Tax Law Changes - North Carolina Department Of Revenue - 2012 Page 18
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41CORPORATION INCOME TAX
G.S. 105-130.2 – Definitions: This section was amended to add the definitions of
“affiliate”, “parent”, and “subsidiary”. These definitions had previously been codified in
G.S 105-130.6, which was repealed by S.L. 11-390. The items in this section were also
renumbered.
(Effective June 26, 2012, SB 826, s. 1.14.(b), S.L.12-79)
G.S. 105-130.5(b)(14) – Technical Change; Deductions from Federal Taxable
Income: When computing State taxable income, a taxpayer is permitted a deduction
from federal income of the amount by which the basis of a depreciable asset is required
to be reduced under the Code for federal tax purposes because of a tax credit allowed
against the corporation‟s federal income tax liability. This technical change clarifies that
the taxpayer may also make the deduction for basis reduction because of a grant
allowed under section 1603 of the American Recovery and Reinvestment Tax Act of
2009, P.L. 111-3. This deduction may be claimed only in the year in which the Code
requires that the asset‟s basis be reduced and is considered as
depreciation.
(Effective June 26, 2012, SB 826, s. 1.1, S.L.12-79.)
G.S. 105-130.5A – Rules for Combined Return: This section was added to establish
new procedures for the Secretary to follow when he has reason to believe that a
corporation conducts its business in such a manner as to fail to accurately report its
State net income. The Secretary may make written request of the taxpayer to provide
any information reasonably necessary to determine whether the corporation‟s
intercompany transactions have economic substance and are at fair market value. The
corporation must provide the information within 90 days of the request.
If the Secretary finds as a fact that the intercompany transactions lack economic
substance or are not at fair market value, the Secretary must first adjust the
intercompany transactions to redetermine the taxpayer‟s income attributable to this
State. If adjustment to intercompany transactions is inadequate to correct taxable
income, the Secretary may give written notice to the taxpayer requiring a combined
report of all members of the affiliated group that are conducting a unitary business. The
taxpayer must submit the return within 90 days. The Secretary or the taxpayer may
propose a combination of fewer than all members of the unitary group; however, there
must be mutual consent.
If the Secretary makes an adjustment or requires a combined return, he must provide a
written statement to the taxpayer containing detailed facts, circumstances, and reasons
for which he has found that the corporation did not accurately report its income
attributable to this State. The statement must also give the proposed method for
computing income. The statement must be given to the taxpayer no later than 90 days
following the issuance of a proposed assessment.
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