GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2013

S                                                                                                                                                    D

SENATE DRS35162-RBx-17B  (03/07)

 

 

 

Short Title:        Business Tax Reduction and Reforms.		(Public)
Sponsors:	Senator Brock (Primary Sponsor).
Referred to:

 

A BILL TO BE ENTITLED

AN ACT to reduce and simplify business taxes and to tax all business entities with limited liability protection the same.

The General Assembly of North Carolina enacts:

 

PART I.          general findings AND INTENT

SECTION 1.(a)  The General Assembly of North Carolina finds the following:

(1)        North Carolina's franchise tax is imposed on corporations for the privilege of engaging in business in this State in a form of ownership that limits the liability of individual owners of the business.

(2)        North Carolina's franchise tax was enacted in the early years of the 20th century when the corporate form of ownership was the form of ownership that conferred the privilege of limited liability for its owners.

(3)        Today many forms of business entities enjoy the privilege of limited liability, but they are not subject to the corporate franchise tax.

(4)        Businesses in North Carolina are subject to a myriad of different State, county, and municipal privilege taxes.

(5)        North Carolina relies increasingly on volatile income taxes for its General Fund revenues.

(6)        Franchise taxes and sales tax are more stable forms of revenue.

(7)        North Carolina's personal income tax rates and corporate income tax rates are among the highest in our surrounding states.

SECTION 1.(b)  It is the intent of this legislation to do the following:

(1)        Eliminate the myriad of different State, county, and municipal privilege taxes imposed on businesses.

(2)        Simplify the process of tax preparation and tax administration.

(3)        Replace the current franchise tax on corporations with a business privilege tax on all forms of limited liability business entities.

SECTION 1.(c)  It is the intent of the North Carolina General Assembly to do the following:

(1)        Implement comprehensive tax reform.

(2)        Restructure North Carolina's General Fund tax revenues to rely more heavily on stable sources of revenue.

(3)        Phase out the State's reliance on income taxes.

(4)        Increase the State's reliance on consumption taxes by expanding the sales tax base to include services.

(5)        Exempt businesses that pay the franchise tax from the sales tax base expansion to business services.

 

PART II.         simplify business taxes by repealing archaic state and local PRIVILEGE TAXES

SECTION 2.(a)  G.S. 105‑33(b), 105‑41, 105‑83, 105‑88, 105‑102.3, 105‑102.6, 105‑103, 105‑105, 105‑106, 105‑108, and 105‑109 are repealed.

SECTION 2.(b)  G.S. 153A‑152 reads as rewritten:

"§ 153A‑152.  Privilege No general authority for privilege license taxes.

(a)        Authority. – A county may levy privilege license taxes on trades, occupations, professions, businesses, and franchises to the extent authorized by Article 2 of Chapter 105 of the General Statutes and any other acts of the General Assembly. A county may levy privilege license taxes to the extent formerly authorized by the following sections of Article 2 of Chapter 105 of the General Statutes before they were repealed:

 

G.S. 105‑50                         Pawnbrokers.

G.S. 105‑53                         Peddlers, itinerant merchants, and specialty market operators.

G.S. 105‑55                         Installing elevators and automatic sprinkler systems.

G.S. 105‑58                         Fortune tellers, palmists, etc.

G.S. 105‑65                         Music machines.

G.S. 105‑66.1                      Electronic video games.

G.S. 105‑80                         Firearms dealers and dealers in other weapons.

G.S. 105‑89                         Automobiles, wholesale supply dealers and service stations.

G.S. 105‑89.1                      Motorcycle dealers.

G.S. 105‑90                         Emigrant and employment agents.

G.S. 105‑102.5                    General business license.

(b)        Telecommunications Restriction. – A county may not impose a license, franchise, or privilege tax on a company taxed under G.S. 105‑164.4(a) (4c).A county may not levy a privilege license tax on a trade, occupation, profession, business, or franchise carried on within the county unless a statute or an act of the General Assembly authorizes the county to do so."

SECTION 2.(c)  G.S. 160A‑211 reads as rewritten:

"§ 160A‑211.  Privilege No general authority for privilege license taxes.

(a)        Authority. – Except as otherwise provided by law, a city shall have power to levy privilege license taxes on all trades, occupations, professions, businesses, and franchises carried on within the city. A city may levy privilege license taxes on the businesses that were formerly taxed by the State under the following sections of Article 2 of Chapter 105 of the General Statutes only to the extent the sections authorized cities to tax the businesses before the sections were repealed:

G.S. 105‑36                         Amusements – Manufacturing, selling, leasing, or distributing moving picture films.

G.S. 105‑36.1                      Amusements – Outdoor theatres.

G.S. 105‑37                         Amusements – Moving pictures – Admission.

G.S. 105‑42                         Private detectives and investigators.

G.S. 105‑45                         Collecting agencies.

G.S. 105‑46                         Undertakers and retail dealers in coffins.

G.S. 105‑50                         Pawnbrokers.

G.S. 105‑51.1                      Alarm systems.

G.S. 105‑53                         Peddlers, itinerant merchants, and specialty market operators.

G.S. 105‑54                         Contractors and construction companies.

G.S. 105‑55                         Installing elevators and automatic sprinkler systems.

G.S. 105‑61                         Hotels, motels, tourist courts and tourist homes.

G.S. 105‑62                         Restaurants.

G.S. 105‑65                         Music machines.

G.S. 105‑65.1                      Merchandising dispensers and weighing machines.

G.S. 105‑66.1                      Electronic video games.

G.S. 105‑74                         Pressing clubs, dry cleaning plants, and hat blockers.

G.S. 105‑77                         Tobacco warehouses.

G.S. 105‑80                         Firearms dealers and dealers in other weapons.

G.S. 105‑85                         Laundries.

G.S. 105‑86                         Outdoor advertising.

G.S. 105‑89                         Automobiles, wholesale supply dealers, and service stations.

G.S. 105‑89.1                      Motorcycle dealers.

G.S. 105‑90                         Emigrant and employment agents.

G.S. 105‑91                         Plumbers, heating contractors, and electricians.

G.S. 105‑97                         Manufacturers of ice cream.

G.S. 105‑98                         Branch or chain stores.

G.S. 105‑99                         Wholesale distributors of motor fuels.

G.S. 105‑102.1                    Certain cooperative associations.

G.S. 105‑102.5                    General business license.

(b)        Barbershop and Salon Restriction. – A privilege license tax levied by a city on a barbershop or a beauty salon may not exceed two dollars and fifty cents ($2.50) for each barber, manicurist, cosmetologist, beautician, or other operator employed in the barbershop or beauty salon.

(c)        Prohibition. – A city may not impose a license, franchise, or privilege tax on a person engaged in any of the businesses listed in this subsection. These businesses are subject to a State tax for which the city receives a share of the tax revenue.

(1)        Supplying piped natural gas taxed under Article 5E of Chapter 105 of the General Statutes.

(2)        Providing telecommunications service taxed under G.S. 105‑164.4(a)(4c).

(3)        Providing video programming taxed under G.S. 105‑164.4(a)(6).

(d)        Repealed by Session Laws 2006‑151, s. 12, effective January 1, 2007.A city may not levy a privilege license tax on a trade, occupation, profession, business, or franchise carried on within the city unless a statute or an act of the General Assembly authorizes the city to do so."

SECTION 2.(d)  This section becomes effective January 1, 2015. Subsections (b) and (c) of this section apply to taxes imposed for fiscal years beginning on or after that date. Subsection (a) of this section applies to taxes imposed under repealed Article 2 of Chapter 105 of the General Statutes as follows:

(1)        For taxes payable under G.S. 105‑41, 105‑88, or 105‑102.3, the section applies to taxes imposed under those statutes for taxable years beginning on or after July 1, 2015.

(2)        For taxes payable under G.S. 105‑83, the section applies to obligations dealt in, bought, or discounted on or after January 1, 2015.

 

PART III.       REPEAL FRANCHISE TAX AND REPLACE IT WITH A MORE SIMPLE BUSINESS PRIVILEGE TAX APPLICABLE TO ALL BUSINESSES WITH LIMITED LIABILITY.

SECTION 3.(a)  The title of Article 3 of Chapter 105 of the General Statutes reads as rewritten:

"Article 3.

Franchise Tax.Business Privilege Tax."

SECTION 3.(b)  G.S. 105‑114, 105‑114.1, 105‑120.2, 105‑121.1, 105‑122, 105‑122.1, 105‑125, 105‑127, 105‑128, and 105‑129 are repealed.

SECTION 3.(c)  Article 3 of Chapter 105 of the General Statutes is amended by adding the following new sections to read:

"§ 105‑114.2.  Definitions.

The following definitions apply in this Article:

(1)        Affiliate. – A business entity under common ownership with another business entity.

(2)        Affiliated group. – Defined in section 1504 of the Code.

(3)        Business entity. – Any of the following:

a.         A domestic corporation organized under Chapter 55 of the General Statutes or a foreign corporation that has received a certificate of authority under that Chapter authorizing it to do business in this State.

b.         An electric membership corporation organized under Chapter 117 of the General Statutes.

c.         A domestic limited liability company formed under Chapter 57C of the General Statutes or a foreign limited liability company that has received a certificate of authority under that Chapter authorizing it to do business in this State.

d.         A domestic limited partnership formed under Article 5 of Chapter 59 of the General Statutes or a foreign limited partnership that has received a certificate of authority under that Article authorizing it to do business in this State.

e.         A domestic limited liability partnership registered under Article 3B of Chapter 59 of the General Statutes or a foreign limited liability partnership registered under Article 4A of that Chapter.

f.          A domestic or foreign limited liability limited partnership registered under G.S. 59‑210.

g.         Any other business whose form of organization confers limited liability on one or more of its owners.

(4)        Capital interest. – The right of a business entity that is not a corporation to receive a percentage of the business entity's assets upon dissolution after payments to creditors.

(5)        City. – Defined in G.S. 105‑228.90.

(6)        Code. – Defined in G.S. 105‑228.90.

(7)        Doing business. – Each and every act, power, or privilege exercised or enjoyed in this State, as an incident to, or by virtue of the powers and privileges granted by the laws of this State.

(8)        Holding company. – A business entity that receives during its taxable year more than eighty percent (80%) of its gross income from one or more business entities with which it has common ownership.

(9)        Ownership. – The direct or indirect control of more than fifty percent (50%) of the outstanding voting stock or voting capital interests of a business entity. Ownership of voting stock is determined by reference to the constructive ownership rules for stock under section 318 of the Code. Ownership of capital interests is determined by reference to the constructive ownership rules for partnerships, estates, and trusts in section 318(a)(2)(A) and (B) of the Code with the following modifications:

a.         The term "capital interest" is substituted for "stock" each place it appears.

b.         A noncorporate limited liability company and any noncorporate entity other than a partnership, estate, or trust is treated as a partnership. A noncorporate entity does not include a human being. A noncorporate limited liability company is a limited liability company that does not elect to be taxed as a corporation under the Code.

c.         The operating rule of section 318(a)(5) of the Code applies without regard to section 318(a)(5)(C).

(10)      Parent. – A business entity that has ownership of another business entity.

(11)      Secretary. – Defined in G.S. 105‑228.90.

(12)      Subsidiary. – A business entity under the ownership of another business entity.

(13)      Taxable year. – Defined in section 441(b) of the Code.

"§ 105‑114.3.  Nature of tax.

This Article imposes a privilege tax on a business entity for the privilege of doing business in this State in an organizational form that confers limited liability on one or more owners of the entity. The tax is an accrued tax and is imposed for the exercise of this privilege during the period covered by a tax return. Payment of the tax imposed by this Article is a condition precedent to the right to do business in this State and, for a business entity that is organized or formed in this State, to the right to continue in the entity's organizational form. When a noncorporate business entity is doing business in this State, each owner of the noncorporate business entity is doing business in this State.

"§ 105‑114.4.  Business privilege tax imposed.

An annual privilege tax is imposed on a business entity doing business in this State at the rate of one dollar and thirty‑five cents ($1.35) per one thousand dollars ($1,000) of the business entity's adjusted net worth tax base, determined in accordance with G.S. 105‑114.5. The tax payable by a business entity may not be less than five hundred dollars ($500.00). The tax payable by a business entity other than a corporation may not be more than five thousand dollars ($5,000). The tax payable by a holding company may not be more than seventy‑five thousand dollars ($75,000). The tax imposed by this section does not apply to a company that is subject to tax under G.S. 105‑116 unless the tax imposed under G.S. 105-116 is less than the tax imposed under this section.

After the end of the taxable year in which a business entity is dissolved, the entity is no longer subject to the tax levied in this Article unless the Secretary finds that the entity has engaged in business activities in this State not appropriate to winding up and liquidating its business.

"§ 105‑114.5.  Adjusted net worth tax base.

The net worth of a business entity is the entity's total assets less its total liabilities, computed in accordance with generally accepted accounting principles as of the end of the entity's taxable year. If the entity does not maintain its books and records in accordance with generally accepted accounting principles, then its net worth is computed in accordance with the accounting method used by the entity for federal tax purposes so long as the method fairly reflects the entity's net worth for purposes of the tax levied by this section. A business entity's net worth is subject to the following adjustments:

(1)        A deduction for accumulated depreciation and amortization is determined in accordance with the method used for federal tax purposes.

(2)        An addition for indebtedness the business entity owes to a parent, a subsidiary, or an affiliate. The amount added back to the business entity's net worth may be further adjusted as follows:

a.         If part of the capital of the creditor business entity is capital borrowed from a source other than a parent, a subsidiary, or an affiliate, the debtor business entity may deduct a proportionate part of the indebtedness based on the ratio of the borrowed capital of the creditor business entity to the total assets of the creditor business entity.

b.         If part of the capital of the creditor business entity consists of indebtedness owed to a parent, a subsidiary, or an affiliate that is directly traceable to capital borrowed from a source other than a parent, a subsidiary, or an affiliate, the debtor business entity may deduct a proportionate part of the indebtedness based on the ratio of the borrowed capital of the creditor business entity to the total assets of the creditor business entity.

c.         If the creditor business entity is taxable under this Article, the creditor business entity may deduct the indebtedness from its net worth to the extent the debtor business entity was not allowed to deduct the indebtedness.

(3)        A corporation may deduct the cost of treasury stock.

"§ 105‑114.6.  Exclusions in calculating tax.

(a)        Disregarded LLC. – A single member limited liability company whose single member is a corporation is disregarded under this Article if it is disregarded for federal income tax purposes. The corporation that is the single member of the disregarded limited liability company must include the net worth and property of the disregarded limited liability company in the corporation's tax base.

(b)        No Tax Tiering. – A noncorporate business entity's ownership interest in another noncorporate business entity that is taxable under this Article is excluded in determining the owner's net worth under G.S. 105‑114.5.

(c)        Investment Companies. – The following exclusions apply to investment companies in determining their tax liability under this Article:

(1)        A regulated investment company may deduct the value of its investments in  stocks, bonds, debentures, or other securities or evidences of debt. A regulated investment company is an entity that qualifies as a regulated investment company under section 851 of the Code.

(2)        A REIT may deduct the value of its investments in real property, unless the REIT is a captive REIT. The terms "REIT" and "captive REIT" have the same meanings as defined in G.S. 105‑130.12.

(3)        A venture capital company may deduct the value of its capital under management. A venture capital company is an entity whose purpose is to provide financing for start‑up businesses and that obtains the capital it uses to provide financing only from investors who are accredited investors under 17 C.F.R. § 230.215 or are institutional investors.

(d)        Short Year Adjustment. – A business entity that changes its taxable year and files a "short period" income tax return may deduct from its tax liability computed on an annual basis the amount of tax previously paid that is applicable to the period subsequent to the beginning of the new taxable year.

"§ 105‑114.7.  Determination of ownership after certain transfers.

(a)        Transfers by Corporations. – Ownership of the capital interests in a noncorporate business entity is determined as of the last day of the business entity's taxable year. If a noncorporate business entity and a corporation or an affiliated group have engaged in a pattern of transferring assets between them with the result that each did not own the capital interest on the last day of its taxable year, the ownership of the capital interests in the noncorporate business entity must be determined as of the last day of the corporation's or group of corporations' taxable year.

(b)        Tax‑Free Distribution. – If a noncorporate business entity receives from a person a tax‑free contribution of assets under section 721 of the Code within 120 days after making a tax‑free distribution of assets to that person under section 732 of the Code with the result that the business entity did not own the capital interests on the last day of its taxable year, the assets that were distributed tax‑free are considered owned by the business entity as of the last day of its taxable year.

"§ 105‑114.8.  Apportionment by multistate business entities.

A business entity that is doing business in this State and in one or more other states must apportion its net worth to this State. A corporation that is subject to income tax under Article 4 of this Chapter must use the fraction it applies in apportioning its income under that Article. A business entity that is not subject to income tax under Article 4 of this Chapter must apportion its net worth by using the fraction it would be required to apply in apportioning its income if it were subject to that Article. A business entity that believes this apportionment method subjects a greater portion of its net worth to tax under this section than is attributable to its business in this State may make a written request to the Secretary for permission to use an alternative method of apportionment, in the same manner as provided in G.S. 105‑130.4(t1).

"§ 105‑114.9.  Return and payment.

The tax imposed by G.S. 105‑114.4 is due when a return is due. A return is due on or before the fifteenth day of the fourth month following the end of the business entity's income year. A taxpayer may ask the Secretary for an extension of time to file a return under G.S. 105‑263. A business entity must file a return under affirmation with the Secretary at the place and in the manner prescribed by the Secretary. The return must be signed by the president, vice president, treasurer, or chief financial officer of the business entity.

…

"§ 105‑125.1.  Exempt business entities.

A business entity listed in this section is exempt from the privilege tax imposed by this Article unless it has unrelated business income. A business entity that is listed in this section and has unrelated business income is subject to the tax imposed by this Article on its adjusted net worth or property attributable to its unrelated business income. Upon request of the Secretary, an exempt business entity must establish its claim for exemption in writing. The exempt entities are:

(1)        A business entity exempt from federal income tax under the Code.

(2)        An insurance company subject to tax under Article 8B of this Chapter.

(3)        A single member limited liability company that is disregarded for federal income tax purposes if the single member is a corporation and the disregarded limited liability company's net worth is included in that of its single member.

(4)        A real estate mortgage investment conduit as defined in section 860D of the Code."

SECTION 3.(d)  This act is effective for taxable years beginning on or after January 1, 2015, and for which taxes are due on or after that date.

 

PART IV.       REDUCE ANNUAL REPORT FILING FEES FOR UNINCORPORATED BUSINESSES WITH LIMITED LIABILITY

SECTION 4.(a)  G.S. 57C‑1‑22(a)(25) reads as rewritten:

"(a)       The Secretary of State shall collect the following fees when the documents described in this subsection are delivered to the Secretary of State for filing:

                        Document                                                                                          Fee

…

(25)      Annual report (paper) ……………………………………....  200.0025.00

(25a)    Annual report (electronic) …………………………………..... 18.00

…."

SECTION 4.(b)  G.S. 59‑35.2(a)(18) reads as rewritten:

"(a)       The Secretary of State shall collect the following fees when the documents described in this subsection are submitted by a partnership to the Secretary of State for filing:

                        Document                                                                                          Fee

…

(18)      Annual report (paper) ………………………………………  200.0025.00

(18a)    Annual report (electronic) …………………………………....  18.00

…."

SECTION 4.(c)  G.S. 59‑1106(a)(22) reads as rewritten:

"(a)       The Secretary of State shall collect the following fees when the documents described in this subsection are delivered to the Secretary of State for filing:

                        Document                                                                                          Fee

…

(22)      Annual report for a limited liability limited

partnership (paper) ………………………............................  200.0025.00

(22a)    Annual report for a limited liability limited

 partnership (electronic) …………………………………….. 18.00

…."

SECTION 4.(d)  G.S. 105‑122.1 is repealed.

SECTION 4.(e)  This section becomes effective January 1, 2015, and applies to annual reports due on or after January 1, 2015.

 

PART V.         PRIVILEGE TAX CONFORMING CHANGES

SECTION 5.(a)  G.S. 93‑12(12) and G.S. 105‑259(b)(4) are repealed.

SECTION 5.(b)  G.S. 53‑165 reads as rewritten:

"§ 53‑165.  Definitions.

The following definitions apply in this Article:

(a)(1)   "Amount of the loan" shall mean the Amount of the loan. – The aggregate of the cash advance and the charges authorized by G.S. 53‑173 and G.S. 53‑176.

(b)(2)   "Borrower" shall mean any Borrower. – A person who borrows money from any licensee or who pays or obligates himself to pay any money from, pays or is obligated to pay money to, or otherwise furnishes any valuable consideration to any licensee for any act of the licensee as a licensee.

(c)(3)   "Cash advance" shall mean the Cash advance. – The amount of cash or its equivalent that the a borrower actually receives or is paid out at his discretion or on his behalf.the discretion of the borrower or on behalf of the borrower.

(d)(4)   "Commission" shall mean the Commission. – The State Banking Commission.

(e)(5)   "Commissioner" shall mean the Commissioner. – The Commissioner of Banks.

(f)(6)    "Deputy commissioner" shall mean the Deputy commissioner. – The deputy commissioner of banks.

(7)        Installment paper dealer. – A person who buys or discounts notes or other evidences of debt secured, at the time the debt is incurred, by personal property located in this State.

(g)(8)   "License" shall mean the License. – The certificate issued by the Commissioner under the authority of this Article to conduct a consumer finance business.

(h)(9)   "Licensee" shall mean a Licensee. – A person to whom one or more licenses have been issued.

(i)(10)  "Loanable assets" shall mean cash or bank deposits or installment loans made as a licensee pursuant to this Article or installment loans made as a licensee pursuant to the Article which this Article supersedes or such other loans payable on an installment basis as the Commissioner of Banks may approve, or any combination of two or more thereof.Loanable assets. – Cash, bank deposits, installment loans, or any combination of these.

(j)(11)  "Person" shall include any person, Person. – An individual, a firm, a partnership, association or corporation. an association, a limited liability company, a corporation, or another group acting as a unit."

SECTION 5.(c)  G.S. 53‑172(a) reads as rewritten:

"(a)       No licensee shall conduct the business of making loans under this Article within any office, suite, room, or place of business in which any other business is solicited or transacted. The business of making loans includes acting as an installment paper dealer and collecting a loan made by a government regulated lender.

Installment paper dealers as defined in G.S. 105‑83, and the collection by a licensee of loans legally made in North Carolina, or another state by another government regulated lender or lending agency, shall not be considered as being any other business within the meaning of this section."

SECTION 5.(d)  G.S. 53‑191 reads as rewritten:

"§ 53‑191.  Businesses exempted.

Nothing in this This Article shall be construed to does not apply to any person, firm or corporation person doing business under the authority of any law of this State or of the United States relating to banks, trust companies, savings and loan associations, cooperative credit unions, agricultural credit corporations or associations organized under the laws of North Carolina, production credit associations organized under the act of Congress known as the federal Farm Credit Act of 1933, pawnbrokers lending or advancing money on specific articles of personal property, industrial banks, the business of negotiating businesses that negotiate or solicit loans on real estate as defined in G.S. 105‑41, agent for another for compensation, nor to or installment paper dealers as defined in G.S. 105‑83 other than persons, firms and corporations other than persons engaged in the business of accepting fees for endorsing or otherwise securing loans or contracts for the repayment of loans."

SECTION 5.(e)  G.S. 95‑47.2(d)(3)c. reads as rewritten:

"(d)      Upon the receipt of an application for a license the Commissioner:

…

(3)        Upon completion of the investigation, or 60 days after the application was received, whichever is later, but in no case more than 75 days after the application was received, shall determine whether or not a license should be issued. The license shall be denied for any of the following reasons:

…

c.         If the employment agency will be operated on the same premises as a loan agency (as defined in G.S. 105‑88) or collection agency (as defined in G.S. 58‑70‑15).any of the following:

1.         A business that makes loans and takes as security for repayment of the loans an assignment of wages or any other type of security.

2.         A check cashing business regulated under Article 22 of Chapter 53 of the General Statutes.

3.         A pawnbroker business regulated under Chapter 91A of the General Statutes.

4.         A collection agency as defined in G.S. 58‑70‑15."

SECTION 5.(f)  G.S. 105‑130.6A(a)(2) reads as rewritten:

"(a)       Definitions. – The provisions of G.S. 105‑130.6 govern the determination of whether a corporation is a subsidiary or an affiliate of another corporation. In addition, the following definitions apply in this section:

…

(2)        Bank holding company. – A holding company with an affiliate that is subject to the privilege tax on banks levied in G.S. 105‑102.3.engaged in the business of banking.

…."

SECTION 5.(g)  This section becomes effective January 1, 2015.

 

PART VI.       FRANCHISE TAX CONFORMING CHANGES

SECTION 6.(a)  G.S. 105‑116 reads as rewritten:

"§ 105‑116.  Franchise or privilege Privilege tax on electric power, water, and sewerage companies.

(a)        Tax. – An annual franchise or privilege tax is imposed on the following:

(1)        An electric power company engaged in the business of furnishing electricity, electric lights, current, or power.

(2),       (2a) Repealed by Session Laws 1998‑22, s. 2, effective July 1, 1999.

(3)        A water company engaged in owning or operating a water system subject to regulation by the North Carolina Utilities Commission.

(4)        A public sewerage company engaged in owning or operating a public sewerage system.

(a1)      Rate. – The tax on an electric power company is three and twenty‑two hundredths percent (3.22%) of the company's taxable gross receipts from the business of furnishing electricity, electric lights, current, or power. The tax on a water company is four percent (4%) of the company's taxable gross receipts from owning or operating a water system subject to regulation by the North Carolina Utilities Commission. The tax on a public sewerage company is six percent (6%) of the company's taxable gross receipts from owning or operating a public sewerage company. A company's taxable gross receipts are its gross receipts from business inside the State less the amount of gross receipts from sales reported under subdivision (b)(2). A company that engages in more than one business taxed under this section shall pay tax on each business.

(b)        Report and Payment. – The tax imposed by this section is payable quarterly or monthly as specified in this subsection. A return is due quarterly.

A water company or public sewerage company must pay tax quarterly when filing a return. An electric power company must pay tax in accordance with the schedule and requirements that apply to payments of sales and use tax under G.S. 105‑164.16 and must file a return quarterly.

A quarterly return covers a calendar quarter and is due by the last day of the month that follows the quarter covered by the return. A taxpayer must submit a return on a form provided by the Secretary. The return must include the taxpayer's gross receipts from all property it owned or operated during the reporting period in connection with its business taxed under this section. A taxpayer must report its gross receipts on an accrual basis. A return must contain the following information:

(1)        The taxpayer's gross receipts for the reporting period from business inside and outside this State, stated separately.

(2)        The taxpayer's gross receipts from commodities or services described in subsection (a) that are sold to a vendee subject to the tax levied by this section or to a joint agency established under Chapter 159B of the General Statutes or a city having an ownership share in a project established under that Chapter.

(3)        The amount of and price paid by the taxpayer for commodities or services described in subsection (a) that are purchased from others engaged in business in this State and the name of each vendor.

(4)        For an electric power company the entity's gross receipts from the sale within each city of the commodities and services described in subsection (a).subsection (a) of this section.

(c)        Repealed by Session Laws 1998‑22, s. 2, effective July 1, 1999.

(d)        Distribution. – Part of the taxes imposed by this section on electric power companies is distributed to cities under G.S. 105‑116.1. If a taxpayer's return does not state the taxpayer's taxable gross receipts derived within a city, the Secretary must determine a practical method of allocating part of the taxpayer's taxable gross receipts to the city.

(e)        Local Tax. – The following restrictions apply to local taxes on an electric power company that is subject to tax under this section:

(1)        So long as there is a distribution to cities from the tax imposed by this section, no city shall impose or collect any greater franchise, privilege or license taxes, in the aggregate, on the businesses taxed under this section, than was imposed and collected on or before January 1, 1947.

(e1)(2) An electric power company engaged in the business of furnishing electricity, electric lights, current, or power that collects the annual franchise or privilege tax pursuant to subsection (a) of this section and remits the tax collected to the Secretary shall not be is not subject to any additional franchise or privilege tax imposed upon it by any city or county.

(f)         Repealed by Session Laws 1998‑22, s. 2, effective July 1, 1999."

SECTION 6.(b)  G.S. 105‑120.2 reads as rewritten:

"§ 105‑120.2.  Franchise or privilege Privilege tax on holding companies.

…

(b)        (1)        Every A corporation taxed under this section shall annually pay to the Secretary of Revenue, at the time the report and statement are due, a franchise or privilege tax, which is hereby levied, attax at the rate of one dollar and fifty cents ($1.50) one dollar and thirty‑five cents ($1.35) per one thousand dollars ($1,000) of the amount determined under subsection (a) of this section, but in no case shall the tax be more than seventy‑five thousand dollars ($75,000) nor less than thirty‑five dollars ($35.00).five hundred dollars ($500.00).

(2)        Notwithstanding the provisions of subdivision (1) of this subsection, if the tax produced pursuant to application of this paragraph (2) exceeds the tax produced pursuant to application of subdivision (1), then the tax shall be levied at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) on the greater of the amounts of

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

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

…."

SECTION 6.(c)  G.S. 105‑129.27(b) reads as rewritten:

"(b)      Taxes Credited. – The credit provided in this section is allowed against the franchise privilege tax levied in Article 3 of this Chapter and the income tax levied in Part 1 of Article 4 of this Chapter. Any other nonrefundable credits allowed the owner are subtracted before the credit allowed by this section."

SECTION 6.(d)  G.S. 105‑129.41(a1) reads as rewritten:

"(a1)     Tax Election. – The credit allowed in this section is allowed against the franchise privilege tax levied in Article 3 of this Chapter, the income taxes levied in Article 4 of this Chapter, or the gross premiums tax levied in Article 8B of this Chapter. The taxpayer must elect the tax against which the credit will be claimed when filing the return on which the first installment of the credit is claimed. This election is binding. Any carryforwards of the credit must be claimed against the same tax."

SECTION 6.(e)  G.S. 105‑129.96(b) reads as rewritten:

"(b)      Taxes Credited. – The credit provided in this section is allowed against the franchise privilege tax levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which the first installment of the credit is claimed. This election is binding. The credit may not exceed fifty percent (50%) of the tax against which it is applied. Any unused portion of a credit may be carried forward for the succeeding 10 years. Any carryforwards of a credit must be claimed against the same tax."

SECTION 6.(f)  G.S. 105‑130.6A(h) reads as rewritten:

"(h)       Limitation on Credits. – The credits provided in this section are allowed against the tax levied in this Part and the franchise privilege tax levied in Article 3 of this Chapter. A taxpayer may claim a credit against only one of the taxes against which it is allowed. Each taxpayer must elect the tax against which the credit will be taken when filing the return on which the first installment of the credit is claimed. This election is binding. All installments and carryforwards of the credit must be taken against the same tax.

In order for a member of an affiliated group to take a credit, each member of the affiliated group that is required to file a return under this Part or under Article 3 of this Chapter must attach a schedule to its return that shows for every member of the group the amount of the credit taken by it, the tax against which it is taken, and the amount of the resulting tax. In addition, each member must provide any other documentation required by the Secretary.

A credit allowed in this section may not exceed the amount of tax against which it is taken for the taxable year reduced by the sum of all credits allowable, except tax payments made by or on behalf of the taxpayer. Any unused portion of the credit may be carried forward to succeeding taxable years."

SECTION 6.(g)  G.S. 105‑230 reads as rewritten:

"§ 105‑230.  Charter suspended for failure to report.Suspension of business entity's right to do business for noncompliance.

(a)        Suspension. If a corporation or a limited liability company fails to file any Failure of a business entity, as defined in G.S. 105‑114.2, to file a report or return or to pay any a tax or fee required by this Subchapter for 90 days after it is due, the Secretary shall inform the Secretary of State of this failure. The Secretary of State shall due is grounds to suspend the business entity's articles of incorporation, articles of organization, or certificate of authority, as appropriate, of the corporation or limited liability company. The Secretary of State shall immediately notify by mail every domestic or foreign corporation or limited liability company so suspended of its suspension. or certificate of registration, as appropriate. The Secretary must notify the Secretary of State when a business entity's authority to transact business is subject to suspension. The Secretary of State must then immediately suspend the business entity's articles of incorporation or other authority to transact business and must notify the business entity by mail of the suspension. The powers, privileges, and franchises conferred upon the corporation or limited liability company by the articles of incorporation, the articles of organization, or the certificate of authority business entity by its articles of incorporation or other authority to transact business terminate upon suspension.

(b)        Effect. – Any act performed or attempted to be performed during the period of suspension the business entity's authority to transact business is suspended under this section is invalid and of no effect, unless the Secretary of State reinstates the corporation or limited liability company business entity's authority pursuant to G.S. 105‑232."

SECTION 6.(h)  G.S. 105‑232 reads as rewritten:

"§ 105‑232.  Rights restored; receivership and liquidation.Procedure for reinstatement after suspension of business entity's authority to do business for noncompliance.

(a)        Any corporation or limited liability company whose articles of incorporation, articles of organization, or certificate of authority to do business in this State has been suspended by the Secretary of State under G.S. 105‑230, that complies with all the requirements of this Subchapter and pays all State taxes, fees, or penalties due from it (which total amount due may be computed, for years prior and subsequent to the suspension, in the same manner as if the suspension had not taken place), and pays to the Secretary of Revenue a fee of twenty‑five dollars ($25.00) to cover the cost of reinstatement, is entitled to exercise again its rights, privileges, and franchises in this State. The Secretary of Revenue shall notify the Secretary of State of this compliance and the Secretary of State shall reinstate the corporation or limited liability company by appropriate entry upon the records of the office of the Secretary of State. Upon entry of reinstatement, it relates back to and takes effect as of the date of the suspension by the Secretary of State and the corporation or limited liability company resumes carrying on its business as if the suspension had never occurred, subject to the rights of any person who reasonably relied, to that person's prejudice, upon the suspension. The Secretary of State shall immediately notify by mail the corporation or limited liability company of the reinstatement.The suspension under G.S. 105‑230 of the authority of a business entity to transact business terminates when the business entity resolves the noncompliance that resulted in the suspension and pays a reinstatement fee of fifty dollars ($50.00) to the Secretary of Revenue. The Secretary of Revenue must notify the Secretary of State when a business entity whose authority is suspended resolves the noncompliance. The Secretary of State must then immediately reinstate the business entity's authority and must notify the business entity by mail of the reinstatement. Reinstatement of a business entity's authority to do business relates back to and takes effect as of the date of the suspension, subject to the rights of a person who reasonably relied to that person's prejudice on the suspension.

(b)        When the articles of incorporation, articles of organization, or certificate of authority to do business in this State has been suspended by the Secretary of State under G.S. 105‑230, and the corporation or limited liability company has ceased to operate as a going concern, if there remains property held in the name of the corporation or limited liability company or undisposed of at the time of the suspension, or there remain future interests that may accrue to the corporation, the limited liability company, or its successors, members, or stockholders, any interested party may apply to the superior court for the appointment of a receiver. Application for the receiver may be made in a civil action to which all stockholders, members, or their representatives or next of kin shall be made parties. Stockholders or members whose whereabouts are unknown, unknown stockholders or members, unknown heirs and next of kin of deceased stockholders, members, creditors, dealers, and other interested persons may be served by publication. A guardian ad litem may be appointed for any stockholders, members, or their representatives who are infants or incompetent. The receiver shall enter into a bond if the court requires one and shall give notice to creditors by publication or otherwise as the court may prescribe. Any creditor who fails to file a claim with the receiver within the time set shall be barred of the right to participate in the distribution of the assets. The receiver may (i) sell the property interests of the corporation or limited liability company upon such terms and in such manner as the court may order, (ii) apply the proceeds to the payment of any debts of the corporation or limited liability company, and (iii) distribute the remainder among the stockholders, the members, or their representatives in proportion to their interests in the property interests. Shares due to any stockholder or member who is unknown or whose whereabouts are unknown shall be paid into the office of the clerk of the superior court, to be disbursed according to law. In the event the records of the corporation or limited liability company are lost or do not reflect the owners of the property interests, the court shall determine the owners from the best evidence available, and the receiver shall be protected in acting in accordance with the court's finding. This proceeding is authorized for the sole purpose of providing a procedure for disposing of the assets of the corporation or limited liability company by the payment of its debts and by the transfer to its stockholders, its members, or their representatives their proportionate shares of its assets."

SECTION 6.(i)  This section becomes effective for taxable years beginning on or after January 1, 2014.

 

PART VII.      SAVINGs CLAUSE AND EFFECTIVE DATE

SECTION 7.(a)  This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before the effective date of its amendment or repeal, nor does it affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal.

SECTION 7.(b)  Except as otherwise provided, this act is effective when it becomes law.