H.B. 279
GENERAL ASSEMBLY OF NORTH CAROLINA
Mar 11, 2021
SESSION 2021 HOUSE PRINCIPAL CLERK
H D
HOUSE BILL DRH40179-SVxf-8
Short Title: 2021 Revenue Laws Changes. (Public)
Sponsors: Representative Howard.
Referred to:
1 A BILL TO BE ENTITLED
2 AN ACT TO UPDATE THE REFERENCE TO THE INTERNAL REVENUE CODE, TO
3 EXEMPT COVID-19 RELIEF PAYMENTS FROM THE INCOME DETERMINATION
4 FOR THE PROPERTY TAX HOMESTEAD EXCLUSION, AND TO MAKE VARIOUS
5 TECHNICAL, ADMINISTRATIVE, AND CLARIFYING CHANGES TO THE
6 REVENUE LAWS.
7 The General Assembly of North Carolina enacts:
8
9 PART I. IRC UPDATE
10 SECTION 1.1.(a) G.S. 105-228.90(b)(7) reads as rewritten:
11 "(7) Code. – The Internal Revenue Code as enacted as of May 1, 2020, January 1,
12 2021, including any provisions enacted as of that date that become effective
13 either before or after that date."
14 SECTION 1.1.(b) G.S. 105-153.5(a)(2)b. reads as rewritten:
15 "b. Mortgage Expense and Property Tax. – The amount allowed as a
16 deduction for interest paid or accrued during the taxable year under
17 section 163(h) of the Code with respect to any qualified residence plus
18 the amount allowed as a deduction for property taxes paid or accrued
19 on real estate under section 164 of the Code for that taxable year. For
20 taxable years 2014 through 2020, 2021, the amount allowed as a
21 deduction for interest paid or accrued during the taxable year under
22 section 163(h) of the Code with respect to any qualified residence shall
23 not include the amount for mortgage insurance premiums treated as
24 qualified residence interest. The amount allowed under this
25 sub-subdivision may not exceed twenty thousand dollars ($20,000).
26 For spouses filing as married filing separately or married filing jointly,
27 the total mortgage interest and real estate taxes claimed by both
28 spouses combined may not exceed twenty thousand dollars ($20,000).
29 For spouses filing as married filing separately with a joint obligation
30 for mortgage interest and real estate taxes, the deduction for these
31 items is allowable to the spouse who actually paid them. If the amount
32 of the mortgage interest and real estate taxes paid by both spouses
33 exceeds twenty thousand dollars ($20,000), these deductions must be
34 prorated based on the percentage paid by each spouse. For joint
35 obligations paid from joint accounts, the proration is based on the
36 income reported by each spouse for that taxable year."
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 General Assembly Of North Carolina Session 2021
1 SECTION 1.1.(c) G.S. 105-153.5(c2) reads as rewritten:
2 "(c2) Decoupling Adjustments. – In calculating North Carolina taxable income, a taxpayer
3 must make the following adjustments to the taxpayer's adjusted gross income:
4 (1) For taxable years 2014 through 2020, 2025, the taxpayer must add the amount
5 excluded from the taxpayer's gross income for the discharge of qualified
6 principal residence indebtedness under section 108 of the Code. The purpose
7 of this subdivision is to decouple from the income exclusion available under
8 federal tax law. If the taxpayer is insolvent, as defined in section 108(d)(3) of
9 the Code, then the addition required under this subdivision is limited to the
10 amount of discharge of qualified principal residence indebtedness excluded
11 from adjusted gross income under section 108(a)(1)(E) of the Code that
12 exceeds the amount of discharge of indebtedness that would have been
13 excluded under section 108(a)(1)(B) of the Code.
14 …
15 (18) For taxable year 2020, years 2020 through 2025, a taxpayer must add the
16 amount excluded from the taxpayer's gross income for payment by an
17 employer, whether paid to the taxpayer or to a lender, of principal or interest
18 on any qualified education loan, as defined in section 221(d)(1) of the Code,
19 incurred by the taxpayer for education of the taxpayer. The purpose of this
20 subdivision is to decouple from the exclusion for certain employer payments
21 of student loans under section 2206 of the CARES Act.Act or under the
22 Consolidated Appropriations Act, 2021.
23 …
24 (21) For taxable years 2021 and 2022, a taxpayer must add an amount equal to the
25 amount by which the taxpayer's deduction under section 274(n) of the Code
26 exceeds the deduction that would have been allowed under the Internal
27 Revenue Code as enacted as of May 1, 2020. The purpose of this subdivision
28 is to decouple from the increased deduction under the Consolidated
29 Appropriations Act, 2021, for business-related expenses for food and
30 beverages provided by a restaurant."
31
32 PART II. EXEMPT COVID-19 RELIEF FROM HOMESTEAD INCOME
33 SECTION 2.1. For purposes of determining a person's eligibility under the elderly
34 or disabled property tax homestead exclusion, G.S. 105-277.1, Extra Credit Grants and
35 COVID-19 Recovery Rebates are not considered income. For purposes of this section,
36 COVID-19 Recovery Rebates are the following:
37 (1) Payments received under Section 6428 of the Internal Revenue Code.
38 (2) Payments received under Section 6428A of the Internal Revenue Code.
39 (3) Any similar relief payments to those listed in subdivisions (1) and (2) of this
40 section received by an individual from the federal government due to the
41 COVID-19 pandemic.
42
43 PART III. PERSONAL INCOME TAX CHANGES
44 SECTION 3.1. G.S. 105-153.5(b) reads as rewritten:
45 "(b) Other Deductions. – In calculating North Carolina taxable income, a taxpayer may
46 deduct from the taxpayer's adjusted gross income any of the following items that are included in
47 the taxpayer's adjusted gross income:
48 …
49 (14)(15) The amount granted to the taxpayer during the taxable year under the Extra
50 Credit grant program. This subdivision expires for taxable years beginning on
51 or after January 1, 2021.2022."
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1 SECTION 3.2. G.S. 105-153.5(c2) reads as rewritten:
2 "(c2) Decoupling Adjustments. – In calculating North Carolina taxable income, a taxpayer
3 must make the following adjustments to the taxpayer's adjusted gross income:
4 …
5 (17) For taxable years 2019 and 2020, a taxpayer must add an amount equal to the
6 amount by which the taxpayer's interest expense deduction under section
7 163(j) of the Code exceeds the interest expense deduction that would have
8 been allowed under the Internal Revenue Code as enacted as of January 1,
9 2020. An add-back under this subdivision is not required to the extent the
10 amount was required to be added back under another provision of this
11 subsection. The purpose of this subdivision is to decouple from the
12 modification of limitation on business interest allowed under section 2306 of
13 the CARES Act.
14 …
15 (21) A taxpayer who made an addition under subdivision (17) of this subsection
16 may deduct twenty percent (20%) of the addition in each of the taxable years
17 2021 through 2025."
18 SECTION 3.3. G.S. 105-153.9(a)(2) reads as rewritten:
19 "(2) The fraction of the gross income, as modified as provided in G.S. 105-134.6A,
20 G.S. 105-153.5, G.S. 105-153.5 and G.S. 105-153.6, that is subject to income
21 tax in another state or country shall be ascertained, and the North Carolina net
22 income tax before credit under this section shall be multiplied by that fraction.
23 The credit allowed is either the product thus calculated or the income tax
24 actually paid the other state or country, whichever is smaller."
25 SECTION 3.4. G.S. 105-163.7(b) reads as rewritten:
26 "(b) Informational Return to Secretary. – Every employer shall annually file an
27 informational return with the Secretary that contains the information given on each of the
28 employer's written statements to an employee. The Secretary may require additional information
29 to be included on the informational return, provided the Secretary has given a minimum of 90
30 days' notice of the additional information required. The informational return is due on or before
31 January 31 of the succeeding year and must be filed in an electronic format as prescribed by the
32 Secretary. If Secretary and is due on or before January 31 of the succeeding year or, if the
33 employer terminates its business or permanently ceases paying wages during before the close of
34 the calendar year, the informational return must be filed within 30 days of the last payment of
35 remuneration. on or before the last day of the month following the end of the calendar quarter in
36 which the employer terminates its business, but no later than January 31 of the succeeding year.
37 The informational return required by this subsection is in lieu of the report required by
38 G.S. 105-154."
39 SECTION 3.5. G.S. 105-163.8 is amended by adding a new subsection to read:
40 "(c) If a withholding agent fails to file a return and pay the tax due under this Article or
41 files a grossly incorrect or false or fraudulent return, the Secretary must estimate the tax due and
42 assess the withholding agent based on the estimate."
43 SECTION 3.6. G.S. 105-241.6(b)(5) reads as rewritten:
44 "(5) Contingent Event. – The period to request a refund of an overpayment may be
45 extended once as provided in this subdivision:
46 …
47 b. Other Event. – If a taxpayer contends that an event has occurred that
48 prevents the taxpayer from filing an accurate and definite request for
49 a refund of an overpayment within the period under this section, the
50 period to request a refund of an overpayment is six months after the
51 event concludes. Prior to the expiration of the statute of limitations
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1 under this section, the taxpayer may must submit a written request to
2 the Secretary seeking an extension of the statute of limitations. The
3 taxpayer must file a written request to the Secretary prior to expiration
4 of the statute of limitations under this section. The request must
5 establish by clear, convincing proof that the event is beyond the
6 taxpayer's control and prevents the taxpayer from timely filing an
7 accurate and definite request for a refund of an overpayment. The
8 Secretary's decision on the request is final and is not subject to
9 administrative or judicial review."
10 SECTION 3.7. G.S. 105-252.1 reads as rewritten:
11 "§ 105-252.1. Use of a TTIN.
12 A TTIN may not be used on any return, statement, or other document required to be filed
13 with or furnished to the Department unless specifically authorized in this Chapter.by the
14 Secretary."
15
16 PART IV. CORPORATE INCOME TAX CHANGES
17 SECTION 4.1.(a) G.S. 105-83(d) reads as rewritten:
18 "(d) This section does not apply to the following:
19 (1) corporations liable for the tax levied under G.S. 105-102.3 or to savings
20 Banks. For purposes of this subdivision, the term "bank" has the same
21 meaning as defined in G.S. 105-130.7B(b).
22 (2) Savings and loan associations."
23 SECTION 4.1.(b) This section is effective when it becomes law and applies
24 retroactively for taxable years beginning on or after July 1, 2016.
25 SECTION 4.2.(a) G.S. 105-130.5(a)(31) reads as rewritten:
26 "(a) The following additions to federal taxable income shall be made in determining State
27 net income:
28 …
29 (31) For taxable years 2019 and 2020, a taxpayer must add an amount equal to the
30 amount by which the taxpayer's interest expense deduction under section
31 163(j) of the Code exceeds the interest expense deduction that would have
32 been allowed under the Internal Revenue Code as enacted as of January 1,
33 2020, as calculated on a separate entity basis. An add-back under this
34 subdivision is not required to the extent the amount was required to be added
35 back under another provision of this subsection. The purpose of this
36 subdivision is to decouple from the modification of limitation on business
37 interest allowed under section 2306 of the CARES Act."
38 SECTION 4.2.(b) G.S. 105-130.5(b) is amended by adding a new subdivision to
39 read:
40 "(b) The following deductions from federal taxable income shall be made in determining
41 State net income:
42 …
43 (33) A taxpayer who made an addition under subdivision (a)(31) of this section
44 may deduct twenty percent (20%) of the addition in each of the taxable years
45 2021 through 2025."
46 SECTION 4.3. G.S. 105-130.5A reads as rewritten:
47 "§ 105-130.5A. Secretary's authority to adjust net income or require a combined return.
48 …
49 (b) Adjust Net Income. – If upon review of the information provided, the Secretary finds
50 as a fact that the corporation's intercompany transactions lack economic substance or are not at
51 fair market value, the Secretary may redetermine the State net income of the corporation properly
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1 attributable to its business carried on in the State under this section by (i) adding back,
2 eliminating, or otherwise adjusting intercompany transactions to accurately compute the
3 corporation's State net income properly attributable to its business carried on in the State, or, if
4 such adjustments are not adequate under the circumstances to redetermine State net income, (ii)
5 requiring the corporation to file a return that reflects the net income on a combined basis of all
6 members of its affiliated group with intercompany transactions that are conducting a unitary
7 business. The Secretary shall consider and be authorized to use any reasonable method proposed
8 by the corporation for redetermining its State net income attributable to its business carried on in
9 the State. In determining whether the corporation's intercompany transactions lack economic
10 substance or are not at fair market value, the Secretary shall consider each taxable year separately.
11 (c) Voluntary Redetermination. – In addition to the authority granted under subsection
12 (b) of this section, if the Secretary has reason to believe that any corporation's State net income
13 properly attributable to its business carried on in this State is not accurately reported on a separate
14 return required by this Part because of intercompany transactions, without making a finding that
15 those transactions lack economic substance or are not at fair market value, the Secretary and the
16 corporation may jointly determine and agree to an alternative filing a combined return
17 methodology that accurately reports State net income. The Subject to the provisions of this
18 section and G.S. 105-130.7A, the Secretary is authorized to allow any reasonable method for
19 redetermining the corporation's State net income attributable to its business carried on in this