2024 Corporate Taxes Law Changes

The 2023 General Assembly amended this subsection by setting a cap on the franchise tax for a holding company at five hundred dollars ($500) for the first one million dollars ($1,000,000) of its franchise tax base. As amended, the franchise tax rate is now five hundred dollars ($500) for the first one million dollars ($1,000,000) of the corporation’s tax base as determined under G.S. 105-120.2(a) and one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of its tax base that exceeds one million dollars ($1,000,000).

(Effective for taxable years beginning on or after January 1, 2025, and is applicable to the calculation of franchise tax reported on the 2024 and later corporate income tax return; HB 259, s. 42.6A.(b), S.L. 2023-134.)

The 2024 General Assembly further amended this subsection to clarify that the new franchise tax rate for a holding company is one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of the corporation’s tax base, with a maximum of five hundred dollars ($500) for the first one million dollars ($1,000,000) of its tax base. As previously written, the amended law could have been misinterpreted to be a raise of the minimum tax rate, instead of setting a maximum on the first one million dollars ($1,000,000) of the franchise tax base. The minimum franchise tax remains two hundred dollars ($200) and the total maximum franchise tax for a holding company remains one hundred fifty thousand dollars ($150,000).

(Effective for taxable years beginning on or after January 1, 2025, and is applicable to the calculation of franchise tax reported on the 2024 and later corporate income tax return; SB 508, s. 11.2.(b), S.L. 2024- 1.)

The 2023 General Assembly amended this subsection by setting a cap on the franchise tax for a C Corporation at five hundred dollars ($500) for the first one million dollars ($1,000,000) of its franchise tax base. As amended, the franchise tax rate is now five hundred dollars ($500) for the first one million dollars ($1,000,000) of the corporation’s tax base as determined under G.S. 105-120.2(a) and one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of its tax base that exceeds one million dollars ($1,000,000).

(Effective for taxable years beginning on or after January 1, 2025, and is applicable to the calculation of franchise tax reported on the 2024 and later corporate income tax return; HB 259, s. 42.6A.(a), S.L. 2023-134.)

The 2024 General Assembly further amended this subsection to clarify that the new franchise tax rate for a C Corporation is one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of the corporation’s tax base, with a maximum of five hundred dollars ($500) for the first one million dollars ($1,000,000) of its tax base. As previously written, the amended law could have been misinterpreted to be a raise of the minimum tax rate, instead of setting a maximum on the first one million dollars ($1,000,000) of the franchise tax base. The minimum franchise tax remains two hundred dollars ($200).

(Effective for taxable years beginning on or after January 1, 2025, and is applicable to the calculation of franchise tax reported on the 2024 and later corporate income tax return; SB 508, s. 11.2.(a), S.L. 2024- 1.)

This section was rewritten to clarify that a taxpayer can receive an extension of time to file a franchise tax return under the provisions of G.S. 105-263 without asking the Secretary for the extension.

Under old law, this section allowed a taxpayer to ask the Secretary for an extension to time to file a franchise tax return under the provisions of G.S. 105-263. Because the 2018 General Assembly amended G.S. 105-263 to provide taxpayers who are granted an automatic federal extension with an automatic state extension to file their corresponding North Carolina franchise tax return, G.S. 105-129 was amended by the 2024 General Assembly to conform the statute to the other changes made to Article 9 of Chapter 105.

(Effective July 1, 2024; HB 319, s. 1.4.(d), S.L. 2024-28.)

This section was amended by the 2021 General Assembly to phase out the corporate income tax imposed on C Corporations doing business in North Carolina beginning with the 2025 tax year. As amended, the tax is a percentage of the taxpayer’s state net income computed as follows:

Note: Neither an S Corporation nor a Taxed S Corporation are subject to the tax levied in this section.

(Effective for taxable years beginning on or after January 1, 2025; SB 105, s. 42.2.(a), S.L. 2021-180.)

Subsection (d) was rewritten to clarify that a taxpayer can receive an extension of time to file an income tax return under the provisions of G.S. 105-263 without asking the Secretary for the extension.

Under old law, this section allowed a taxpayer to ask the Secretary for an extension to time to file an income tax return under the provisions of G.S. 105-263. Because the 2018 General Assembly amended G.S. 105-263 to provide taxpayers who are granted an automatic federal extension with an automatic state extension to file their corresponding North Carolina income tax return, G.S. 105-129 was amended by the 2024 General Assembly to conform the statute to the other changes made to Article 9 of Chapter 105.

(Effective July 1, 2024; HB 319, s. 1.4.(c), S.L. 2024-28.)

The General Assembly reenacted the conservation tax credit for certain real property donations, as it existed before its previous expiration. The statute provides an income tax credit to a C Corporation that makes a qualified donation of real property in North Carolina for a specific qualifying conservation use. Subject to the limitations set forth by the 2024 General Assembly, the credit is equal to twenty-five percent (25%) of the fair market value of the donated property.

Subsection (a) provides the list of specific qualifying conservation uses which the credit is based and provides the aggregate amount of credit allowed to a corporation in a taxable year. In addition, the credit cannot be taken for the year in which the donation was made but can be taken for the taxable year beginning during the calendar year in which the application for the credit is effective.

Subsection (a1) defines the term “qualified donation.”

Subsection (a2) outlines the application process which the taxpayer must follow to be eligible for the credit.

Subsection (a3) requires the taxpayer claiming the credit to maintain and make available for inspection any information or records required by the Department.

Subsections (b) through (d) provide certain limitations for the credit allowed. If the credit exceeds the taxpayer’s tax liability for the year reduced by the sum of all other tax credits allowed, the excess is not refunded but may be carried forward for five years. In addition, Subsection (d) prevents a taxpayer from receiving a “double benefit” by not allowing the taxpayer that claims the credit from deducting a charitable contribution under G.S. 105-130.9 for the value of the donated property for which the credit is based.

Subsection (e) creates an aggregate cap on all credits allowed for donations made during a taxable year to individuals, pass-through entities, and corporations (collectively, “taxpayers”) of $5,000,000, of which $3,250,000 is reserved for credits to taxpayers that made a qualified donation for the specific use of forestland or farmland conservation. This subsection also provides the procedure for which the Department may reopen the application period if allocated funds become available.

Subsection (f) provides the procedures for the Department to follow when the aggregate amount of credits claimed by taxpayers exceed the ceiling provided in subsection (e).

Subsection (g) requires the Department to include specific information about the credit in the economic incentives report required to be published by May 1 of each year pursuant to G.S. 105-256(a)(2a).

(Effective for taxable years beginning on or after January 1, 2025, for donations made on or after January 1, 2025, and expires for taxable years beginning on or after January 1, 2027, for donations made on or after January 1, 2027; SB 355, s.15.(a), S.L. 2024-32.)

This subsection was amended to change its expiration date and to eliminate the date a captive insurance company must redomesticate by, in order to qualify for exemption from premium taxes. Previously, the premium tax exemption applied to captive insurance companies formed and licensed under the laws of a jurisdiction other than North Carolina that redomesticated to North Carolina prior to December 31, 2022, and obtained approval from the North Carolina Commissioner of Insurance pursuant to G.S. 58-10-380(g) to operate as a North Carolina-domiciled captive insurance company. As amended, this date has been removed from the statute and the statutory expiration date for this exemption has been extended to taxable years beginning on or after January 1, 2026, from January 1, 2024.

(Effective July 2, 2024; SB 319, s. 3.(a), S.L. 2024-29.)

This subdivision was amended to change the distribution of net proceeds credited to Workers' Compensation Fund from up to twenty percent (20%) to ten percent (10%). In addition, this subdivision was amended to reference that the Fund is established in G.S. 58-87-10 and that the Fund reserve cannot exceed forty-five million dollars ($45,000,000). As amended, the statute also now allocates ten percent (10%) of the net proceeds to the Office of the State Fire Marshal in the Department of Insurance to be used to fund the Firefighters’ Cancer Insurance Program established in Article 86A of Chapter 58 of the General Statutes and limits the amount credited to ten million dollars ($10,000,000).

(Effective July 1, 2025, and applies to the distribution of net proceeds of the gross premiums tax collected on or after that date; SB 319, s. 10.2., S.L. 2024-29.)

The percentage rate to be used in calculating the insurance regulatory charge under this statute is two percent (2%) for the 2024 calendar year and the 2025 calendar year. This charge is a percentage of premiums tax liability.

(Effective October 3, 2023; HB 259, s. 30.1.(a), S.L. 2023-134.)