2023 General Administration Law Changes

State law defines the Internal Revenue Code as the Code enacted as of a certain date. When the General Statutes reference date to the Code is updated, North Carolina conforms to federal law that has been enacted as of that specified date, except for 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 April 1, 2021, to January 1, 2023. Any amendments to the Internal Revenue Code enacted after April 1, 2021, that increase North Carolina taxable income for the 2021 or 2022 taxable year become effective for tax year 2023.

(Effective April 3, 2023; SB 174, s. 1.1., S.L. 2023-12.)

Subdivision (a)(1) requires the Department to assess a penalty for bad electronic funds transfer when a taxpayer does not have enough money in a bank account to cover the payment of tax made by a taxpayer for a tax debt and the financial institution dishonors and returns an electronic payment and declares the amount unpaid.

This subdivision was amended to clarify that the penalty for bad checks applies to the drawer of the check. For purposes of this subdivision, in the case of a garnishment payment, the term “drawer” would refer to the garnishee.

(Effective April 3, 2023; SB 174, s. 5.1.(a), S.L. 2023-12.)

Subdivision (a)(1) requires the Department to assess a penalty for bad electronic funds transfer when a taxpayer does not have enough money in a bank account to cover the payment of tax made by a taxpayer for a tax debt and the financial institution dishonors and returns an electronic payment and declares the amount unpaid.

This subdivision was amended to clarify that the penalty for bad electronic funds transfer applies to the transferor. For purposes of this subdivision, in the case of a garnishment payment, the term “transferor” would refer to the garnishee.

(Effective April 3, 2023; SB 174, s. 5.1.(a), S.L. 2023-12.)

In general, subdivision (4) requires the Department to assess a penalty for failure to pay tax when due if the tax shown due on a return is not paid by the due date of the return. The 2021 General Assembly enacted legislation to change the calculation of the penalty from a flat rate of ten percent (10%) to a graduated rate (two percent, 2%, for the first month the tax is not paid, increased by two percent, 2%, for each succeeding month, not to exceed ten percent, 10%.) The change was to be effective for taxes assessed on or after July 1, 2022. The 2022 General Assembly amended this subdivision to:

(1) Continue the current penalty rate of ten percent (10%) through December 2022; 
(2) Temporarily reduce the penalty rate to five percent (5%) from January 2023 to June 2024; and 
(3) Reintroduce the graduated penalty rate in July 2024.\

(Effective June 30, 2022; HB 83, s. 5.6.(a), S.L. 2022-13. Effective January 1, 2023, and applies to tax assessed on or after that date; H83, s. 5.6.(b), S.L. 2022-13. Effective July 1, 2024, and applies to tax assessed on or after that date; H83 s. 5.6,(c), S.L. 2022-13.)

Subsections (a), (a1), and (a2) of this section were amended to allow the Secretary to assign employees of any division of the Department to serve as revenue law enforcement officers. Previously, the statute provided that revenue law enforcement officers could only be assigned from the Unauthorized Substances Tax, Motor Fuels Investigations, and Criminal Investigations Sections of the Tax Enforcement Division.

(Effective July 1, 2023; HB 259, s. 34.2., S.L. 2023-134.)

This subsection was amended to allow the Department to accept a written statement that clearly indicates that the taxpayer requests Departmental review of a proposed denial of a refund or a proposed assessment of tax. This amendment codifies the Department’s practice.

(Effective April 3, 2023; SB 174, s. 5.2., S.L. 2023-12.)

This new section was added to create a new 10-year statute of limitations on collections. As enacted, when a tax becomes collectible under G.S. 105-241.22, the Department generally has 10 years to collect the tax. If the tax is not collected in 10 years, the remaining tax liability is abated.

Note: The 10-year statute of limitations may toll for the reasons specified in G.S. 105-242(c).

(Effective April 3, 2023; SB 174, s. 5.3.(a), S.L. 2023-12.)

This subsection was amended to state that the period a certificate of tax liability is enforceable may not extend beyond the 10-year statute of limitations provided for in G.S. 105-241.24. This subsection was also amended to make other conforming changes to the new 10-year statute of limitations for collecting a tax provided for in G.S. 105-241.24. Previously, a certificate of tax liability was generally enforceable for a period of 10 years from the date it was docketed.

(Effective April 3, 2023; SB 174, s. 5.3.(b), S.L. 2023-12.)

This subsection was amended to clarify that a garnishee is subject to any penalties imposed in Article 9 of Chapter 105 of the North Carolina General Statutes. Further, if the garnishee does not file a response to a notice of garnishment within the time set in this subsection and fails to comply with the notice, the garnishee is subject to the penalties imposed under Article 9 and such penalties would be included on a notice of proposed assessment sent to a garnishee, in accordance with G.S. 105-241.9.

(Effective April 3, 2023; SB 174, s. 5.1(b), S.L. 2023-12.)

This subsection was amended to add the informational return penalty imposed by G.S. 105- 236(a)(10)(c) to the list of penalties the Secretary is not allowed to assess for any period in which the time for filing a federal return or report or for paying a federal tax is extended under IRC section 7508A because of a presidentially declared disaster.

(Effective April 3, 2023, and applies to presidentially declared disasters occurring on or after that date; SB 174, s. 1.7.(a), S.L. 2023-12.)

This subdivision was amended as part of the new tax on interactive sports wagering operators. The amendment allows the Department to share additional tax information with the North Carolina State Lottery Commission.

In accordance with the newly enacted G.S. 18C-114(c), the North Carolina State Lottery Commission and the Department “may agree to exchange any data necessary to enforce and administer Articles 9 and 10 of [Chapter 18C] and Article 2E of Chapter 105 . . . ."

As amended, this subdivision provides that the Department, in addition to sharing information in accordance with G.S. 18C-141, may disclose tax information to the North Carolina State Lottery Commission that has been “agreed upon under G.S. 18C-114(c).”

(Effective January 8, 2024; HB 347, s. 4.(d), S.L. 2023-42.)