SUBCHAPTER 5B ‑ FRANCHISE TAX

 

SECTION .0100 ‑ GENERAL INFORMATION

 

17 NCAC 05B .0101          SCOPE AND NATURE

17 NCAC 05B .0102          CORPORATION DEFINED

17 NCAC 05B .0103          PERIOD COVERED

 

History Note:        Authority G.S. 105‑114; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .0104          INACTIVE CORPORATIONS

A corporation that is inactive and without assets is subject annually to a minimum franchise tax. A return is required containing a statement of the status of the corporation. Failure to file this return and pay the minimum tax will result in suspension of the articles of incorporation or certificate of authority.

 

History Note:        Authority G.S. 105‑114; 105‑262;

Eff. February 1, 1976;

Amended Eff. November 1, 1991; November 1, 1987;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .0105          DISSOLUTION OR WITHDRAWAL OF CORPORATE RIGHTS

Corporations are not subject to franchise tax after the end of the income year in which articles of dissolution or withdrawal are filed with the Secretary of State unless they engage in business activities not incidental to winding up their affairs. Therefore, no franchise tax is required with the income return filed for the year in which the application is filed or with any subsequent income returns that may be required in connection with winding up the affairs of the corporation.

 

History Note:        Authority G.S. 105‑114; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994; October 31, 1981;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .0106          PAYMENT OF FRANCHISE TAXES

 

History Note:        Authority G.S. 105‑127; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 1, 1993.

 

17 NCAC 05B .0107          EXTENSION OF FILING DATE

Rule 17 NCAC 5C .2004 sets out the procedure for a corporation to obtain an extension of time to file its corporate franchise and income tax return.

 

History Note:        Authority G.S. 105-129; 105-262; 105-263;

Eff. February 1, 1976;

Amended Eff. July 1, 1999; January 1, 1994; April 1, 1991; January 1, 1978.

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .0108          electronic filing of general business franchise tax returns

 

History Note:        Authority G.S. 105‑262;

Eff. March 1, 2006;

Expired Eff. September 1, 2017 pursuant to G.S. 150B-21.3A.

 

SECTION .0200 ‑ RAILROADS

 

17 NCAC 05B .0201          BASIS FOR TAXATION

17 NCAC 05B .0202          DUE DATE OF THE TAX

 

History Note:        Authority G.S. 105‑115; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .0203          BILLED FOR THE TAX

 

History Note:        Authority G.S. 105‑115; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 1, 1993.

 

SECTION .0300 ‑ ELECTRIC: POWER: GAS: WATER AND SEWERAGE COMPANIES

 

17 NCAC 05B .0301          BASIS FOR TAXATION

17 NCAC 05B .0302          DUE DATE OF THE REPORT AND TAX

17 NCAC 05B .0303          FORM TO BE USED FOR FILING

17 NCAC 05B .0304          SPECIAL EXEMPTION

17 NCAC 05B .0305          DISTRIBUTION TO MUNICIPALITIES

 

History Note:        Authority G.S. 105‑116; 105‑262;

Eff. February 1, 1976;

Amended Eff. October 23, 1977;

Repealed Eff. October 31, 1981.

 

SECTION .0400 ‑ PULLMAN: SLEEPING: CHAIR AND DINING CARS

 

17 NCAC 05B .0401          BASIS FOR TAXATION

17 NCAC 05B .0402          DUE DATE OF THE REPORT AND TAX

 

History Note:        Authority G.S. 105‑117; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .0403          FORM TO BE USED FOR FILING

 

History Note:        Authority G.S. 105‑117; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Repealed Eff. December 1, 1997.

 

SECTION .0500 ‑ EXPRESS COMPANIES

 

17 NCAC 05B .0501          BASIS FOR TAXATION

17 NCAC 05B .0502          DUE DATE OF THE REPORT AND TAX

 

History Note:        Authority G.S. 105‑118; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .0503          FORM TO BE USED FOR FILING

 

History Note:        Authority G.S. 105‑118; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Repealed Eff. December 1, 1997.

 

SECTION .0600 ‑ TELEGRAPH COMPANIES

 

17 NCAC 05B .0601          BASIS FOR TAXATION

17 NCAC 05B .0602          DUE DATE OF THE REPORT AND TAX

 

History Note:        Authority G.S. 105‑119; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .0603          FORM TO BE USED FOR FILING

 

History Note:        Authority G.S. 105‑119; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Repealed Eff. July 1, 2000.

 

SECTION .0700 ‑ TELEPHONE COMPANIES

 

17 NCAC 05B .0701          BASIS FOR TAXATION

17 NCAC 05B .0702          DUE DATE OF THE REPORT AND TAX

17 NCAC 05B .0703          FORM TO BE USED FOR FILING

17 NCAC 05B .0704          DISTRIBUTION TO MUNICIPALITIES

 

History Note:        Authority G.S. 105‑120; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

SECTION .0800 ‑ STREET TRANSPORTATION COMPANIES

 

17 NCAC 05B .0801          BASIS FOR TAXATION

17 NCAC 05B .0802          DUE DATE OF THE TAX

 

History Note:        Authority G.S. 105‑120.1; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .0803          CORPORATION BILLED FOR THE TAX

 

History Note:        Authority G.S. 105‑120.1; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Repealed Eff. July 1, 2000.

 

SECTION .0900 ‑ MUTUAL BURIAL ASSOCIATION

 

17 NCAC 05B .0901          BASIS FOR TAXATION

17 NCAC 05B .0902          DUE DATE OF THE TAX

 

History Note:        Authority G.S. 105‑121.1; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .0903          CORPORATION BILLED FOR THE TAX

 

History Note:        Authority G.S. 105‑121.1; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Repealed Eff. July 1, 2000.

 

SECTION .1000 ‑ GENERAL BUSINESS CORPORATIONS

 

17 NCAC 05B .1001          BASIS FOR THE TAX

17 NCAC 05B .1002          FRANCHISE TAX BASES

17 NCAC 05B .1003          CORPORATIONS REQUIRED TO FILE

17 NCAC 05B .1004          FORMS TO BE USED FOR FILING

17 NCAC 05B .1005          REPORT AND PAYMENT DUE

17 NCAC 05B .1006          TAX RATE

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

SECTION .1100 ‑ CAPITAL STOCK: SURPLUS AND UNDIVIDED PROFITS BASE

 

17 NCAC 05B .1101          BASED ON THE YEAR ENDING BALANCE SHEET

17 NCAC 05B .1102          SURPLUS DEFINED

17 NCAC 05B .1103          ITEMS INCLUDABLE AND EXCLUDABLE

 

History Note:        Authority G.S. 105‑120.2; 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1104          EXCLUSION OF RETAINED EARNINGS BY PARENT CORPORATION

A parent corporation may exclude any retained earnings of existing subsidiary corporations which it has capitalized or otherwise recorded on its books from the calculation of the capital stock, surplus and undivided profits base under G.S. 105-122.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .1105          INVESTMENT IN SUBSIDIARY

For purposes of G.S. 105-122, the capital stock, surplus, and undivided profits base may not be reduced by the amount invested in a subsidiary.

 

History Note:        Authority G.S. 105-122; 105-262;

Eff. February 1, 1976;

Amended Eff. July 1, 1999; January 1, 1994.

 

17 NCAC 05B .1106          BORROWED CAPITAL TREATMENT: DEBTOR CORPORATION

17 NCAC 05B .1107          BORROWED CAPITAL TREATMENT: CREDITOR CORPORATION

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1108          EXCLUSION PROVISION LIMITED TO INDEBTEDNESS OWED

The exclusion from the Capital Stock Base of indebtedness owed which is permitted the debtor corporation and the deduction permitted the creditor corporation in G.S. 105-122 are applicable only to indebtedness owed to or due from a parent, subsidiary or affiliated corporation.  These provisions do not apply where the indebtedness is merely endorsed or guaranteed.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994.

 

17 NCAC 05B .1109          EQUITY CAPITAL NOT DEDUCTIBLE

The equity capital of a wholly owned subsidiary does not represent "indebtedness" owed to a parent corporation which the parent is entitled to deduct from its franchise tax base.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .1110          RECIPROCAL INDEBTEDNESS BETWEEN AFFILIATES

A corporation which owes indebtedness to a parent, subsidiary or affiliated corporation and at the same time is owed indebtedness by the same parent, subsidiary or affiliated corporation may net the payable and receivable for purposes of the indebtedness computation in arriving at the capital stock, surplus and undivided profits base under G.S. 105-122.  If the indebtedness is owed to one corporation and the receivable is due from another corporation, each amount must be treated separately.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994.

 

17 NCAC 05B .1111          INDEBTEDNESS DEFINED

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 1, 1993.

 

17 NCAC 05B .1112          BORROWED CAPITAL DEFINED

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. November 2, 1992;

Repealed Eff. July 1, 2000.

 

17 NCAC 05B .1113          DEDUCTION FOR QUALIFIED RECYCLING FACILITIES

17 NCAC 05B .1114          HOLDING COMPANIES

 

History Note:        Authority G.S. 105‑120.2; 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1115          CASH BASIS CORPORATIONS

 

History Note:        Authority G.S. 105‑122; 105‑258;

Eff. April 1, 1991;

Expired Eff. September 1, 2017 pursuant to G.S. 150B-21.3A.

 

SECTION .1200 ‑ MULTISTATE CORPORATIONS

 

17 NCAC 05B .1201          APPORTIONMENT FORMULA

17 NCAC 05B .1202          ALTERNATIVE APPORTIONMENT FORMULA

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. October 23, 1977;

Repealed Eff. October 31, 1981.

 

SECTION .1300 ‑ INVESTMENT IN TANGIBLE PROPERTIES IN NORTH CAROLINA BASE

 

17 NCAC 05B .1301          BASIS FOR THE INVESTMENT BASE

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1302          WHAT IS INCLUDABLE IN THE INVESTMENT BASE

For purposes of G.S. 105-122, all tangible assets located in North Carolina shall be included in the Tangible Property Base at book value (original purchase price less reserve for depreciation permitted for income tax purposes). Typical items of tangible property would include: inventory, consigned inventories to be included by consignor, machinery and equipment, furniture and fixtures, containers, tools and supplies, land, buildings, leasehold improvements, and all other tangible assets.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .1303          TREATMENT OF CONSTRUCTION IN PROGRESS

Construction in progress is excluded from the tangible properties base in G.S. 105-122 only if such property is not owned by the corporation filing the return.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .1304          CARRIER OPERATIONS PROPERTY EXEMPT FROM INVESTMENT BASE

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Repealed Eff. October 1, 1998.

 

17 NCAC 05B .1305          INDEBTEDNESS DEDUCTION

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1306          REFINANCING OF A LOAN

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994; October 31, 1981;

Expired Eff. September 1, 2017 pursuant to G.S. 150B-21.3A.

 

17 NCAC 05B .1307          POLLUTION ABATEMENT FACILITIES

17 NCAC 05B .1308          DEDUCTION FOR QUALIFIED RECYCLING FACILITIES

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1309          DETERMINATION OF INCLUSION BY DEPRECIATION

When two or more corporations are in doubt as to which should include property in the investment in tangible property base pursuant to G.S. 105-122, such property shall be included by the corporation allowed depreciation under the Internal Revenue Code.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .1310          NO LIMITATION ON HOLDING COMPANIES

 

History Note:        Authority G.S. 105‑120.2; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 1, 1993.

 

SECTION .1400 ‑ APPRAISED VALUATION OF TANGIBLE AND INTANGIBLE PROPERTY BASE

 

17 NCAC 05B .1401          BASIS FOR TANGIBLE PROPERTY

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1402          CARRIER OPERATIONS APPRAISED PROPERTY EXEMPT

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Repealed Eff. May 1, 1998.

 

17 NCAC 05B .1403          AVERAGE BANK BALANCE

17 NCAC 05B .1404          INTANGIBLE PROPERTY

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1405          NO LIMITATION ON HOLDING COMPANIES

 

History Note:        Authority G.S. 105‑120.2; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 1, 1993.

 

17 NCAC 05B .1406          INVESTMENT BASE PROPERTY INCLUDED

A corporation including property in the investment in tangible property base shall also include the value of this property in the appraised valuation base.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976.

 

SECTION .1500 ‑ CHANGE OF INCOME YEAR

 

17 NCAC 05B .1501          COMPUTATION OF TAX

A change in income year automatically establishes a new franchise year. A combined franchise and income tax return is required for the short income period. Credit is permitted on such return against the franchise tax to the extent that the new franchise year overlaps the old year.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. October 31, 1981;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

17 NCAC 05B .1502          COMPUTATION OF TAX WHEN MERGER IS INVOLVED

(a)  Since franchise tax is prepaid, a special computation is sometimes required to prevent a duplication of tax when two, or more, corporations with different income years merge or otherwise transfer the entire assets from one corporation to the other.

(b)  The surviving corporation shall be allowed to deduct from franchise tax computed on an annual basis the amount of franchise tax paid by the submerged corporation applicable to the period that overlaps the surviving corporation's income year.

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994; October 31, 1981;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017.

 

SECTION .1600 ‑ NEW CORPORATIONS

 

17 NCAC 05B .1601          INITIAL REQUIREMENTS

17 NCAC 05B .1602          FRANCHISE TAX PAYABLE IN ADVANCE

 

History Note:        Authority G.S. 105‑123; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

SECTION .1700 ‑ CORPORATIONS CONDITIONALLY OR PARTIALLY EXEMPT

 

17 NCAC 05B .1701          NON‑PROFIT ORGANIZATIONS

17 NCAC 05B .1702          CORPORATIONS FULLY EXEMPT

 

History Note:        Authority G.S. 105‑125; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.

 

17 NCAC 05B .1703          FRANCHISE MOTOR CARRIERS

 

History Note:        Authority G.S. 105‑122; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1994;

Repealed Eff. May 1, 1998.

 

17 NCAC 05B .1704          REGULATED INVESTMENT COMPANIES

 

History Note:        Authority G.S. 105‑125; 105‑262;

Eff. February 1, 1976;

Repealed Eff. October 31, 1981.