Directive CD-98-1

Subject:Effective Date For Payment of Franchise Tax By Motor Carriers
Tax: Franchise Tax
Statute:G.S. 20-97 and 105-122
Issued By:Corporate, Excise, and Insurance Tax Division
Date: March 13, 1998

This directive sets the effective date of the application of the State franchise tax imposed by G.S. 105-122 to franchise motor vehicle carriers. The effective date is January 1, 1998. This date applies to franchise taxes payable with income tax returns filed for taxable years that begin on or after January 1, 1998. Thus, the 1998 calendar year corporate income and franchise tax return, due March 15, 1999, is the first income and franchise tax return on which franchise motor vehicle carriers must report and pay franchise tax.

Clarification of this effective date is needed as a result of changes in the laws made by the 1997 General Assembly. The 1997 General Assembly rewrote G.S. 20-97 and deleted language in that statute that had been interpreted by the Department of Revenue to exempt franchise motor vehicle carriers from the State franchise tax imposed under G.S. 105-122. Before the rewrite, G.S. 20-97(b) prohibited the State and cities and counties from imposing any additional "franchise tax, license tax, or other fee" against a franchise motor vehicle carrier taxed under Article 3 of Chapter 20 of the General Statutes, which imposes vehicle registration fees. The rewritten statute continues the prohibition concerning additional taxation by cities and counties but deletes the reference to the State.

The 1997 act that rewrote G.S. 20-97 became effective August 21, 1997. The effective date section of the act did not make any separate provision for the effective date of the tax law implications of the changes made in G.S. 20-97. Typically, tax law changes for franchise and income taxes become effective for taxes payable on or January 1 of a specified year. The Department finds that the August 21, 1997, effective date for the changes to G.S. 20-97 does not dictate the same date for the tax law effects of the changes. The Department finds that application of the typical effective date in this circumstance serves taxpayers by providing notice and consistency. The Department therefore considers the effective date of the tax law change to be January 1, 1998, as explained in the first paragraph of this directive.

If you have questions about this directive, you may call the Corporate Tax Division of the North Carolina Department of Revenue at 919-814-1163. You may also write to the Division at P.O. Box 871, Raleigh, N.C., 27602-0871.