2019 Disaster Relief Tax Law Changes

Part 8 of Article 1A of Chapter 166A was amended to add a new section to provide state tax and regulatory relief to out-of-state businesses that come into North Carolina immediately after a disaster solely to help with critical infrastructure repair at the request of a critical infrastructure company. New section G.S. 166A-19.70A consists of subsections (a) through (e).

This subsection sets out the legislative findings for why the relief in G.S. 166A-19.70A is warranted.

Under the new law, the state finds that it is appropriate to exclude nonresident businesses and nonresident employees who temporarily come into North Carolina at the request of a critical infrastructure company solely to perform disaster-related work during a disaster response period from the following tax and regulatory requirements:

1. Corporate and individual income tax, as provided under G.S. 105- 130.1 and G.S. 105-153.2. 
2. Franchise tax, as provided under G.S. 105-114. 
3. Unemployment tax, as provided under G.S. 96-1(b)(12). 
4. Certificate of Authority from the Secretary of State to transact business in this state, as provided under G.S. 55-15-01(d) and G.S. 57D-1-24(d).

This subsection sets out the definitions that apply to G.S. 166A-19.70A.

Subdivision (1) defines “corporation” by cross-reference to the definition of that term in G.S. 105-130.2.

Subdivision (2) defines “critical infrastructure” as “property and equipment owned or used by a critical infrastructure company for utility or communications transmission services provided to the public in the state. Examples of critical infrastructure include communications networks, electric generation, transmission and distribution systems, natural gas transmission and distribution systems, water pipelines, and related support facilities. Related support facilities may include buildings, offices, lines, poles, pipes, structures, and equipment.”

Subdivision (3) defines a “critical infrastructure company” as “one of the following:

a. A registered public communications provider. 
b. A registered public utility.”

Subdivision (4) defines “disaster-related work” as “repairing, renovating, installing, building, or performing services on critical infrastructure that has been damaged, impaired, or destroyed as a result of a disaster or emergency in an area covered by the disaster declaration.”

Subdivision (5) defines “disaster response period” as “a period that begins 10 days prior to the first day of a disaster declaration and expires on the earlier of the following:

a. Sixty days following the expiration of the disaster declaration, as provided under G.S. 166A-19.21(c). 
b. One hundred eighty days following the issuance of the disaster declaration.”

Subdivision (6) defines “employee” by cross-reference to the definition of that term in G.S. 105-163.1.

Subdivision (7) defines “nonresident business” as “an entity that has not been required to file an income or franchise tax return with the State for three years prior to the disaster response period, other than those arising from the performance of disaster-related work during a tax year prior to the enactment of this section, and that meets one or more of the following conditions:

a. Is a nonresident entity. 
b. Is a nonresident individual who owns an unincorporated business as a sole proprietor.”

Subdivision (8) defines “nonresident employee” as “a nonresident individual who is one of the following:

a. An employee of a nonresident business. 
b. An employee of a critical infrastructure company who is temporarily in this State to perform disaster-related work during a disaster response period.”

Subdivision (9) defines “nonresident entity” by cross-reference to the definition of that term in G.S. 105-163.1.

Subdivision (10) defines “nonresident individual” by cross-reference to the definition of that term in G.S. 105-153.3.

Subdivision (11) defines “registered public communications provider” as “a corporation doing business in this State prior to the disaster declaration that provides the transmission to the public of one or more of the following:

a. Broadband. 
b. Mobile telecommunications. 
c. Telecommunications. 
d. Wireless internet access.”

Subdivision (12) defines “registered public utility” as “a corporation doing business in this State prior to the disaster declaration that is subject to the control of one or more of the following entities:

a. North Carolina Utilities Commission. 
b. North Carolina Rural Electrification Authority. 
c. Federal Communications Commission. 
d. Federal Energy Regulatory Commission.”

This subsection requires a critical infrastructure company to provide notification to the Department of Revenue within 90 days of the expiration of the disaster response period. The notification must be in the form and manner required by the Department and must include the following:

1. A list of all nonresident businesses who performed disaster-related work in this state during a disaster response period at the request of the critical infrastructure company. 
2. A list of nonresident employees who performed disaster-related work in this state for the critical infrastructure company during a disaster response period. The notification must include the amount of compensation paid to the nonresident employee performing disaster-related work in this State.

This subsection requires a nonresident business to provide notification to the Department of Revenue within 90 days of the date the nonresident business concludes its disaster-related work in the state. The notification must be in the form and manner required by the Department and must include the following:

1. A list of nonresident employees who perform disaster-related work in this state during a disaster response period. 
2. The amount of compensation paid to the nonresident employee performing disaster-related work in this state.

Importantly, if a nonresident business fails to timely submit the nonresident business notification to the Department, the nonresident business forfeits the tax relief provided under G.S. 166A-19.70A.

This subsection makes it clear that the tax and regulatory relief provided under G.S. 166A-19.70A applies only to nonresident businesses and nonresident employees who would not otherwise be subject to North Carolina’s tax and regulatory requirements if the nonresident business or nonresident employee had not performed disaster-related work during a disaster response period.

Under the new law, the relief does not apply to a tax year that is part of a disaster response period if:

1. The nonresident business or nonresident employee continues to perform disaster-related work following the end of the disaster response period. 
2. The nonresident business or nonresident employee is required to file an income tax return for that tax year with the Department for reasons other than the performance of disaster-related work.

(Effective August 1, 2019 and applies to disaster declarations on or after that date; SB 498, s. 1.(a), S.L. 2019-187.)