2018 General Administration Law Changes

State law defines the Internal Revenue Code as the Code enacted as of a certain date. When the General Statute’s reference date to the Code is updated, North Carolina conforms to federal law that has been enacted as of that specified date, except for any specific adjustments to the Code that are required by state law.

This subdivision was amended to update the reference to the Internal Revenue Code from January 1, 2017 to February 9, 2018.

(Effective June 12, 2018; SB 99, s. 38.1(a), S.L. 2018-5.)

Subsection (b) of G.S. 105-228.90 was amended to add new subdivision (3a) as part of a series of changes to the state’s federal corrections statutes, which are statutes that address a taxpayer’s filing obligation when the taxpayer’s federal taxable income is changed or corrected at the federal level. As amended and specifically provided in G.S. 105-228.90(b)(3a), a federal determination is a change or correction of the amount of federal tax due arising from an audit by the Commissioner of the Internal Revenue.

(Effective June 12, 2018; SB 99, s. 38.3(g), S.L. 2018-5.)

This subsection was rewritten to clarify that the imposition of a revenue suspension on a corporation or a limited liability company done by the Secretary of State at the direction of the Department of Revenue, does not relieve the suspended entity for accrued, current, or subsequent taxes. The tax liability and compliance obligations remain unaffected by the suspension.

(Effective June 12, 2018; SB 99, s. 38.10(a), S.L. 2018-5.)

This subdivision was amended as part of a series of changes to the state’s informational return statutes to impose specific penalties with regard to certain informational returns. As enacted, the penalties apply to informational returns required by Article 4A (Withholding Tax), Article 5 (Sales and Use Tax), Article 9 (General Administration: Penalties and Remedies), Article 36C (Gasoline, Diesel, and Blends), and Article 36D (Alternative Fuel).

Sub-subdivision (b) was recodified as G.S. 105-163.7(d). Sub-subdivision (c) was amended to modify an existing penalty for failure to file an informational return. As amended and specifically stated in G.S. 105-236(a)(10)(c), the Secretary shall assess a penalty of fifty dollars ($50) per day, up to a maximum penalty of one thousand dollars ($1,000) against a taxpayer that fails to file an informational return by the date the informational return is due. Sub-subdivision (d) was added to create a new informational return penalty. As enacted, G.S. 105-236(a)(10)(d) imposes a penalty of two hundred dollars ($200) against a taxpayer that fails to file an informational return in the format prescribed by the Secretary.

(Effective June 12, 2018; SB 99, s. 38.10(p), S.L. 2018-5.)

This subsection was rewritten to provide that “Civilly, a violation of a tax is considered an act committed in part at the office of the Secretary in Raleigh. Criminally, a violation of tax law shall NOT be considered an act committed at the office of the Secretary in Raleigh. The District Attorney of the county where the charged offense occurred shall have sole jurisdiction to prosecute violations of tax law, but the Attorney General shall have concurrent jurisdiction in such prosecutions if the District Attorney requests, in writing, that the Attorney General prosecute the violation.”

(Effective December 1, 2018 and applies to offenses committed on or after that date; SB 561, s. 2(a), S.L. 2018-98.)

As amended, this subdivision permits the Secretary to compromise a taxpayer’s liability if the taxpayer is a retailer or a person under Article 5 of Chapter 105; the assessment is for sales or use tax the retailer failed to collect or the person failed to pay on an item taxable under G.S. 105- 164.4(a)(10) through (a)(15), and the retailer or person made a good-faith effort to comply with the sales and use tax laws. This subdivision applies to assessments for any tax due for a reporting period ending prior to July 1, 2020.

(Effective June 12, 2018; SB 99, s. 38.10.(c), S.L. 2018-5.)

This section was added to provide a framework for the Department to offer and prescribe the format for electronic filing. The new statutes are explained below.

Subsection (a) of new G.S. 105-241A explains the purpose for the new statutes, acknowledging that the various statutes within Chapter 105 of the General Statutes were originally drafted for the use of paper returns submitted to the Department either personally or through the mail. The General Assembly finds that through technological advances, there are many methods by which tax returns can be filed electronically that can be processed more efficiently by the Department, are easier and more convenient for taxpayers, improve the accuracy of the return, and are safer to use with respect to identity theft. The General Assembly also recognized that the Secretary must have the flexibility to provide specific guidance to taxpayers on how to file tax returns electronically in order to improve the process and reduce the costs of and the time to process tax returns.

Subsection (b) requires the Department to offer electronic filing for tax returns if the Department determines that electronic filing is cost-effective. The Department is also required to establish and implement electronic filing procedures.

Subsection (c) requires the Department to prescribe the format for electronic filing, including how a taxpayer or preparer of a tax return can sign an electronically filed return.

Subsection (d) provides the Secretary with the authority to waive any electronic submission requirement for returns filed electronically under Chapter 105. Subsection (e) requires the Department to publish annually on the Department’s website a list of returns that are required to be filed electronically and those that are permitted to be filed electronically during the next calendar year. The list is required to be published by December 1 of each year.

(G.S. 105-241.01 was recodified from the original Session Law. Originally, this section was enacted as G.S. 105-241A).

(Effective June 12, 2018; SB 99, s. 38.10(r), S.L. 2018-5.)

This section was amended as part of a series of changes to the state’s federal corrections statutes, which are statutes that address a taxpayer’s filing obligation when the taxpayer’s federal taxable income is changed or corrected at the federal level and the change affects the amount of state tax payable.

As enacted, subdivision (1a) provides an exception to the general statute of limitations for assessments proposed from adjustments voluntarily filed with the Internal Revenue Service that affect state tax payable. As amended and specifically provided in G.S. 105-241.8(b)(1a), if a taxpayer files a state amended return as a result of filing a federal amended return and the amended return is filed within the time required by statute, the period for proposing an assessment of any tax due is one year after the amended return is filed or three years after the original return was filed or due to be filed, whichever is later. If the taxpayer does not file the state amended return within the required time, the period for proposing an assessment of any tax due is three years after the date the federal amended return was filed with the Internal Revenue Service.

(Effective June 12, 2018 and applies to federal amended returns filed on or after that date; SB 99, s. 38.3(e), S.L. 2018-5.)

This section was amended to incorporate reference to the definition of a federal determination codified in G.S. 105-228.90(b)(3a).

(Effective June 12, 2018 and applies to federal amended returns filed on or after that date; SB 99, s. 38.3(f), S.L. 2018-5.)

This subdivision was amended to clarify that a business entity, which is defined as a corporation, a limited liability company, or a partnership, continues to be defined as a business entity regardless of whether the entity is suspended under G.S. 105-230, or is dissolved under Article 14 of Chapter 55 of the General Statutes or under Article 6 of Chapter 57D of the General Statutes.

(Effective June 12, 2018; SB 99, s. 38.10(b), S.L. 2018-5.)

This section was amended and provides certain additional and extended relief from sales and use taxes due to the expansion of the sales tax base. A complete explanation is located under Special Provisions of the Sales and Use Tax section of this document.

(Effective June 12, 2018; SB 99, s. 38.5.(q), S.L. 2018-5.)

Subsection (b) of this section was amended to correct a typographical error. Subsection (d) was amended to strike the failure to file penalty language because the penalty language was recodified as G.S. 105-236(a)(10)(c).

(Effective June 12, 2018; SB 99, s. 38.10(o), S.L. 2018-5.)

This subdivision was rewritten to add the physical address of tobacco product licensees to the list of information permitted for disclosure in the public access list allowed by the subdivision. As tobacco product licensees are required to obtain a separate license for each place of business, without disclosure of the physical address of each license, a user of the public access list cannot discern if a particular location is in fact licensed.

(Effective June 12, 2018; SB 99, s. 38.6(e), S.L. 2018-5.)

This subdivision was added to allow the Department to provide to the Office of Recovery and Resiliency data drawn from state tax information for the purpose of facilitating a taxpayer’s application for means-tested federal or state relief related to a federal major disaster declaration. As written, the Department may not disclose federal tax information to the Office of Recovery and Resiliency unless the disclosure is permitted under section 6103 of the Internal Revenue Code.

(Effective October 16, 2018; SB 3, s. 5.17(a), S.L. 2018-136.)

This subsection was added to allow the Department, consistent with the requirements of G.S. 105-259, to maintain secrecy of tax information, determine when, how, and under what conditions the disclosure of tax information authorized shall be made. As enacted and specifically stated, the Secretary is solely responsible for determining whether information security protections for systems or services that store, process, or transmit state or federal tax information are adequate, and the Secretary is not required to use any systems or services determined to be inadequate.

(Effective June 12, 2018; SB 99, s. 38.10(q), S.L. 2018-5.)

For tax years beginning prior to January 1, 2019, the Department required all taxpayers to timely submit a state extension application form to receive an extension of time to file a state income or franchise tax return. The Department did not accept a federal extension form in lieu of the North Carolina extension. The amendments to this section provide a method by which a taxpayer that is granted an automatic extension to file a federal income tax return is granted an automatic extension to file a state income and franchise tax return. As amended, a person who is granted an automatic extension to file a federal income tax return, including a return of partnership income, is granted an automatic extension to file the corresponding state income tax return and franchise tax return. The person must certify on the North Carolina return that the person was granted a federal extension.

(Effective for taxable years beginning on or after January 1, 2019; SB 99, s. 38.4(a), S.L. 2018-5.)

New subsection (d) was added to this section to authorize the Secretary to prescribe when an electronically filed return, report, payment, or any other document submitted to the Department is considered timely filed.

(G.S. 105-263(d) was recodified from the original Session Law. Originally, this subsection was enacted as G.S. 105-263(c).

(Effective June 12, 2018; SB 99, s. 38.10(q), S.L. 2018-5.)