2020 General Administration Tax Law Changes

Subdivision (1b) of this subsection was amended to update the reference to the Internal Revenue Code from January 1, 2019 to May 1, 2020. Any amendments to the Internal Revenue Code enacted after January 1, 2019 that increase North Carolina taxable income for the 2019 taxable year become effective for tax year 2020.

An unnumbered (#) subdivision was also added for the definition of the “CARES Act.” As defined, it is the Coronavirus Aid, Relief, and Economic Security Act.

This subsection was further amended to add two new subdivisions as part of a series of changes that require a taxpayer to provide the full taxpayer identification number when tax documents are filed with the Department.

Subdivision (9) was added to define the term “Taxpayer Identification Number (TIN)” as an identification number issued by the Social Security Administration or the Internal Revenue Service, excluding a Taxpayer Identification Number for Pending U.S. Adoptions (ATIN) and a Preparer Taxpayer Identification Number (PTIN).

Subdivision (10) was added to define the term “Truncated Taxpayer Identification Number (TTIN)” by reference to Treasury Regulation section 301.6109-4. In general, a truncated taxpayer identification number is a social security number (SSN) or other identification number whereby the first five digits are omitted (e.g., XXX-XX-1234).

The Revisor of Statutes is authorized to renumber the subdivisions of G.S. 105-228.90(b) to ensure that the subdivisions are listed in alphabetical order and in a manner that reduces the current use of alphanumeric designations, to make conforming changes, and to reserve sufficient space to accommodate future additions to the statutory subsection. The above amendments may be renumbered by the Revisor of Statutes.

(Effective June 30, 2020; HB 1080, s. 1.(a,b), 4.4(a), S.L. 2020-58.)

This subdivision was amended to add three additional Articles to which a penalty for failure to file an informational return timely and a penalty for failure to file an informational return in the format prescribed by the Secretary apply.

Under prior law, the penalty for failure to file an informational return timely and the penalty for failure to file an informational return in the format prescribed by the Secretary applied to the following Articles:

• Article 4A, Withholding Tax 
• Article 5, Sales and Use Tax 
• Article 9, General Administration; Penalties and Remedies 
• Article 36C, Gasoline, Diesel, and Blends 
• Article 36D, Alternative Fuel

As amended, the penalty for failure to file an informational return timely and the penalty for failure to file an informational return in the format prescribed by the Secretary apply to the following Articles:

• Article 2A, Tobacco Products Tax 
• Article 2C, Alcoholic Beverage License and Excise Tax 
• Article 4, Income Tax 
• Article 4A, Withholding Tax 
• Article 5, Sales and Use Tax 
• Article 9, General Administration; Penalties and Remedies 
• Article 36C, Gasoline, Diesel, and Blends 
• Article 36D, Alternative Fuel

(Effective January 1, 2020, and applies to informational returns due to be filed on or after that date; SB 523, s. 5.2.(a), S.L. 2019-169.)

This subdivision was amended to add a new criminal offense to the list of offenses for which the Secretary of Revenue may appoint employees of the Criminal Investigations Division to serve as revenue law enforcement officers. The added criminal offense is for the secrecy of tax information related to G.S. 105-259.

(Effective June 30, 2020; HB 1080, s. 6.1, S.L. 2020-58.)

This subdivision was added and provides that the Secretary may compromise the liability of an auctioneer licensed under Chapter 85B of the General Statutes if the assessment is for sales tax that the taxpayer failed to collect for the sale of livestock at auction if certain conditions are met. A complete explanation is located under Special Provisions of the Sales and Use Tax section of this document.

(Effective June 5, 2020; HB 1079, s. 1.(c), S.L. 2020-6.)

This statute was amended to add new subdivision (2a) to the list of exceptions to the general statute of limitations for proposing an assessment. As enacted, subdivision (2a) provides a ten-year statute of limitations applicable to a tax assessment for trust taxes collected but not remitted to the state.

As amended and specifically provided in G.S.105-241.8(b)(2a), if a taxpayer, as a trustee, collects taxes on behalf of the state, but fails to remit all the taxes held in trust when due, the period for proposing as assessment is the later of the following:

a. Ten years from the due date of the return. 
b. Ten years after the taxpayer filed the return.

(Effective June 30, 2020 and applies to assessments not barred by the statute of limitations prior to that date; HB 1080, s. 6.2.(a), S.L. 2020-58.)

This section, which addresses the Department’s actions on timely requests for Departmental review, was amended to add additional clarifying language and to move a sentence found in subsection (c) to a more appropriate place in subsection (b). Importantly, the substance of the law effectively remains the same.

Under prior law, subsection (c) provided that if a taxpayer fails to attend a scheduled conference on the proposed denial of a refund or a proposed assessment without notifying the Department, the Department and the taxpayer are considered to be unable to resolve the issue.

The additional language inserted into subsection (b) clarifies that the Department and the taxpayer may mutually agree to reschedule the conference. As was with the prior law, subsection (b) now provides that if the taxpayer fails to attend the scheduled conference on the proposed denial of a refund or a proposed assessment, the Department and the taxpayer are considered to be unable to resolve the taxpayer's objection.

(Effective June 30, 2020; HB 1080, s. 4.5, S.L. 2020-58.)

This subsection was added to state that the scope of section 105-242.2 does not “apply to, or limit the criminal liability of any person.” This amendment clarifies that the civil tax liability statute has no applicability to the criminal liability of a person.

(Effective June 30, 2020; HB 1080, s. 6.3, S.L. 2020-58.)

This subdivision was amended to update the definition of an overdue tax debt to any part of a tax debt that remains unpaid 60 days or more after it becomes collectible under G.S. 105- 241.22. The term does not include tax debt for which the taxpayer enters into an installment agreement within 60 days after the debt becomes collectible. Under prior law, the definition applied to any part of a tax debt that remained unpaid 90 days or more after it became collectible.

(Effective August 1, 2020, and applies to tax debts that become collectible after that date; HB 1080, s. 6.4.(a), S.L. 2020-58.)

This subsection was amended by the 2019 General Assembly to allow the Department to impose a collection assistance fee 60 days after a tax debt is deemed collectible under G.S. 105-241.22. Under prior law, the collection assistance fee was assessed 90 days after the debt was deemed collectible. Additionally, the requirement that the Department mail a separate collection fee notice to the taxpayer earlier than 60 days after the debt becomes collectible has been removed. The 2020 General Assembly made an amendment to the effective date of the legislation passed for this subsection under S.L. 2019-169. As amended, the effective date was changed from January 1, 2020 to August 1, 2020.

(Effective August 1, 2020, and applies to tax debts that become collectible on or after that date; SB 523, s. 5.1.(a), S.L. 2019-169 and HB 1080, s. 6.4.(b), S.L. 2020-58.)

The 2020 General Assembly further amended this subsection to state that the Department must notify the taxpayer 60 days prior to imposing the collection assistance fee on an overdue tax debt. Language was removed that stated the fee was imposed on an overdue tax debt that remained unpaid for 60 days or more. As amended, the fee is tied to when notice is given to the taxpayer. The amendment also provides that notice of the fee may be included on the collection notice. These changes were made to be consistent with the amendment made to this subsection by the 2019 General Assembly.

(Effective August 1, 2020, and applies to tax debts that become collectible after that date; HB 1080, s. 6.4.(a), S.L. 2020-58.)

This section was added and provides that the Department shall take no action to assess a person for any sales and use tax due for a filing period beginning on or after October 1, 2019, and ending prior to August 1, 2020, with respect to the retail sale of digital audio works or digital audiovisual works that meet certain conditions. A complete explanation is located under Special Provisions of the Sales and Use Tax section of this document.

(Effective June 5, 2020; HB 1079, s. 3.(d), S.L. 2020-6; Effective June 30, 2020; HB 1080, s. 3.6., S.L. 2020-58.)

To reduce the risk of identity theft, the Internal Revenue Service (“IRS”) issued regulations permitting a person to truncate a payee’s identification number on a statement the person gives to the payee (i.e., authorizes the use of a Truncated Taxpayer Identification Number (TTIN), as the term is defined by Treasury Regulation section 301.3109-4). Importantly, the regulations do not allow the use of a TTIN on tax documents filed with the IRS.

Article 9 of Chapter 105 was amended to add a new section to specify that a TTIN may not be used on any return, statement, or other document required to be filed with or furnished to the Department unless specifically authorized by law.

(Effective June 30, 2020; HB 1080, s. 4.4.(b), S.L. 2020-58.)

This subdivision was amended to allow the Department of Revenue to disclose information regarding Article 8B tax information with the North Carolina Department of Health and Human Services. Previously, information concerning a tax imposed under Article 8B could only be shared with the Department of Insurance. This subdivision also was amended to clarify that the reference to “Department” is for the Department of Revenue.

(Effective August 1, 2020, and applies to capitation payments received by prepaid health plans on or after that date; SB 808, s. 16.(e)., S.L. 2020-88.)

This subdivision was amended to allow the Secretary flexibility in how to disclose licensee information maintained by the Department and to clarify who can obtain taxpayer information. Specifically, the Secretary need only make licensee information available to other persons licensed under Article 2A.

(Effective June 30, 2020; HB 1080, s. 2.2.(b), S.L. 2020-58.)

The sunset of this contribution was extended. The contribution was scheduled to expire for taxable years beginning on or after January 1, 2021. As rewritten, the contribution now sunsets for taxable years beginning on or after January 1, 2026.

(Effective June 30, 2020; HB 1080, s. 7.1, S.L. 2020-58.)