AN ACT to reduce state individual income tax and franchise tax.

The General Assembly of North Carolina enacts:

 

part i. individual income tax

SECTION 1.1.(a)  G.S. 105‑153.7(a) reads as rewritten:

(a)      Tax. – A tax is imposed for each taxable year on the North Carolina taxable income of every individual. The tax shall be levied, collected, and paid annually. The tax is five and one‑quarter percent (5.25%) four and ninety‑nine hundredths percent (4.99%) of the taxpayer's North Carolina taxable income.

SECTION 1.1.(b)  G.S. 105‑153.5(a)(1) reads as rewritten:

(1)      Standard deduction amount. – The standard deduction amount is zero for a person who is not eligible for a standard deduction under section 63 of the Code. For all other taxpayers, the standard deduction amount is equal to the amount listed in the table below based on the taxpayer's filing status:

Filing Status                                                   Standard Deduction

Married, filing jointly/surviving spouse              $21,500$25,500

Head of Household                                                16,12519,125

Single                                                                     10,75012,750

Married, filing separately                                     10,750.12,750.

SECTION 1.1.(c)  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 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:

Filing Status                                 AGI                                  Deduction Amount

Married, filing jointly/                  Up to $40,000                      $2,500.00$3,000

surviving spouse                           Over $40,000

                                                      Up to $60,000                          2,000.002,500

                                                      Over $60,000

                                                      Up to $80,000                          1,500.002,000

                                                      Over $80,000

                                                      Up to $100,000                        1,000.001,500

                                                      Over $100,000

                                                      Up to $120,000                           500.001,000

                                                      Over $120,000                                              0

                                                      Up to $140,000                                    500.00

                                                      Over $140,000                                              0

 

Head of Household                       Up to $30,000                      $2,500.00$3,000

                                                      Over $30,000

                                                      Up to $45,000                          2,000.002,500

                                                      Over $45,000

                                                      Up to $60,000                          1,500.002,000

                                                      Over $60,000

                                                      Up to $75,000                          1,000.001,500

                                                      Over $75,000

                                                      Up to $90,000                             500.001,000

                                                      Over $90,000                                                0

                                                      Up to $105,000                                    500.00

                                                      Over $105,000                                              0

 

Single                                            Up to $20,000                      $2,500.00$3,000

                                                      Over $20,000

                                                      Up to $30,000                          2,000.002,500

                                                      Over $30,000

                                                      Up to $40,000                          1,500.002,000

                                                      Over $40,000

                                                      Up to $50,000                          1,000.001,500

                                                      Over $50,000

                                                      Up to $60,000                             500.001,000

                                                      Over $60,000                                                0

                                                      Up to $70,000                                      500.00

                                                      Over $70,000                                                0

 

Married, filing separately              Up to $20,000                      $2,500.00$3,000

                                                      Over $20,000

                                                      Up to $30,000                          2,000.002,500

                                                      Over $30,000

                                                      Up to $40,000                          1,500.002,000

                                                      Over $40,000

                                                      Up to $50,000                          1,000.001,500

                                                      Over $50,000

                                                      Up to $60,000                             500.001,000

                                                      Over $60,000                                               0.

                                                      Up to $70,000                                      500.00

                                                      Over $70,000                                              0.

SECTION 1.1.(d)  This section is effective for taxable years beginning on or after January 1, 2022.

 

part ii. franchise tax

SECTION 2.1.(a)  G.S. 105‑122(d) reads as rewritten:

(d)      Tax Base. – A corporation's tax base is the greatest of the following:

(1)        The proportion of its net worth as set out in subsection (c1) of this section.

(2)        Fifty five percent (55%) of the corporation's appraised value as determined for ad valorem taxation of all the real and tangible personal property in this State. For purposes of this subdivision, the appraised value of tangible property, including real estate, is the ad valorem valuation for the calendar year next preceding the due date of the franchise tax return.

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

SECTION 2.1.(b)  G.S. 105‑114.1(b) reads as rewritten:

(b)      Controlled Companies. – If a corporation or an affiliated group of corporations owns more than fifty percent (50%) of the capital interests in a noncorporate limited liability company, the corporation or group of corporations must include in its three tax bases base pursuant to G.S. 105‑122 the same percentage of (i) the noncorporate limited liability company's net worth; (ii) fifty‑five percent (55%) of the noncorporate limited liability company's appraised ad valorem tax value of property; and (iii) the noncorporate limited liability company's actual investment in tangible property in this State, as appropriate.worth.

SECTION 2.1.(c)  G.S. 105‑120.2(b) reads as rewritten:

(b)      Tax Rate. – Every corporation taxed under this section shall annually pay to the Secretary of Revenue, at the time the return is due, the greater of the following:

(1)        A a franchise or privilege tax at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of the amount determined under subsection (a) of this section, but in no case shall the tax be more than one hundred fifty thousand dollars ($150,000) nor less than two hundred dollars ($200.00).

(2)        If the tax calculated under this subdivision exceeds the tax calculated under subdivision (1) of this subsection, then the tax is levied at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) on the greater of the following:

a.         Fifty‑five percent (55%) of the appraised value as determined for ad valorem taxation of all the real and tangible personal property in this State of each such corporation plus the total appraised value of intangible property returned for taxation of intangible personal property as computed under G.S. 105‑122(d).

b.         The total actual investment in tangible property in this State of such corporation as computed under G.S. 105‑122(d).

SECTION 2.1.(d)  This section is effective for taxable years beginning on or after January 1, 2023, and applicable to the calculation of franchise tax reported on the 2022 and later corporate income tax return.

 

PART III. EFFECTIVE DATE

SECTION 3.1.  Except as otherwise provided, this act is effective when it becomes law.