or after July 1, 2008; HB 2558, S. L. 08- 206.)
This new statute was enacted to legislate the activity of reselling
tickets to admissions over the Internet at more than the face value
of the ticket. Resale is permissible as long as the venue where the
event will be held does not prohibit the resale of the ticket and the
seller of the ticket guarantees that the purchaser will be refunded
the purchase price if the event is cancelled, if the purchaser is
denied access to the event, or if the ticket is not delivered to the
purchaser in accordance with the agreement, resulting in the
purchaser missing the event. The statute does not apply to student
tickets for sporting events. The amusement gross receipts tax is
not imposed on the resale of tickets. The Internet seller of the
tickets is required to file a monthly report with the Department of
Revenue. Required information includes:
• Gross receipts derived from the resale of tickets, not including
the face value of the ticket,
• Identification of the event and venue where the event will be
held,
• Identity of the person from whom the reseller purchased the
tickets,
• Acquisition price of the tickets,
• The price received by the reseller for the tickets,
• Identity and address of the purchaser of the tickets, if the
purchaser is also a reseller,
• Any other information required by the Secretary of Revenue.
SECTION 2
6
G. S. 105- 113.39 –
Refund of Unsaleable
Other Tobacco Product
G. S. 105- 113.81A –
Increase in Wine Tax
Proceeds Earmarked
for Grape Growers
Council
G. S. 105- 114( b)( 2) –
Definition of
Corporation Expanded
( Effective August 1, 2008 and expires June 30, 2009; SB 1407, s. 1,
S. L. 08- 158.)
TOBACCO PRODUCTS TAX
Under prior law, a wholesale dealer or retail dealer could return
stale or otherwise unsaleable cigars to the manufacturer and
receive a refund from the Department of the excise tax previously
paid on the cigars. The law did not provide a refund for any other
returned stale or otherwise unsaleable tobacco products. As
amended, excise tax may be refunded on the return of any stale or
unsaleable tobacco products.
Subsection ( a) was rewritten to remove language that stated the 2%
discount allowed for the timely filing of a report and the timely
payment of tax covered losses due to damage to tobacco products.
Subsection ( b) was rewritten to provide that the refund provision
applied to any tobacco product instead of just cigars.
( Effective October 1, 2008 and applies to products returned on or
after that date; HB 2530, s. 4, S. L. 08- 207.)
ALCOHOLIC BEVERAGE
LICENSE AND EXCISE TAXES
This section was amended to increase the amount of wine tax
proceeds earmarked for the North Carolina Grape Growers Council.
Under prior law, the Department of Revenue credited $ 200,000 of
the net proceeds of tax collected on unfortified wine to the
Department of Commerce on a quarterly basis. As amended, the
Department will credit quarterly an additional $ 25,000 from the net
proceeds of tax collected on unfortified wine for the express
purpose of research and development. The original $ 200,000 is
now designated for industry promotion.
( Effective October 1, 2008; HB 2436, s. 13.6A, S. L. 08- 107.)
FRANCHISE TAX
This section was amended by S. L. 06- 66 to include in the definition
of “ corporation” an LLC that elects to be treated as a C- Corporation.
The purpose of the change was to close the loophole that permitted
an entity to elect corporate status for federal income tax purposes
7
G. S. 105- 114.1( a)( 5) –
Conforming Change
G. S. 105- 122( a) –
Technical Change
G. S. 105- 122 –
Revenue Laws Study
Committee Studies
G. S. 105- 125( b) –
Captive REITs
and avoid franchise tax liability imposed under G. S. 105- 122. By
specifying “ C- Corporation,” the statute left open the possibility for
an LLC to elect S- Corporation status for federal purposes and
continue to avoid franchise tax liability. To close this loophole, the
definition is further amended to replace the reference to “ C-Corporation”
with “ corporation.” The amendment is effective for
taxable years beginning on or after January 1, 2009. Because the
general business franchise tax imposed in G. S. 105- 122 is for the
tax year in which the tax becomes due, this amendment will impact
the franchise tax reported on the 2008 income and franchise tax
return since it is due on or after April 15, 2009.
( Effective for taxable years beginning on or after January 1, 2009;
HB 2436, s. 28.7( a), S. L. 08- 107.)
This section was amended to replace the reference to “ C-Corporation”
with “ corporation” thereby making the statute
applicable to S- Corporations as well as C- Corporations.
( Effective for taxable years beginning on or after January 1, 2009;
HB 2436, s. 28.7( b), S. L. 08- 107.)
This subsection was amended by S. L. 2007- 491 with the intent to
conform the franchise tax due date to the change in the due date for
corporate income tax returns. However, the effective date for
franchise tax was incorrect. This legislation corrects the effective
date such that the change in the due date of both franchise and
income tax returns to the fifteenth day of the fourth month is
effective for the tax return due in 2009.
( Effective for taxable years beginning on or after January 1, 2009;
SB 1704, s. 3.( b), S. L. 08- 134.)
The Revenue Laws Study Committee may consider the treatment of
certain liability accounts as they relate to the computation of the
franchise tax capital stock, surplus, and undivided profits base of
corporations in the construction industry. This relates directly to an
issue raised by a taxpayer concerning the Department’s position
that billings in excess of cost do not constitute a definite and
accrued legal liability. If the Committee elects to take up the matter,
it will report its findings to the 2009 General Assembly.
( Effective August 4, 2008; HB 2431, s. 7.2, S. L. 08- 181.)
Under prior law, all Real Estate Investment Trusts ( REITs) were
permitted to reduce the franchise tax capital stock base by the
aggregate market value of its investments in stocks, bonds,
debentures, or other securities or evidences of debt of other
corporations, partnerships, individuals, municipalities, governmental
agencies, or governments. This section was amended to deny that
8
G. S. 105- 129.2A( a4) –
Technical Change
G. S. 105- 129.16E( d) –
Sunset for Small
Business Employee
Health Benefits
G. S. 105- 129.16F –
New Tax Credit for
Biodiesel Producers
G. S. 105- 129.16G –
Clarifying Change
reduction in the base to captive REITs as defined for corporate
income tax purposes.
( Effective for taxable years beginning on or after January 1, 2009;
HB 2436, s. 28.7( c), S. L. 08- 107.)
TAX CREDITS FOR NEW AND
EXPANDING BUSINESSES
This section was amended to correct a statutory reference that
erroneously referred to Article 3J as Article 3I.
( Effective July 28, 2008; SB 1704, s. 69, S. L. 08- 134.)
BUSINESS AND ENERGY TAX
CREDITS
This subsection was amended to extend the sunset. The credit will
expire for taxable years beginning on or after January 1, 2010.
( Effective July 16, 2008; HB 2436, s. 28.9A, S. L. 08- 107.)
This section was added to Article 3B to provide a tax credit to
biodiesel providers that produce at least 100,000 gallons of
biodiesel during the taxable year. The credit is equal to the per
gallon excise tax the producer paid on the biodiesel under Article
36C of Chapter 105. “ Biodiesel” is defined for purposes of this
section as “ liquid fuel derived in whole from agricultural products,
animal fats, or wastes from agricultural products or animal fats.”
The credit does not apply to tax paid on diesel fuel included in a
biodiesel blend. The maximum annual credit is $ 500,000. The
credit expires for taxable years beginning on or after January 1,
2010.
( Effective for taxable years beginning on or after January 1, 2008;
SB 1741, s. 24.8( a), S. L. 06- 66.)
This section was rewritten to make the existing language
subsection ( a) and amended to limit the Work Opportunity Tax
Credit to wages paid during the taxable year for positions located in
North Carolina. A position is located in the State if more than 50%
of the employee’s duties are performed in this State. Under prior
law, the taxpayer was eligible to claim 6% of its federal credit,
regardless of where the jobs were located.
9
G. S. 105- 129.16H –
Credit for Donations to
a Nonprofit
Organization for
Acquisition of
Renewable Energy
Property; Expansion
G. S. 105- 129.45 –
Sunset
Subsection ( b) was added to provide that this credit sunsets for
taxable years beginning on or after January 1, 2012.
( Effective for taxable years beginning on or after January 1, 2008;
SB 1704, s. 2.( a), S. L. 08- 134.)
This section was added by the 2007 Legislature to Article 3B to
allow a credit to a taxpayer who donates money to a tax- exempt
nonprofit organization to construct, purchase, or lease renewable
energy property. The amount of the credit is the taxpayer’s
proportionate share of the credit the nonprofit could have taken
under G. S. 105- 129.16A if the nonprofit were subject to tax. The
taxpayer must take the credit in the year the property is placed in
service. The installment requirements for nonresidential property in
G. S. 105- 129.16A do not apply. The nonprofit organization must
provide each taxpayer who made a donation a statement describing
the property, setting out the cost of the property, the amount of the
credit the organization could claim if it were subject to tax, and the
taxpayer’s share of the credit. A taxpayer claiming a credit under
this section may not deduct this donation as a charitable
contribution.
Two amendments were made to this section by the 2008
Legislature. The first amendment expanded the credit to include
donations to units of State or local governments. The second
amendment clarifies that the credit must be taken in the ‘ taxable’
year in which the property is placed in service.
( New credit effective for taxable years beginning on or after January
1, 2008; SB 3, s. 13( a), S. L. 07- 397. Expansion of the credit for
donations to State or local governments is effective for taxable
years beginning on or after January 1, 2008; HB 2436, s. 28.25( a),
S. L. 08- 107. Technical change effective July 28, 2008; SB 1704, s.
70, S. L. 08- 134.)
LOW- INCOME HOUSING TAX
CREDITS
This section was rewritten to extend the sunset for the credit to
taxable years beginning on or after January 1, 2015 instead of
January 1, 2010. The sunset applies to developments to which
federal credits are allocated on or after that date.
( Effective July 16, 2008; HB 2436, s. 28.3, S. L. 08- 107.)
10
G. S. 105- 129.51( b) –
Sunset
G. S. 105- 129.70 –
Clarifying and
Technical Changes
G. S. 105- 129.71( a)
and 105- 129.72( a) –
Clarifying and
Technical Changes
G. S. 105- 129.75 –
Sunset
RESEARCH AND
DEVELOPMENT
This section was rewritten to extend the sunset for the credits in
Article 3F to taxable years beginning on or after January 1, 2014
instead of January 1, 2009.
( Effective July 16, 2008; HB 2436, s. 28.2, S. L. 08- 107.)
MILL REHABILITATION TAX
CREDIT
Subsection ( 3) was amended to clarify that the definition of “ cost
certification” includes only expenses incurred with respect to repairs
or alterations consistent with the Secretary of the Interior’s
Standards for Rehabilitation. Subsection ( 4) was amended to
delete the reference to “ a certified rehabilitation” because that
language was incorporated into subsection ( 3). Subsection ( 5) d
was deleted and recodified in G. S. 105- 129.71( a).
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.4, S. L. 08- 107.)
These subsections were amended to incorporate the provision
which establishes the floor for cost certification at $ 3,000,000 that
was originally codified in G. S. 105- 129.70( 5) d. The term
“ certification” was replaced with “ the eligibility certification” because
it is a defined term.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.4, S. L. 08- 107.)
This section was amended to effectively extend the sunset of the
credit. Under prior law, the sunset was effective for expenditures
incurred on or after January 1, 2011. As amended, the credit
sunsets for rehabilitation projects for which an application for an
eligibility certification is submitted on or after January 1, 2011.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.4.( d), S. L. 08- 107.)
11
G. S. 105- 130.5( a)( 15)
– Technical Change
G. S. 105- 130.5( a)( 15a)
– 50% First Year
Bonus Depreciation
Add- Back
G. S. 105- 130.5( a)( 20)
– Addition for Donation
to Nonprofit for
Renewable Energy
Property; Expansion
G. S. 105- 130.5( b)( 11)
– Clarifying Change
CORPORATION INCOME TAX
This subdivision was amended to limit the applicability of that
subdivision to taxable years 2002 through 2005.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.1( c), S. L. 08- 107.)
This subdivision was added to require a taxpayer to add to federal
taxable income a percentage of the 50% first- year bonus
depreciation deduction allowed for federal income tax purposes
under Section 168( k) of the Internal Revenue Code under the
Economic Stimulus Act of 2008. The applicable percentage is 85%
of the bonus depreciation for the tax year 2008. Any taxpayer who
claimed the bonus depreciation for federal purposes for the tax year
2007 and whose North Carolina return also reflected that deduction
must also add back 85% of the deduction claimed for the tax year
2007 on the 2008 tax return. This adjustment does not result in a
difference in basis of the affected assets for State and federal
income tax purposes.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.1( d), S. L. 08- 107.)
This subdivision was added by the 2007 Legislature to require a
taxpayer who claimed a tax credit under G. S. 105- 129.16H for a
donation to a nonprofit organization for acquisition or lease of
renewable energy property to make an addition to federal taxable
income for the amount of the donation. The 2008 Legislature
amended this subdivision to conform to the amendment to G. S.
105- 129.16H that expanded the credit to include donations to State
or local governments.
( New addition effective for taxable years beginning on or after
January 1, 2008; SB 3, s. 13( b), S. L. 07- 397; expansion of addition
effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.25.( b), S. L. 08- 107.)
This subdivision was amended to clarify that the deduction from
federal taxable income for a business expense that was reduced or
disallowed for federal income tax purposes because the Code
allowed a federal tax credit in lieu of a deduction is allowed only to
the extent that a similar State income tax credit is not allowed for
the expense.
( Effective July 28, 2008; SB 1704, s. 2.( b), S. L. 08- 134.)
12
G. S. 105- 130.5( b)( 21a)
– Future Deduction for
50% First- Year
Accelerated
Depreciation Add- Back
G. S. 105- 130.5( b)( 24)
– Subtraction for
Qualified Sale of
Manufactured Home
Community
G. S. 105- 130.16( a) –
Conforming Change
G. S. 105- 130.17( b) –
Due Date
G. S. 105- 130.41( c1) –
State Ports Tax Credit
Reporting
Requirements
This subdivision was added to provide a deduction from future
income tax returns for the 50% additional first- year depreciation
deduction required to be added to federal taxable income under
G. S. 105- 130.5( a)( 15a). A taxpayer may deduct 20% of the total
amount of accelerated depreciation added to federal taxable
income in the tax year 2008 in each of the first five taxable years
beginning on or after January 1, 2009.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.1.( g), S. L. 08- 107.)
This subdivision was added to provide a deduction from federal
taxable income for 5% of the gross purchase price of a qualified
sale of a manufactured home community. To qualify, the sale must
be a one- time event to a group composed of a majority of the
community’s leaseholders or to a nonprofit organization that
represents the group of leaseholders and notice of the sale must be
given to the NC Housing Finance Agency pursuant to G. S. 42- 14.3.
( Effective for taxable years beginning on or after January 1, 2008
and expires for taxable years beginning on or after January 1, 2015;
HB 2436, s. 28.27.( a), S. L. 08- 107.)
This section was amended to conform the corporate officers
authorized to sign a corporate income tax return with those
authorized by statute to sign a franchise tax return. Under prior law,
the president, vice- president, treasurer, assistant treasurer,
secretary, or assistant secretary was authorized to sign the return.
As amended, the assistant treasurer, secretary, or assistant
secretary are deleted and replaced by the chief financial officer.
( Effective for taxable years beginning on or after January 1, 2009;
SB 1704, s. 4.( a), S. L. 08- 134.)
This subdivision was amended to change the due date of the
income tax return to the 15th day of the fourth month following the
end of the corporation’s income year.
( Effective for taxable years beginning on or after January 1, 2008;
SB 242, s. 14, S. L. 07- 491.)
This subsection was amended to expand the information the
Department is required to publish by May 1 of each year concerning
the State Ports Tax Credit. Additional information includes the
amount of charges attributable to imports and the amount of
charges attributable to exports.
( Effective July 16, 2008; HB 2436, s. 28.5.( a), S. L. 08- 107.)
13
G. S. 105- 130.41( d) –
State Ports Tax Credit
Sunset
G. S. 105- 130.47( a) –
Film Industry Credit
Expansion
G. S. 105- 130.47( j) –
NC Film Office
Notification and
Acknowledgement
G. S. 105- 130.47( k) –
Film Industry Credit
Sunset
This subsection was amended to extend the sunset of the credit to
taxable years beginning on or after January 1, 2014 from January 1,
2009.
( Effective July 16, 2008; HB 2436, s. 28.5.( b), S. L. 08- 107.)
This section was amended to expand the expenses of a production
company that qualify for the credit. Under prior law, compensation
paid to a highly compensated individual ( defined as an individual
who directly or indirectly receives compensation in excess of one
million dollars) was not a qualifying expense. As amended,
compensation up to one million dollars constitutes a qualifying
expense. Amounts in excess of one million dollars are non-qualifying.
Additionally, the cost of production- related insurance
coverage constitutes a qualifying expense as long as the coverage
is not purchased from a related member as defined for corporate
income tax purposes.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.24.( a), S. L. 08- 107.)
Former subsection ( j) was recodified as subsection ( k). New
subsection ( j) was added to require a taxpayer to notify the Division
of Tourism, Film, and Sports Development Division of the
Department of Commerce of its intent to claim a credit and to
provide the following information to claim a credit:
• The title of the production
• The name of the production company
• A financial contact for the production company
• The proposed dates on which the production company plans
to begin filming
• Any other information required by the Division.
Productions receiving production credits must acknowledge in the
production credits both the NC Film Office and the regional film
office responsible for the geographic area in which the filming
occurred.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.24.( a), S. L. 08- 107.)
Former subsection ( j) was recodified as subsection ( k) and
amended to extend the sunset. The credit will expire for qualifying
expenses occurring on or after January 1, 2014 instead of January
1, 2010.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.24.( a), S. L. 08- 107.)
14
G. S. 58- 6- 25 –
Insurance Regulatory
Charge
G. S. 105- 228.5( d)( 3) –
Adjustment to the Rate
of the Additional Gross
Premiums Tax on
Property Coverage
Contracts
G. S. 105- 228.5B
( effective until June 30,
2010) – Conforming
Change
G. S. 105- 228.5B
( effective June 30,
2010) – Technical
Change
INSURANCE GROSS
PREMIUMS TAX
The percentage rate to be used in calculating the insurance
regulatory charge under this statute is 5.5% for the 2008 calendar
year. This charge is a percentage of gross premiums tax liability.
( Effective July 16, 2008; HB 2436, s. 28.13, S. L. 08- 107.)
The 2006 Legislature repealed the additional State and local fire
and lightning taxes and replaced them with an additional tax on
property coverage contracts with no reference to fire and lightning
coverage. The rate of the new tax was set at 0.85%. The tax is
imposed on 10% of the gross premiums from automobile physical
damage policies, as defined in subparagraph ( a), and 100% of the
gross premiums from all other property coverage policies, as
defined in subparagraph ( b). The new tax was effective for taxable
years beginning on or after January 1, 2008.
The 2007 Legislature further considered these changes and
reduced the tax rate from 0.85% to 0.74%.
( Repeal of State and local taxes and enactment of new tax on
property coverage contracts effective for taxable years beginning on
or after January 1, 2008; HB 1891, s. 3; S. L. 06- 196; reduced rate
of new tax also effective for taxable years beginning on or after
January 1, 2008; SB 238, s. 1, S. L. 07- 250.)
This section was amended to conform to a change in the name of
the North Carolina Health Insurance Risk Pool Special Fund as
defined in G. S. 58- 50- 175. The term “ special” was deleted from the
name.
( Effective July 28, 2008; HB 2438, s. 3.2.( d), S. L. 08- 118.)
The catch line is amended to read “ Distribution of part of tax
proceeds to High Risk Pool.”
( Effective July 28, 2008; HB 2438, s. 3.2.( e), S. L. 08- 118.)
SALES AND USE TAX
15
SECTION 3
G. S. 105- 164.3( 8g) –
Definition of Energy
Star Qualified Product
G. S. 105- 164.4( a) –
Increase in State Sales
Tax Rate
G. S. 105- 164.4( a)( 1j) –
Tax on Electricity Sold
to Manufacturers and
Farmers
SALES AND USE TAX
This definition was added as a result of a new sales tax holiday
authorized by the General Assembly. The term is defined as “ a
product that meets the energy efficient guidelines set by the United
States Environmental Protection Agency and the United States
Department of Energy and is authorized to carry the Energy Star
label.”
( Effective July 16, 2008 for sales made on or after that date; HB
2436, s. 28.12( a), S. L. 08- 107.)
The State general rate of tax increases from 4.25% to 4.5%. This
occurs simultaneously with the reduction in the local sales tax under
Article 44 from one- half to one- quarter percent as a result of the
State’s assumption of Medicaid responsibilities for the counties.
( Effective October 1, 2008 for sales occurring on or after that date;
HB 1473, s. 31.16.3( h), S. L. 07- 323. The State general rate further
increases from 4.5% to 4.75% simultaneously with the repeal of the
one- quarter percent tax under Article 44; effective October 1, 2009
for sales occurring on or after that date; HB 1473, s. 31.16.4( g),
S. L. 07- 323.)
This new subdivision imposes a State sales tax at the rate of 1.4%
on sales of electricity to manufacturing industries and
manufacturing plants for use in connection with the operation of the
industries and plants and to farmers to be used by them for any
farming purposes other than preparing food, heating dwellings, and
other household purposes. The electricity must be measured by a
separate meter or another separate device.
( Effective July 1, 2008 for sales occurring on or after that date; SB
3, s. 10( d), S. L. 07- 397. The rate is further reduced from 1.4% to
0.8%; effective July 1, 2009 for sales occurring on or after that date;
SB 3, s. 10( e), S. L. 07- 397. The subdivision is repealed and sales
of electricity to manufacturers and farmers are exempt from tax;
effective July 1, 2010 for sales occurring on or after that date; SB 3,
s. 10( f), S. L. 07- 397.)
16
G. S. 105- 164.4B( d)( 2)
– Sourcing of Direct
Mail
G. S. 105- 164.13 –
Exemptions and
Exclusions
This subdivision was rewritten to correct a reference to the sourcing
rule that applies when the purchaser of direct mail does not provide
the seller a direct pay permit or other information to show the
jurisdictions to which the direct mail is to be delivered. In such
cases, direct mail is sourced to the address from which it was
shipped.
( Effective August 7, 2008; SB 1632, s. 42, S. L. 08- 187.)
The 2008 Session of the General Assembly added two new
exemptions. Also included are exemptions enacted by the 2007
General Assembly with future effective dates. The changes and
their effective dates are as follows:
Fuel sold to farmers – ( 1). This exemption for sales of specific
items to a farmer for use by the farmer in the planting, cultivating,
harvesting, or curing of farm crops or in the production of dairy
products, eggs, or animals was rewritten to remove the reference to
“ electricity” in the phrase “ fuel other than electricity.” The sales tax
on electricity will be phased out.
( Effective July 1, 2010 for sales occurring on or after that date; SB
3, s. 10( g), S. L. 07- 397.)
Electricity sold to farmers – ( 1b). This is a new exemption for
electricity sold to a farmer to be used for any farming purpose other
than preparing food, heating dwellings, and other household
purposes.
( Effective July 1, 2010 for sales occurring on or after that date; SB
3, s. 10( h), S. L. 07- 397.)
Fuel and electricity sold to manufacturers – ( 57). This is a new
exemption for fuel and electricity sold to a manufacturer for use in
connection with the operation of a manufacturing facility.
( Effective July 1, 2010 for sales occurring on or after that date; SB
3, s. 10( h), S. L. 07- 397.)
Disaster assistance debit card purchases – ( 58). This is a new
exemption for 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 such as the Federal
Emergency Management Administration ( FEMA) or the American
Red Cross. Prior to August 1, 2008, such purchases were subject
to the applicable State and local sales and use tax.
( Effective August 1, 2008, HB 2436, s. 28.6( a), S. L. 08- 107.)
17
G. S. 105- 164.13B( a) –
State Sales Tax
Exemption for Certain
Bakery Items
G. S. 105- 164.13C( a) –
Change in 2008 Sales
Tax Holiday
G. S. 105- 164.13D –
New Sales and Use
Tax Holiday for Energy
Star Qualified Products
Charges for interior design services in connection with sales –
( 59). This is a new exemption for interior design services provided
in conjunction with the sale of tangible personal property. In order
to qualify for the exemption, the charge representing the interior
design services must be separately stated from the sales price of
the tangible personal property.
( Effective August 1, 2008, HB 2436, s. 28.20( a), S. L. 08- 107.)
This is a new exemption from the State sales and use tax for bakery
items sold without eating utensils by an artisan bakery. These
items are subject to the 2% local sales and use tax applicable to
sales of qualifying food. Subdivision ( 4), which provides that
“ prepared food” is subject to the State and applicable local rates of
tax, was amended to provide that prepared food other than bakery
items sold without eating utensils by an artisan bakery is subject to
the State and local rates of tax. For purposes of the exemption, 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 defined
as “… a bakery that meets all of the following requirements: ( a) It
derives over eighty percent ( 80%) of its gross receipts from bakery
items, and ( b) Its annual gross receipts, combined with the gross
receipts of all related persons as defined in G. S. 105- 163.010, do
not exceed one million eight hundred thousand dollars
($ 1,800,000).”
( Effective January 1, 2009 for sales made on or after that date; HB
2436, s. 28.19( a), S. L. 08- 107.)
This subsection was rewritten to add new subdivision ( 2a) that
exempts school instructional materials as defined in G. S. 105-
164.3( 37b) with a sales price of three hundred dollars ($ 300.00) or
less per item if sold during the sales tax holiday. Only the following
items are included in the term “ school instructional materials:”
reference books, reference maps and globes, textbooks, and
workbooks.
( Effective October 1, 2007 for sales made on or after that date; HB
1473, s. 31.14( b), S. L. 07- 323.)
This new section authorizes a sales and use tax holiday for specific
products that meet energy efficient guidelines and carry the Energy
Star label. The term “ Energy Star qualified product” is defined in
G. S. 105- 164.3( 8g). Qualified products are exempt from all State
and local sales and use taxes if sold between 12: 01 a. m. on the first
Friday of November and 11: 59 p. m. the following Sunday. For
2008, the dates are Friday, November 7th through Sunday,
November 9th. Only the following Energy Star qualified products
18
G. S. 105- 164.14( a1) –
Refunds to Interstate
Passenger Air Carriers
Extended
G. S. 105- 164.14( b) –
Refunds to Certain
501( c)( 3)
Organizations
G. S. 105- 164.14( b) –
Refunds to University
Affiliated Nonprofit
Organizations
will be exempt from tax during the holiday period: clothes washers,
freezers, refrigerators, central air conditioners, room air
conditioners, air- source heat pumps, geothermal heat pumps,
ceiling fans, dehumidifiers, and programmable thermostats. The
exemption does not apply to rentals of qualified products and to
sales of qualified products for use in a trade or business, including
sales to contractors of products that will be installed in buildings or
structures. Rentals of qualified products and sales of qualified
products for use in a trade or business, such as sales to
contractors, are subject to sales and use tax even when rented or
sold during the holiday period.
( Effective July 16, 2008 for sales made on or after that date; HB
2436, s. 28.12( b), S. L. 08- 107.)
The provision allowing an interstate passenger air carrier a refund
of the net amount of sales and use tax paid by it in North Carolina
on fuel during a calendar year in excess of $ 2,500,000, which was
scheduled to be repealed for purchases made on or after January
1, 2009, was extended. As amended, the refund provision is
repealed for purchases made on or after January 1, 2011.
( Effective July 16, 2008; HB 2436, s. 28.23( a), S. L. 08- 107.)
This subsection was rewritten to clarify the types of entities that
qualify for semiannual refunds of sales and use taxes paid on direct
purchases of tangible personal property and certain services for use
in carrying on the work of the nonprofit entity. As rewritten, the
refund provisions apply to an organization that is exempt from
income tax under section 501( c)( 3) of the Internal Revenue Code
and is not classified in any of the following major group areas of the
National Taxonomy of Exempt Entities: Community Improvement
and Capacity Building, Public and Societal Benefit, or Mutual and
Membership Benefit. The provisions pertaining to hospitals not
operated for profit and qualified retirement homes were not
changed.
( Effective July 1, 2008 for purchases made on or after that date; HB
2436, s. 28.22( a), S. L. 08- 107.)
This subsection was further amended to add an additional category
of organizations that qualifies for semiannual refunds of sales and
use taxes. As amended, a university affiliated nonprofit
organization ( including an entity exempt from taxation as a
disregarded entity of the nonprofit organization) that procures,
designs, constructs, or provides facilities to, or for use by, a
constituent institution of the University of North Carolina is eligible
for refunds. Notwithstanding the statutory requirements pertaining
to due dates, a request for a refund 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.
19
G. S. 105- 164.14( j) –
Refunds to Certain
Industrial Facilities
G. S. 105- 164.14( l) –
Refunds to Motorsports
Racing Teams or
Motorsports
Sanctioning Bodies
Extended
G. S. 105- 164.16( e) –
Simultaneous State
and Local Changes
G. S. 105- 164.29( d) –
Revocation of
Certificate of
Registration
( Effective January 1, 2004 for purchases made on or after that date;
HB 2509, s. 1, S. L. 08- 154.)
This subsection was rewritten to expand the provision authorizing
refunds of sales and use taxes paid by an eligible facility on
qualified building materials, building supplies, fixtures, and
equipment that become a part of the real property of the eligible
facility. New sub- subdivision ( 3) n. provides that a solar electricity
generating materials manufacturing industry is now eligible for
refunds. Solar electricity generating materials manufacturing
means the development and production of one or more of the
following: ( 1) Photovoltaic materials or modules used in producing
electricity, and ( 2) Polymers or polymer films primarily intended for
incorporation into photovoltaic materials or modules used in
producing electricity. New sub- subdivision ( 2) d. sets out the wage
standard eligibility requirement that must be satisfied. The refund
provision is repealed for sales made on or after January 1, 2013.
( Effective July 1, 2008 for purchases made on or after that date; HB
2438, s. 3.10( a), S. L. 08- 118.)
The provision allowing a professional motorsports racing team or a
motorsports sanctioning body a refund of sales and use tax paid by
it in this State on aviation fuel, which was scheduled to be repealed
for purchases made on or after January 1, 2009, was extended. As
amended, the refund provision is repealed for purchases made on
or after January 1, 2011.
( Effective July 16, 2008; HB 2436, s. 28.23( b), S. L. 08- 107.)
This new subsection was added to clarify how sales and use tax on
lease or rental payments and installment sale payments is reported
when the State and local rates change on the same date but the
“ combined general rate” does not change. When the State and
local sales and use tax rates change on the same date because
one increases and the other decreases, but the “ combined general
rate” as defined in G. S. 105- 164.3( 4a) does not change, taxes
payable on the gross receipts from the following periodic payments
are to be reported in accordance with the changed State and local
rates: ( 1) Lease or rental payments billed after the effective date of
the changes, and ( 2) Installment sale payments received after the
effective date of the changes by a taxpayer who reports the
installment sale on a cash basis.
( Effective July 28, 2008; SB 1704, s. 11, S. L. 08- 134.)
This subsection was rewritten as a result of the major revision of the
appeals procedures. It changes the procedure for revoking a
wholesale merchant’s or retailer’s certificate of registration to
parallel the new procedures for refunds and assessment. As
rewritten, it requires the Secretary to notify the merchant of the
20
G. S. 105- 164.38( c) –
Transferee Liability
G. S. 105- 164.44I( b) –
Revision to Video
Programming and
Telecommunications
Tax Distribution for
Supplemental PEG
Channel Support
G. S. 105- 164.44I( e) –
Revision to Use of
Proceeds from
Supplemental PEG
Channel Support
G. S. 105- 164.44J –
Supplemental PEG
Channel Support
proposed revocation, which will become final unless the merchant
objects and files a timely request for a Departmental review.
( Effective January 1, 2008; SB 242, s. 19, S. L. 07- 491.)
This subsection was rewritten as a result of the major revision of the
appeals procedures. It makes necessary changes to correspond to
the new assessment and collection procedures.
( Effective January 1, 2008; SB 242, s. 20, S. L. 07- 491.)
This subsection was rewritten to change the maximum amount of
supplemental PEG channel support funds a county or city can
receive.
( Effective August 2, 2008; SB 1716, s. 1, S. L. 08- 148.)
This subsection was rewritten to clarify that the amount of proceeds
for subsequent fiscal years is the same proportionate amount of
funds as distributed in fiscal year 2006- 2007, and that the funds are
to be used for the same purpose as in 2006- 2007.
( Effective August 2, 2008; SB 1716, s. 2, S. L. 08- 148.)
This is new section pertaining solely to supplemental PEG ( Public,
Educational, or Governmental) channel support. Subsection ( a)
contains definitions of the following terms: “ existing agreement,”
“ PEG channel,” “ PEG channel operator,” “ qualifying PEG channel,”
and “ supplemental PEG channel support funds.” Subsection ( b)
specifies the information that cities and counties must include in
their annual certifications to the Secretary of Revenue. Cities or
counties must certify to the Department by July 15th of each year
the number of qualifying PEG channels provided for use by a cable
service provider. The certification must include 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. If a qualifying PEG channel has more than one
PEG channel operator, the city or county must include the name of
each operator of the PEG channel and 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, and ( 3) Any other
information required by the Department. Subsection ( c) provides
additional restrictions as to how the supplemental PEG channel
support funds are to be used. Subsection ( d) requires a county or
city to submit a revised certification if the county or city certifies a
PEG channel in error and to return all supplemental PEG channel
support funds distributed as a result of the error.
21
Chapter 323 of the
2007 Session Laws –
Transfer for Wildlife
Resources
Commission
G. S. 105- 467( b) –
Exemption for Products
Sold During New Sales
Tax Holiday
G. S. 105- 472( b1) –
First One Percent
Local Tax Distribution
G. S. 105- 501 –
Distribution of Second
One- Half Percent Local
Sales and Use Tax
G. S. 105- 502 – Use of
Additional Tax
Revenue by Counties
For the 2008 certification, the date the certification must be
submitted is September 15, 2008 rather than July 15, as provided in
Subsection ( b).
( Effective August 2, 2008; SB 1716, s. 3, S. L. 08- 148.)
This act provides that, for the 2007- 2008 and 2008- 2009 fiscal
years, the Secretary of Revenue must make a quarterly transfer
from the State sales and use tax net collections to the State
Treasurer for the Wildlife Resources Fund to fund legislative salary
increases for Wildlife Resources Commission employees.
( Effective July 1, 2007; HB 1473, s. 28.15B, S. L. 07- 323.)
LOCAL SALES AND USE TAX
A technical amendment was made to add a reference to sales
made during the new sales tax holiday for certain Energy Star
qualified products set out in G. S. 105- 164.13D. Sales of specific
products made during the holiday are exempt from local sales and
use taxes as well as State sales and use taxes.
( Effective July 16, 2008; HB 2436, s. 28.12( c), S. L. 08- 107.)
This new subsection is added to reduce the county’s allocation by
the amount of the city’s hold harmless amount. The reduction does
not affect the portion of the county’s distribution that is shared with
its municipalities. A corresponding change is made to the
Mecklenburg first one percent local tax.
( Effective October 1, 2008 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.3( d), S. L. 07- 323.) Repealed
( Effective July 28, 2008; SB 1704, s. 14( b), S. L. 08- 134.)
This section alters the method of distributing the proceeds of the
second one- half percent tax from per capita to point of origin. The
amount of the net proceeds allocated to a county is no longer
adjusted by the statutory adjustment factors.
( Effective October 1, 2009 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.4( b), S. L. 07- 323.)
This section amends the method of determining the amount
required to be reserved for the public school capital outlay fund in
each county. As a result of the second one- half percent tax
distribution method changing October 1, 2009, some counties will
receive less funds under G. S. 105- 501. The county must use sixty
percent ( 60%) of the amount of revenue specified in the following:
( 1) The amount of revenue the county receives under G. S. 105-
22
G. S. 105- 520 –
Distribution of Third
One- Half Percent Local
Tax
G. S. 105- 515 through
105- 520 – Third One-
Half Percent Local
Sales and Use Tax
Repealed
G. S. 105- 521 – Hold
Harmless for Repealed
Reimbursements
G. S. 105- 522 – City
Hold Harmless for
Repealed Local Taxes
501( a), and ( 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. This
new method ensures the public school capital outlay fund is held
harmless as a result of the Medicaid swap.
( Effective October 1, 2009 for distributions for months beginning on
or after that date; SB 1704, s. 13( a), S. L. 08- 134.)
As a result of the reduction of the third one- half percent local tax to
one- quarter percent, the method of distributing the proceeds of the
tax changes. The one- quarter percent tax will be distributed
monthly on a point of origin basis; no portion of the proceeds of this
levy will be distributed on a per capita basis.
( Effective October 1, 2008 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.3( b), S. L. 07- 323.)
The sections providing for the adoption, levy, administration, and
distribution of the third one- half percent tax are repealed.
( Effective October 1, 2009 for sales occurring on or after that date;
HB 1473, s. 31.16.4( a), S. L. 07- 323.)
As a result of the reduction of the third one- half percent local tax to
one- quarter percent, a hold harmless provision is added to replace
the repealed reimbursements. A definition of “ replacement
revenue” is added; this term is defined as the sum of 50% of the
revenue distributed under Article 40 other than revenue from the
sale of qualifying food subject to only the 2% local tax and 25% of
the revenue distributed under Article 39 ( first one- cent local tax) or
under the Mecklenburg first one- cent tax other than revenue from
the sale of qualifying food subject to only the 2% local tax. A local
government is reimbursed if the estimated amount of replacement
revenue is less than the repealed reimbursement amount. The
source of the funds for hold harmless distributions is State sales
and use tax collections.
( Effective January 1, 2008; HB 1473, s. 31.16.3( c), S. L. 07- 323.)
This is a new section providing that a municipality that was
incorporated on or before October 1, 2008 and receives a sales and
use tax distribution under G. S. 105- 472 receives a hold harmless
amount. The hold harmless amount is 50% of the amount of sales
and use tax revenue distributed for a month to the municipality
under Article 40 other than revenue from sales of qualifying food
subject to only the 2% local tax. A county must hold the
municipalities harmless from the repeal of the taxes formerly
imposed under Article; the municipality’s hold harmless amount is to
be added to the municipality’s monthly distribution. The revenue for
the hold harmless distribution is obtained by reducing each county’s
23
G. S. 105- 522( a)( 2) –
City Hold Harmless for
Repealed Local Taxes
G. S. 105- 522( a)( 2) –
City Hold Harmless for
Repealed Local Taxes
Amended
monthly allocation under G. S. 105- 472( b) or under the
corresponding provision in the Mecklenburg first one- cent sales tax
act by the hold harmless amounts for the municipalities in that
county.
( Effective October 1, 2008 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.3( f), S. L. 07- 323. The
calculation of the repealed sales tax amount is changed for fiscal
year 2008- 2009; effective October 1, 2008 for distributions for
months beginning on or after that date; HB 1473, s. 31.16.3( g), S. L.
07- 323. Repealed ( Effective July 28, 2008; SB 1704, s. 15( b),
S. L. 08- 134.) The calculation of the hold harmless amount is
amended; effective October 1, 2009 for distributions for months
beginning on or after that date; HB 1473, s. 31.16.4( c), S. L. 07- 323.
Repealed ( Effective July 28, 2008; SB 1704, s. 15( c), S. L. 08-
134.) For the 2009- 2010 fiscal year, further changes are made in
the method of calculating the repealed sales tax amount; effective
October 1, 2009; HB 1473, s. 31.16.4( e), S. L. 07- 323. Repealed
( Effective July 28, 2008; SB 1704, s. 15( e), S. L. 08- 134.) Further
revisions are made in the method of calculating the hold harmless
amount; effective October 1, 2009 for distributions for months
beginning on or after that date; HB 714, s. 14.4( a), S. L. 07- 345.)
Repealed ( Effective July 28, 2008; SB 1704, s. 15( f), S. L. 08-
134.)
A technical amendment to subdivision ( a)( 2) was made to the hold
harmless calculation to refer to G. S. 105- 486 instead of Article 40
other than revenue from sales of qualifying food subject to only the
2% local tax. This amendment does not result in any change to the
calculated amount. A technical amendment to subsection ( b)
makes it clear that the hold harmless payments are calculated on
the basis of amounts allocated for distribution before any
subtraction for the hold harmless payments, by referencing Article
39 and Chapter 1096 of the 1967 Session Laws.
( Effective October 1, 2008 for distributions for months beginning on
or after that date; SB 1704, s. 14( a), S. L. 08- 134.)
This amends the city hold harmless calculation to match the
formulas used in the tables that calculated the impact of the
“ Medicaid swap.” The calculation is the sum of ( a) the amount
allocated under G. S. 105- 486 ( Article 40), and ( b) amount
determined by subtracting twenty- five percent ( 25%) of G. S. 105-
472 ( Article 39) or Chapter 1096 of the 1967 Session Laws from
fifty percent ( 50%) of G. S. 105- 486 ( Article 40).
( Effective October 1, 2009 for distributions for months beginning on
or after that date; SB 1704, s. 15( g), S. L. 08- 134.)
24
G. S. 105- 523 – County
Hold Harmless for
Repealed Local Taxes
G. S. 105- 523( b)( c)( d) –
County Hold Harmless
for Repealed Local
Taxes Amended
This is a new section requiring the Secretary to make hold harmless
payments to a county if the “ repealed sales tax amount” for a fiscal
year exceeds the county’s “ hold harmless threshold.” These terms
are defined in this section. To determine if the county is eligible for
a hold harmless payment, the Secretary must estimate a county’s
repealed sales tax amount and hold harmless threshold for a fiscal
year and must send an eligible county 90% of its estimated hold
harmless payment with the monthly distribution made under G. S.
105- 472 for March of that year. At the end of each fiscal year, the
Secretary is required to determine the difference between a
county’s repealed sales tax amount and its hold harmless threshold
for that year and send the remainder of the county’s hold harmless
payment for the fiscal year ended June 30 by August 15. The intent
of this section is that each county benefit by at least $ 500,000
annually from the exchange of a portion of the local sales and use
taxes for the State’s assumption of responsibility for the non-administrative
costs of Medicaid.
( Effective October 1, 2008 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.3( f), S. L. 07- 323. The
calculation of the repealed sales tax amount is changed for fiscal
year 2008- 2009; effective October 1, 2008 for distributions for
months beginning on or after that date; HB 1473, s. 31.16.3( g), S. L.
07- 323. Repealed ( Effective July 28, 2008; SB 1704, s. 15( b),
S. L. 08- 134.) The calculation of the hold harmless amount is
amended; effective October 1, 2009 for distributions for months
beginning on or after that date; HB 1473, s. 31.16.4( d), S. L. 07- 323.
Repealed ( Effective July 28, 2008; SB 1704, s. 15( d), S. L. 08-
134.) For the 2009- 2010 fiscal year, further changes are made in
the method of calculating the repealed sales tax amount; effective
October 1, 2009; HB 1473, s. 31.16.4( e), S. L. 07- 323. Repealed
( Effective July 28, 2008; SB 1704, s. 15( e), S. L. 08- 134.) Further
revisions are made in the method of calculating the repealed sales
tax amount; effective October 1, 2009 for distributions for months
beginning on or after that date; HB 714, s. 14.4( b), S. L. 07- 345.)
Repealed ( Effective July 28, 2008; SB 1704, s. 15( f), S. L. 08-
134.)
This amends subsections ( b), ( c), and ( d) by inserting the city hold
harmless amount into the calculation of the county hold harmless
payment. A technical amendment to subdivision ( b)( 3) was made
to the hold harmless calculation to refer to G. S. 105- 486 instead of
Article 40 other than revenue from sales of qualifying food subject
to only the 2% local tax. This amendment does not result in any
change to the calculated amount.
( Effective October 1, 2008 for distributions for months beginning on
or after that date; SB 1704, s. 15( a), S. L. 08- 134.)
25
G. S. 105- 523( b)( 3) –
County Hold Harmless
for Repealed Local
Taxes
Chapter 323 of the
2007 Session Laws –
Reduction of Third
One- Half Percent Local
Sales and Use Tax
Chapter 323 of the
2007 Session Laws –
Hold Harmless
Chapter 323 of the
2007 Session Laws –
Article 44 Title
This amends the county hold harmless calculation to match the
formulas used in the tables that calculated the impact of the
“ Medicaid swap.” The calculation is the sum of subdivision ( a.) the
amount allocated under G. S. 105- 486 ( Article 40) and subdivision
( b.) amount determined by subtracting twenty- five percent ( 25%) of
G. S. 105- 472 ( Article 39) or Chapter 1096 of the 1967 Session
Laws from fifty percent ( 50%) of G. S. 105- 486 ( Article 40).
( Effective October 1, 2009 for distributions for months beginning on
or after that date; SB 1704, s. 15( h), S. L. 08- 134.)
As a result of the State’s assumption of Medicaid responsibilities for
the counties, this act reduces the one- half percent ( ½ %) sales and
use tax authorized under Article 44 of Chapter 105 of the General
Statutes to one- quarter percent ( ¼ %). No action is required of the
county; a resolution enacted by the county to levy the one- half
percent tax is considered to be a resolution authorizing the levy of
the one- quarter percent tax. The one- quarter percent reduction is
offset by a one- quarter percent increase in the State general rate of
sales and use tax.
( Effective October 1, 2008 for sales occurring on or after that date;
HB 1473, s. 31.16.3( a), S. L 07- 323. The remaining one- quarter
percent ( ¼ %) local tax under Article 44 is repealed; effective
October 1, 2009 for sales occurring on or after that date; HB 1473,
s. 31.16.4( a), S. L. 07- 323.)
This act provides that, effective October 1, 2007, the State begins
assuming Medicaid responsibilities for the counties over a three-year
period. There is a county hold harmless provision, and the
revenue for the hold harmless distribution is to be withheld from
State sales and use tax collections. The Secretary is required to
estimate a county’s hold harmless amount for the 2007- 2008 fiscal
year and send the county 90% of the estimated amount with the
monthly sales tax distribution for March 2008. The Secretary must
determine the county’s actual hold harmless amount for the 2007-
2008 fiscal year and send the remainder to the county by August
15, 2008.
( Effective July 31, 2007; HB 1473, ss. 31.16.2( a) through
31.16.2( c), S. L. 07- 323.)
The title of Article 44 is changed from “ Third One- Half Cent Local
Government Sales and Use Tax” to “ Local Government Hold
Harmless Provisions” as a result of the incremental repeal of the
third one- half percent local tax.
( Effective October 1, 2009; HB 1473, s. 31.16.4( f), S. L. 07- 323.)
26
Chapter 1096 of the
1967 Session Laws, as
Amended –
Mecklenburg First One
Percent Local Tax
Distribution
Chapter 1096 of the
1967 Session Laws, as
Amended – Exemption
for Products Sold
During New Sales Tax
Holiday
G. S. 105- 187.10( b) –
Collection of Unpaid
Highway Use Tax
G. S. 105- 187.51A –
Privilege Tax on
Manufacturing Fuel
A new paragraph is added to reduce the Mecklenburg County’s
allocation by the amount of the city’s hold harmless amount. The
reduction does not affect the portion of Mecklenburg County’s
distribution that is shared with its municipalities. A corresponding
change is made to the first one percent local tax for other counties.
( Effective October 1, 2008 for distributions for months beginning on
or after that date; HB 1473, s. 31.16.3( e), S. L. 07- 323.) Repealed
( Effective July 28, 2008; SB 1704, s. 14( c), S. L. 08- 134.)
A technical amendment was made to add a reference to sales
made during the new sales tax holiday for certain Energy Star
qualified products set out in G. S. 105- 164.13D. Sales of specific
products made during the holiday are exempt from the 1%
Mecklenburg County local sales and use tax as well as State sales
and use taxes and other local sales and use taxes.
( Effective July 16, 2008; HB 2436, s. 28.12( d), S. L. 08- 107.)
HIGHWAY USE TAX –
ARTICLE 5A
This subsection was rewritten as a result of the major revision of the
appeals procedures. It provides that the remedies for collection of
taxes under Article 9 apply to the highway use tax; prior to this
change, the remedies in G. S. 20- 99 apply. For purposes of this
subsection, it also grants the Commissioner of Motor Vehicles the
same authority as the Secretary of Revenue.
( Effective January 1, 2008; SB 242, s. 21, S. L. 07- 491.)
MANUFACTURING FUEL AND
CERTAIN MACHINERY AND
EQUIPMENT– ARTICLE 5F
This section was rewritten to reflect a reduction in the privilege tax
rate imposed on a manufacturing industry or plant that purchases
fuel to operate the industry or plant. The rate is five - tenths percent
( 0.5%).
( Effective July 1, 2008 for fuel purchased on or after that date; SB
3, s. 12( b), S. L. 07- 397. The rate is further reduced from 0.5% to
0.3%; effective July 1, 2009 for fuel purchased on or after that date;
27
G. S. 105- 187.51B –
Privilege Tax on
Industrial Machinery
Refurbishing
Companies
G. S. 105- 187.60 –
Definitions
G. S. 105- 187.61 – Tax
Imposed
SB 3, s. 12( c), S. L. 07- 397. The section is repealed and purchases
of fuel by manufacturers are exempt from tax; effective July 1,
2010; SB 3, s. 12( d), S. L. 07- 397.)
This section was rewritten to expand the imposition of the 1%
privilege tax with a maximum tax of eighty dollars ($ 80.00) per
article to include an industrial machinery refurbishing company that
is included in industry group 811310 of NAICS. The privilege tax
will apply to the purchase of equipment or an attachment or repair
part for equipment that meets all of the following requirements: ( a)
is capitalized by the company for tax purposes under the Code, ( b)
is used by the company in repairing or refurbishing tangible
personal property, and ( c) would be considered mill machinery
under G. S. 105- 187.51 if it were purchased by a manufacturing
industry or plant and used by the industry or plant to manufacture
tangible personal property.
( Effective July 1, 2008; HB 2436, s. 28.21( a), S. L. 08- 107.)
SOLID WASTE DISPOSAL TAX
– ARTICLE 5G
A new Article 5G of Subchapter I of Chapter 105 was added
effective July 1, 2008. The new Article consists of G. S. 105- 187.60
through 105- 187.63.
( Effective July 1, 2008; SB 1492, s. 14( a), S. L. 07- 550.)
This section provides that the definitions set out in G. S. 105- 164.3
and G. S. 130A- 290 apply to this Article.
( Effective July 1, 2008; SB 1492, s. 14( a), S. L. 07- 550.)
This section imposes an excise tax 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 at the same rate is also imposed on the transfer of municipal
solid waste and construction and demolition debris to a transfer
station permitted under the same Article for disposal outside the
State. The tax is due on waste and debris received from third
parties and on waste and debris disposed of by the owner or
operator; it is payable by the owner or operator of each landfill and
transfer station.
( Effective July 1, 2008; SB 1492, s. 14( a), S. L. 07- 550.)
28
G. S. 105- 187.62 –
Administration of Tax
G. S. 105- 187.62 –
Administration of Tax
Amended
G. S. 105- 187.63 – Use
of Tax Proceeds
This section requires the owner or operator of the landfill or transfer
station to maintain scales designed to determine waste tonnage
that are approved by the Department of Agriculture and Consumer
Services. The owner or operator must record waste tonnage when
the waste is received and must maintain records required by the
Secretary of Revenue. The owner or operator may add 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. The tax is payable and a return is due to be filed in the
same manner as required for sales and use tax under G. S. 105-
164.16.
( Effective July 1, 2008; SB 1492, s. 14( a), S. L. 07- 550.)
This section was rewritten to make administrative changes. The
owner or operator must record waste tonnage disposed of in a
landfill or transferred to a station for disposal outside the State.
This change clarifies that the tax is due only on the tonnage actually
disposed of in North Carolina or transferred to a transfer station for
disposal outside North Carolina; if recyclables or other items are
removed prior to disposal or transfer of the tonnage, tax is not due
on those items. The due date for a solid waste disposal tax return
and payment was changed to provide that the return and payment
are due on a quarterly basis, regardless of the amount of tax due.
A return covers a calendar quarter; the return and payment are due
by the last day of the month following the end of the quarter. The
original provision required the return and payment to be filed in the
same manner as sales and use tax returns. In addition, a bad debt
deduction provision was added. This provision allows an owner or
operator to recover tax paid on tonnage it received but for which it
was never compensated.
( Effective August 9, 2008; HB 2530, s. 1, S. L. 08- 207.)
This section, as amended, allows the Secretary of Revenue to
retain the costs of collection, not to exceed $ 225,000. The
proceeds of the tax, less the costs of collection, are to be distributed
as follows: ( 1) Fifty percent ( 50%) to the Inactive Hazardous Sites
Cleanup Fund established by G. S. 130A- 310.11, ( 2) Eighteen and
seventy- five one hundredths percent ( 18.75%) is to be distributed to
cities in the State on a per capita basis and eighteen and seventy-five
one hundredths percent ( 18.75%) is to be distributed to
counties in the State on a per capita basis. Persons who reside
within a city are not counted in the population of the county or
counties in which the city is located, and ( 3) Twelve and one- half
percent ( 12.5%) to the Solid Waste Management Trust Fund
established by G. S. 130A- 309.12.
( Effective July 1, 2008; SB 1492, s. 14( a), S. L. 07- 550.
Amendment effective July 1, 2008; SB 6, s. 2, S. L. 07- 543.)
29
G. S. 105- 187.63 – Use
of Tax Proceeds
Amended
G. S. 153A- 155( c) –
County Occupancy Tax
Due on Certain
Bundled Transactions
G. S. 160A- 215( c) –
City Occupancy Tax
Due on Certain
Bundled Transactions
This section was rewritten to change the manner in which the tax
proceeds are distributed. As amended, thirty- seven and one- half
percent ( 37.5%) is to be distributed to cities and counties in the
State on a per capita basis; one- half of this amount must be
distributed to cities, and one- half to counties. 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 if it does
not provide solid waste management programs and services and is
not responsible by contract for payment for these programs and
services, unless it is served by a regional solid waste management
authority. Funds distributed must be used by a city or county solely
for solid waste management programs and services; a city or
county that receives such funds and is served by a regional solid
waste management authority must forward the amount it receives to
that authority. The portions distributed to the Inactive Hazardous
Sites Cleanup Fund and the Solid Waste Management Trust Fund
are unchanged.
( Effective August 9, 2008; HB 2530, s. 2, S. L. 08- 207.)
LOCAL OCCUPANCY TAXES
This statute, which provides for the collection of the county room
occupancy tax by operators of subject businesses, was rewritten to
address the taxation of packages that include accommodation
rentals. As rewritten, it specifies that when a taxable
accommodation is furnished as part of a package, the bundled
transaction provisions in G. S. 105- 164.4D apply in determining the
sales price of the taxable accommodation. If the bundled
transaction provisions do not address the type of package offered,
the operator may determine an allocated price for each item in the
package based on a reasonable allocation of revenue that is
supported by its business records kept in the ordinary course of
business; the tax is due on the allocated price of the taxable
accommodation.
( Effective July 28, 2008; SB 1704, s. 12( b), S. L. 08- 134.)
This statute, which provides for the collection of the city room
occupancy tax by operators of subject businesses, was rewritten to
address the taxation of packages that include accommodation
rentals. As rewritten, it specifies that when a taxable
accommodation is furnished as part of a package, the bundled
transaction provisions in G. S. 105- 164.4D apply in determining the
sales price of the taxable accommodation. If the bundled
transaction provisions do not address the type of package offered,
the operator may determine an allocated price for each item in the
package based on a reasonable allocation of revenue that is
supported by its business records kept in the ordinary course of
30
business; the tax is due on the allocated price of the taxable
accommodation.
( Effective July 28, 2008; SB 1704, s. 12( c), S. L. 08- 134.)
PROPERTY TAX
31
SECTION 4
G. S. 105- 273 –
Definitions
G. S. 105- 275( 29) —
Nonprofit Historic
Preservation Property
G. S. 105- 275( 31e) —
Leasehold Interest in
Exempt Real Property
G. S. 105- 275( 42a) —
Taxation of Heavy
Equipment
PROPERTY TAX
Changes the definition of taxpayer to: 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. Makes other
technical changes to the definitions throughout G. S. 105- 273.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2008; SB 1876, s. 1.1, S. L. 2008- 35.)
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.
( Effective for taxes imposed for taxable years beginning on or after
July 28, 2008; SB 1704, s. 72, S. L. 2008- 134.)
Excludes from taxation 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. This exclusion requires a one- time application.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2008; HB 1889, s. 7, S. L. 2008- 171.)
Excludes from taxation heavy equipment on which a gross receipts
tax may be imposed under G. S. 153A- 156.1 and G. S. 160A- 215.2.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2009; SB 1852, s. 1, S. L. 2008- 144.)
32
G. S. 105- 275( 44) —
Taxation of Drugs
Given as Free Samples
G. S. 105- 275( 45) —
Taxation of Solar
Electric Systems
G. S. 105- 277.1B —
Property Tax
Homestead Circuit
Breaker
G. S. 105- 277.1C —
Provide a Property Tax
Exclusion for
Honorably Discharged
Disabled Veterans and
Their Surviving
Spouses
G. S. 105- 277.1D —
Uniform Provisions for
Payment of Deferred
Taxes
Excludes from taxation 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 their course of practice.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2008; SB 1878, s. 4, S. L. 2008- 146.)
Designates solar energy electric systems used directly and
exclusively for conversion of solar energy to electricity as a special
class of property. Excludes 80% of the appraised value of the solar
systems from taxation.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2008; SB 1878, s. 5, S. L. 2008- 146.)
Numerous technical changes were made to the circuit breaker to
help with the administration of this new program starting in 2009.
The residence has to be owned and occupied for at least five years.
A permanent residence owned and occupied by husband and wife
as tenants by the entirety is entitled to the full benefit even if only
one of the owners meets the requirements. An annual application
is required for this program. G. S. 105- 282.1( a)( 2) e is repealed.
G. S. 153A- 148.1( a) and G. S. 160A- 208.1( a) is amended to allow
the following information to be disclosed:
To include on a property tax receipt the amount of property taxes
due and the amount of property taxes deferred on a residence
classified under G. S. 105- 277.1B, the property tax homestead
circuit breaker.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2008; SB 1876, s. 1.2- 1.5, S. L. 2008- 35.)
Provides a property tax exclusion of the first $ 45,000 of appraised
value of the residence owned and occupied by a honorably
discharged disabled veteran or the unmarried surviving spouse of a
honorably discharged disabled veteran.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2009; HB 2436, s. 28.11, S. L. 2008- 107.)
Provides for uniform treatment of all the property tax deferral
programs. The following statutes have this statement added
concerning when deferred taxes are due:
The deferred taxes for the preceding three fiscal years are due and
payable in accordance with G. S. 105- 277.1D when the property
loses its eligibility for deferral as a result of a disqualifying event.
33
G. S. 105- 277.1d( a) —
Deferred Tax Programs
G. S. 105- 277.2 —
Present Use Value
Property Changes
G. S. 105- 277.3 —
Wildlife Exception
A disqualifying event is also defined in each of the following
statutes:
• G. S. 105- 275( 29a), historic district property held as future site of
historic structure.
• G. S. 105- 277.1B, the property tax- homestead circuit breaker.
• G. S. 105- 277.4( c), present- use value property.
• G. S. 105- 277.14, working waterfront property.
• G. S. 105- 277.15, wildlife conservation land.
• G. S. 105- 278( b), historic property.
• G. S. 105- 278.6( e), nonprofit property held as future site of low-or
moderate- income housing.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2008; SB 1876, s. 2.1- 2.7, S. L. 2008- 35.)
Adds wildlife conservation land to the list of deferred tax programs
as enacted in Section 2.2 of S. L. 2008- 35.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2010; HB 1889, s. 2, S. L. 2008- 171.)
Changes the present use value law to allow additional forms of
ownership to qualify for special tax treatment. Changes the types of
business entities and trust, which can qualify for present use value.
All members of the business entity must be directly or indirectly
individuals who are actively engaged in farming agricultural land,
horticultural land or forestland. Allows land to immediately qualify
without requiring the deferred taxes to be assumed by the new
owner as long as the new owner continues to use the land for the
purpose for which it was classified under the previous ownership.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2008; SB 1878, s. 2, S. L. 2008- 146.)
Provides that 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.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2010; HB 1889, s. 5, S. L. 2008- 171.)
34
G. S. 105- 277.3( d1) —
Easements on
Qualified Conservation
Lands Previously
Appraised at Use
Value
G. S. 105- 277.15 —
Taxation of Wildlife
Conservation Land
G. S. 105- 277.16 —
Taxation of Low-
Income Housing
Property
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 the property is subject to an enforceable
conservation easement that would qualify for the conservation tax
credit provided in G. S. 105- 130.34 and G. S. 105- 151.12, without
regard to actual production or income requirements of this section;
and the taxpayer received no more than seventy- five percent ( 75%)
of the fair market value of the donated property interest in
compensation.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2010; HB 1889, s. 4, S. L. 2008- 171.)
Provides a present use value system for wildlife conservation land.
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.
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 January 1 of the year for which the benefit of this section
is claimed. The land has to be at least 20 contiguous acres with no
more than 100 acres of an owner’s land in a county in the program.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2010; HB 1889, s. 1, S. L. 2008- 171.)
Designates low- income housing to which the North Carolina
Housing Finance Agency allocated a federal tax credit under
Section 42 of the Code as a special class of property. Requires the
assessor to use the income approach as the method of valuation
and requires the assessor to take rent restrictions that apply to the
property into consideration. The assessor may not consider the
income tax credits received under Section 42 of the Code in
determining the income attributable to the property.
35
G. S. 105- 282.1 —
Application for
Exemption and
Exclusion
G. S. 105- 286 — Time
for General
Reappraisal of Real
Property
G. S. 105- 330 —
Combined Motor
Vehicle Registration
and Property Tax
System Changes
G. S. 105- 365.1 —
When and Against
Whom Collection
Remedies May Be
Used
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2009; SB 1878, s. 3, S. L. 2008- 146.)
Adds wildlife conservation land to the list of property, which only
requires a one- time application for exclusion.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2010; HB 1889, s. 3, S. L. 2008- 171.)
Changes the schedule for general reappraisal of real property for
those counties whose population is 75,000 or greater. If the
county’s sales assessment ratio determined under G. S. 105- 289( h)
is less than .85 or greater than 1.15, a reappraisal is required to be
effective no later than January 1 of the third year following the year
the ratio is reported to the county, or the eighth year following the
year of the county’s last reappraisal, whichever is earlier. Removes
the Fourth Year Horizontal Adjustments provision from the statutes.
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2009; SB 1878, s. 1, S. L. 2008- 146.)
Repeals G. S. 105- 330.2. Provides that unregistered motor vehicles
are subject to a discovery pursuant to G. S. 105- 312 unless the
vehicle has been taxed as a registered vehicle for the current year.
Provides the accounting for the 60% interest of the first month’s
interest collected on unpaid property taxes on motor vehicles.
Provides for a memorandum of understanding to be entered into by
the Division of Motor Vehicles and the Property Tax Division of the
Department of Revenue. Delays the effective date of
implementation of the Combined Motor Vehicle Registration and
Property Tax System until January 1, 2011.
( Effective for taxes imposed for taxable years beginning on or after
July 28, 2008; SB 1704, s. 61- 66, S. L. 2008- 134.)
Provides the date of delinquency after which the tax collector may
use delinquent tax collection remedies. For a non- deferral tax, the
delinquency date is the date interest begins. For deferred taxes,
the delinquency date is the date a disqualifying event occurs except
for the death of the owner under the circuit breaker program. Under
the circuit breaker program the delinquency date is the first day of
the ninth month following the death of the owner.
Also provides who the taxpayer is for the purposes of enforced
collection of property tax. For real property, it is the owner of record
as of the date of delinquency. For personal property, it is the owner
of record as of January 1 of the calendar year in which the taxes
are due. For motor vehicles, it is the owner of record as of the date
the registration is renewed or applied for.
36
G. S. 153A- 156.1 —
Heavy Equipment
Gross Receipts Tax in
Lieu of Property Tax
G. S. 160A- 215.2 —
Heavy Equipment
Gross Receipts Tax in
Lieu of Property Tax
( Effective for taxes imposed for taxable years beginning on or after
July 1, 2008; SB 1876, s. 2.8, S. L. 2008- 35.)
Allows a county by resolution to impose a gross receipt tax at the
rate of one and two- tenths percent ( 1.2%) on the gross receipts
from the short- term lease or rental of heavy equipment.
( Effective on August 2, 2008; SB 1852, s. 2, S. L. 2008- 144.)
Allows a city by resolution to impose a gross receipt tax at the rate
of eight- tenths percent ( 0.8%) on the gross receipts from the short-term
lease or rental of heavy equipment.
( Effective on August 2, 2008; SB 1852, s. 3, S. L. 2008- 144.)
MOTOR FUELS TAX
37
SECTION 5
G. S. 105- 449.37( a) –
Definitions
G. S. 105- 449.38 –
Technical
G. S. 105- 449.44 –
Clarifying
G. S. 105- 449.47 –
Technical
G. S. 105- 449.47A –
Technical
G. S. 105- 449.50 –
Repealed
MOTOR FUELS TAX
This statute was amended to add definitions for International Fuel
Tax Agreement and qualified motor vehicle. This statute was also
amended to modify the current definitions for motor carrier, motor
vehicle, and operations. The definition additions and modifications
were for clarification, with the exception of the motor vehicle
definition, which was modified to include special mobile equipment
within the definition.
( Effective January 1, 2009; SB 1704, s. 16, S. L. 08- 134.)
This statute was amended to add a period at the end of the
sentence.
( Effective January 1, 2009; SB 1704, s. 17, S. L. 08- 134.)
This statute was amended to allow the Department to include
information received from SHP when determining a potential liability
of motor carriers. A technical change was also added to remove
the dated term “ identification marker” and replace it with a more
commonly used and defined term of “ decal.”
( Effective January 1, 2009; SB 1704, s. 18, S. L. 08- 134.)
This statute was amended to remove the dated term “ identification
marker” and replace it with a more commonly used term of “ decal.”
( Effective January 1, 2009; SB 1704, s. 19, S. L. 08- 134.)
This statute was amended to remove the dated term “ identification
marker” and replace it with a more commonly used term of “ decal.”
( Effective January 1, 2009; SB 1704, s. 20, S. L. 08- 134.)
This statute was repealed as the required information on
application forms is identified in the General Administration statutes.
( Effective January 1, 2009; SB 1704, s. 21, S. L. 08- 134.)
38
G. S. 105- 449.51 –
Technical
G. S. 105- 449.52 –
Technical
G. S. 105- 449.52( b) –
Conforming
G. S. 105- 449.60 –
Definitions
G. S. 105- 449.65 –
License Requirement
G. S. 105- 449.66 –
Conforming
G. S. 105- 449.68 –
Technical
G. S. 105- 449.69( c) –
Technical
This statute was amended to remove the dated term “ identification
marker” and replace it with a more commonly used term of “ decal.”
( Effective January 1, 2009; SB 1704, s. 22, S. L. 08- 134.)
This statute was amended to remove the dated term “ identification
marker” and replace it with a more commonly used term of “ decal.”
( Effective January 1, 2009; SB 1704, s. 23, S. L. 08- 134.)
This statute was amended to conform the appeals language to that
of the administrative review based on legislation passed during the
previous legislative session.
( Effective July 25, 2008; SB 1704, s. 8, S. L. 08- 134.)
This statute was amended to add definitions for clarity, move
definitions that are currently located in other areas of the statutes,
remove cross- references to other statutes wherever possible,
reference a federal regulation, and to renumber the definitions.
( Effective January 1, 2009; SB 1704, s. 24, S. L. 08- 134.)
This statute was amended to limit the motor fuel transporter
licensing requirement to those motor fuels transporters that
transport motor fuel for compensation. This statute also removes
the multiple activity reference for motor fuel transporters.
( Effective January 1, 2009; SB 1704, s. 25, S. L. 08- 134.)
This statute was amended to move the definitions included in this
statute to the definitions section for consistency. Also, a technical
change was made to the term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 26, S. L. 08- 134.)
This statute was amended to correct a grammatical error to the
term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 27, S. L. 08- 134.)
This statute was amended to remove permissive supplier from the
list requiring a Federal Certificate of Registry. Permissive supplier
is included in the definition of supplier; therefore, the inclusion is
redundant.
( Effective January 1, 2009; SB 1704, s. 28, S. L. 08- 134.)
39
G. S. 105- 449.70( a) –
Technical
G. S. 105- 449.74 –
Conforming
G. S. 105- 449.75 –
Clarifying
G. S. 105- 449.81 –
Taxation of Fuel Grade
Ethanol
G. S. 105- 449.82( c) –
Imposition of Tax on
Unlicensed Exporters
G. S. 105- 449.83A –
Clarifying
G. S. 105- 449.84A –
Imposition of Tax on
Unlicensed Suppliers
G. S. 105- 449.85 –
Technical
G. S. 105- 449.86( b) –
Technical
This statute was amended to correct a grammatical error.
( Effective January 1, 2009; SB 1704, s. 29, S. L. 08- 134.)
This statute was amended to make a conforming change to have
the same requirements for identifying the importer category as the
current statutes have for identifying the supplier category.
( Effective January 1, 2009; SB 1704, s. 30, S. L. 08- 134.)
This statute was amended to clarify the payment responsibilities of
all licensees rather than just the supplier upon cancellation of the
license.
( Effective January 1, 2009; SB 1704, s. 31, S. L. 08- 134.)
This statute was amended to impose the excise tax on fuel grade
ethanol once it is removed from production storage, is removed
from a terminal, or is imported into this State and not delivered to a
licensed terminal.
( Effective January 1, 2009; SB 1704, s. 32, S. L. 08- 134.)
This statute was amended to impose the excise tax on motor fuel
sold to unlicensed exporters.
( Effective January 1, 2009; SB 1704, s. 33, S. L. 08- 134.)
This statute was amended to clarify that tax payments on fuel grade
ethanol are payable by the fuel alcohol provider.
( Effective January 1, 2009; SB 1704, s. 34, S. L. 08- 134.)
This statute was amended to impose the excise tax on motor fuel
transferred within the terminal transfer system to an unlicensed
supplier. The tax liability is payable by the person transferring the
fuel, the person receiving the fuel, and the terminal operator
location at which the fuel was transferred.
( Effective January 1, 2009; SB 1704, s. 35, S. L. 08- 134.)
This statute was amended to correct a grammatical error.
( Effective January 1, 2009; SB 1704, s. 36, S. L. 08- 134.)
This statute was amended to correct a grammatical error to the
terms bulk end- user and end- seller.
( Effective January 1, 2009; SB 1704, s. 37, S. L. 08- 134.)
40
G. S. 105- 449.87( b) –
Technical
G. S. 105- 449.89 –
Restrictions and
Technical
G. S. 105- 449.91 –
Conforming
G. S. 105- 449.96 –
Technical
G. S. 105- 449.97( c) –
Technical
G. S. 105- 449.100 –
Conforming
G. S. 105- 449.101 –
Clarifying
G. S. 105- 449.102 –
Conforming
This statute was amended to correct a grammatical error to the
term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 38, S. L. 08- 134.)
This statute was amended to restrict the transfer of fuel from a
terminal to a marine vessel to licensed suppliers. This statute was
further amended to correct a grammatical error to the term bulk
end- user.
( Effective January 1, 2009; SB 1704, s. 39, S. L. 08- 134.)
This statute was amended to identify the tax responsibility of
purchasers of motor fuel to the supplier.
( Effective January 1, 2009; SB 1704, s. 40, S. L. 08- 134.)
This statute was amended to remove the majority of the return
schedule sorting requirements that are obsolete due to electronic
filing. The statute was further amended to modify the filing
requirements for sales to exempt entities. The law was previously
amended to no longer allow a distributor to use an exempt access
card at the terminal. This change would remove that enabling
language from this reporting statute.
( Effective January 1, 2009; SB 1704, s. 41, S. L. 08- 134.)
This statute was amended to correct a grammatical error to the
term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 42, S. L. 08- 134.)
This statute was amended to require licensed terminal operators to
report transactions from out- of- state terminals with this State as its
destination. This conforms to what is currently practiced. The
statute was further amended to conform the structure of the statute
to that of other like statutes.
( Effective January 1, 2009; SB 1704, s. 43, S. L. 08- 134.)
This statute was amended to clarify the person responsible for filing
a motor fuels transporter return.
( Effective January 1, 2009; SB 1704, s. 44, S. L. 08- 134.)
This statute was amended to conform the structure of the statute to
that of other like statutes.
( Effective January 1, 2009; SB 1704, s. 45, S. L. 08- 134.)
41
G. S. 105- 449.105 –
Denial of Refund
G. S. 105- 449.105A( a)
– Clarifying
G. S. 105- 449.105A
( a)( 1) – Technical
G. S. 105- 449.108( a) –
Conforming
G. S. 105- 449.115( b) –
Clarifying
G. S. 105- 449.117( a) –
Conforming
G. S. 105- 449.121( b) –
Technical
G. S. 105- 449.130 –
Definitions
G. S. 105- 449.131 –
Technical
This statute was amended to change the heading to more
accurately reflect the statute. The statute was further amended to
disallow the refund on motor fuel exported by an unlicensed
exporter.
( Effective January 1, 2009; SB 1704, s. 46, S. L. 08- 134.)
This statute was amended to clarify that the filing frequency of the
kerosene refunds is monthly.
( Effective January 1, 2009; SB 1704, s. 47, S. L. 08- 134.)
This statute was amended to correct a grammatical error to the
term end- user.
( Effective January 1, 2009; SB 1704, s. 48, S. L. 08- 134.)
This statute was amended to conform the refund return due dates
to the filing frequencies as established.
( Effective January 1, 2009; SB 1704, s. 49, S. L. 08- 134.)
This statute was amended to clarify the information that is required
on the shipping document.
( Effective January 1, 2009; SB 1704, s. 50, S. L. 08- 134.)
This statute was amended to conform to current practice and
terminology.
( Effective January 1, 2009; SB 1704, s. 51, S. L. 08- 134.)
This statute was amended to remove the term “ distributor” from the
list of those that the Department may audit. A distributor is included
in the definition of a person, as defined by statute.
( Effective January 1, 2009; SB 1704, s. 52, S. L. 08- 134.)
This statute was amended to update cross- references and to
correct a grammatical error to the term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 53, S. L. 08- 134.)
This statute was amended to correct a grammatical error to the
term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 54, S. L. 08- 134.)
42
G. S. 105- 449.133( a) –
Technical
G. S. 105- 449.137( a) –
Technical
G. S. 105- 449.138 –
Technical
G. S. 105- 449.139( c) –
Technical
G. S. 119- 15 –
Definitions
G. S. 119- 18( a) –
Clarifying
This statute was amended to correct a grammatical error to the
term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 55, S. L. 08- 134.)
This statute was amended to correct a grammatical error to the
term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 56, S. L. 08- 134.)
This statute was amended to correct a grammatical error to the
term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 57, S. L. 08- 134.)
This statute was amended to correct a grammatical error to the
term bulk end- user.
( Effective January 1, 2009; SB 1704, s. 58, S. L. 08- 134.)
This statute was amended to add definitions for aviation gasoline
and jet fuel and to update cross- references.
( Effective January 1, 2009; SB 1704, s. 59, S. L. 08- 134.)
This statute was amended to identify all fuel products subject to the
inspection tax.
( Effective January 1, 2009; SB 1704, s. 60, S. L. 08- 134.)
GENERAL ADMINISTRATION
43
SECTION 6
G. S. 105- 228.90( b)( 1b)
– Reference to the
Internal Revenue Code
Updated
G. S. 105- 241.11( a) –
Clarifying Change
G. S. 105- 241.14( c) –
Clarifying Change
GENERAL
This subdivision was amended to update the reference to the
Internal Revenue Code from January 1, 2007 to May 1, 2008. Any
amendments to the Internal Revenue Code enacted in 2007 that
increase North Carolina taxable income for the 2007 taxable year
become effective for taxable years beginning on or after January 1,
2008.
Note: This implies that North Carolina has conformed to all of the
tax provisions of the federal Economic Stimulus Act of 2008.
However, separate provisions in G. S. 105- 130.5( a) and G. S. 105-
134.6( c) result in the State not immediately conforming to the 50%
first- year bonus depreciation allowance.
( Effective July 16, 2008; HB 2436, s. 28.1( a), S. L. 08- 107.)
This section was amended to clarify the time for requesting a review
after a proposed denial of a refund. The Department is deemed to
have denied a request for refund if it takes no action within six
months of the request for refund. Under prior law, a taxpayer had
45 days after the date the refund was deemed denied to request a
review. Because the Department was concerned that taxpayers
might not track the deemed denial date and inadvertently lose their
opportunity to request a review, it recommended a modification of
the statute to the General Assembly. As amended, a taxpayer may
still request a review after a request for refund is deemed denied;
however, the 45 day time period to request a review does not begin
until the Department mails or delivers in person to the taxpayer a
notice of denial.
( Effective for taxable years beginning on or after January 1, 2008
and applies to all requests for refunds pending on or filed on or after
that date; SB 1704, s. 5( a), S. L. 08- 134.)
This section was amended to clarify that failure to issue a notice of
final determination within the required time does not affect the
validity of either a proposed assessment or a proposed denial of a
refund. As originally enacted, a proposed denial of a refund was
omitted from the statute.
44
G. S. 105- 241.22( 1) –
Clarifying Change
G. S. 105- 242.2 –
Technical Change
G. S. 105- 249.2( b) –
Technical Change
G. S. 105- 251 –
Technical and
Clarifying Changes
G. S. 105- 259 –
Disclosure
( Effective for taxable years beginning of or after January 1, 2008;
SB 1704, s. 6.( a), S. L. 08- 134.)
This section was amended to clarify that the Department may
collect tax, interest and penalty on a no- remit return even if the
taxpayer does not show interest and penalty on the return. As
originally written, the Department could collect a tax when a
taxpayer filed a return showing tax due with the return but did not
pay the amount shown due. As amended, “ showing tax due” was
replaced with “ showing an amount due” to clarify that the
Department is not limited to collecting only the tax amount shown
due on the return.
( Effective for taxable years beginning on or after January 1, 2008;
SB 1704, s. 7.( a), S. L. 08- 134.)
This section, originally codified as G. S. 105- 253, was amended to
make stylistic and clarifying changes and to include partners and
managers of partnerships in the list of responsible persons who
may be assessed for certain unpaid trust taxes owed by the
business entity.
( Effective July 1, 2008 and applies to taxes that become collectible
on or after that date; SB 1704, s. 10.( a), S. L. 08- 134.)
This section was amended to correct a statutory cross- reference to
G. S. 105- 236( a)( 2),( 3), and ( 4). It was erroneously referred to as
G. S. 105- 236( 2),( 3), and ( 4).
( Effective August 7, 2008; SB 1632, s. 16, S. L. 08- 187.)
The catchline of this statute was amended to include the addition of
a new subsection that clarifies that when a taxpayer provides
additional information within the statute of limitations that
establishes that an assessment or denial of a refund is incorrect,
the correction must be made. The correction is not part of the
process for the administrative or judicial review.
( Effective July 28, 2008; S. B. 1704, s. 71, S. L. 08- 134.)
A provision in the ratified bill authorizes an employee of the State to
provide tax information about tax credits claimed under former
Article 3A and current Article 3J to the University of North Carolina
at Chapel Hill to enable the University to compile statistical
information to fulfill a contractual obligation between the University
and the General Assembly. In lieu of extracting the needed
information from the tax returns, the State may provide a copy of
the returns to the University for the University to extract the
information. This disclosure is an exception to G. S. 105- 259, but no
amendments were made to that section.
45
G. S. 105- 259( b)( 5d) —
Secrecy Required of
Officials; Penalty for
Violation
G. S. 105- 259( b)( 38) –
Disclosure
G. S. 105- 263 –
Extensions of Time for
Filing a Report or
Return
G. S. 105- 264.1 –
Secretary’s
Interpretation
G. S. 150B- 31.1( d) –
Clarifying
( Effective July 28, 2008; SB 1704, s. 78, S. L. 08- 134.)
This subdivision was amended to add heavy equipment rental tax to
the list of information that may be disclosed to a county or city on an
annual basis, when the county or city needs the information for the
administration of the heavy equipment rental tax.
( Effective on August 2, 2008; SB 1852, s. 4, S. L. 2008- 144.)
This subdivision was amended to permit the Department to verify
with a unit of State or local government information concerning a
tax credit claimed by a taxpayer for donations to the unit of State or
local government for acquisition or lease of renewable energy
property.
( Effective for taxable years beginning on or after January 1, 2008;
HB 2436, s. 28.25.( d), S. L. 08- 107.)
This section was amended to remove the reference to gift tax
returns as a result of the repeal of the gift tax.
( Effective January 1, 2009 and applies to gifts made on or after that
date; HB 2436, s. 28.18.( a), S. L. 08- 107.)
This new section was added to clarify the authority for interpreting
the application of local occupancy taxes to specific transactions
since those taxes apply to accommodation rentals that are subject
to sales and use tax. It provides that an interpretation by the
Secretary of Revenue 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 in determining 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. Such an interpretation
provides the same protections against liability under the local law
that it provides under the State law.
( Effective July 28, 2008; SB 1704, s. 12( a), S. L. 08- 134.)
This statute was amended to allow the lab reports from the
Department of Agriculture and other State and federal agencies to
be admissible in a contested tax matter before the Office of
Administrative Hearings ( OAH) without testimony from the agency
that completed the report. This is similar to that of law enforcement
reports.
( Effective July 25, 2008; SB 1704, s. 9, S. L. 08- 134.)
SMALL BUSINESS
PROTECTION ACT
46
S7ECTION
G. S. 105- 237.1 –
Compromise of Liability
SMALL BUSINESS
PROTECTION ACT
Session Law 2008- 107 ( House Bill 2436) added several new
statutes to Article 9 of Chapter 105 with regard to assessments
against small businesses. Several statutes pertaining to advice
given to taxpayers by the Department of Revenue were revised.
The new and revised statutes, which are a result of findings by the
General Assembly pertaining to compliance issues in complex
areas of the sales and use tax laws, are explained below.
This section of the law authorizing the Secretary of Revenue to
compromise the amount of a taxpayer’s liability was rewritten. The
finding pertaining to a taxpayer’s insolvency was rewritten to clarify
that a taxpayer is considered insolvent only if it is plain and
indisputable that the taxpayer is clearly insolvent and will remain so
in the reasonable future or the taxpayer has been determined to be
insolvent in a judicial proceeding. A new finding was added and
provides that a taxpayer’s liability may be compromised if collection
of a greater amount than that offered in compromise would produce
an unjust result under the circumstances. The provision specifically
related to compromising an assessment based upon an action of
the federal government in making an assessment which is
subsequently settled, compromised, or adjusted was deleted. A
new provision requires that, for a compromised tax liability of at
least $ 1,000.00, the Secretary must make a written statement
setting out the amount of the liability, the aount 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 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; for other compromise settlements, approval of the
Attorney General is not required.
( Effective July 16, 2008; HB 2436, s. 28.16( f), S. L. 08- 107.)
47
G. S. 105- 244.2 –
Reduction of Certain
Sales Tax
Assessments Against
Small Businesses
This is a new statute that requires the Secretary to reduce an
assessment against a small business for State and local sales and
use taxes and to waive any penalties imposed as part of the
assessment when the assessment is made as the result of an audit
of the small business and all of the following apply:
1. The gross receipts of the business for the calendar year
preceding the year in which the audit period begins,
combined with the gross receipts of all related persons as
defined in G. S. 105- 163.010, do not exceed one million
eight hundred thousand dollars ($ 1,800,000).
2. The business remitted to the Department all the sales and
use taxes it collected during the audit period.
3. The business had not been told 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.
4. The business made a good faith effort to comply with the
sales and use tax laws and the assessment is based on the
incorrect application of one of the following complex areas of
these laws:
a. The rate of tax that applies to 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 is therefore taxable, and a service that is
incidental to the sale of tangible personal property,
and is therefore not taxable.
d. The determination of whether a person is a
manufacturer.
The amount by which a sales and use tax assessment against a
business must be reduced under the provisions of the Small
Business Protection Act is a percentage of the assessment. The
percentage is determined by the average monthly gross receipts of
the business for the calendar year preceding the year in which the
audit period begins, combined with the average monthly gross
receipts of all related persons as defined in G. S. 105- 163.010. Any
reduction of an assessment and waiver of