CHAPTER 6 ‑ INDIVIDUAL INCOME TAX

 

SUBCHAPTER 6A ‑ DIVISIONAL RULES

 

17 NCAC 06A .0101         LOCATION

17 NCAC 06A .0102         GENERAL PURPOSES

17 NCAC 06A .0103         ADMINISTRATIVE ORGANIZATION

17 NCAC 06A .0104         INDIVIDUAL INCOME TAX

17 NCAC 06A .0105         INCOME TAX WITHHOLDING

 

History Note:        Authority G.S. 105‑133 to 105‑163.24; 143B-10; 143B‑221;

Eff. February 1, 1976;

Amended Eff. June 1, 1990;

Repealed Eff. June 1, 1993.

 

 

section .0100 - FILING INDIVIDUAL INCOME TAX RETURNS

 

17 NCAC 06B .0101          FORMS

 

History Note:        Authority G.S. 105-155; 105-262;

Eff. February 1, 1976;

Amended Eff. October 1, 1991;

Repealed Eff. August 1, 2002.

 

17 NCAC 06B .0102          GENERAL

Careful attention should be given to the answering of all questions and to the completion of all applicable schedules on the return.  Incomplete or inaccurate information, or the failure to sign a return, may result in the returning of the forms to the taxpayer and in correspondence, thereby delaying the processing of the return and any refund due thereon.

 

History Note:        Authority G.S. 105-153.8; 105-155; 105-251; 105-252; 105-262;

Eff. February 1, 1976;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .0103          COMBINED RETURNS

 

History Note:        Authority G.S. 105‑152(e); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 4, 1978;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0104          completing a return

(a)  A taxpayer shall use the North Carolina income tax form for the year that his or her taxable year begins.

(b)  A person who files an income tax return for an unmarried individual who died during the taxable year shall enter the date of the individual's death and the individual's name on the return.

(c)  On a return, a taxpayer shall furnish his or her social security number and the name and social security number of his or her spouse and shall indicate whether the return is filed jointly or separately.

(d)  The same filing status claimed on the federal income tax return shall be claimed on the North Carolina income tax return.  However, if the taxpayer filed the federal return as married filing jointly and either the taxpayer or the taxpayer's spouse is a nonresident and had no North Carolina taxable income, the taxpayer may file the North Carolina tax return as either married filing jointly or married filing separately as explained in 17 NCAC 06B .3904.

(e)  Each applicable line of the tax return shall be completed and the entering of words or phrases, such as "unconstitutional" or "object - self incrimination" shall not meet the requirement of completing each applicable line on the return.

(f)  The tax shall be computed by multiplying North Carolina taxable income by the tax rate in G.S. 105-153.7. In the case of a delinquent return, the penalty and interest prescribed by statute shall be added.

(g)  If an individual has moved into or out of North Carolina during the tax year or is a nonresident with income from sources within North Carolina, the Computation of North Carolina Taxable Income for Part-Year Residents and Nonresidents section on Form D-400 Schedule S North Carolina Supplemental Schedule shall be completed. Credit for tax paid to another state shall not be allowed to an individual moving into or out of this State unless the individual has income derived from and taxed by another state or country while a resident of this State.

(h)  If a tax credit is claimed for tax paid to another state or country, there shall be attached to the return a true copy of the return filed with the other state or country and a canceled check, receipt, or other proof of payment of tax to the other state or country.

(i)  Every return shall be signed by the taxpayer or his or her authorized agent, and joint returns shall be signed by both spouses.

(j)  Where tax has been withheld, the state copy of the Wage and Tax Statement shall be attached to the return.

(k)  Any additional information that the taxpayer believes will assist in the processing and auditing of a return shall be indicated on the return or a worksheet or schedule attached to the return.

(l)  Anyone who is paid to prepare a return shall sign the return in the space provided.

 

History Note:        Authority G.S. 105-153.7; 105-153.8; 105-153.9; 105-154; 105-155; 105-163.5(e); 105-163.7; 105-163.10; 105-251; 105-252; 105-262;

Eff. February 1, 1976;

Amended Eff. September 1, 2008; February 1, 2005; August 1, 2002; July 1, 1999; August 1, 1998; November 1, 1994; June 1, 1993; October 1, 1991; June 1, 1990;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0105          REPRODUCED COPIES

 

History Note:        Authority G.S. 105‑155; 105‑251; 105‑252; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1993; May 1, 1984;

Repealed Eff. July 1, 2000.

 

17 NCAC 06B .0106          FEDERAL FORMS

A taxpayer whose federal return reflects an address outside of North Carolina shall attach a copy of the federal return to the taxpayer's North Carolina return.

 

History Note:        Authority G.S. 105-153.8; 105-155; 105-251; 105-252; 105-262;

Eff. February 1, 1976;

Amended Eff. August 1, 1998; June 1, 1993; February 1, 1991; June 1, 1990; May 1, 1984;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0107          EXTENSIONS

(a)  Application. -- If an income tax return cannot be filed by the due date, a taxpayer may apply for an automatic six-month extension of time to file the return.  To receive the extension, an individual shall file Form D-410, Application for Extension for Filing Individual Income Tax Return, by the original due date of the return. A partnership, estate, or trust shall file Form D-410P, Application for Extension for Filing Partnership, Estate, or Trust Tax Return, by the original due date of the return.

(b)  Late Payment Penalty. -- A 10 percent late payment penalty shall apply to the remaining balance due if less than 90 percent of the total amount of tax due is paid by the due date.  If the 90 percent requirement is met, any remaining balance due shall be paid with the income tax return before the expiration of the extension period to avoid the late payment penalty.  If a taxpayer does not file the application for extension by the original due date of the return, the taxpayer is subject to both the five percent per month late filing penalty (25 percent maximum) and the 10 percent late payment penalty on the remaining balance due.

(c)  Individuals Outside U.S. -- An individual who is "Out of Country" on the date the return is due shall be granted an automatic four-month extension for filing the North Carolina income tax return by marking the Out of Country indicator on the Form D-400 when the State return is filed.  "Out of Country" means the individual is a United States citizen or resident who is living outside the United States and Puerto Rico and either the taxpayer's main place of work is outside the United States and Puerto Rico or the taxpayer is in the military service outside the United States and Puerto Rico.  The time for payment of the tax shall also be extended; however, interest shall be due on any unpaid tax from the original due date of the return until the tax is paid.  If an individual is unable to file the return within the automatic four-month extension period, an additional two-month extension may be obtained by following the provisions in Paragraph (a) of this Rule; however, the Form D-410 shall be filed by the automatic extension date of August 15.

(d)  Return. -- A return may be filed at any time within the extension period but it shall be filed before the end of the extension period to avoid the late filing penalty.

 

History Note:        Authority G.S. 105-155; 105-157; 105-160.6; 105-160.7; 105-236(a)(3); 105-236(a)(4); 105-262; 105-263;

Eff. February 1, 1976;

Amended Eff. September 1, 2008; May 1, 2006; August 1, 2002; August 1, 1998; November 1, 1994; May 1, 1994; June 1, 1993; October 1, 1992;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0108          AMENDED RETURNS

 

History Note:        Authority G.S. 105‑156; 105‑159; 105‑262;

Eff. June 1, 1982;

Amended Eff. May 1, 1984;

Pursuant to G.S. 150B-21.3A, rule Expired August 1, 2015.

 

17 NCAC 06B .0109          FILING REQUIREMENTS ‑ GENERAL STATEMENT

The minimum gross income filing requirements under North Carolina law are different from the filing requirements under the Internal Revenue Code because North Carolina law does not allow the same standard deduction amount as the Internal Revenue Code or a personal exemption for the individual, the individual's spouse, the individual's children, or any other qualifying dependents on the State return.

 

History Note:        Authority G.S. 105-153.5; 105‑262;

Eff. June 1, 1990;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0110          INDIVIDUALS REQUIRED TO FILE A N.C. INDIVIDUAL INCOME TAX RETURN

17 NCAC 06B .0111          MINIMUM GROSS INCOME FILING REQUIREMENTS

 

History Note:        Authority G.S. 105‑134.2; 105‑134.5; 105‑134.6(c); 105‑152; 105‑262;

Eff. June 1, 1990;

Amended Eff. October 1, 1991; February 1, 1991;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .0112          JOINT FEDERAL BUT SEPARATE STATE RETURN

(a)  Separate Return or Schedule.  -- A spouse who files a joint federal return but files a separate North Carolina return pursuant to G.S. 105-153.8(c) shall complete a separate federal return and attach it to the North Carolina tax return to show how the spouse's adjusted gross income would be determined on a separate federal return.  In lieu of completing a separate federal return, the spouse may submit a schedule showing the computation of the spouse's separate adjusted gross income.  A spouse who submits a schedule shall attach a copy of the spouse's joint federal return if the federal return reflects an address outside North Carolina.

(b)  Allowable Deductions.  -- In completing a separate federal return or preparing a schedule computing a spouse's separate adjusted gross income, deductions are allowable only for items paid during the tax year.  Deductions for separate obligations are allowable only to the spouse who paid the obligation and was responsible for paying the obligation.  Deductions for joint obligations paid by one spouse from that spouse's separate account are allowable only to that spouse.  Deductions for joint obligations paid from a joint account are allowable to each spouse in proportion to the spouses' adjusted gross incomes for that tax year.

 

History Note:        Authority G.S. 105-134.1; 105-153.5(a)(2); 105-153.8(e); 105-262;

Eff. June 1, 1990;

Amended Eff. August 1, 2002; August 1, 1998; February 1, 1991;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0113          TAXPAYERS DOMICILED IN COMMUNITY PROPERTY STATES

(a)  If a married couple is domiciled in a state or country recognized for federal income tax purposes as a community property state or country and the spouses file separate North Carolina returns with each spouse reporting one‑half of the salary and wages received while domiciled in the community property state or country, each spouse shall claim one‑half of the credit for the income tax withheld with respect to community wages.

(b)  A schedule or statement shall be attached to the North Carolina return showing the name and social security number of each spouse, that they were domiciled in a community property state or country, and that 50 percent of each spouse's income tax withheld is allocated to the other spouse's income tax return.

 

History Note:        Authority G.S. 105‑163.10; 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0114          COMPUTATION OF TAXABLE INCOME ‑ GENERAL

The starting point in determining North Carolina taxable income is federal adjusted gross income, subject to the additions, deductions, and North Carolina standard deduction or North Carolina itemized deductions as provided by G.S. 105-153.5 and 105-153.6.  These adjustments do not apply to all individuals.  Each individual shall determine if any of the adjustments apply to the individual’s return.

 

History Note:        Authority G.S. 105-153.3; 105-153.4; 105-153.5; 105-153.6; 105-262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993; October 1, 1991;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0115          ADDITIONS TO Adjusted Gross INCOME

The additions under G.S. 105-153.5(c)(1) include the portion of an exempt interest dividend from a regulated investment company that represents interest on direct obligations of states and their political subdivisions other than North Carolina and interest from obligations of the District of Columbia.

 

History Note:        Authority G.S. 105-153.5(c)(1); 105‑262;

Eff. June 1, 1990;

Amended Eff. May 1, 1994; June 1, 1993; October 1, 1992; October 1, 1991;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0116          DEDUCTIONS FROM Adjusted gross INCOME

(a)  Deductible Interest. -- The deduction for interest on obligations of the United States or its possessions provided in G.S. 105-153.5(b)(1) applies to direct obligations of the United States to the extent the interest has been included in federal adjusted gross income.  For the interest to be deductible, the obligation shall be in writing, bear interest, be a binding promise by the United States to pay specific amounts at specific dates, and be specifically authorized by Congress.  United States Treasury bonds, notes, bills, certificates, and saving bonds are primary examples of direct obligations.

(b)  Nondeductible Interest. – Interest earned on obligations that are backed or guaranteed by, but not direct obligations of, the United States Government shall not qualify for deduction from an individual's federal adjusted gross income.  Interest earned on obligations where the United States is an insurer or guarantor, but the obligation is not a direct obligation, shall not be deductible from federal adjusted gross income.  Examples include Federal Home Loan Mortgage Corporation ("Freddie Mac"), Federal National Mortgage Association ("Fannie Mae"), and the Government National Mortgage Association ("Ginnie Mae").  Distributions representing gain from the sale or other disposition of United States obligations or interest paid in connection with repurchase agreements issued by banks and savings and loan associations shall not be deductible from federal adjusted gross income.  The deduction from federal adjusted gross income shall not apply to any portion of a distribution from an Individual Retirement Account (IRA).

(c)  Indian Tribe. -- The income earned or received by an enrolled member of the Eastern Band of Cherokee Indians or another federally recognized Indian tribe shall be deductible from federal adjusted gross income if it is included in federal gross income and it is derived from activities on the Cherokee reservation or another federally recognized Indian reservation while the member resided on the reservation.

 

History Note:        Authority G.S. 105-153.5; 105‑262;

Eastern Band of Cherokee Indians v. Lynch 632 F.2d 373 (4th Cir. 1980);

Eff. June 1, 1990;

Amended Eff. April 1, 2001; November 1, 1994; June 1, 1993; October 1, 1992; October 1, 1991;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .0117          TRANSITIONAL ADJUSTMENTS

 

History Note:        Authority G.S. 105-134.7; 105-262; 105-264;

Eff. June 1, 1990;

Amended Eff. August 1, 1998; May 1, 1994; June 1, 1993; October 1, 1992; October 1, 1991;

Expired Eff. August 1, 2015 pursuant to G.S. 150B-21.3A.

 

17 NCAC 06B .0118          ELECTRONIC FILING OF INDIVIDUAL INCOME TAX RETURNS

 

History Note:        Authority G.S. 105-262; Rev. Proc. 93-8, Internal Revenue Bulletin 1993-2, January 11, 1993;

Eff. May 1, 1994;

Amended Eff. August 1, 2002; July 1, 2000; August 1, 1998; November 1, 1994;

Expired Eff. August 1, 2015 pursuant to G.S. 150B-21.3A.

 

17 NCAC 06B .0119          REPORTING INCOME FROM CONVEYANCE OF REAL PROPERTY HELD IN TENANCY BY THE ENTIRETY

When spouses file separate individual income tax returns, the spouses shall determine the portion of the income or loss from real property that shall be reported by each spouse.  When real property conveyed jointly in the name of a married couple is located in another state and the share of ownership of each is not fixed in the deed or other instrument creating the co‑tenancy, each spouse is considered as having received one‑half of the income or loss from the real property, unless they can demonstrate that the laws of that particular state with respect to the right to the income from the property allocate the income or loss in a different manner.

 

History Note:        Authority G.S. 39-13.6; 105‑262;

Eff. May 1, 2016.

 

SECTION .0200 ‑ STATE AND FEDERAL DIFFERENCES

 

17 NCAC 06B .0201          GENERAL

17 NCAC 06B .0202          AREAS OF DIFFERENCE

 

History Note:        Authority G.S. 105‑133 to 105‑163.24; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 4, 1978;

Repealed Eff. March 22, 1981.

 

SECTION .0300 ‑ PERSONAL EXEMPTION

 

 

17 NCAC 06B .0301          GENERAL

17 NCAC 06B .0302          ONE THOUSAND ONE HUNDRED DOLLAR PERSONAL EXEMPTION

17 NCAC 06B .0303          TWO THOUSAND TWO HUNDRED DOLLAR PERSONAL EXEMPTION

17 NCAC 06B .0304          BLIND PERSONS

17 NCAC 06B .0305          INDIVIDUALS AGE 65 OR OVER

17 NCAC 06B .0306          SEVERELY RETARDED DEPENDENT

17 NCAC 06B .0307          HEMOPHILIACS

17 NCAC 06B .0308          EXEMPTION FOR DEPENDENTS

17 NCAC 06B .0309          DEPENDENT IN INSTITUTION OF HIGHER LEARNING

17 NCAC 06B .0310          DECEASED OR INCOMPETENT INDIVIDUALS

17 NCAC 06B .0311          PRORATED PERSONAL EXEMPTION

17 NCAC 06B .0312          OTHER CONSIDERATIONS

 

History Note:        Authority G.S. 105‑135; 105‑149; 105‑149(a)(2); 105‑149(a)(4); 105‑149(a)(5);

105‑149(a)(6); 105‑149(a)(7); 105‑149(a)(8); 105‑149(a)(9); 105‑149(a)(10); 105‑149(a)(2a);

105‑149(a)(8a); 105‑149(b); 105‑149(c); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1989; November 1, 1988; August 1, 1986; May 1, 1984;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0313          DEAF INDIVIDUALS

17 NCAC 06B .0314          RENAL DISEASE

 

History Note:        Authority G.S. 105‑149(a)(8b); 105‑149(a)(8c); 105‑262;

Eff. February 11, 1978;

Amended Eff. November 1, 1988; April 19, 1981;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0315          PARAPLEGICS

 

History Note:        Authority G.S. 105‑149(a)(8d); 105‑262;

Eff. April 19, 1981;

Amended Eff. November 1, 1988; February 1, 1988;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0316          CYSTIC FIBROSIS

17 NCAC 06B .0317          SPINA BIFIDA

17 NCAC 06B .0318          MULTIPLE SCLEROSIS

17 NCAC 06B .0319          SEVERE HEAD INJURY

 

History Note:        Authority G.S. 105‑149(a)(8e); 105‑149(a)(8f); 105‑149(a)(8g); 105‑149(a)(8h);

105‑262;

Eff. August 1, 1986;

Amended Eff. November 1, 1988;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0320          MUSCULAR DYSTROPHY

17 NCAC 06B .0321          ORGAN AND TISSUE TRANSPLANTS

 

History Note:        Authority G.S. 105‑149(a); 105‑262;

Eff. November 1, 1988;

Amended Eff. December 1, 1988;

Repealed Eff. June 1, 1990.

 

SECTION .0400 ‑ ANNUITIES AND PENSIONS

 

 

17 NCAC 06B .0401          GENERAL

17 NCAC 06B .0402          GENERAL RULES FOR ANNUITIES

17 NCAC 06B .0403          SPECIAL RULE

17 NCAC 06B .0404          VARIABLE ANNUITIES

17 NCAC 06B .0405          GUARANTEED PAYMENTS

17 NCAC 06B .0406          LUMP SUM

17 NCAC 06B .0407          INSTALLMENT OPTIONS

17 NCAC 06B .0408          FEDERAL EMPLOYEES PENSIONS

 

History Note:        Authority G.S. 105‑141.1; 105‑141(b)(2); 105‑141(b)(14); 105‑141(b)(18);

105‑141(b)(20); 105‑141(c); 105‑141.1(d)(3); 105‑141.1(g); 105‑262;

Eff. February 1, 1976;

Amended Eff. November 1, 1988; May 1, 1984; June 1, 1982; March 22, 1981;

Repealed Eff. June 1, 1990.

 

SECTION .0500 ‑ DIVORCED OR SEPARATED PERSONS

 

 

17 NCAC 06B .0501          GENERAL

 

History Note:        Authority G.S. 105‑141.2; 105‑147(21); 105‑262;

Eff. February 1, 1976;

Amended Eff. August 1, 1986; March 22, 1981;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0502          INCOME

17 NCAC 06B .0503          DEDUCTIONS

17 NCAC 06B .0504          NONDEDUCTIBLE PAYMENTS

17 NCAC 06B .0505          MINOR CHILDREN

17 NCAC 06B .0506          PERIODIC PAYMENTS

17 NCAC 06B .0507          LUMP‑SUM SETTLEMENT

17 NCAC 06B .0508          LARGE EARLY PAYMENTS

17 NCAC 06B .0509          SETTLEMENT OF PROPERTY RIGHTS

17 NCAC 06B .0510          TRANSFER OF APPRECIATED PROPERTY

17 NCAC 06B .0511          RETROACTIVE EFFECT OF A DECREE

17 NCAC 06B .0512          EFFECT OF LOCAL LAW

17 NCAC 06B .0513          PAYMENTS FROM A TRUST

17 NCAC 06B .0514          MEDICAL EXPENSES

17 NCAC 06B .0515          LIFE INSURANCE PREMIUMS

17 NCAC 06B .0516          TAXES: INTEREST: INSURANCE: UTILITIES

17 NCAC 06B .0517          BACK ALIMONY PAYMENTS

17 NCAC 06B .0518          PAYMENT AFTER WIFE'S DEATH OR REMARRIAGE

17 NCAC 06B .0519          LEGAL EXPENSES

17 NCAC 06B .0520          PERSONAL EXEMPTION

 

History Note:        Authority G.S. 105‑141(a)(3); 105‑141.2; 105‑144; 105‑147(2); 105‑147(5);

105‑147(6); 105‑147(11); 105‑147(21); 105‑149; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982; March 22, 1981; February 11, 1978;

Repealed Eff. August 1, 1986.

 

SECTION .0600 ‑ TAX CREDITS

 

 

17 NCAC 06B .0601          GENERAL

17 NCAC 06B .0602          RESIDENTS

17 NCAC 06B .0603          NONRESIDENTS

 

History Note:        Authority G.S. 105‑130.4; 105‑134; 105‑135(13); 105‑141(a); 105‑142(c); 105‑147(9); 105‑147(18);                                                                       105‑149(b); 105‑151; 105‑262;

Eff. February 1, 1976;

Amended Eff. November 1, 1988; August 1, 1986; May 1, 1984; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0604          OTHER TAX CREDITS

 

History Note:        Authority G.S. 105‑151.1; 105‑151.2; 105‑151.3; 105‑163.03; 105‑262;

Eff. February 11, 1978;

Amended Eff. March 22, 1981;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .0605          RESIDENTIAL SOLAR ENERGY EQUIPMENT

 

History Note:        Authority G.S. 105-129.15; 105-129.16A; 105‑262;

Eff. June 1, 1982;

Amended Eff. July 1, 2000; June 1, 1995; June 1, 1993; June 1, 1990; July 1, 1986;

Repealed Eff. February 1, 2005.

 

17 NCAC 06B .0606          CREDIT FOR CHILD AND DEPENDENT CARE EXPENSES

 

History Note:        Authority G.S. 105‑151.11; 105‑262;

Eff. June 1, 1990;

Amended Eff. July 1, 1999; November 1, 1994; June 1, 1993; October 1, 1991;

Expired Eff. August 1, 2015 pursuant to G.S. 150B-21.3A.

 

17 NCAC 06B .0607          CREDIT FOR INCOME TAX PAID TO ANOTHER STATE OR COUNTRY

(a)  If credits are claimed for taxes paid to more than one state or country, a separate computation must be made for each state or country and the separate credits combined to determine the total credit.

(b)  No credit is allowed for income taxes paid to a city, county, or other political subdivision of a state or to the federal government.

(c)  If credit is claimed for the shareholder's part of the corporate tax paid, a schedule must be attached to the North Carolina return showing the total tax paid by the S corporation and how the pro rata share of the tax was determined.

 

History Note:        Authority G.S. 105-153.9; 105-262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .0608          CREDIT FOR CORPORATE TAX PAID BY S CORPORATION TO ANOTHER STATE

 

History Note:        Authority G.S. 105‑131.8; 105‑262;

Eff. June 1, 1990;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .0609          CREDIT FOR NORTH CAROLINA DIVIDENDS

 

History Note:        Authority G.S. 105-151.19; 105-262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993;

Repealed Eff. August 1, 1998.

 

17 NCAC 06B .0610          CREDIT FOR THE DISABLED

 

History Note:        Authority G.S. 105‑151.18; 105‑262;

Eff. February 1, 1991;

Amended Eff. June 1, 1993;

Expired Eff. August 1, 2015 pursuant to G.S. 150B-21.3A.

 

17 NCAC 06B .0611          CREDIT FOR TAX PAID ON CERTAIN GOVERNMENT RETIREMENT BENEFITS

 

History Note:        Authority G.S. 105‑151.20; 105‑262;

Eff. February 1, 1991;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .0612          TAX CREDIT FOR QUALIFIED BUSINESS INVESTMENTS

 

History Note:        Authority G.S. 105‑131.8(b); 105‑163.010; 105‑163.011; 105‑163.012; 105‑163.013; 105‑163.14; 105‑262;

Eff. September 1, 1992;

Amended Eff. July 1, 1996; May 1, 1994;

Repealed Eff. September 1, 2008.

 

17 NCAC 06B .0613          CREDIT FOR USE OF NORTH CAROLINA PORTS

 

History Note:        Authority G.S. 105‑131.8; 105‑151.22; 105‑262;

Eff. January 4, 1993;

Expired Eff. August 1, 2015 pursuant to G.S. 150B-21.3A.

 

SECTION .0700 ‑ ACTIVE AND RESERVE DUTY MILITARY PAY

 

 

17 NCAC 06B .0701          MILITARY PAY IN GENERAL

17 NCAC 06B .0702          RESIDENT ARMED SERVICES PERSONNEL

17 NCAC 06B .0703          NONRESIDENT ARMED SERVICES PERSONNEL

17 NCAC 06B .0704          ESTIMATED INCOME TAX RETURNS

17 NCAC 06B .0705          SERVICE INCOME AND DEDUCTIONS

17 NCAC 06B .0706          EXTENSIONS

 

History Note:        Authority G.S. 105‑134; 105‑135(13); 105‑141; 105‑141(b)(25); 105‑147;

105‑163.15; 105‑163.18; 105‑262; 105‑263; 50 U.S.C. Sec. 574;

Eff. February 1, 1976;

Amended Eff. August 1, 1986; May 1, 1984; June 1, 1982; March 22, 1981;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0707          PENALTY AND INTEREST

17 NCAC 06B .0708          CANCELLATION AND ABATEMENT

 

History Note:        Authority G.S. 105‑244.1; 105‑249.2; 105‑158; 105‑262;

Eff. February 1, 1976;

Amended Eff. March 22, 1981;

Repealed Eff. June 1, 1982.

 

SECTION .0800 ‑ INSTALLMENT SALES

 

17 NCAC 06B .0801          GENERAL

 

History Note:        Authority G.S. 105‑141(a); 105‑142(f); 105‑144; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; May 1, 1984; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0802          THE INSTALLMENT METHOD

17 NCAC 06B .0803          OTHER SALES

17 NCAC 06B .0804          REPOSSESSIONS

17 NCAC 06B .0805          REPOSSESSION OF REAL PROPERTY

17 NCAC 06B .0806          DISPOSITIONS

 

History Note:        Authority G.S. 105‑142(f); 105‑141(a); 105‑144; 105‑147(9),(10); 105‑262;

Eff. February 1, 1976;

Amended Eff. March 29, 1981;

Repealed Eff. June 1, 1982.

 

SECTION .0900 ‑ SALE OF PRINCIPAL RESIDENCE

 

 

17 NCAC 06B .0901          GENERAL

17 NCAC 06B .0902          RULES

17 NCAC 06B .0903          DEFINITIONS

17 NCAC 06B .0904          PARTIALLY USED AS A RESIDENCE

17 NCAC 06B .0905          CONVERTED TO RENTAL PROPERTY

17 NCAC 06B .0906          EXCHANGE

17 NCAC 06B .0907          ALLOCATION BETWEEN HUSBAND AND WIFE

17 NCAC 06B .0908          ACQUIRED BY GIFT OR INHERITANCE

 

History Note:        Authority G.S. 105‑144.2; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; August 1, 1986; May 1, 1984; March 21, 1981;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0909          65 OR OLDER

 

History Note:        Authority G.S. 105‑144.2; 105‑262;

Eff. February 1, 1976;

Repealed Eff. March 22, 1981.

 

17 NCAC 06B .0910          REPORTING SALE

 

History Note:        Authority G.S. 105‑144.2; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982; March 29, 1981; February 21, 1979;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .0911          55 OR OVER

 

History Note:        Authority G.S. 105‑141(b)(26); 105‑262;

Eff. March 29, 1981;

Amended Eff. May 1, 1984;

Repealed Eff. June 1, 1990.

 

SECTION .1000 ‑ PRIVATE ANNUITY TRANSACTIONS

 

 

17 NCAC 06B .1001          GENERAL

 

History Note:        Authority G.S. 105‑141(a); 105‑144; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1002          PURCHASE AND SALE

17 NCAC 06B .1003          REPORTING BY THE TRANSFEROR

17 NCAC 06B .1004          THE TRANSFEREE

 

History Note:        Authority G.S. 105‑141(a); 105‑144; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

SECTION .1100 ‑ INVOLUNTARY CONVERSION

 

 

17 NCAC 06B .1101          GENERAL

 

History Note:        Authority G.S. 105‑144.1; 105‑262;

Eff. February 1, 1976;

Amended Eff. April 1, 1978;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1102          NONRECOGNITION OF GAIN

17 NCAC 06B .1103          LOSSES

17 NCAC 06B .1104          CONDEMNATION AWARDS

17 NCAC 06B .1105          COMPUTING GAIN OR LOSS

17 NCAC 06B .1106          SEVERANCE DAMAGES

17 NCAC 06B .1107          EASEMENTS

17 NCAC 06B .1108          THREAT OR IMMINENCE

17 NCAC 06B .1109          BASIS OF NEW PROPERTY

17 NCAC 06B .1110          SIMILAR OR RELATED PROPERTY

17 NCAC 06B .1111          REPLACEMENT PERIOD

17 NCAC 06B .1112          ASSESSMENTS

 

History Note:        Authority G.S. 105‑141(a); 105‑144; 105‑144.1; 105‑147(9); 105‑262;

Eff. February 1, 1976;

Repealed Eff. April 1, 1978.

 

SECTION .1200 ‑ COST BASIS OF PROPERTY

 

 

17 NCAC 06B .1201          GENERAL

17 NCAC 06B .1202          CHANGES IN THE BASIS

17 NCAC 06B .1203          COST BASIS GUIDE CHART

 

History Note:        Authority G.S. 105‑144; 105‑262;

Eff. February 1, 1976;

Amended Eff. March 25, 1978;

Repealed Eff. June 1, 1990.

 

SECTION .1300 ‑ TENANCY BY THE ENTIRETY

 

 

17 NCAC 06B .1301          GENERAL

17 NCAC 06B .1302          HOW CREATED

17 NCAC 06B .1303          INCOME

17 NCAC 06B .1304          GAIN OR LOSS

17 NCAC 06B .1305          BASIS TO SURVIVOR

 

History Note:        Authority G.S. 39‑13.6; 39‑13.6(c); 105‑144; 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1984; June 1, 1982; February 18, 1978;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1306          BASIS AFTER DIVORCE

 

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

Eff. February 18, 1978;

Repealed Eff. June 1, 1990.

 

SECTION .1400 ‑ INCOME AND DEDUCTIONS OF DECEDENTS

 

 

17 NCAC 06B .1401          GENERAL

17 NCAC 06B .1402          THE REPORTING OF INCOME

17 NCAC 06B .1403          DEDUCTIONS

17 NCAC 06B .1404          REFUNDS

 

History Note:        Authority G.S. 28A‑15‑8; 28A‑15‑9; 31A‑4; 105‑142; 105‑142.1; 105‑152; 105‑262;

Eff. February 1, 1976;

Amended Eff. August 1, 1986; June 1, 1982; February 21, 1979;

Repealed Eff. June 1, 1990.

 

SECTION .1500 ‑ STOCK DIVIDENDS AND STOCK RIGHTS

 

 

17 NCAC 06B .1501          GENERAL

 

History Note:        Authority G.S. 105‑141(a); 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1502          BASIS IN A NONTAXABLE DISTRIBUTION

17 NCAC 06B .1503          BASIS IN A TAXABLE DISTRIBUTION

17 NCAC 06B .1504          FRACTIONAL SHARES

17 NCAC 06B .1505          ANTITRUST LAWS

 

History Note:        Authority G.S. 105‑141(a); 105‑144.4; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

SECTION .1600 ‑ BASIS OF DIVESTED STOCK

 

 

17 NCAC 06B .1601          GENERAL

17 NCAC 06B .1602          ALLOCATION OF BASIS

 

History Note:        Authority G.S. 105‑144.4; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1990.

 

SECTION .1700 ‑ EXEMPT INCOME

 

 

17 NCAC 06B .1701          GENERAL

17 NCAC 06B .1702          LIFE INSURANCE PROCEEDS

17 NCAC 06B .1703          RETURN OF PREMIUMS

17 NCAC 06B .1704          GIFTS

17 NCAC 06B .1705          INHERITANCE

17 NCAC 06B .1706          GOVERNMENT OBLIGATIONS

 

History Note:        Authority G.S. 105‑141; 105‑141(a); 105‑141(b)(1); 105‑141(b)(2); 105‑141(b)(3);

105‑141(b)(4); 105‑144; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1989; August 1, 1986; June 1, 1982; March 29, 1981;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1707          NONPROFIT EDUCATIONAL INSTITUTIONS

 

History Note:        Authority G.S. 105‑141(b)(4); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1708          ACCIDENT OR HEALTH INSURANCE

17 NCAC 06B .1709          MEDICAL BENEFITS

 

History Note:        Authority G.S. 105‑141(a); 105‑141(b)(5); 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1984;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1710          WORKMEN'S COMPENSATION

17 NCAC 06B .1711          DAMAGES

17 NCAC 06B .1712          MINISTER'S DWELLING

17 NCAC 06B .1713          ORPHANAGE EMPLOYEES

17 NCAC 06B .1714          SOCIAL SECURITY

 

History Note:        Authority G.S. 105‑141(b)(5)(6)(7); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1715          RETIREMENT BENEFITS FROM OTHER STATES

17 NCAC 06B .1716          MEALS AND LODGING

 

History Note:        Authority G.S. 105‑141(a); 105‑141(b)(8); 105‑141(b)(9)a.; 105‑262;

Eff. February 1, 1976;

Amended Eff. April 19, 1981; March 29, 1981; February 18, 1978;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1717          GROUP LIFE INSURANCE

17 NCAC 06B .1718          SCHOLARSHIPS

17 NCAC 06B .1719          DEATH BENEFITS

17 NCAC 06B .1720          COMBAT ZONE PAY

17 NCAC 06B .1721          FIREMEN'S PENSIONS

17 NCAC 06B .1722          LAW ENFORCEMENT OFFICERS

17 NCAC 06B .1723          FORSYTH COUNTY AND WINSTON SALEM

17 NCAC 06B .1724          FEDERAL EMPLOYEES

17 NCAC 06B .1725          HOSTILE FIRE DUTY PAY

17 NCAC 06B .1726          ARMED FORCES DISABILITY PAY

 

History Note:        Authority G.S. 105‑141(b)(9)b.,(10),(11),(12), (13),(14),(15),(16); 105‑141.1;

105‑262; 128‑31; 128‑32; 143‑166;

Eff. February 1, 1976;

Amended Eff. March 29, 1981; February 18, 1978;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1727          ARMED FORCES RETIREMENT PAY

 

History Note:        Authority G.S. 105‑141(b)(18); 105‑141(b)(20); 105‑141.1; 105‑262;

Eff. February 1, 1976;

Amended Eff. April 19, 1981; February 18, 1978:

Repealed Eff. May 1, 1984.

 

17 NCAC 06B .1728          TAX SHELTERED ANNUITIES

 

History Note:        Authority G.S. 105‑141(b)(17); 105‑262;

Eff. February 1, 1976;

Amended Eff. April 19, 1981; February 18, 1978;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1729          ANNUITY INCOME

 

History Note:        Authority G.S. 105‑144.1; 105‑262;

Eff. February 1, 1976;

Repealed Eff. April 19, 1981.

 

17 NCAC 06B .1730          DEDUCTIBLE DIVIDENDS

17 NCAC 06B .1731          RELOCATION EXPENSE

 

History Note:        Authority G.S. 105‑141(a); 105‑142(e); 105‑144; 105‑147(7);

105‑262; 133‑15;

Eff. February 1, 1976;

Amended Eff. June 1, 1982; April 19, 1981;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1732          LAW ENFORCEMENT OFFICERS

 

History Note:        Authority G.S. 143‑166; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1733          NORTH CAROLINA LOCAL GOVERNMENT

17 NCAC 06B .1734          RAILROAD RETIREMENT

 

History Note:        Authority G.S. 105‑141(a); 105‑262; 128‑31; 45 U.S.C. Sec. 231m;

Eff. February 1, 1976;

Amended Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1735          VETERANS

 

History Note:        Authority G.S. 105‑141(b)(16); 165‑44; 105‑262;

Eff. February 1, 1976;

Repealed Eff. February 18, 1978.

 

17 NCAC 06B .1736          POLLUTION ABATEMENT BONDS

 

History Note:        Authority G.S. 159C‑14; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 18, 1978;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1737          VETERANS ADMINISTRATION BENEFITS

17 NCAC 06B .1738          DISABILITY INCOME

 

History Note:        Authority G.S. 105‑141; 105‑262; 38 U.S.C. sec. 3101;

Eff. February 1, 1976;

Amended Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1739          BUSINESS DEVELOPMENT CORPORATIONS

 

History Note:        Authority G.S. 53A‑15; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1740          STATE EMPLOYEES' RETIREMENT

 

History Note:        Authority G.S. 135‑9; 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1984; February 18, 1978;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1741          STATE SUPPORTED SCHOOLS

 

History Note:        Authority G.S. 116‑183; 116‑196; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1742          CAMPAIGN CONTRIBUTIONS

17 NCAC 06B .1743          TRAINING ALLOWANCES

17 NCAC 06B .1744          BROTHERHOOD RELIEF

 

History Note:        Authority G.S. 105‑141(a); 105‑141(b)(3); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1745          NATIONAL GUARD PENSIONS

17 NCAC 06B .1746          RAILROAD UNEMPLOYMENT INSURANCE

 

History Note:        Authority G.S. 105‑262; 127A‑40(e); 45 USC Sec. 352(e);

Eff. February 18, 1978;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1747          INDIAN RESERVATION INCOME

 

History Note:        Authority United States Court of Appeals (Fourth Circuit) No. 79‑1589;

G.S. 105‑141; 105‑262;

Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1748          NORTH CAROLINA LEGISLATIVE RETIREMENT BENEFITS

 

History Note:        Authority G.S. 120‑4.4; 120‑4.23; 105‑262;

Eff. May 1, 1984;

Amended Eff. August 1, 1986;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .1749          PUNITIVE DAMAGES

17 NCAC 06B .1750          FOSTER PARENTS REIMBURSEMENT

17 NCAC 06B .1751          CHILD AND DEPENDENT ASSISTANCE PAID BY EMPLOYER

17 NCAC 06B .1752          FOREIGN INCOME EXCLUSION

 

History Note:        Authority G.S. 105‑141(a); 105‑141(b)5; 105‑141(b)(9)c.; 105‑141(b)(22); 105‑262;

Eff. August 1, 1986;

Amended Eff. November 1, 1988;

Repealed Eff. June 1, 1990.

 

SECTION .1800 ‑ SCHOLARSHIP AND FELLOWSHIP GRANTS

 

 

17 NCAC 06B .1801          GENERAL

 

History Note:        Authority G.S. 105‑141(b)(10); 105‑135; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .1802          FEDERAL PRACTICE TO BE FOLLOWED

 

History Note:        Authority G.S. 105‑141(b)(10); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1990.

 

SECTION .1900 ‑ EMPLOYEE DEATH BENEFITS

 

 

17 NCAC 06B .1901          GENERAL

17 NCAC 06B .1902          THE FIVE THOUSAND DOLLAR EXCLUSION

17 NCAC 06B .1903          NONFORFEITABLE RIGHTS

 

History Note:        Authority G.S. 105‑141(a)(16); 105‑141.1; 105‑141(b)(11); 105‑262;

Eff. February 1, 1976;

Amended Eff. August 1, 1986; June 1, 1982; February 18, 1978;

Repealed Eff. June 1, 1990.

 

SECTION .2000 ‑ DEPRECIATION AND DEPLETION

 

 

17 NCAC 06B .2001          GENERAL

17 NCAC 06B .2002          JOINT FEDERAL RETURNS

 

History Note:        Authority G.S. 105‑147(12); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .2003          STATE AND FEDERAL DIFFERENCES

17 NCAC 06B .2004          FEDERAL PRACTICE TO BE FOLLOWED

 

History Note:        Authority G.S. 105‑147(12); 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1984; June 1, 1982;

Repealed Eff. June 1, 1990.

 

SECTION .2100 ‑ CONSERVATION AND LAND CLEARING

 

 

17 NCAC 06B .2101          GENERAL

 

History Note:        Authority G.S. 105‑147(1); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .2102          FEDERAL PRACTICE TO BE FOLLOWED

 

History Note:        Authority G.S. 105‑147(1); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1990.

 

SECTION .2200 ‑ TRAVEL EXPENSES

 

 

17 NCAC 06B .2201          GENERAL

 

History Note:        Authority G.S. 105‑147(1); 105‑147(2); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1989;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2202          ORDINARY AND NECESSARY

 

History Note:        Authority G.S. 105‑147(1); 105‑147(2); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .2203          FEDERAL PRACTICE TO BE FOLLOWED

 

History Note:        Authority G.S. 105‑147(1); 105‑147(2); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2204          REIMBURSEMENT FOR MEALS

 

History Note:        Authority G.S. 105‑147(1); 105‑262;

Eff. March 29, 1981;

Repealed Eff. June 1, 1990.

 

SECTION .2300 ‑ EDUCATION EXPENSES

 

 

17 NCAC 06B .2301          GENERAL

17 NCAC 06B .2302          FEDERAL PRACTICE TO BE FOLLOWED

 

History Note:        Authority G.S. 105‑147(2); 105‑147(3); 105‑148(1); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2303          EMPLOYER'S EDUCATIONAL ASSISTANCE

 

History Note:        Authority G.S. 105‑141(b)(23); 105‑262;

Eff. March 29, 1981;

Repealed Eff. June 1, 1990.

 

SECTION .2400 ‑ MOVING EXPENSES

 

 

17 NCAC 06B .2401          GENERAL

17 NCAC 06B .2402          FEDERAL PRACTICE TO BE FOLLOWED

 

History Note:        Authority G.S. 105‑141(a)(21); 105‑147(8); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; March 11, 1978;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2403          MEMBERS OF THE ARMED FORCES

 

History Note:        Authority G.S. 105‑141(a)(21); 105‑147(8); 105‑262;

Eff. March 11, 1978;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2404          FOREIGN MOVES

 

History Note:        Authority G.S. 105‑141(a)(21); 105‑147(8); 105‑262;

Eff. May 1, 1984;

Repealed Eff. June 1, 1990.

 

SECTION .2500 ‑ RETIREMENT PLANS

 

 

17 NCAC 06B .2501          GENERAL

 

History Note:        Authority G.S. 105‑147(20); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .2502          FEDERAL PRACTICE TO BE FOLLOWED

 

History Note:        Authority G.S. 105‑147(20); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; August 1, 1986; May 1, 1984; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2503          INDIVIDUAL RETIREMENT CONTRIBUTIONS

 

History Note:        Authority G.S. 105‑147(20); 105‑262;

Eff. February 1, 1976;

Amended Eff. December 17, 1978;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .2504          FEDERAL PRACTICE TO BE FOLLOWED

 

History Note:        Authority G.S. 105‑147(20); 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1984; June 1, 1982;

Repealed Eff. June 1, 1990.

 

SECTION .2600 ‑ CARRY‑OVER LOSS

 

 

17 NCAC 06B .2601          GENERAL

 

History Note:        Authority G.S. 105‑147(9)d.; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2602          DEFINITION

 

History Note:        Authority G.S. 105‑147(9)d.; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .2603          BUSINESS‑CONNECTED DEDUCTION

17 NCAC 06B .2604          APPORTIONMENT

 

History Note:        Authority G.S. 105‑147(9)d.; 105‑262;

Eff. February 1, 1976;

Amended Eff. August 1, 1986; June 1, 1982;

Repealed Eff. June 1, 1990.

 

SECTION .2700 ‑ INTEREST DEDUCTION

 

 

17 NCAC 06B .2701          GENERAL

17 NCAC 06B .2702          CASH AND ACCRUAL BASIS

17 NCAC 06B .2703          BUSINESS DEDUCTION

17 NCAC 06B .2704          HUSBAND AND WIFE

17 NCAC 06B .2705          MORTGAGES

17 NCAC 06B .2706          LIFE INSURANCE LOANS

17 NCAC 06B .2707          COOPERATIVE OWNERS

17 NCAC 06B .2708          NOTE DISCOUNT

 

History Note:        Authority G.S. 105‑135(11); 105‑141.3; 105‑142; 105‑147(5); 105‑147(19); 105‑262;

Eff. February 1, 1976;

Amended Eff. November 1, 1988; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2709          TAX EXEMPT INCOME

17 NCAC 06B .2710          CARRYING CHARGES

 

History Note:        Authority G.S. 105‑147(5); 105‑262;

Eff. February 1, 1976;

Amended Eff. March 11, 1978;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .2711          REVOLVING CHARGE ACCOUNTS

17 NCAC 06B .2712          OTHER INTEREST PAYMENTS

17 NCAC 06B .2713          RETIREMENT SYSTEMS

 

History Note:        Authority G.S. 105‑147(5); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1990.

 

SECTION .2800 ‑ TAXES PAID

 

 

17 NCAC 06B .2801          GENERAL

17 NCAC 06B .2802          CASH AND ACCRUAL BASIS

17 NCAC 06B .2803          WHO MAY CLAIM THE DEDUCTION

17 NCAC 06B .2804          BUSINESS DEDUCTION

17 NCAC 06B .2805          DEDUCTIBLE BY RESIDENTS

17 NCAC 06B .2806          NONDEDUCTIBLE

 

History Note:        Authority G.S. 105‑135(11); 105‑141.3; 105‑147(6); 105‑147(19); 105‑262;

Eff. February 1, 1976;

Amended Eff. November 1, 1988; February 1, 1988; August 1, 1986; April 5, 1981;

Repealed Eff. June 1, 1990.

 

SECTION .2900 ‑ CASUALTY AND THEFT LOSSES

 

 

17 NCAC 06B .2901          GENERAL

 

History Note:        Authority G.S. 105‑147(9)a.; 105‑147(9)b.; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; May 1, 1984; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .2902          DEFINITIONS

17 NCAC 06B .2903          SOME DEDUCTIBLE LOSSES

17 NCAC 06B .2904          SOME NONDEDUCTIBLE LOSSES

17 NCAC 06B .2905          WHO MAY CLAIM THE LOSS

17 NCAC 06B .2906          WHEN DEDUCTIBLE

17 NCAC 06B .2907          TREATMENT ON RETURN

17 NCAC 06B .2908          COMPENSATION

17 NCAC 06B .2909          AMOUNT OF LOSS

17 NCAC 06B .2910          REAL OR PERSONAL PROPERTY

17 NCAC 06B .2911          ORNAMENTAL PLANTS

17 NCAC 06B .2912          APPRAISAL AND PROOF OF LOSS

17 NCAC 06B .2913          REIMBURSEMENT

17 NCAC 06B .2914          ADJUSTMENT TO BASIS AFTER CASUALTY

17 NCAC 06B .2915          DISASTER LOSSES

 

History Note:        Authority G.S. 105‑147(9)a.; 105‑147(9)b.; 105‑147(9)e.; 105‑262;

Eff. February 1, 1976;

Amended Eff. April 5, 1981;

Repealed Eff. June 1, 1982.

 

SECTION .3000 ‑ CONTRIBUTIONS

 

 

17 NCAC 06B .3001          GENERAL

17 NCAC 06B .3002          QUALIFIED ORGANIZATIONS

17 NCAC 06B .3003          GRATUITOUS SERVICE EXPENSES

17 NCAC 06B .3004          WHEN DEDUCTIBLE

17 NCAC 06B .3005          LIMITATIONS

17 NCAC 06B .3006          AMOUNT DEDUCTIBLE

17 NCAC 06B .3007          NONDEDUCTIBLE CONTRIBUTIONS

17 NCAC 06B .3008          PARTNERSHIP CONTRIBUTIONS

 

History Note:        Authority G.S. 105‑147(15); 105‑147(15a); 105‑147(16);

105‑163.16(e); 105‑262;

Eff. February 1, 1976;

Amended Eff. November 1, 1988; August 1, 1986; May 1, 1984; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3009          CONTRIBUTIONS BY NONRESIDENTS

 

History Note:        Authority G.S. 105‑147(15); 105‑147(16); 105‑147(18)b.; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

SECTION .3100 ‑ MEDICAL EXPENSES

 

 

17 NCAC 06B .3101          GENERAL

17 NCAC 06B .3102          DEFINITIONS

17 NCAC 06B .3103          LIMITATIONS

17 NCAC 06B .3104          HUSBAND AND WIFE

17 NCAC 06B .3105          DEPENDENTS

17 NCAC 06B .3106          FUNERAL EXPENSES

17 NCAC 06B .3107          COMMON DEDUCTIBLE EXPENSES

17 NCAC 06B .3108          SPECIAL CASES

17 NCAC 06B .3109          NONDEDUCTIBLE EXPENSES

17 NCAC 06B .3110          MEDICAL CARE FOR A DECEDENT

17 NCAC 06B .3111          REIMBURSEMENT

 

History Note:        Authority G.S. 105‑142.1; 105‑147(11); 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1984; June 1, 1982; April 12, 1981; March 11, 1978;

Repealed Eff. June 1, 1990.

 

SECTION .3200 ‑ PENALTIES: INDIVIDUAL INCOME TAX

 

 

17 NCAC 06B .3201          GENERAL

17 NCAC 06B .3202          SCHEDULE OF PENALTIES

 

History Note:        Authority G.S. 105‑159; 105‑161(j); 105‑163.15; 105‑163.17; 105‑236; 105-241.1(i); 105‑262;

Eff. February 1, 1976;

Amended Eff. October 1, 1991; July 1, 1986; March 11, 1978;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .3203          PENALTIES FOR FAILURE TO FILE AND PAY

(a)  General. -- Under the provisions of G.S. 105-236, both the "failure to file return" and "failure to pay tax when due" penalties, if due, can be applied for the same period.  If a return is filed late without payment of the tax shown due, both the failure to file and failure to pay penalties shall be assessed at the same time.

(b)  Extension. -- If the return is filed under an extension, the failure to file penalty applies from the extended filing date rather than from the original due date.  The failure to pay penalty applies from the original due date of the return and shall be assessed if the taxpayer does not meet the 90 percent requirement established in 17 NCAC 06B .0107.  If the 90 percent requirement is met, any remaining tax due shall be paid with the income tax return on or before the expiration of the extension period to avoid the failure to pay penalty. Interest is due on any tax not paid by the original due date from the original due date to the date paid.

(c)  Amended Return. -- The failure to pay penalty shall not apply to amounts paid with an amended return if the amount shown due on the return is paid when the return is filed.

(d)  Assessment. -- The failure to pay penalty applies to a proposed assessment of additional tax due that is not paid within 45 days of the assessment, unless a request for review is timely filed with the Department in accordance with G.S. 105-241.11.  If a taxpayer timely requests a Departmental review of a proposed assessment, the failure to pay penalty applies to tax due that is not paid within 45 days of the date the assessment becomes collectible pursuant to G.S. 105-241.22(3), G.S. 105-241.22(4), G.S. 105-241.22(5), or G.S. 105-241.22(6).

 

History Note:        Authority G.S. 105‑155; 105‑157; 105‑160.6; 105‑160.7; 105‑236; 105-241.22(3); 105-241.22(4); 105-241.22(5); 105-241.22(6); 105-262; 105‑263;

Eff. April 1, 1978;

Amended Eff. September 1, 2008; July 1, 1999; June 1, 1993; February 1, 1991; June 1, 1990;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .3204          NEGLIGENCE PENALTIES

When the accuracy-related penalty has been assessed for federal income tax purposes under Section 6662 of the Internal Revenue Code, the 10 percent negligence penalty shall be assessed for state income tax purposes unless the large individual income tax deficiency or other large tax deficiency penalty applies pursuant to G.S. 105-236.5(a)(5)b. or c., respectively.

 

History Note:        Authority G.S. 105-236(a)(5); 105‑262;

Eff. April 1, 1978;

Amended Eff. April 1, 1999; June 1, 1993;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .3205          FAILURE TO REPORT FEDERAL CHANGES

 

History Note:        Authority G.S. 105‑159; 105‑236(3); 105‑262;

Eff. April 1, 1978;

Amended Eff. June 1, 1990;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .3206          FRAUD PENALTY

When an audit is based upon a federal audit report and the fraud penalty has been assessed for federal purposes, the 50 percent fraud penalty shall be assessed for State purposes.  When the fraud penalty is assessed, no penalty for negligence shall be assessed with respect to the same deficiency; however, the penalty for failure to file and interest on the underpayment of estimated income tax shall be assessed if applicable with respect to the same deficiency.

 

History Note:        Authority G.S. 105‑159; 105‑163.15; 105‑236; 105‑262;

Eff. April 1, 1978;

Amended Eff. May 1, 2006; July 1, 1999; June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3207          FAILURE TO FILE INFORMATIONAL RETURNS

 

History Note:        Authority G.S. 105‑236; 105‑262;

Eff. April 1, 1978;

Amended Eff. June 1, 1993;

Repealed Eff. January 1, 1999.

 

17 NCAC 06B .3208          UNDERPAYMENT OF ESTIMATED TAX

17 NCAC 06B .3209          WAIVER OF PENALTY

 

History Note:        Authority G.S. 105‑163.15; 105‑237; 105‑262;

Eff. April 1, 1978;

Amended Eff. June 1, 1990;

Repealed Eff. June 1, 1993.

 

SECTION .3300 ‑ ACCOUNTING PERIODS AND METHODS

 

 

17 NCAC 06B .3301          GENERAL

17 NCAC 06B .3302          ACCOUNTING METHODS

17 NCAC 06B .3303          ACCOUNTING PERIODS

17 NCAC 06B .3304          CHANGE IN INCOME YEAR

17 NCAC 06B .3305          ANNUALIZING INCOME

 

History Note:        Authority G.S. 105‑135(5); 105‑142(a); 105‑142(b); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; June 1, 1982; April 12, 1981;

Repealed Eff. June 1, 1990.

 

SECTION .3400 ‑ STATUTE OF LIMITATIONS AND FEDERAL CHANGES

 

 

17 NCAC 06B .3401          GENERAL

 

History Note:        Authority G.S. 105‑159; 105‑163.16; 105‑241.1; 105‑262; 105‑266; 105‑266.1;

105‑267;

Eff. February 1, 1976;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .3402          LIMITATIONS FOR ASSESSMENTS

A return from which material particulars are missing is not a return for the purpose of determining when the statute of limitations will run.  The date the final return is filed is the determining date.  There is no statutory provision prohibiting the making of an assessment for a given year after an assessment has already been made for that year.  A second assessment can be made upon the discovery of new facts.

 

History Note:        Authority G.S. 105‑241.8; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1993; February 1, 1991;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3403          FEDERAL CHANGES

 

History Note:        Authority G.S. 105‑159; 105‑163.16; 105‑241.1; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1991;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .3404          FEDERAL CHANGES AND FRAUD

When there is a federal change and a fraud penalty is assessed by the federal government, the state may open the year on the basis of either fraud or the federal assessment.

 

History Note:        Authority G.S. 105‑159; 105‑236(a)(3); 105‑236(a)(6); 105‑241.8; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3405          FAILURE TO PAY TAX

 

History Note:        Authority G.S. 105‑242(c); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .3406          REFUNDS

If the taxpayer has been granted an extension of time for filing the return, the three year period referred to in G.S. 105-241.6 is three years from the extended date.

 

History Note:        Authority G.S. 105‑262; 105-263; 105-241.6;

Eff. February 1, 1976;

Amended Eff. September 1, 2008; May 1, 1994; October 1, 1992; October 1, 1991; June 1, 1990;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3407          Service members Civil Relief Act

 

History Note:        Authority G.S. 105‑262; 50 U.S.C. 501; P.L. 108-189;

Eff. February 1, 1976;

Amended Eff. February 1, 2005;

Repealed Eff. May 1, 2016.

 

17 NCAC 06B .3408          WAIVER OF TIME LIMITATION

 

History Note:        Authority G.S. 105‑241.1; 105‑262; 105‑266; 105‑266.1;

Eff. December 17, 1978;

Amended Eff. June 1, 1993;

Repealed Eff. July 1, 2000.

 

SECTION .3500 - PARTNERSHIPS

 

17 NCAC 06B .3501          GENERAL

The starting point for preparing the North Carolina partnership income tax return shall be the total income or loss from lines 1 through 11 of Schedule K, Federal Form 1065.  The adjustments required for individuals under G.S. 105-153.5 and 105-153.6 shall apply to partnerships.

 

History Note:        Authority G.S. 105-154(b); 105-154(c); 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1990; December 1, 1986;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .3502          TAXING PARTNERSHIP INCOME

 

History Note:        Authority G.S. 105‑142(c); 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3503          PARTNERSHIP RETURNS

(a)  When Required -- A North Carolina partnership return, Form D-403, shall be filed by every partnership doing business in North Carolina if a federal partnership return was required to be filed.  The partnership return shall be filed on or before April 15 if on a calendar year basis, or on or before the 15th day of the fourth month following the end of the fiscal year if on a fiscal year basis.  Income from an intangible source, including gain realized from the sale of intangible property received in the course of "doing business in this State" so as to have a taxable situs here (including income in the distributive share of partnership income, whether distributed or not) shall be included in the numerator of the fraction used in determining the portion of adjusted gross income that is taxable to North Carolina by a nonresident.  The return shall include the names and addresses of the persons entitled to share in the net income of the partnership and shall be signed by one of the partners and the individual preparing the return.

(b)  Schedule NC K-1 -- A partnership shall provide a completed Schedule NC K-1, or other document containing all of the information that would be reported on Schedule NC K-1, to each person who was a partner in the partnership at any time during the year reflecting that partner's share of the partnership's income, adjustments, tax credits, and tax paid by the manager of the partnership. The Schedule NC K-1 shall be provided to each partner on or before the day on which the partnership return is required to be filed.  When reporting the distributive share of tax credits, a list of the amount and type of tax credits shall be provided to each partner.

(c)  Investment Partnerships -- A partnership whose only activity is as an investment partnership shall not be considered to be doing business in North Carolina.  An investment partnership shall be a partnership that is not a "dealer in securities," as defined in section 475(c)(1) of the Internal Revenue Code, and that derives income exclusively from buying, holding, and selling securities for its own account.  If any of the partnership's income is from other activities, either within or outside this State, either received directly or flowing through from other pass-through entities, the partnership shall not be an investment partnership for North Carolina tax purposes.  Other activities include providing services or products to customers and holding real property for appreciation and income.  An investment partnership shall not be required to file an income tax return in North Carolina or pay income tax to North Carolina on behalf of its nonresident partners.

 

History Note:        Authority G.S. 105-154(c); 105-154(d); 105-262;

Eff. February 1, 1976;

Amended Eff. February 1, 2005; August 1, 2003; July 1, 2000; August 1, 1998; May 1, 1994; June 1, 1993; July 1, 1991; June 1, 1990;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .3504          ACCOUNTING PERIOD

17 NCAC 06B .3505          ACCOUNTING METHODS

17 NCAC 06B .3506          ITEMS EXEMPT FROM INCOME

17 NCAC 06B .3507          BUSINESS DEDUCTIONS

17 NCAC 06B .3508          CONTRIBUTIONS

17 NCAC 06B .3509          DEDUCTIBLE DIVIDENDS

 

History Note:        Authority G.S. 105‑141; 105‑142(a); 105‑142(b); 105‑142(c); 105‑147(1)(b);

105‑147(2); 105‑147(7); 105‑147(15); 105‑147(16); 105‑154(b); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3510          ADDITIONAL FIRST YEAR DEPRECIATION

 

History Note:        Authority G.S. 105‑147(12); 105‑262;

Eff. February 1, 1976;

Amended Eff. January 21, 1979;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .3511          NONDEDUCTIBLE ITEMS

17 NCAC 06B .3512          OUT‑OF‑STATE INCOME

 

History Note:        Authority G.S. 105‑136; 105‑140; 105‑141(a); 105‑142(c); 105‑151; 105‑154(b);105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3513          NONRESIDENT PARTNERS

(a)  Although a partnership may treat guaranteed payments to a partner for services or for use of capital as if they were paid to a person who is not a partner, that treatment is only for purposes of determining the partnership’s gross income and deductible business expenses.  For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income.

(b)  Deductions from adjusted gross income do not include a partner's salary, interest on a partner's capital account, partner relocation and mortgage interest differential payments, or payments to a retired partner regardless of whether they were determined without regard to current profits.  The payments listed in this Paragraph shall be treated as part of the partnership income.

(c)  A nonresident individual partner is not required to file a North Carolina individual income tax return when the only income from North Carolina sources is the nonresident's share of income from a partnership doing business in North Carolina, and the manager of the partnership has reported the income of the nonresident partners and paid the tax due.  A nonresident individual partner may file an individual income tax return and claim credit for the tax paid by the manager of the partnership if the partner submits with the individual income tax return the Schedule NC K-1 or other document from the partnership verifying that the partnership paid tax on behalf of the partner. 

 

History Note:        Authority G.S. 105‑153.4 (d); 105-153.5(b); 105‑154; 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1994; June 1, 1993; February 3, 1992; October 1, 1991;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .3514          LIMITATION ON LOSSES

17 NCAC 06B .3515          BASIS OF A PARTNER'S INTEREST

17 NCAC 06B .3516          LIQUIDATION

17 NCAC 06B .3517          PROPERTY RETAINED

17 NCAC 06B .3518          GAIN OR LOSS ON DISTRIBUTION

17 NCAC 06B .3519          DISPOSITION OF PARTNER'S INTEREST

17 NCAC 06B .3520          FAMILY PARTNERSHIPS

 

History Note:        Authority G.S. 105‑142(a); 105‑142(c); 105‑144(a); 105‑147(9)a.; 105‑154(b);105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3521          ESTIMATED INCOME TAX

No estimated income tax is required of a partnership.  A resident individual partner who meets the statutory requirements of G.S. 105‑163.15 must pay estimated income tax on Form NC‑40.  Nonresident individual partners are not required to pay estimated tax on their distributive share of partnership income.

 

History Note:        Authority G.S. 105‑163.15; 105‑262;

Eff. February 1, 1976;

Amended Eff. November 1, 1994; June 1, 1990;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3522          INFORMATION RETURNS

 

History Note:        Authority G.S. 105‑154(a); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .3523          COMMON TRUST FUNDS

17 NCAC 06B .3524          INVESTMENT CLUBS

17 NCAC 06B .3525          TENANCY BY THE ENTIRETY

 

History Note:        Authority G.S. 105‑142(c); 105‑152(a)(3); 105‑154(b); 105‑262;

Eff. February 1, 1976;

Amended Eff. November 1, 1988; May 1, 1984;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3526          TAX CREDITS

 

History Note:        Authority G.S. 105-151.19; 105-262;

Eff. June 1, 1990;

Repealed Eff. August 1, 1998.

 

17 NCAC 06B .3527          DISPOSITION OF PARTNER'S INTEREST

(a)  An interest in a partnership is intangible personal property.  Gain from the sale of a nonresident partner's interest in a partnership is not included in the numerator of the fraction the nonresident uses to determine the amount of income subject to tax in North Carolina unless the sale of the partnership interest conveys title to tangible partnership property. If a partnership owning an interest in another partnership sells its interest in that partnership, the nonresident partners of the partnership selling its interest do not include their distributive shares of the gain realized by the partnership from the sale of its partnership interest in the numerator unless the partnership selling its interest is carrying on a trade or business in this State.

(b)  Nonresident partners must include their distributive share of the gains or losses from the sale or other disposition of the partnership's assets in the numerator of the fraction in determining North Carolina taxable income.  If the sale of partnership interests conveys title to tangible partnership property instead of to limited interests in the partnership, the transaction is considered a sale of partnership assets for purposes of determining North Carolina taxable income.

 

History Note:        Authority G.S. 105-153.4; 105-153.8; 105-154; 105-262;

Eff. July 1, 1991;

Amended Eff. August 1, 2003; June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3528          PART‑YEAR RESIDENT PARTNERS

A part-year resident receiving partnership income from a partnership doing business in North Carolina and in one or more other states, must prorate his share of the partnership's income attributable and not attributable to North Carolina between his periods of residence and nonresidence in accordance with the number of days in each period.  The amount required to be included in the numerator of the fraction for determining taxable income is the taxpayer's share of partnership income determined for the period of residence, plus the taxpayer's share of the partnership income attributable to North Carolina during the period of nonresidence.

 

History Note:        Authority G.S. 105-153.4; 105-154; 105-262;

Eff. October 1, 1991;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3529          INTEREST INCOME PASSED THROUGH TO PARTNERS

(a)  Although the interest income passed through to a partner in a partnership retains its same character as when received by the partnership, the expenses incurred in earning interest income shall be either deductible by the partnership and net interest income after expenses shall be reflected in the partner's pro rata share of the income of the partnership, or not deductible by the partnership and interest income before expenses shall be reflected in the partner’s pro rata share of the income of the partnership.

(b)  Net interest income shall be reported if the activities are considered trade or business activities under federal law and interest income before expenses shall be reported if the activities are considered investment activities under federal law.  If the activities are considered investment activities, the expenses incurred in earning that income shall be reported by the partnership to its partners as a separately stated item and shall be deducted by the partner to the extent allowable on the partner's income tax return.

(c)  For interest income subject to federal income tax and considered trade or business activities, the partner's federal gross income shall include the net interest income after expenses incurred in earning the income.  If that interest income is deductible from federal adjusted gross income pursuant to G.S. 105-153.5(b), the individual partner shall deduct the net income on the North Carolina return.  For interest income subject to federal income tax and considered investment activities, the partner's federal gross income includes the interest income before expenses incurred in earning the income.  If that interest income is deductible from federal adjusted gross income pursuant to G.S. 105-153.5(b), the individual partner shall deduct the income before expenses on the North Carolina return.  No addition shall be made for the expenses incurred in earning that income to the extent those expenses are deductible by the individual partner in arriving at federal adjusted gross income.

(d)  Interest income not subject to federal income tax is not included in the partner's federal adjusted gross income.  For interest income not subject to federal tax but required to be added to federal adjusted gross income pursuant to G.S. 105-153.5(c), the individual partner shall add the total interest income on the North Carolina return.  No deduction shall be made for expenses incurred in earning that income if the expenses are not deductible in arriving at federal adjusted gross income.

 

History Note:        Authority G.S. 105-153.5(b); 105-153.5(c); 105‑154; 105‑262;

Eff. February 3, 1992;

Readopted Eff. May 1, 2016.

 

SECTION .3600 ‑ LIFE ESTATE AND REMAINDER INTEREST

 

 

17 NCAC 06B .3601          GENERAL

17 NCAC 06B .3602          DEFINITIONS

17 NCAC 06B .3603          BASIS OF LIFE ESTATE PROPERTY

17 NCAC 06B .3604          ALLOCATION OF BASIS

17 NCAC 06B .3605          BASIS TO REMAINDERMAN

17 NCAC 06B .3606          BASIS TO REMAINDERMAN'S SUCCESSOR

17 NCAC 06B .3607          DEPRECIATION AND DEPLETION

17 NCAC 06B .3608          CASUALTY LOSS DEDUCTION

17 NCAC 06B .3609          CAPITAL EXPENDITURES

17 NCAC 06B .3610          SALE OF LIFE ESTATE AND REMAINDER INTERESTS

17 NCAC 06B .3611          TABLES

 

History Note:        Authority G.S. 8‑46; 8‑47; 105‑144; 105‑144(a); 105‑147(9)b.;

105‑147(12); 105‑148(2); 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982;

Repealed Eff. June 1, 1990.

 

SECTION .3700 ‑ ESTATES AND TRUSTS

 

 

17 NCAC 06B .3701          GENERAL

 

History Note:        Authority G.S. 105‑160 to 105‑163; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1990;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .3702          GROSS INCOME

 

History Note:        Authority G.S. 105‑161(a); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .3703          SIMPLE AND COMPLEX TRUSTS

17 NCAC 06B .3704          INCOME TAXABLE TO FIDUCIARIES

17 NCAC 06B .3705          OTHER INCOME

17 NCAC 06B .3706          EXEMPT INCOME

 

History Note:        Authority G.S. 105‑152; 105‑161(b); 105‑161(c)(3); 105‑161(d)(5); 105‑161(d)(7); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1989;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3707          EXEMPT TRUSTS

 

History Note:        Authority G.S. 105‑161(f); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06B .3708          PERSONAL EXEMPTIONS

17 NCAC 06B .3709          ORDINARY DEDUCTIONS

17 NCAC 06B .3710          DEDUCTION FOR CHARITABLE PURPOSES

17 NCAC 06B .3711          DISTRIBUTABLE NET INCOME

17 NCAC 06B .3712          DISTRIBUTIONS TO BENEFICIARIES

17 NCAC 06B .3713          BASIS OF PROPERTY

 

History Note:        Authority G.S. 105‑142.1(e); 105‑144(a); 105‑161(c)(1); 105‑161(d); 105‑161(d)(4); 105‑161(d)(5);

105‑161(d)(6); 105‑161(d)(7); 105‑162(e); 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; August 1, 1986; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3714          TAX CREDITS

(a)  A fiduciary required to pay an income tax to North Carolina on behalf of a trust or an estate may claim a credit for tax imposed and paid to another state or country on income from sources within the other state or country under the provisions of G.S. 105-160.4(a).

(b)  A resident beneficiary of an estate or trust, the fiduciary of which pays an income tax to another state or country on distributable income reportable to North Carolina that is derived from sources in the other state or country may claim a credit against the beneficiary's North Carolina tax for the beneficiary's share of tax paid the other state or country under the provisions of G.S. 105-160.4(e).

(c)  A schedule is provided on the fiduciary return for use in computing the tax credit allowable to the estate or trust. Before this schedule may be completed, however, there must be an allocation between the estate or trust and its beneficiaries of the tax paid and the gross income on which tax was paid to the other state or country.

(d)  The fiduciary's share and each beneficiary's share of the gross income on which tax has been paid to another state or country is determined by the governing instrument and should be entered in the appropriate schedule on the fiduciary return. The fiduciary's share of the total gross income to be used in the tax credit computation schedule is the total gross income from Federal Form 1041.

(e)  If additional tax credits are claimed, a separate schedule must be attached to the fiduciary return showing how the credits were determined and how they are allocated between the beneficiaries and the fiduciary.

 

History Note:        Authority G.S. 105-131.8; 105-153.9; 105-160.3; 105-160.4; 105-262;

Eff. February 1, 1976;

Amended Eff. August 1, 1998; June 1, 1993; June 1, 1990; June 1, 1982;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3715          INCOME TAXABLE TO BENEFICIARIES

 

History Note:        Authority G.S. 105‑162(a); 105‑162(b); 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1984; June 1, 1982;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3716          INCOME TAX RETURN FOR ESTATES AND TRUSTS

(a)  The federal taxable income of the fiduciary shall be the starting point for preparing a North Carolina Income Tax Return for Estates and Trusts, Form D-407.

(b)  The fiduciary shall file an income tax return for the estate or trust for which he acts if he is required to file a U.S. Income Tax Return for Estates and Trusts and:

(1)           the estate or trust derives income from North Carolina sources; or

(2)           the estate or trust derives any income which is for the benefit of a resident of North Carolina.

(c)  Fiduciaries shall be consistent in the use of the name and address of an estate or trust on a return.  If a different name for an estate or trust is used in any year from that used in the prior year, that fact shall be noted on the first page of the return and the name used in the prior year indicated.

 

History Note:        Authority G.S. 105-160.2; 105-160.5; 105-160.6; 105-262;

Eff. February 1, 1976;

Amended Eff. July 1, 1996; June 1, 1993; October 1, 1991; June 1, 1990; April 12, 1981;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3717          TRUST INSTRUMENTS AND WILLS

 

History Note:        Authority G.S. 105‑161(e)(1); 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3718          PAYMENT OF TAX

 

History Note:        Authority G.S. 105‑160.2; 105‑160.7; 105‑262;

Eff. February 1, 1976;

Amended Eff. October 1, 1991; June 1, 1990;

Repealed Eff. May 1, 2016.

 

17 NCAC 06B .3719          FAILURE TO FILE PENALTIES

 

History Note:        Authority G.S. 105‑236; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1993;

Repealed Eff. January 1, 1999.

 

17 NCAC 06B .3720          LIABILITY OF THE FIDUCIARY

 

History Note:        Authority G.S. 105‑207; 105‑236(10); 105‑262;

Eff. February 1, 1976;

Amended Eff. January 21, 1979;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .3721          SPECIAL TRUSTS

17 NCAC 06B .3722          GRANTORS TRUSTS

 

History Note:        Authority G.S. 105‑142(c); 105‑152(3); 105‑154(b); 105‑161(f)(1)a; 105‑163; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; April 12, 1981;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3723          ALLOCATION OF ADJUSTMENTS

(a)  The additions and deductions to federal taxable income of an estate or trust shall be apportioned between the estate or trust and the beneficiaries based on the distributions of income made during the taxable year.  If the trust instrument or will that created the estate or trust does not provide for the distribution of certain classes of income to different beneficiaries, the apportionment of additions and deductions to the beneficiaries shall be determined on the basis that each beneficiary's share of the estate's or trust's "total income," the sum of lines 1 through 8 on the beneficiary's Schedule K‑1, Federal Form 1041, relates to "adjusted total income" from line 17 of Federal Form 1041.  If the trust instrument or will specifically provides for the distribution of certain classes of income to different beneficiaries, any addition or deduction directly attributable to a particular class of income shall be apportioned to the beneficiaries to which that class of income is distributed.  After apportioning the additions and deductions to the beneficiaries, the balance is apportioned to the fiduciary.

(b)  In allocating the adjustments, for State purposes the amount of "total income" on Federal Schedule K‑1 shall be adjusted for distributions to the beneficiary that are not reflected in "total income."  The "adjusted total income" on Federal Form 1041 shall be adjusted:

(1)           to exclude classes of income that are not part of the distribution to the beneficiary;

(2)           to include classes of income that are a part of the distribution to the beneficiary, but shall not be included in adjusted total income; and

(3)           by any deduction treated differently for State and federal tax purposes that adjusts federal taxable income pursuant to G.S. 105‑153.5 and G.S. 105-153.6.

 

History Note:        Authority G.S. 105-153.4; 105‑153.5; 105-153.6; 105‑160.2; 105‑160.5; 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .3724          ALLOCATION OF INCOME ATTRIBUTABLE TO NONRESIDENTS

(a)  If an estate or trust has income from sources outside of North Carolina and if any of the beneficiaries are nonresidents of North Carolina, the portion of federal taxable income of the Fiduciary that is subject to North Carolina tax must be determined.  If there are no nonresident beneficiaries or if there is no gross income from dividends, interest, other intangibles or from sources outside North Carolina for the benefit of a nonresident beneficiary, the total income of the estate or trust is taxable to the fiduciary.

(b)  The determination of the amount of undistributed income from intangible property which is for the benefit of a resident is based on the beneficiary's state of residence on the last day of the taxable year of the trust.  In the case of both resident and nonresident beneficiaries, the determination of the amount of undistributed income from intangible property which is for the benefit of a resident is made on the basis that the resident beneficiary's interest for the taxable year relates to the interest of both resident and nonresident income beneficiaries for the taxable year.

 

History Note:        Authority G.S. 105-153.4; 105-160.2; 105-262;

Eff. June 1, 1990;

Amended Eff. February 1, 2005; June 1, 1993; October 1, 1991;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3725          ADMINISTRATION EXPENSES

 

History Note:        Authority G.S. 105-160.2; 105-262;

Eff. June 1, 1990;

Repealed Eff. August 1, 1998.

 

SECTION .3800 ‑ MISCELLANEOUS RULES

 

 

17 NCAC 06B .3801          INCOME

17 NCAC 06B .3802          DEDUCTIONS

17 NCAC 06B .3803          OTHER ITEMS

 

History Note:        Authority G.S. 8‑45.3; 105‑141(a); 105‑141.1; 105‑142(a); 105‑144(a); 105‑144(c);

105‑144.3; 105‑147(1); 105‑147(1)h; 105‑147(2); 105‑147(7); 105‑147(9)a; 105‑147(10);

105‑147(17); 105‑147(19); 105‑147(24); 105‑147(28); 105‑148(1); 105‑148(2); 105‑148(8);

105‑159.1; 105‑163.16(c); 105‑163.16(e); 105‑251; 105‑262; 147‑77;

Eff. February 1, 1976;

Amended Eff. November 1, 1988; February 1, 1988; April 1, 1987; February 1, 1987;

Repealed Eff. June 1, 1990.

 

17 NCAC 06B .3804          DEPOSIT OF PAYMENT

When a payment is received by the Department of Revenue for less than the correct tax, penalty, and interest due and the payment includes the statement, "paid in full" or other similar statements, the payment will be deposited as required by G.S. 147‑77.

 

History Note:        Authority G.S. 39-13.6; 105‑154; 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993; October 1, 1991; February 1, 1991;

Readopted Eff. May 1, 2016.

 

section .3900 - NONRESIDENTS AND PART‑YEAR RESIDENTS

 

17 NCAC 06B .3901          DEFINITION OF RESIDENT

(a)  Only One Domicile. -- Domicile means the place where an individual has a true, fixed permanent home and principal establishment, and to which place, whenever absent, the individual has the intention of returning.  In many cases, a determination must be made as to when or whether a domicile has been abandoned.  A long standing principle in tax administration, repeatedly upheld by the courts, is that an individual can have but one domicile; and, once established, it is not legally abandoned until a new one is established.  A taxpayer may have several places of abode in a year, but at no time can an individual have more than one domicile.  A mere intent or desire to make a change in domicile is not enough; voluntary and positive action must be taken.

(b)  Factors. -- Some of the tests or factors to be considered in determining the legal residence of an individual for income tax purposes are as follows:

(1)           Place of birth of the taxpayer, the taxpayer's spouse, and the taxpayer's children.

(2)           Permanent residence of the taxpayer's parents.

(3)           Family connections and close friends.

(4)           Address used for federal tax returns, military purposes, passports, driver's license, vehicle registrations, insurance policies, professional licenses or certificates, subscriptions for newspapers, magazines, and other publications, and monthly statements for credit cards, utilities, bank accounts, loans, insurance, or any other bill or item that requires a response.

(5)           Civic ties, such as church membership, club membership, or lodge membership.

(6)           Professional ties, such as licensure by a licensing agency or membership in a business association.

(7)           Payment of state income taxes.

(8)           Place of employment or, if self-employed, place where business is conducted.

(9)           Location of healthcare providers, such as doctors, dentists, veterinarians, and pharmacists.

(10)         Voter registration and ballots cast, whether in person or by absentee ballot.

(11)         Occasional visits or spending one's leave "at home" if a member of the armed services.

(12)         Ownership of a home, insuring a home as a primary residence, or deferring gain on the sale of a home as a primary residence.

(13)         Location of pets.

(14)         Attendance of the taxpayer or the taxpayer's children at State supported colleges or universities on a basis of residence—taking advantage of lower tuition fees.

(15)         Location of activities for everyday "hometown" living, such as grocery shopping, haircuts, video rentals, dry cleaning, fueling vehicles, and automated banking transactions.

(16)         Utility usage, including electricity, gas, telecommunications, and cable television.

(c)  When Change Occurs. -- The following events indicate a change in residency:

(1)           Selling a house and buying a new one.

(2)           Directing the U.S. Postal Service to forward mail to a new address.

(3)           Notifying senders of statements, bills, subscriptions, and similar items of a new address.

(4)           Transferring family medical records to a new healthcare provider.

(5)           Registering a vehicle in a new jurisdiction.

(6)           Transferring memberships for church, a health club, a lodge, or a similar activity.

(7)           Applying for professional certifications in a new jurisdiction.

(d)  Military Service. -- A legal resident of North Carolina serving in the United States Armed Forces is liable for North Carolina income tax and North Carolina income tax shall be withheld from that individual's military pay whether the individual is stationed in this State or in some other state or country.  An individual who enters military service while a resident of North Carolina is presumed to be a resident of this State for income tax purposes.  Residency in this State is not abandoned until residency is established elsewhere.  To change residency, an individual in military service must not only be present in the new location with the intention of making it a new domicile, but must also factually establish that the individual has done so.

 

History Note:        Authority G.S. 105-153.3(15); 105-153.4; 105-262;

Eff. June 1, 1990;

Amended Eff. August 1, 2002; July 1, 1999; June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3902          NONRESIDENTS

(a)  The term "nonresident" includes an individual:

(1)           Who resides in North Carolina for a temporary or transitory purpose and is, in fact, a domiciliary resident of another state or country; or

(2)           Who does not reside in North Carolina but has income from sources within North Carolina and is, in fact, a domiciliary resident of another state or country.

(b)  Under the Servicemembers Civil Relief Act, a member of the Armed Services who is a legal resident of another state stationed in North Carolina by virtue of military orders, is not subject to North Carolina income tax on his service pay but other income from employment, a business, or tangible property in North Carolina is subject to North Carolina income tax.

(c)  There is no presumption as to the residence of a spouse of a member of the armed forces because of marriage.  Legal residence shall be determined based on the facts in each case.

 

History Note:        Authority G.S. 105-153.4; 105-262;

Eff. June 1, 1990;

Amended Eff. May 1, 2006; June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3903          PART‑YEAR RESIDENT

An individual who moves his domicile into or out of North Carolina during the tax year, is a part-year resident.

 

History Note:        Authority G.S. 105-153.4; 105-262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .3904          TAXABLE INCOME OF NONRESIDENTS AND PART-YEAR RESIDENTS

(a)  Nonresidents and part-year residents shall prorate their adjusted gross income, adjusted as required under G.S. 105-153.5 and G.S. 105-153.6, to determine the portion that is subject to North Carolina tax.

(b)  An individual who files a joint federal income tax return with his or her spouse and is not required to file a joint North Carolina income tax return because the spouse is a nonresident and had no North Carolina taxable income, may file the State return as either married filing jointly or married filing separately.  However, once the individual files a joint North Carolina income tax return, the individual shall not amend the return to file as married filing separately for that tax year after the due date of the return.  An individual who files a joint federal income tax return and chooses to file a separate State return shall calculate the individual's adjusted gross income on a federal income tax form as a married person filing a separate federal income tax return and attach it to the individual's North Carolina return to show how the separate adjusted gross income was determined.  The individual filing the separate federal income tax return shall report only the individual's income and deductions.  In lieu of making the calculation on a federal form, an individual may submit a schedule showing the computation of the individual's separate adjusted gross income.  An individual who submits a schedule shall attach a copy of pages one and two of the individual's joint federal return if the federal return reflects an address outside North Carolina.

(c)  An individual who has income from sources within another state or country while a resident of North Carolina and is subject to tax on the income by the other state or country may be eligible to claim a tax credit for tax paid to another state or country under G.S. 105-153.9.

(d)  A nonresident is not entitled to the tax credit for tax paid to another state or country.

 

History Note:        Authority G.S. 105-153.4; 105-153.8; 105-153.9; 105-262;

 Eff. June 1, 1990;

Amended Eff. September 1, 2008; July 1, 1999; August 1, 1998; June 1, 1993;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .3905          NONRESIDENT MEMBERS OF PROFESSIONAL ATHLETIC TEAMS

(a)  Determination of North Carolina source income.

(1)           To determine the portion of his or her total compensation for services rendered as a member of a professional athletic team during the taxable year that shall be considered North Carolina source income and shall be included in the numerator of the fraction determined under G.S. 105-153.4(b), the nonresident member of a professional athletic team shall   multiply his or her total compensation for services rendered as a member of a professional athletic team during the taxable year by a fraction, the numerator of which is the number of duty days spent in North Carolina rendering services for the team in any manner during the taxable year.  The denominator shall be the total number of duty days spent both within and outside North Carolina during the taxable year.

(2)           Travel days that do not involve any of the activities set forth in Subparagraph (b)(3) of this Rule, or other similar team activity, are not considered duty days spent in North Carolina and compensation for those days shall not be included in the numerator of the fraction determined under G.S. 105-153.4(b).  However, the travel days shall be considered duty days spent within and outside North Carolina and compensation for those days is included in the denominator of the fraction determined under G.S. 105-153.4(b).

(3)           Where the method of apportioning and allocating the compensation provided in this Rule produces substantially incorrect results, the Secretary of Revenue may require the member of a professional athletic team to apportion and allocate the compensation under another method prescribed by the Secretary as long as the prescribed method better reflects the compensation received for services rendered in North Carolina.  A nonresident member of a professional athletic team may request an alternative method to apportion and allocate the compensation, demonstrating that the method provided under this Rule produces substantially incorrect results.  If the Secretary approves the alternative method, a copy of the Secretary's written approval shall be included with the North Carolina income tax return filed by the nonresident member.

(b)  Definitions.  For purposes of this Rule:

(1)           The term "professional athletic team" includes any professional baseball, basketball, football, soccer, hockey, or other team.

(2)           The term "member of a professional athletic team" shall include those employees who are active players, players on the disabled list, and any other persons required to travel and who do travel with and perform services on behalf of a professional athletic team on a regular basis.  This includes coaches, managers and trainers.

(3)           The term "duty days" shall mean all days during the taxable year from the beginning of the professional athletic team's official pre-season training period through the last game in which the team competes or is scheduled to compete.  Duty days shall also include days on which a member of a professional athletic team renders a service for a team on a date that does not fall within the period from the beginning of the professional athletic team's official pre-season training period through the last game in which the team competes or is scheduled to compete.  The services include participation in instructional leagues, the "Pro Bowl," or promotional caravans.  This includes days during the member's off-season where the member conducts training activities at the facilities of the team.  Duty days include game days, practice days, days spent at team meetings, promotional caravans and pre-season training camps, and days served with the team through all post-season games in which the team competes or is scheduled to compete.  Duty days for any person who joins a team during the season shall begin on the day the person joins the team, and for any person who leaves a team shall end on the day the person leaves the team.  Where a person switches teams during the taxable year, a separate duty day calculation shall be made for the period the person was with each team.  Days for which a member of a professional athletic team is not compensated and is not rendering services for the team in any manner, including days when the member of a professional athletic team has been suspended without pay and prohibited from performing any services for the team, shall not be treated as duty days.  Days for which a player is on the disabled list shall be considered duty days and shall be included in in the denominator of the fraction described in Subparagraph (a)(1) of the Rule, but shall not be considered duty days spent in North Carolina and shall not be included in the numerator of the fraction.

(4)           The term "total compensation for services rendered as a member of a professional athletic team" means the total compensation received during the taxable year for services rendered:

(A)          from the beginning of the official pre-season training period through the last game in which the team competes or is scheduled to compete during that taxable year; and

(B)          for an event during the taxable year that occurs on a date that does not fall within the period from the beginning of the professional athletic team's official pre-season training period through the last game in which the team competes or is scheduled to compete, such as participation in instructional leagues, the "Pro Bowl," or promotional caravans.

The compensation shall include salaries, wages, bonuses, and any other type of compensation identified in Internal Revenue Code Section 61 and its regulations and paid during the taxable year to a member of a professional athletic team for services performed in that year.  The compensation shall not include strike benefits, severance pay, termination pay, contract or option year buy-out payments, expansion or relocation payments, or any other payments not related to services rendered to the team.

(5)           For purposes of Subparagraph (b)(4) of this Rule, "bonuses" included in "total compensation for services rendered as a member of a professional athletic team" subject to the allocation described in Paragraph (a) of this Rule are:

(A)          bonuses earned as a result of play, such as performance bonuses, during the season, including bonuses paid for championship, play-off, or "bowl" games played by a team, or for selection to all-star league or other honorary positions; and

(B)          bonuses paid for signing a contract, unless all of the following conditions are met:

(I)            the payment of the signing bonus is not conditional upon the signee playing any games for the team, or performing any subsequent services for the team, or even making the team;

(II)          the signing bonus is payable separately from the salary and any other compensation; and

(III)        the signing bonus is nonrefundable.

(c)  Withholding requirements.

(1)           A professional athletic team shall withhold income tax from the North Carolina source income of a nonresident member of the team at the rate for individuals with no withholding allowances as provided in G.S. 105-163.5.  Taxes shall be withheld from the income of a resident member of the team as provided in G.S. 105-163.2.

(2)           A professional athletic team that is not domiciled in this State shall be classified as a quarterly employer and shall file a return reporting the amount of taxes withheld and pay the amounts withheld as provided in G.S. 105-163.6.  A professional athletic team that is domiciled in this State shall determine its filing and paying requirements based on its average monthly withholding as provided in G.S. 105-163.6.

(d)  Income tax return filing requirements.

(1)           A nonresident member of a professional athletic team is not required to file a North Carolina individual income tax return when the only income from North Carolina sources is the compensation received for services rendered as a member of the team and the team has withheld taxes from the North Carolina source income as set forth in Paragraph (c) of this Rule.  The individual may file an individual income tax return and claim credit for the tax withheld.

(2)           The professional athletic team, as well as the individual, shall be personally and individually liable for any additional tax due if the professional athletic team does not properly determine the North Carolina source income of a member of the professional athletic team or properly withhold tax from the income.

 

History Note:        Authority G.S. 105-153.4; 105-163.2; 105-163.3; 105-163.5; 105-163.6; 105-163.7; 105-163.8; 105-262;

Eff. November 1, 1995;

Amended Eff. August 1, 2002;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .3906          PURCHASE OF REAL PROPERTY LOCATED IN North Carolina FROM A NONRESIDENT

(a)  Every individual, fiduciary, partnership, corporation, or unit of government buying real property located in North Carolina from a nonresident individual, partnership, estate, or trust shall complete Form NC‑1099NRS, Report of Sale of Real Property by Nonresidents, to report the following:

(1)           the seller's name, address, and social security number, or federal employer identification number;

(2)           the location of the property;

(3)           the date of closing; and

(4)           the gross sales price of the real property and its associated tangible personal property.

(b)  Within 15 days of the closing date of the sale, the buyer shall file one copy of the report with the Department and also furnish a copy of the report to the seller.

 

History Note:        Authority G.S. 105‑154(b); 105‑262;

Eff. May 1, 2016.

 

SECTION .4000 ‑ S CORPORATION

 

 

17 NCAC 06B .4001          REPORTING INCOME ‑ IN GENERAL

17 NCAC 06B .4002          RESIDENT SHAREHOLDERS

 

History Note:        Authority G.S. 105‑131; 105‑131.1; 105‑131.2; 105‑134.6(a); 105‑262;

Eff. June 1, 1990;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .4003          NONRESIDENT SHAREHOLDERS

(a)  A nonresident shareholder of an S corporation shall take into account only his or her share of the S corporation's income attributable to North Carolina in the numerator of the fraction in determining that portion of adjusted gross income that is taxable to North Carolina.  If an S corporation does business in North Carolina and one or more other states, the income attributable to North Carolina shall be determined under G.S. 105-130.4.

(b)  A nonresident shareholder in an S corporation may claim credit on the shareholder's North Carolina individual income tax return for the tax paid on his or her behalf by the S corporation to North Carolina on his or her share of the S corporation income.

(c)  A nonresident shareholder in an S corporation shall not be required to file a North Carolina individual income tax return when the only income from North Carolina sources is his or her share of S corporation income and the S corporation pays the tax on his or her behalf.

 

History Note:        Authority G.S. 105-130.4; 105‑131.1; 105‑131.5; 105‑131.7; 105-153.4(d); 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993; October 1, 1991;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .4004          TAX CREDITS

If part of the S corporation's income is earned within and taxed by another state, either to the individual or to the corporation, a resident shareholder is entitled to a tax credit on the individual or the estates and trusts income tax return for the share of the tax paid to the other state.  A shareholder claiming the tax credit must attach a schedule to the income tax return reflecting the total amount of tax paid to the State by the S corporation, and explaining how  the shareholder's pro rata share of the tax was determined.  Nonresident shareholders are not allowed credit for tax paid to another state.

 

History Note:        Authority G.S. 105‑131.8; 105‑262;

Eff. June 1, 1990;

Amended Eff. July 1, 1999; June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .4005          BASIS IN STOCK

(a)  Due to different tax treatment of an S corporation's income for State and federal purposes for taxable years beginning before January 1, 1989, a shareholder's basis in the stock of an S corporation for State tax purposes may be different than for federal tax purposes; thereby causing adjustments in determining North Carolina taxable income upon receipt by the shareholder of distributions from the S corporation and upon disposition of the S corporation stock.

(b)  The initial basis of the stock in an S corporation to a nonresident of North Carolina is zero, and the nonresident shareholder shall not be taxed on distributions from the corporation and recognizes no income or loss upon disposition of the stock.  A nonresident shareholder's basis in the S corporation stock shall be adjusted for his or her pro rata share of the income or loss of the corporation.

(c)  A resident shareholder's initial basis in the stock of an S corporation shall be determined as of the later of the date the stock is acquired, the effective date of the S corporation election, or the date the shareholder became a resident of North Carolina.  A resident shareholder's basis in the stock shall be increased by his or her pro rata share of the corporation's income, subject to the adjustments required under G.S. 105-153.5 and G.S. 105-153.6, except for income exempt from federal or State income taxes and deductions for depletion in excess of the basis of the property being depleted.  The basis shall be decreased by:

(1)           distributions to the extent deemed a return of basis;

(2)           a pro rata share of the losses of the corporations as adjusted under G.S. 105-153.5 and G.S. 105-153.6;

(3)           nondeductible expenses of the corporation; and

(4)           the amount of the shareholder's deduction for depletion of oil and gas wells to the extent the deduction does not exceed the proportionate share of the adjusted basis of that property allocated to the shareholder.

The adjustments to the basis do not apply to tax periods beginning prior to January 1, 1989.

 

History Note:        Authority G.S. 105‑131.3; 105‑262;

Eff. June 1, 1990;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .4006          DISTRIBUTIONS

(a)  A resident shareholder must take into account distributions from an S corporation in computing North Carolina taxable income to the extent the distributions are characterized as dividends or as gains pursuant to Section 1368 of the Internal Revenue Code.  Section 1368 of the Code provides that if the S corporation has no accumulated earnings and profits, the amount distributed to a shareholder reduces the adjusted basis in his stock.  If the S corporation has earnings and profits, the distribution is applied in the following order:

(1)           To the Accumulated Adjustments Account (AAA), which basically includes the income during the period the corporation has been an S corporation reduced by its losses and distributions during that period.  The AAA for State income tax purposes does not include the federal AAA for tax years beginning prior to January 1, 1989.  The shareholder does not take into account distributions from the AAA in determining taxable income but such distributions reduce the adjusted basis of his stock.

(2)           To Earnings and Profits (E and P): An S corporation is not considered to have earnings and profits for State tax purposes for years in which it operates as an S corporation after January 1, 1989.  The E and P account basically includes the earnings and profits on hand from the period the corporation was a C corporation; and for State tax purposes, the E and P account also includes the undistributed earnings and profits of the S corporation from tax years beginning before January 1, 1989, (the federal AAA that existed on the day North Carolina began to measure the S corporation shareholder's income by reference to the income of the S corporation).  The amount distributed to the shareholder from the E and P account is taxed to the shareholder as a dividend.  Since the State E and P account includes the federal AAA that existed prior to the change in State law taxing the S corporation income to the shareholders, State taxable income must be increased for any distributions from the federal AAA that existed prior to the law change.

(3)           To the basis of the shareholder's stock: Any excess over the shareholder's basis is taxed as a capital gain.

(b)  A shareholder who makes an election for federal tax purposes to treat distributions from the S corporation as being paid first from earnings and profits may not make a different election for State purposes.

 

History Note:        Authority G.S. 105‑131.6; 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1994; June 1, 1993; February 1, 1991;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06B .4007          FISCAL YEAR S CORPORATION

 

History Note:        Authority G.S. 105‑131.1(b); 105‑262;

Eff. June 1, 1990;

Repealed Eff. June 1, 1993.

 

17 NCAC 06B .4008          LOSSES

 

History Note:        Authority G.S. 105‑131.3; 105‑131.4; 105‑262;

Eff. February 1, 1991;

Repealed Eff. June 1, 1993.

 

SECTION .4100 - TAXABLE STATUS OF DISTRIBUTIONS FROM REGULATED INVESTMENT COMPANIES

 

17 NCAC 06B .4101          GENERAL

(a)  Exempt interest dividends paid by a regulated investment company ("mutual fund") to a shareholder and not included in the shareholder's federal adjusted gross income shall be added to adjusted gross income to the extent it represents interest on obligations of states, other than North Carolina, and their political subdivisions.

(b)  The total distribution designated as exempt interest dividends by a regulated investment company ("mutual fund") shall be added to adjusted gross income in computing the shareholder's North Carolina taxable income, unless the regulated investment company provides a statement to the shareholder that designates the portion of the exempt interest dividends that represents interest from obligations of the State of North Carolina or its political subdivisions or the United States or its possessions.

 

History Note:        Authority G.S. 105-153.4; 105-153.5(c)(1); 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .4102          EXEMPT INTEREST DIVIDENDS

 

History Note:        Authority G.S. 105‑153.5 (c); 105‑262;

Eff. June 1, 1990;

Amended Eff. October 1, 1991;

Repealed Eff. May 1, 2016.

 

17 NCAC 06B .4103          ORDINARY DIVIDENDS

(a)  Interest received in the form of dividends from regulated investment companies shall be deductible from an individual's adjusted gross income to the extent the distributions represent interest on direct obligations of the United States Government.    Interest earned on obligations that are merely backed or guaranteed by the United States Government shall not qualify for the deduction.  Further, this deduction shall not apply to distributions that represent gain from the sale or other disposition of the securities nor to interest paid in connection with repurchase agreements issued by banks and savings and loan associations.

(b)  The taxpayer may not deduct mutual fund dividends on the basis of a percentage of investments held by the fund (i.e., a fund has 75 percent of its investments in United States Treasury Notes).  The regulated investment company shall furnish the shareholder a statement verifying the amount of interest paid to the shareholder that accrued from direct obligations of the United States Government. The statement to support the deduction shall specify the amount dividended to the shareholder that represents interest on direct obligations of the United States Government.

 

History Note:        Authority G.S. 105-153.5(b)(1); 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993; December 1, 1990;

Readopted Eff. May 1, 2016.

 

17 NCAC 06B .4104          CAPITAL GAIN DISTRIBUTIONS

17 NCAC 06B .4105          DIVIDEND TAX CREDIT

 

History Note:        Authority G.S. 105-134.6(b)(1); 105‑134.6(b)(2); 105-151.19; 105‑262;

Eff. June 1, 1990;

Amended Eff. December 1, 1990;

Repealed Eff. June 1, 1993.

 

 

 

SUBCHAPTER 6C ‑ WITHHOLDING

 

SECTION .0100 ‑ WITHHOLDING INCOME TAXES

 

17 NCAC 06C .0101         GENERAL

 

History Note:        Authority G.S. 105‑163.1 through 105‑163.10; 105‑163.17 to 105‑163.24; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06C .0102         WITHHOLDING FROM WAGES

 

History Note:        Authority G.S. 105‑163.1; 105‑163.1(3); 105‑163.1(4); 105‑163.1(13); 105‑163.2; 105‑163.3; 105‑163.6; 105‑163.18; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1990; December 1, 1988; April 1, 1987;

Repealed Eff. June 1, 1993.

 

17 NCAC 06C .0103         INCOME NOT SUBJECT TO WITHHOLDING

 

History Note:        Authority G.S. 105‑154; 105‑163.1(6); 105‑163.11; 105‑163.14; 105‑163.18;105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1990;

Repealed Eff. October 1, 1991.

 

17 NCAC 06C .0104         EXEMPTION CERTIFICATES

 

History Note:        Filed as a Temporary Amendment [(d) and (f)] Eff. November 16, 1981, for a period of 46 days to expire on January 1, 1982;

Authority G.S. 105‑163.3; 105‑163.5; 105‑163.18; 105‑262;

Eff. February 1, 1976;

Amended Eff. January 1, 1989; June 1, 1982; January 1, 1982; April 12, 1981;

Repealed Eff. June 1, 1990.

 

17 NCAC 06C .0105         WAGES

17 NCAC 06C .0106         EMPLOYERS

 

History Note:        Authority G.S. 105-163.1(4); 105‑163.1(13); 105‑163.2; 105-163.2(h); 105‑163.18; 105‑262;

Eff. February 1, 1976;

Amended Eff. October 1, 1991; June 1, 1990;

Repealed Eff. June 1, 1993.

 

17 NCAC 06C .0107         EMPLOYEES

To prevent double withholding and to anticipate any tax credits allowable to a North Carolina resident, withholding of North Carolina tax is not required from wages paid to a resident for services performed in another state if that state requires withholding.  This relief from double withholding does not relieve the resident of his obligation to file a North Carolina individual income tax return and pay any balance due after tax credit.

All wages received by a nonresident for services performed in this State are subject to withholding of North Carolina income tax.  Any relief from double withholding must be granted by his state of residence.

 

History Note:        Authority G.S. 105-153.8(a); 105-163.1(4); 105-262;

Eff. February 1, 1976;

Amended Eff. June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06C .0108         EMPLOYEE‑EMPLOYER RELATIONSHIP

Everyone who performs services subject to the will and control of an employer, both as to what shall be done and how it shall be done, is an employee.  An employer-employee relationship exists when the person for whom the services are performed has the right to control and direct the individual performing the services.  Managers and other supervisory personnel, officers of corporations, and elected public officials are employees.  Whether the employer actually controls and directs the manner in which the services are performed does not matter if he has the right to do so, and it does not matter that the employee is called by some other name such as partner, agent, or independent contractor; nor whether the individual works full or part time; nor how the payments are measured, paid, or what they are called.

Lawyers, physicians, contractors, and others who follow an independent trade, business, or profession in which they offer their services to the public, generally are not employees.  If an individual is subject to the control and direction of another only as to the results of his work and not as to the methods of accomplishing the results, he is an independent contractor and not an employee.

 

History Note:        Authority G.S. 105-163.1(4); 105-163.1(5); 105-262;

Eff. February 1, 1976;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06C .0109         MINISTERS

 

History Note:        Authority G.S. 105‑163.1A; 105‑163.2; 105‑163.18; 105‑262;

Eff. February 1, 1976;

Amended Eff. October 1, 1991; August 1, 1986; February 21, 1979;

Repealed Eff. June 1, 1993.

 

17 NCAC 06C .0110         COMMON CARRIERS

 

History Note:        Authority G.S. 105‑163.2; 105‑262; 49 U.S.C. Sec. 26; Sec. 301A; Sec. 923; Sec. 1512;

Eff. February 1, 1976;

Amended Eff. July 1, 1999; November 1, 1994; December 1, 1990; November 1, 1988;

Repealed Eff. May 1, 2016.

 

17 NCAC 06C .0111         FEDERAL EMPLOYEES

 

History Note:        Authority G.S. 105‑163.2; 105‑163.18; 105‑163.23; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 21, 1979;

Repealed Eff. June 1, 1993.

 

17 NCAC 06C .0112         SEAMEN

(a)  The Vessel Worker Tax Fairness Act, 46 U.S.C. 11108 prohibits withholding of state income tax from the wages of a seaman on a vessel engaged in foreign, coastwide, intercoastal, interstate, or noncontiguous trade or an individual employed on a fishing vessel or any fish processing vessel.  Vessels engaged in other activity do not come under the restriction; however, any seaman who is employed in coastwide trade between ports in this State may have tax withheld if such withholding is pursuant to a voluntary agreement between such seaman and his employer.

(b)  With respect to income obtained while:

(1)           engaged as a pilot (licensed under section 7101 of Title 46 of the Code or under the laws of a state) on a vessel performing duties in more than one state; or

(2)           performing regularly assigned duties as a master, officer or crewman on a vessel operating on the navigable waters of more than one state; an individual is subject to income tax only in the state and political subdivision in which the individual resides.

(c)  Seamen and fishing boat crewmen exempt from withholding as specified above, shall determine whether they meet the requirements for paying estimated income tax.

 

History Note:        Authority G.S. 105-262; 46 U.S.C. Sec. 11108;

Eff. February 1, 1976;

Amended Eff. February 1, 2005; June 1, 1993; May 1, 1984; February 21, 1979;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06C .0113         BONUS PAYMENTS

17 NCAC 06C .0114         TRAVEL ALLOWANCES

17 NCAC 06C .0115         MOVING EXPENSE REIMBURSEMENT

17 NCAC 06C .0116         WITHHOLDING FROM TIPS

 

History Note:        Authority G.S. 105‑163.1(6); 105‑163.2; 105‑163.4; 105‑163.18; 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 1984; February 21, 1979;

Repealed Eff. June 1, 1990.

 

17 NCAC 06C .0117         SUPPLEMENTAL WAGE PAYMENTS

(a)  If an employer pays supplemental wages separately (or combines them with regular wages in a single payment and specifies the amount of each), the income tax withholding method depends on whether the employer withholds income tax from the employee's regular wages and whether the wages and supplemental wages are paid in a single payment.

(b)  If tax has been withheld on the regular wages and the supplemental amount is not paid in a single payment together with regular wages, the employer may treat the supplemental wages as wholly separate from the regular wages and apply the income tax rate for that tax year pursuant to G.S. 105-153.7(a) plus one-tenth of one percent to the supplemental wage payment without consideration for allowances claimed on the employee's withholding allowance certificate.  Otherwise, the supplemental wages shall be added to the regular wages for the most recent payroll period.  The income tax shall be figured as if the regular wages and supplemental wages constitute a single payment.  The tax already withheld from the regular wages is subtracted from this amount.

(c)  The remaining tax determined under Paragraph (b) shall be withheld from the supplemental wages. If the employer did not withhold income tax from the employee's regular wages, the employer shall add the supplemental wages to the employee's regular wages paid for the current or last preceding payroll period and withhold tax as though the supplemental wages and regular wages were one payment.

(d)  Tips shall be treated as supplemental wages.  The employer shall withhold the income tax on tips from wages or collect the tax from funds the employee provides.  If an employee receives regular wages and reports tips, the employer shall figure income tax as if the tips were supplemental wages.  If the employer has not withheld income tax from the regular wages, the employer shall add the tips to the regular wages and withhold income tax on the total.  If the employer withheld income tax from the regular wages, the employer shall withhold on the tips as explained in Paragraphs (b) and (c).

 

History Note:        Authority G.S. 105-153.7; 105‑163.1(13); 105‑163.2; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1990;

Readopted Eff. May 1, 2016;

Amended Eff. August 1, 2016.

 

17 NCAC 06C .0118         SICK PAY

 

History Note:        Authority G.S. 105‑163.1(4); 105‑163.1(5); 105‑163.1(6); 105‑163.2; 105‑163.18;

105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1990.

 

17 NCAC 06C .0119         WAGE AND TAX STATEMENTS

To meet the requirements of G.S. 105-163.7, an employer shall use the six-part Federal Form W-2 or any other alternate forms which have been designed for his payroll equipment if they provide the same information and the same number of copies as the official form.  When completed, the state copies must show the employer's North Carolina withholding identification number; must designate the state tax as North Carolina tax; and the North Carolina gross wages must be separately stated if they are different from federal gross wages.  Statements which do not meet the above requirements shall not be accepted and employees shall not be given credit for the tax withheld.

 

History Note:        Authority G.S. 105‑163.7; 105‑254; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 2005; May 1, 1984;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06C .0120         RECIPROCITY OF TAX CREDITS

North Carolina does not allow tax credit to nonresidents for income tax paid to another state or country; therefore, any relief from double taxation must be granted by the state of residence.  North Carolina provides such relief to its residents as explained in 17 NCAC 06C .0107.

 

History Note:        Authority G.S. 105-153.9(a); 105-163.22; 105-262;

Eff. February 1, 1976;

Amended Eff. June 1, 1990;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06C .0121         CREDIT FOR INCOME TAX WITHHELD

 

History Note:        Authority G.S. 105‑163.10; 105‑163.18; 105‑262;

Eff. February 1, 1976;

Repealed Eff. June 1, 1982.

 

17 NCAC 06C .0122         FRINGE BENEFITS

 

History Note:        Authority G.S. 105‑163.1(6); 105‑163.2; 105‑163.18; 105‑262;

Eff. July 1, 1986;

Repealed Eff. June 1, 1990.

 

17 NCAC 06C .0123         EMPLOYEE'S WITHHOLDING ALLOWANCE CERTIFICATE

(a)  Requirement.  -- Each new employee, before beginning employment, shall furnish his or her employer with a signed North Carolina Employee's Withholding Allowance Certificate, Form NC‑4, Form NC-4 EZ, or Form NC-4 NRA. A federal exemption certificate shall not be acceptable.  A certificate filed by a new employee shall be effective upon the first payment of wages after it is filed and remains in effect until the employee furnishes a new one.  G.S. 105-153.3 defines the terms married individual, head of household, and surviving spouse (qualifying widow(er)) by reference to the Internal Revenue Code; however, the number of allowances to which an individual is entitled may differ under federal and state law.  If an employee fails to furnish an allowance certificate, Form NC‑4, Form NC-4 EZ, or Form NC-4 NRA, the employer shall withhold tax as if the employee is single with no allowances.

(b)  Notice.  -- The employer is not required to ascertain whether or not the total amount of allowances claimed is greater than the total number to which the employee is entitled.  If, however, the employer has reason to believe that the number of allowances claimed by an employee is greater than the number to which the employee is entitled, the employer shall notify the Department of Revenue at the time for filing the quarterly report for the quarter during which the certificate is received, if the employer files quarterly withholding reports.  If the employer files monthly withholding reports, the employer shall notify the Department of Revenue of certificates received during the quarter at the time for filing the monthly report for the third month of the quarter.

(c)  Military spouse.  – A military spouse exempt from withholding under the Military Spouse Residency Relief Act shall furnish an employer a Form NC-4 EZ certifying the spouse meets the requirements of the Military Spouse Residency Relief Act and the state in which the spouse is domiciled, a copy of the spouse's spousal military identification card, and a copy of the servicemember's most recent leave and earnings statement.  A new Form NC-4 EZ shall be submitted each calendar year, along with the supplemental information set forth in this Paragraph.

 

History Note:        Authority G.S. 105-163.2; 105‑163.5; 105‑262; 50 U.S.C. 571;

Eff. June 1, 1990;

Amended Eff. August 1, 2002; June 1, 1993; October 1, 1991;

Readopted Eff. May 1, 2016.

 

17 NCAC 06C .0124         ADDITIONAL WITHHOLDING ALLOWANCES

(a)  Deductions. -- Additional withholding allowances may be claimed by taxpayers expecting to have allowable itemized deductions exceeding the standard deduction or allowable adjustments to income.  For most taxpayers, one additional allowance may be claimed for each two thousand five hundred dollars ($2,500) that the itemized deductions allowed under G.S. 105-153.5(a)(2) are expected to exceed the standard deduction allowed under G.S. 105-153.5(a)(1) and for each two thousand five hundred dollars ($2,500) of net adjustments reducing income.

(b)  Tax Credits. -- A taxpayer who will be entitled to a tax credit may claim one additional allowance for each one hundred forty-six dollars ($146.00) of tax credit.

 

History Note:        Authority G.S. 105-163.2(b); 105-163.2A; 105‑163.5; 105‑262;

Eff. June 1, 1990;

Amended Eff. April 1, 2001; July 1, 1999;

Readopted Eff. May 1, 2016.

 

17 NCAC 06C .0125         PENALTY

 

History Note:        Authority G.S. 105‑163.5; 105‑262;

Eff. June 1, 1990;

Repealed Eff. June 1, 1993.

 

17 NCAC 06C .0126         SUBMISSION OF CERTAIN WITHHOLDING ALLOWANCE CERTIFICATES

(a)  An employer is required to submit a copy of any withholding allowance certificate on which the employee claims more than 10 withholding allowances or claims exemption from withholding and the employee's wages would normally exceed two hundred dollars ($200.00) per week.

(b)  An employer filing quarterly withholding reports shall submit copies of the certificates received during the quarter when filing the quarterly report.  An employer filing monthly withholding reports shall submit copies of the certificates received during the quarter when filing the monthly report for the third month of the calendar quarter.  Copies may be submitted earlier and for shorter reporting periods.

(c)  Copies of the certificates, along with a letter showing the employer's name, address, withholding identification number, and the number of certificates submitted, shall be mailed to: North Carolina Department of Revenue, Tax Compliance - Withholding Tax, P.O. Box 25000, Raleigh, North Carolina 27640.

(d)  The employer shall withhold on the basis of the certificate until written notice is received from the Department that the certificate is defective.  As part of that written notice, the Department shall advise the employer to ignore the allowance certificate filed and to withhold using the number of allowances specified.

(e)  The employer shall furnish the employee a copy of the written notice upon receipt.

(f)  If the employee files a new certificate, the employer shall honor that certificate only if the employee does not claim exempt and claims a number smaller than the number allowed in the Department's written notice.  If the new certificate claims a number larger than the employee has been allowed and the employee specifies, in writing, any circumstances as justification to support the claims, the employer shall, upon receipt, forward a copy of the certificate and the employee's written statement to the Department for review.  The employer shall continue to withhold as specified in the Department's written notice until written notice is received from the Department advising the employer to withhold on the basis of the new certificate.

(g)  To increase withholding, an employee or a recipient of a pension payment may claim less than his or her allowable allowances or may enter into an agreement with his or her withholding agent and request that an additional amount be withheld by entering the desired amount on Form NC-4, NC-4 EZ, NC-4 NRA, or NC-4P.

(h)  An employee working for two or more employers or a recipient receiving pension payments from two or more pension payers shall claim his or her allowable allowances with only one withholding agent and claim zero allowances with the other withholding agents.

(i)  If an employee claims total exemption from withholding, the employee's wages shall be exempt from withholding of North Carolina income tax for the remainder of the calendar year, and through February 15 of the succeeding year unless the employee withdraws the statement during the year.  An employee claiming exemption from withholding shall complete a new certificate by February 15.  If the employee does not complete a new certificate, the employer shall withhold on the basis of a single individual with no allowances.

 

History Note:        Authority G.S. 105.163.2; 105-163.2A; 105‑163.5; 105‑262;

Eff. June 1, 1990;

Amended Eff. April 1, 2001; June 1, 1993;

Readopted Eff. May 1, 2016.

 

SECTION .0200 ‑ REPORTING AND PAYING TAX WITHHELD

 

17 NCAC 06C .0201         NEW withholding agents

North Carolina does not use a deposit system for income tax withheld. Each new withholding agent who is required to withhold North Carolina income tax must complete and file with the Department an application for a withholding identification number, Form NC-BR, Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Machinery, Equipment, and Manufacturing Fuel Tax, which can be obtained from any office of the Department or on the Department's website at www.dornc.com. A withholding identification number will be assigned.  The number must be used on all reports and correspondence concerning withholding.

 

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

Eff. February 1, 1976;

Amended Eff. September 1, 2008; April 1, 2001; August 1, 1998; June 1, 1993; June 1, 1990;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06C .0202         REPORTS AND PAYMENTS

 

History Note:        Authority G.S. 105‑163.6; 105‑163.18; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 3, 1992; February 1, 1991; February 1, 1988; February 21, 1979;

Repealed Eff. June 1, 1993.

 

17 NCAC 06C .0203         ANNUAL REPORTS

(a)  At the end of each calendar year, employers shall furnish wage and tax statements, Form W-2, to employees and Form NC-1099PS or NC-1099 ITIN to contractors from whom tax was withheld.  Federal Form 1099-MISC may be filed in lieu of Form NC-1099 PS or NC-1099 ITIN if it reflects the amount or North Carolina income tax withheld.  Two copies shall be furnished to the employee or contractor and one copy shall be furnished to the Department.  Pension payers shall report pension income and State tax withheld on federal Form 1099-R.

(b)  Form NC-1099 PS, NC-1099 ITIN, NC-1099 NRS, and any federal report of Form 1099-MISC or 1099-R shall be filed with North Carolina; however, other reports of 1099 information (interest, rents, premiums, dividends) shall not be filed with North Carolina unless the payments have not been reported to the Internal Revenue Service.

(c)  Notwithstanding Paragraph (b) of this Rule, any person required to file Form NC-1099 NRS under the provisions of 17 NCAC 06B .3906 shall do so regardless of any requirement to report the sale to the Internal Revenue Service.

 

History Note:        Authority G.S. 105-154; 105-163.2; 105-163.2A; 105-163.3; 105-163.7; 105-262;

Eff. February 1, 1976;

Amended Eff. September 1, 2008; February 1, 2005; April 1, 2001; August 1, 1998; June 1, 1993; February 3, 1992; October 1, 1991; February 1, 1991;

Readopted Eff. May 1, 2016.

 

17 NCAC 06C .0204         AMOUNTS WITHHELD ARE HELD IN TRUST FOR SECRETARY OF REVENUE

(a)  A withholding agent who fails to withhold or pay the amount required to be withheld is personally and individually liable for the tax, including any penalties and interest due.  If a withholding agent has failed to withhold or to pay over income tax withheld or required to have been withheld, the unpaid principal amount of tax may be asserted against the responsible persons of the withholding agent when the taxes that have become collectible under G.S. 105-241.22 are not paid by the withholding agent.  More than one person may be liable as a responsible person; however, the amount of the income tax withheld or required to have been withheld shall be collected only once, whether from the withholding agent or one or more responsible persons.  The term "responsible person" is defined in G.S. 105-242.2(a)(2).  Any responsible person who fails to pay the tax withheld or required to be withheld by the Secretary of Revenue shall be personally and individually liable for this failure, regardless of the person's reasons or knowledge of the failure.  A finding of willfulness shall not be required.

(b)  When the Department of Revenue determines that collection of the tax from an employer is in jeopardy, the employer may be required to report and pay the tax at any time after payment of the wages, compensation, or pension payments.

 

History Note:        Authority G.S. 105‑163.8; 105-241.23; 105-242.2; 105‑262;

Eff. June 1, 1990;

Amended Eff. September 1, 2008; April 1, 2001; June 1, 1993; February 1, 1991;

Readopted Eff. May 1, 2016.

 

SECTION .0300 ‑ PAYMENT OF INCOME TAX WITHHELD

 

 

17 NCAC 06C .0301         GENERAL

17 NCAC 06C .0302         PENALTY

17 NCAC 06C .0303         PERSONAL LIABILITY

17 NCAC 06C .0304         JEOPARDY REPORTING AND PAYMENT

 

History Note:        Authority G.S. 105‑163.6(a); 105‑163.6(b); 105‑163.6(f); 105‑163.17; 105‑241.1(g);

105‑262;

Eff. July 1, 1986;

Repealed Eff. October 1, 1991.

 

 

 

SUBCHAPTER 6D ‑ ESTIMATED TAX

 

SECTION .0100 ‑ FILING ESTIMATED INCOME TAX PAYMENTS

 

17 NCAC 06D .0101         FORMS

 

History Note:        Authority G.S. 105‑163.15; 105‑163.18; 105‑254; 105‑262;

Eff. February 1, 1976;

Amended Eff. February 1, 1988; August 1, 1986;

Repealed Eff. June 1, 1993.

 

17 NCAC 06D .0102         REQUIREMENTS FOR FILING

(a)  A married couple may make joint payments of estimated income tax even if the couple is not living together; however, the married couple may not make joint estimated tax payments if the couple is separated under a decree of divorce or of separate maintenance.  The married couple may not make joint estimated tax payments if either spouse is a nonresident alien or if either spouse has a different tax year.  Whether a married couple makes joint estimated tax payments or separate payments shall not affect the couple's choice of filing a joint income tax return or separate return.  If the married couple makes joint payments and then the couple files separate returns, the spouses may determine how to divide the estimated tax payments between them.

(b)  A taxpayer filing a short period return because of changing his or her income year shall make estimated income tax payments on the installment dates that fall within the short period and 15 days after the close of the short period that would have been due had the taxpayer not changed his or her income year.  Interest on an underpayment of estimated income tax for a short period shall be computed for the period of underpayment based on the tax shown due on the short period return and computed in the same manner as it would have been computed had the taxpayer not changed his income year.

(c)  An individual may elect to have his or her income tax refund applied only to estimated income tax for the following year.  A return reflecting an election to apply a refund to estimated tax for the following year shall be filed by the last allowable date for making estimated tax payments for that year for the election to be valid.

(d)  If an individual makes a valid election, that individual may not revoke the election after the return has been filed in order to have the amount refunded or applied in any other manner, such as an offset against any subsequently determined tax liability.

 

History Note:        Authority G.S. 105‑163.15; 105‑262;

Eff. February 1, 1976;

Amended Eff. May 1, 2006; June 1, 1993; October 1, 1991; June 1, 1990; February 1, 1988;

Readopted Eff. May 1, 2016.

 

SECTION .0200 – Interest on UNDERPAYMENT OF ESTIMATED INCOME TAX

 

17 NCAC 06D .0201         GENERAL

Interest may be due for underpayment of estimated income tax. The interest is computed separately for each payment period, therefore an individual may owe interest for an early period even if that individual later paid enough to make up the underpayment.  If an individual did not pay enough tax by the due date of each of the payment periods, the individual may owe interest even if the individual is due a refund when the return is filed.

 

History Note:        Authority G.S. 105-163.15; 105-236(a)(9); 105-241.21; 105-262;

Eff. February 1, 1976;

Amended Eff. May 1, 2006; June 1, 1990; August 1, 1986; February 21, 1979;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06D .0202         THE AMOUNT OF UNDERPAYMENT (TAXABLE YEARS BEFORE 1986)

17 NCAC 06D .0203         THE PERIOD OF UNDERPAYMENT (TAXABLE YEARS BEFORE L986)

17 NCAC 06D .0204         AVOIDING PENALTY (TAXABLE YEARS BEFORE 1986)

 

History Note:        Authority G.S. 105‑163.15(b); 105‑163.15(c); 105‑163.15(d); 105‑163.18; 105‑262;

Eff. February 1, 1976;

Amended Eff. June 1, 1982; April 12, 1981; February 21, 1979;

Repealed Eff. June 1, 1990.

 

17 NCAC 06D .0205         ESTIMATED TAX PAYMENTS (TAXABLE YEARS AFTER 1986)

 

History Note:        Authority G.S. 105‑163.15; 105‑163.18; 105‑262;

Eff. August 1, 1986;

Repealed Eff. June 1, 1990.

 

17 NCAC 06D .0206         AVOIDING PENALTY

 

History Note:        Authority G.S. 105‑163.15; 105‑163.18; 105‑262;

Eff. June 1, 1990;

Amended Eff. October 1, 1991;

Repealed Eff. June 1, 1993.

 

17 NCAC 06D .0207         UNDERPAYMENTS

(a)  An underpayment is the excess of the required installment (or, if lower, the annualized income installment) for a payment period over the portion of the amount paid by the due date that is not applied to an underpayment for an earlier payment period.

(b)  Payments include income tax withheld and are considered payments of estimated tax in equal installments on the required installment dates (usual four), unless the individual can prove otherwise.  A payment of estimated tax is credited against unpaid installments in the order in which the installments are required to be paid.

 

History Note:        Authority G.S. 105‑163.15; 105‑262;

Eff. June 1, 1990;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06D .0208         OVERPAYMENTS

An overpayment for any period occurs when the withholding and estimated tax payments are more than the total of any underpayments for an earlier period plus the lesser of the required installment or the annualized income installment for the period.  If there is an overpayment for a period, it shall be carried to the next period and added to the withholding and estimated tax paid for that later period to determine any underpayment or overpayment for that later period.

 

History Note:        Authority G.S. 105‑163.15; 105‑262;

Eff. June 1, 1990;

Amended Eff. June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06D .0209         DETERMINING AN UNDERPAYMENT

(a)  No interest attributable to the underpayment of estimated tax will be due if the estimated tax payments were made on time and the payment for each period was at least as much as either the required installment or the annualized income installment for the period. Form D‑422, Underpayment of Estimated Income Tax, shall be used to determine any underpayment.

(b)  The required installment for any payment period is the lesser of 22.5 percent of the tax shown on the current‑year return or 25 percent of the tax shown on the prior‑year return (if the prior‑year return covered all 12 months of the year).  However, if the annualized income installment for any period is less than the required installment for the same period and the annualized income installment is used in determining the underpayment, the difference between the annualized income installment and the required installment shall be added to the required installment for the next period.  If the annualized income installment for the next payment period is used, the difference between the annualized income installment for that period and the required installment (as increased) for that period shall be added to the required income installment for the following payment period.

(c)  There will be no underpayment for any payment period in which the estimated tax payments, reduced by any amounts applied to underpayments in earlier periods, were paid by the due date for the period and were at least as much as the annualized income installment for the period.

 

History Note:        Authority G.S. 105‑163.15; 105‑262;

Eff. June 1, 1990;

Amended Eff. September 1, 2008; June 1, 1993; October 1, 1991;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06D .0210         PERIOD OF UNDERPAYMENT

(a)  If a payment of estimated tax is applied to an underpayment for an earlier period, but the payment is less than the underpayment, there shall be more than one period of underpayment for the earlier period.

(b)  The first period of underpayment for any payment period shall be from the day after the due date for the payment period to the date of the first applied payment.  Later periods of underpayment for that payment period shall be from the day after the due date for the payment period to the date of the next applied payment or April 15 of the following year, whichever is earlier.

(c)  To determine the interest for a payment period with more than one period of underpayment, interest shall be computed separately for each of the periods of underpayment using the number of days in each period of underpayment, the correct underpayment balance, and the appropriate interest rates.

 

History Note:        Authority G.S. 105‑163.15; 105‑262;

Eff. June 1, 1990;

Amended Eff. May 1, 2006; June 1, 1993;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. July 26, 2015.

 

17 NCAC 06D .0211         FARMERS AND FISHERMEN

 

History Note:        Authority G.S. 105‑163.15; 105‑163.18; 105‑262;

Eff. June 1, 1990;

Repealed Eff. June 1, 1993.