GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2019
SESSION LAW 2019-6
SENATE BILL 56
AN ACT To make technical changes to the revenue laws.
The General Assembly of North Carolina enacts:
PART I. IRC UPDATE
SECTION 1.1. G.S. 105‑228.90(b)(1b) reads as rewritten:
"(1b) Code. The Internal
Revenue Code as enacted as of February 9, 2018, January 1, 2019, including
any provisions enacted as of that date that become effective either before or
after that date."
PART II. CORPORATE INCOME TAX CHANGES
SECTION 2.1. G.S. 105‑130.5(a) reads as rewritten:
"(a) The following additions to federal taxable income shall be made in determining State net income:
(26) The amount of gain that
would be included for federal income tax purposes without regard to section 1400Z‑2(b)
1400Z‑2(a) of the Code. The adjustment made in this subsection
does not result in a difference in basis of the affected assets for State and
federal income tax purposes. The purpose of this subdivision is to decouple
from the deferral of gains reinvested into an Opportunity Fund available under
federal law.
."
SECTION 2.2. G.S. 105‑130.5(b) reads as rewritten:
"(b) The following deductions from federal taxable income shall be made in determining State net income:
(30) The amount of gain
included in the taxpayer's federal taxable income under section 1400Z‑2(a)
of the Code to the extent the same income was included in the taxpayer's federal
taxable State net income in a prior taxable year under subdivision
(a)(26) of this section. The purpose of this subdivision is to prevent double
taxation of income the taxpayer was previously required to include in the
calculation of State net income.
."
PART III. PERSONAL INCOME TAX CHANGES
SECTION 3.1. Section 38.1(j) of S.L. 2018‑5 reads as rewritten:
"SECTION 38.1.(j) Subsections (e), (f), and (h) of this section are effective for taxable years beginning on or after January 1, 2018. G.S. 105‑153.5(a), as amended by subsection (c) of this section, is effective for taxable years beginning on or after January 1, 2018. The remainder of this section is effective when it becomes law."
SECTION 3.2. G.S. 105‑153.5(a1) reads as rewritten:
"(a1) Child Deduction
Amount. A taxpayer who is allowed a federal child tax credit under section 24
of the Code for the taxable year is allowed a deduction under this subsection
for each dependent qualifying child for whom the taxpayer is
allowed the federal tax credit. The amount of the deduction is equal to the
amount listed in the table below based on the taxpayer's adjusted gross income,
as calculated under the Code:
."
SECTION 3.3. G.S. 105‑153.5(c2) reads as rewritten:
"(c2) Decoupling Adjustments. In calculating North Carolina taxable income, a taxpayer must make the following adjustments to the taxpayer's adjusted gross income:
(5) The
taxpayer must add the amount of gain that would be included for federal income
tax purposes without regard to section 1400Z‑2(b) 1400Z‑2(a)
of the Code. The adjustment made in this subsection does not result in a
difference in basis of the affected assets for State and federal income tax
purposes. The purpose of this subdivision is to decouple from the deferral of
gains reinvested into an Opportunity Fund available under federal law.
(6) The taxpayer may deduct
the amount of gain included in the taxpayer's adjusted gross income under
section 1400Z‑2(a) of the Code to the extent the same income was included
in the taxpayer's adjusted gross North Carolina taxable income in
a prior taxable year under subdivision (5) of this subsection. The purpose of
this subdivision is to prevent double taxation of income the taxpayer was
previously required to include in the calculation of North Carolina taxable
income.
."
PART IV. EXCISE TAX CHANGES
SECTION 4.1. G.S. 105‑113.6 reads as rewritten:
A tax is levied upon the sale or possession for sale by a person other than a licensed distributor, and upon the use, consumption, and possession for use or consumption of cigarettes within this State at the rate set in G.S. 105‑113.5. This tax does not apply, however, to cigarettes upon which the tax levied in G.S. 105‑113.5 has been paid."
SECTION 4.2. G.S. 105‑113.9 reads as rewritten:
"§ 105‑113.9. Out‑of‑state shipments.
Any licensed distributor engaged in interstate business shall be permitted to set aside part of the stock as necessary to conduct interstate business without paying the tax otherwise required by this Part, but only if the licensed distributor complies with the requirements prescribed by the Secretary concerning keeping of records, making of reports, posting of bond, and other matters for administration of this Part.
"Interstate business" as used in this section means:
(1) The sale of cigarettes to
a nonresident where the cigarettes are delivered by the licensed distributor
to the business location of the nonresident purchaser in another state; andstate.
(2) The sale of cigarettes to a nonresident purchaser who has no place of business in North Carolina and who purchases the cigarettes for the purposes of resale not within this State and where the cigarettes are delivered to the purchaser at the business location in North Carolina of the licensed distributor who is also licensed as a distributor under the laws of the state of the nonresident purchaser."
SECTION 4.3. G.S. 105‑113.13 reads as rewritten:
"§ 105‑113.13. Secretary may require a bond or irrevocable letter of credit.
(a) Repealed by Session Laws 2013‑414, s. 22(c), effective September 1, 2013.
(b) The Secretary may require a licensed distributor to furnish a bond in an amount that adequately protects the State from loss if the licensed distributor fails to pay taxes due under this Part. A bond must be conditioned on compliance with this Part, payable to the State, and in the form required by the Secretary. The amount of the bond is two times the licensed distributor's average expected monthly tax liability under this Article, as determined by the Secretary, provided the amount of the bond may not be less than two thousand dollars ($2,000) and may not be more than two million dollars ($2,000,000). The Secretary should periodically review the sufficiency of bonds required of the licensed distributor and increase the required bond amount if the amount no longer covers the anticipated tax liability of the licensed distributor and decrease the amount if the Secretary finds that a lower bond amount will protect the State adequately from loss.
For purposes of this section, a licensed distributor may substitute an irrevocable letter of credit for the secured bond required by this section. The letter of credit must be issued by a commercial bank acceptable to the Secretary and available to the State as a beneficiary. The letter of credit must be in a form acceptable to the Secretary, conditioned upon compliance with this Article, and in the amounts stipulated in this section."
SECTION 4.4. The catch line of G.S. 105‑113.77 reads as rewritten:
"§ 105‑113.77. City beer malt beverage and
wine retail licenses."
SECTION 4.5. The catch line of G.S. 105‑113.78 reads as rewritten:
"§ 105‑113.78. County beer malt beverage and
wine retail licenses."
SECTION 4.6. The catch line of G.S. 105‑113.82 reads as rewritten:
"§ 105‑113.82. Distribution of part of beer malt
beverage and wine taxes."
SECTION 4.7. G.S. 105‑113.80 reads as rewritten:
"§ 105‑113.80. Excise taxes on beer, malt
beverages, wine, and liquor.
(a) Beer. Malt Beverage.
An excise tax of sixty‑one and seventy‑one hundredths cents
(61.71’) per gallon is levied on the sale of malt beverages.
(b) Wine. An excise tax of twenty‑six and thirty‑four hundredths cents (26.34’) per liter is levied on the sale of unfortified wine, and an excise tax of twenty‑nine and thirty‑four hundredths cents (29.34’) per liter is levied on the sale of fortified wine.
(c) Liquor. An excise tax
of thirty percent (30%) is levied on spirituous liquor and antique spirituous
liquor sold in ABC stores and in permitted distilleries. Pursuant to
G.S. 18B‑804(b), the price of liquor on which this tax is computed
is the distiller's or the spirituous liquor or antique spirituous
liquor seller's price plus (i) the State ABC warehouse freight and bailment
charges and (ii) a markup for local ABC boards.boards, unless
otherwise specified by law."
SECTION 4.8. G.S. 105‑113.83(b) reads as rewritten:
"(b) Beer Malt
Beverage and Wine. The excise taxes on malt beverages and wine levied
under G.S. 105‑113.80(a) and (b), respectively, are payable to the
Secretary by the resident wholesaler or importer who first handles the
beverages in this State. The excise taxes levied under G.S. 105‑113.80(b)
on wine shipped directly to consumers in this State pursuant to G.S. 18B‑1001.1
must be paid by the wine shipper permittee. The taxes on malt beverages and
wine are payable only once on the same beverages. Unless otherwise provided,
the tax is due on or before the 15th day of the month following the month in
which the beverage is first sold or otherwise disposed of in this State by the wholesaler,
importer, or wine shipper permittee. wholesaler or importer. When
excise taxes are paid on wine or malt beverages, the wholesaler or importer
must submit to the Secretary verified reports on forms provided by the
Secretary detailing sales records for the month for which the taxes are paid.
The report must indicate the amount of excise tax due, contain the information required
by the Secretary, and indicate separately any transactions to which the excise
tax does not apply. A wine shipper permittee shall submit verified reports once
a year on forms provided by the Secretary detailing sales records for the year
the taxes are paid. The verified report is due on or before the fifteenth day
of the first month of the following calendar year."
SECTION 4.9. G.S. 105‑164.13 reads as rewritten:
"§ 105‑164.13. Retail sales and use tax.
The sale at retail and the use, storage, or consumption in this State of the following tangible personal property, digital property, and services are specifically exempted from the tax imposed by this Article:
(11) Any of the following fuel:
a. Motor fuel, as taxed in
Article 36C of this Chapter, except motor fuel for which a refund of the per
gallon excise tax is allowed under G.S. 105‑449.105A G.S. 105‑449.106(c)
or G.S. 105‑449.107.
b. Alternative fuel taxed under Article 36D of this Chapter, unless a refund of that tax is allowed under G.S. 105‑449.107.
."
SECTION 4.10. G.S. 105‑259(b) reads as rewritten:
"(b) Disclosure Prohibited. An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person except as provided in this subsection. Standards used or to be used for the selection of returns for examination and data used or to be used for determining the standards may not be disclosed for any purpose. All other tax information may be disclosed only if the disclosure is made for one of the following purposes:
(15) To exchange information concerning a tax imposed by Articles 2A, 2C, or 2D of this Chapter with one of the following agencies when the information is needed to fulfill a duty imposed on the Department or the agency:
a. The North Carolina Alcoholic Beverage Control Commission.
b. The Alcohol Law Enforcement Branch of the Department of Public Safety.
c. The Bureau of Alcohol, Tobacco, and Firearms of the United States Department of Justice.
c1. The Alcohol and Tobacco Tax and Trade Bureau of the United States Department of the Treasury.
d. Law enforcement agencies.
e. The Section of Community Corrections of the Division of Adult Correction and Juvenile Justice of the Department of Public Safety.
."
SECTION 4.11. G.S. 105‑449.76 reads as rewritten:
"§ 105‑449.76. Cancellation or revocation of license.
(a) Reasons. The Secretary
may cancel a license issued under this Article upon the written request of the licensee.
licensee and the immediate return of the license to the Secretary. The
Secretary may summarily revoke a license issued under this Article when the
Secretary finds that the licensee is incurring liability for the tax imposed
under this Article after failing to pay a tax when due under this Article. In
addition, the Secretary may revoke the license of a licensee that commits one
or more of the acts listed in G.S. 105‑449.120 after holding a
hearing on whether the license should be revoked.
(b) Procedure. The
Secretary must send a person whose license is summarily revoked a notice of the
revocation and must give the person an opportunity to have a hearing on the
revocation within 10 days after the revocation. The Secretary must give a person
whose license may be revoked after a hearing at least 10 days' written notice
of the date, time, and place of the hearing. A notice of a summary license
revocation and a notice of hearing must be sent by registered certified
mail to the last known address of the licensee.
(c) Release of Bond. When the Secretary cancels or revokes a license and the licensee has paid all taxes and penalties due under this Article, the Secretary must take one of the following actions concerning a bond or an irrevocable letter of credit filed by the licensee:
(1) Return an irrevocable letter of credit to the licensee.
(2) Return a bond to the licensee or notify the person liable on the bond and the licensee that the person is released from liability on the bond."
SECTION 4.12. G.S. 105‑449.90(e) reads as rewritten:
"(e) Monthly Filers on
3rd. An occasional importer must file a monthly return by the third day of
each month. An occasional importer is not required to file a return,
however, return if all the motor fuel imported by the importer in a
reporting period was removed at a terminal located in another state and the
supplier of the fuel is an elective supplier or a permissive supplier."
PART V. SALES TAX CHANGES
SECTION 5.1. Section 38.5(aa) of S.L. 2018‑5 reads as rewritten:
"SECTION 38.5.(aa) Except as otherwise provided, this section is effective when it becomes law.
Subsection (a) of this section is effective retroactively to January 1, 2017. If the amendment to G.S. 105‑164.3(20b), as enacted by subsection (a) of this section, increases sales and use tax liability, then it is effective when this section becomes law.
Subsection (g) of this section is effective retroactively to January 1, 2017, and applies to sales and purchases made on or after that date.
G.S. 105‑164.13(5e), as enacted by Section 38.8(c) of S.L. 2017‑57 and amended by subsection (j) of this section, is effective July 1, 2018.
Subsection (k) of this section is effective retroactively to July 1, 2014. A person who paid sales and use tax for a return period ending prior to the date this section becomes law on an item exempt from sales and use tax pursuant to G.S. 105‑164.13E, as amended by subsection (k) of this section, may apply to the Department of Revenue for a refund of any excess tax paid to the extent the refund is the result of the change in the law enacted by subsection (k) of this section. A request for a refund must be made on or before October 1, 2018. Notwithstanding G.S. 105‑241.6, a request for a refund received after this date is barred and the provisions of G.S. 105‑164.11 do not apply.
Subsections (x) and (y) of this section become effective January 1, 2020."
SECTION 5.2. G.S. 105‑164.8(b) is amended by adding a new subdivision to read:
"(b) Remote Sales. A retailer who makes a remote sale is engaged in business in this State and is subject to the tax levied under this Article if at least one of the following conditions is met:
(9) The retailer, with respect to remote sales into North Carolina for the previous or current calendar year, had one or more of the following:
a. Gross sales in excess of one hundred thousand dollars ($100,000).
b. Two hundred or more separate transactions."
SECTION 5.3. G.S. 105‑164.13 reads as rewritten:
"§ 105‑164.13. Retail sales and use tax.
The sale at retail and the use, storage, or consumption in this State of the following tangible personal property, digital property, and services are specifically exempted from the tax imposed by this Article:
(38) Food and other items
lawfully purchased under the Food Stamp Program, Supplemental
Nutrition Assistance Program, 7 U.S.C. § 2011, and supplemental foods
lawfully purchased with a food instrument issued under the Special Supplemental
Nutrition Program, 42 U.S.C. § 1786, and supplemental foods purchased for
direct distribution by the Special Supplemental Nutrition Program.
."
SECTION 5.4. G.S. 105‑164.13E reads as rewritten:
"§ 105‑164.13E. Exemption for farmers.
(a) Exemption. A qualifying farmer is a person who has an annual income from farming operations for the preceding taxable year of ten thousand dollars ($10,000) or more or who has an average annual income from farming operations for the three preceding taxable years of ten thousand dollars ($10,000) or more. For purposes of this section, the term "income from farming operations" means sales plus any other amounts treated as gross income under the Code from farming operations. A qualifying farmer includes a dairy operator, a poultry farmer, an egg producer, and a livestock farmer, a farmer of crops, a farmer of an aquatic species, as defined in G.S. 106‑758, and a person who boards horses. A qualifying farmer may apply to the Secretary for an exemption certificate number under G.S. 105‑164.28A. The exemption certificate expires when a person fails to meet the income threshold for three consecutive taxable years or ceases to engage in farming operations, whichever comes first.
Except as otherwise provided in
this section, the items exempt under this section must be purchased by a qualifying
farmer or conditional farmer and used by the qualifying or
conditional farmer primarily in farming operations. For purposes of
this section, an item is used by a farmer for farming operations if it is used
for the planting, cultivating, harvesting, or curing of farm crops or crops,
in the production of dairy products, eggs, or animals. animals,
or by a person who boards horses. The following tangible personal property
and services that may be exempt from sales and use tax under this section are
as follows:
(c1) Services for Farmer. A
qualifying item listed in subdivision (6) of subsection (a) of this section
purchased to fulfill a service for a person who holds a qualifying farmer
exemption certificate or a conditional farmer exemption certificate issued
under G.S. 105‑164.28A is exempt from sales and use tax to the same
extent as if purchased directly by the person who holds the exemption
certificate. A person that purchases one of the items allowed an exemption
under this subsection must provide an exemption certificate to the retailer
that includes the name of the purchaser qualifying farmer or
conditional farmer and an the exemption number issued to the purchaser
qualifying farmer or conditional farmer by the Department pursuant
to G.S. 105‑164.28A. A person that purchases an item exempt from tax
pursuant to this subsection must maintain records to substantiate that an item
is used to provide a service for a person who holds a qualifying farmer
exemption certificate or a conditional farmer exemption certificate.
."
SECTION 5.5. G.S. 105‑164.27A(a3) reads as rewritten:
"(a3) Boat and Aircraft.
A direct pay permit issued under this subsection authorizes its holder to
purchase tangible personal property, digital property, or repair, maintenance,
and installation services for a boat, an aircraft, or a qualified jet engine
without paying tax to the seller and authorizes the seller to not collect any
tax on the item or services from the permit holder. A person who purchases the
property or services under a direct pay permit must file a return and pay the
tax due to the Secretary in accordance with G.S. 105‑164.14. G.S. 105‑164.16.
A permit holder is allowed a use tax exemption on one or more of the
following: (i) the installation charges that are a part of the sales price of
tangible personal property or digital property purchased by the permit holder
for a boat, an aircraft, or a qualified jet engine, provided the installation
charges are separately stated and identified as such on the invoice or other
documentation given to the permit holder at the time of the sale and (ii) the
sales price of or gross receipts derived from repair, maintenance, and
installation services provided for a boat, an aircraft, or a qualified jet
engine.
In lieu of purchasing under a direct pay permit pursuant to this subsection, a purchaser may elect to have the seller collect and remit the tax due on behalf of the purchaser. Where the purchaser elects for the seller to collect and remit the tax, an invoice given to the purchaser bearing the proper amount of tax on a retail transaction extinguishes the purchaser's liability for the tax on the transaction. Where a seller cannot or does not separately state installation charges that are a part of the sales price of tangible personal property or digital property for a boat, an aircraft, or a qualified jet engine on the invoice or other documentation given to the purchaser at the time of the sale, tax is due on the total purchase price.
The amount of the use tax exemption is the amount of the installation charges and sales price of or gross receipts derived from the repair, maintenance, and installation services that exceed twenty‑five thousand dollars ($25,000)."
SECTION 5.6. G.S. 105‑164.28A(a) reads as rewritten:
"(a) Authorization. The
Secretary may require a person who purchases an item that is exempt from tax or
is subject to a preferential rate of tax depending on the status of the
purchaser or the intended use of the item to obtain an exemption
certificate from the Department to receive the exemption or preferential
rate. exemption. The Department must issue a preferential rate or
use‑based exemption number to a person who qualifies for the exemption
or preferential rate. exemption. A person who no longer qualifies
for a preferential rate or use‑based exemption number must notify
the Secretary within 30 days to cancel the number.
An exemption certificate issued by
the purchaser authorizes a retailer to sell an item to the holder of the
certificate and either collect tax at a preferential rate or not collect
tax on the sale, as appropriate. sale. A person who no longer
qualifies for an exemption certificate must give notice to each seller that may
rely on the exemption certificate on or before the next purchase. A person who
purchases an item under an exemption certificate is liable for any tax due on
the purchase if the Department determines that the person is not eligible for
the exemption certificate or if the person purchased items that do not qualify
for an exemption under the exemption certificate. The liability is relieved
when the seller obtains the purchaser's name, address, type of business, reason
for exemption, and exemption number in lieu of obtaining an exemption
certificate."
SECTION 5.7. G.S. 105‑241.14(b) reads as rewritten:
"(b) Assessment. If a
taxpayer files a timely request for a Departmental review of a proposed
assessment and the Department and the taxpayer are unable to resolve the
taxpayer's objection to the proposed assessment, the Department must send the
taxpayer a notice of final determination concerning the proposed assessment.
A notice of final determination concerning an the proposed assessment
must contain the following information:
(1) The basis for the determination. This information may be stated on the notice or be set out in a separate document. The statement of the basis for the determination does not limit the Department from changing the basis.
(2) The amount of tax, interest, and penalties payable by the taxpayer.
(3) The procedure the taxpayer must follow to contest the final determination.
(4) A statement that the amount payable stated on the notice is collectible by the Department unless the taxpayer contests the final determination.
(5) An explanation of the collection options available to the Department if the taxpayer does not pay the amount shown due on the notice and any remedies available to the taxpayer concerning these collection options."
SECTION 5.8. G.S. 105‑244.3(a) reads as rewritten:
"(a) Grace Period. The Department shall take no action to assess any tax due for a filing period beginning on or after March 1, 2016, and ending prior to January 1, 2019, if one or more of the conditions of this subsection apply and the retailer did not receive specific written advice from the Secretary for the transactions at issue for the laws in effect for the applicable periods. Except as otherwise provided, this subsection also applies to use tax liability imposed on a purchaser under G.S. 105‑164.6. The conditions are as follows:
(8) A person failed to collect sales tax on the taxable portion of a mixed service contract that exceeds ten percent (10%) for a transaction on or after January 1, 2017, and prior to January 1, 2019. This subdivision does not prohibit the Secretary from assessing use tax on purchases used to fulfill a mixed service contract.
(8b) A person failed to collect sales tax on the taxable portion of a bundled transaction that included a contract for two or more services, one of which was subject to tax and one of which was not subject to tax, for a transaction on or after March 1, 2016, and prior to January 1, 2017.
."
SECTION 5.9. G.S. 105‑269.14(b) reads as rewritten:
"(b) Distribution. The
Secretary must distribute a the local portion of the net use tax
proceeds collected under this section to counties and cities. in
accordance with Subchapter VIII of this Chapter and Chapter 1096 of the 1967
Session Laws.The portion to be distributed to all counties and cities is
the total net use tax proceeds collected under this section multiplied by a
fraction. The numerator of the fraction is the local use tax proceeds collected
under this section. The denominator of the fraction is the total use tax
proceeds collected under this section. The Secretary must distribute this
portion to the counties and cities in proportion to their total distributions
under Articles 39, 40, 42, and 43 of this Chapter and Chapter 1096 of the 1967
Session Laws for the most recent period for which data are available. The
provisions of G.S. 105‑472, 105‑486, and 105‑501 do not apply
to tax proceeds distributed under this section."
PART VI. EFFECTIVE DATE
SECTION 6.1. Except as otherwise provided, this act is effective when it becomes law.
In the General Assembly read three times and ratified this the 18th day of March, 2019.
s/ Philip E. Berger
President Pro Tempore of the Senate
s/ Tim Moore
Speaker of the House of Representatives
s/ Roy Cooper
Governor
Approved 8:54 a.m. this 20th day of March, 2019