H1030 - 2016 Appropriations Act. (SL 2016-94)

Overview: Beginning in 2018, North Carolina will use a single sales factor apportionment formula for apportioning the corporate income and franchise tax liability of multistate corporations. Single sales factor apportionment provides an incentive for multistate corporations to select North Carolina as their primary state to conduct business activities, unless the corporation provides a service instead of a product. Single sales factor apportionment does not provide the same incentive to a multistate company that provides services, because its sales factor is not based on the percentage of income derived from consumption of the company's services in the North Carolina marketplace. Consequently, states that adopt a single sales factor apportionment incentive usually adopt a market-based calculation of the sales factor for all multistate corporations, including those that provide services. This section does not enact market-based sourcing however; it does direct the Department of Revenue to adopt rules to implement market-based sourcing by January 1, 2017. The rules, if approved by the Rules Review Commission, cannot be entered into the Administrative Code until the General Assembly enacts market-based sourcing legislation and directs the Codifier of Rules to do so. The provision ensures that the General Assembly, and the public, will know what the rules pertaining to market-based sourcing would be if the General Assembly decides to enact market-based sourcing legislation in the future.

This section became effective July 14, 2016.