2025 Corporate Taxes Law Changes

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.)

The definition of a wholesale content distributor contained in subdivision (3) of this subsection was amended to update the term “Internet” to “internet”. This conforms with the state’s drafting conventions for use of this term by making it lowercase.

(Effective June 26, 2025; HB 40, s. 29(3), S.L. 2025-25.)

This subsection was amended to correct a statutory reference to the conservation tax credit in G.S. 105-130.34A. The 2025 General Assembly recodified G.S. 105-130.34 as G.S. 105-130.34A.

(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; HB 74, s. 9.1(b), S.L. 2025-4.)

The 2024 General Assembly reenacted the conservation tax credit for certain real property donations, repealed by Session Law 2013-316, and modified the conservation purposes for which the tax credit can be claimed, (collectively, the “NC Conservation Tax Credit”).

The 2025 General Assembly recodified the NC Conservation Tax Credit from G.S. 105-130.34 to G.S. 105-130.34A and made various stylistic, technical, and substantive changes to the NC Conservation Tax Credit, including the following:

Subsection (a), which establishes the NC Conservation Tax Credit, was amended to modify the statutory language to ensure consistency with updates made throughout G.S. 105-130.34A. In addition, the title of the subsection was changed from “Credit” to “Credit; Limitation.”

As rewritten, subsection (a) provides:

(a) Credit; Limitation. – Subject to the limitations in [G.S. 105-130.34A], a C Corporation that makes a qualified donation is allowed a credit against the tax imposed by [North Carolina Corporation Income Tax] equal to twenty-five percent (25%) of the fair market value of the qualified donation. The amount of credit allowed under this subsection may not exceed five hundred thousand dollars ($500,000), whether the corporation makes, directly or indirectly as an owner of a pass-through entity, one or more qualified donations during the calendar year. The credit may not be taken for the year in which the qualified donation is made but may be taken for the taxable year beginning in the calendar year in which the application for the credit becomes effective as provided in [G.S. 105-130.34A(c)].

As rewritten, subsection (b) provides:

(b) Definitions. – The following definitions apply in [G.S. 105-130.34A]:

(1) Allocated credit. – A requested credit minus the reduction required under [G.S. 105-130.34A(h)]. 
(2) Cap remainder. - The amount that is the difference between the maximum amount of prioritized credit requests allowed. 
(3) Maximum amount. – The amount set out in [G.S. 105-130.34A(h)] that is the total aggregate amount of all credits allowed to taxpayers under [G.S. 105 130.34A] and G.S. 105-153.11 for qualified donations made in a calendar year. 
(4) Nonprioritized credit request. – A credit under [G.S. 105-130.34A] or G.S. 105-153.11 that is for a qualified donation for a use other than farmland preservation. 
(5) Prioritized amount. – The amount set out in [G.S. 105-130.34A(h)] that is for prioritized credit requests. 
(6) Prioritized credit request. – A credit requested under [G.S. 105-130.34A] or G.S. 105-153.11 that is for a qualified donation for forestland or farmland preservation. 
(7) Qualified donation. – A qualified donation is a donation of a qualified real property interest located in North Carolina that meets all of the following condition:
a. It is donated in perpetuity for one of the following uses and is accepted in perpetuity for the use for which the qualified real property interest is donated:

1. Forestland or farmland preservation. 
2. Fish or wildlife conservation. 
3. A buffer to limit land use activities that would restrict, impede, or interfere with military training, testing or operations on a installation or training area or otherwise be incompatible with the mission of the installation. 
4. Floodplain protection in a county that, in the five years preceding the donation, was the subject of a Type II or Type III gubernatorial disaster declaration, as provided in G.S. 166A-19.21, as a result of a natural disaster. 
5. Historic landscape conservation. 
6. Public trails or access to public trails.

b. It is donated to the state, a local government, or a body that is both organized to receive and administer lands for conservation purposes and qualified to receive charitable contributions pursuant to G.S 105 130.9. Lands required to be dedicated pursuant to local government regulation or ordinance and dedications made to increase building density levels permitted under a regulation or ordinance are not eligible for [the NC Conservation Tax Credit].

(8) Qualified real property interest. – As defined in section 170(h)(2) of the [Internal Revenue] Code. 
(9) Total allocated credits. – Total requested credits less any reduction required under [G.S. 105-130.34A(h)] and G.S. 105-153.11(l). 
(10) Total requested credits. – The sum of nonprioritized credit requests and prioritized credit requests.

Subsection (c), previously codified as subsection (a2), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-130.34A.

As rewritten, subsection (c) provides:

(c) Application. – A C Corporation must file an application with the Secretary to request the [NC Conservation Tax Credit.] The application must be filed on or before April 15 of the year following the calendar year in which the donation was made. An application is effective for the year in which it is timely filed. The Secretary may not accept late applications. The application must be on a form prescribed by the Secretary and include any information required by the Secretary demonstrating that the donation has met the conditions to qualify for the [NC Conservation Tax Credit], including the following items:

(1) A copy of the certification by the Department of Natural and Cultural Resources identifying which of the valid public benefits listed in [G.S. 105 130.34A(b)(7)] for which the donated qualified real property interest is suitable. The certification for a qualified donation made by a pass-through entity must be filed by the pass-through entity.

(2) A self-contained or summary appraisal report as defined in Standards Rule 2-2 in the latest edition of the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Foundation for the donated qualified real property interest. For fee simple absolute donations of real property, a C Corporation may submit documentation of the county’s appraised value of the donated qualified real property interest, as adjusted by the sales assessment ratio, in lieu of an appraisal report.

Subsection (d), previously codified as subsection (a3), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-130.34A. Previous subsection (d) regarding “no double benefit” was repealed because it is already set out in 105-130.9.

As rewritten, subsection (d) provides:

(d) Substantiation. – A C Corporation must maintain and make available for inspection by the Secretary any records the Secretary considers necessary to determine and verify the amount of [NC Conservation Tax Credit] allowed under [G.S. 105-130.34A(a)]. The burden of proving eligibility for the [NC Conservation Tax Credit] and the amount of the [NC Conservation Tax Credit] rests upon the taxpayer, and no [NC Conservation Tax Credit] may be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection.

Subsection (e), previously codified as subsection (b), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-130.34A. In addition, the title of the subsection was changed from “Limitation” to “Cap.”

As rewritten, subsection (e) provides:

(e) Cap. – The allocated credit may not exceed the amount of the tax against which it is claimed for the taxable year reduced by the sum of all credits allowed, except payments of tax made by or on behalf of the C Corporation.

Subsection (f), previously codified as subsection (c), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-130.34A.

As rewritten, subsection (f) provides:

(f) Carryforward. – If the allocated credit exceeds the cap under [G.S. 105 130.34A(e)], any unused portion of the allocated credit may be carried forward for the next succeeding five years.

Subsection (g) was added to govern the “transferability” of the NC Conservation Tax Credit.

As rewritten, subsection (g) provides:

(g) Transferability. – An allocated credit allowed under [G.S. 105-130.34A(a)] may not be transferred.

Subsection (h), previously codified as subsection (e), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-130.34A. In addition, language was added to require the Secretary to allocate the amount of NC Conservation Tax Credits allowed to C Corporations, individuals and pass-through entities for donations made in a taxable year, based on dollar thresholds and priorities set by the General Assembly.

As rewritten, subsection (h) provides:

(h) Ceiling; Use; Allocation. – The amount of total allocated credits under [G.S. 105-130.34A] and G.S. 105-153.11 for a taxable year may not exceed five million dollars ($5,000,000), of which three million two hundred fifty thousand dollars ($3,250,000) is a prioritized amount. If the total requested credits are equal to or less than the maximum amount, the Secretary shall allow the total requested credits. If the total requested credits are greater than the maximum amount, the Secretary shall allocate the total requested credits in accordance with [G.S. 105 130.34A(h)].

Subsection (i), previously codified as subsection (f), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-130.34A. In addition, language was added to provide a detailed proration formula the Secretary must use to reduce the amount of NC Conservation Tax Credit to which a taxpayer is entitled when the amount of total requested credits exceeds either (1) the maximum overall dollar amount authorized for NC Conservation Tax Credits or (2) the maximum amount that is for prioritized credits.

As rewritten, subsection (i) provides:

(i) Reduction. – If the total requested credits exceed the maximum amount, the Secretary shall prorate the total requested credits in accordance with [G.S. 105 130.34A(i)]. If a requested credit is reduced as provided in [G.S. 105-130.34A(i)], the Secretary shall notify the C Corporation of the amount of the reduction of the credit on or before December 31 of the year following the calendar year in which the qualified donation was made. The Secretary's allocations based on applications filed under [G.S. 105-130.34A(c)] are final and shall not be adjusted to account for credits requested but reduced under [G.S. 105-130.34A(i)]. The total requested credits shall be reduced as follows:

(1) If the total requested credits are (i) all prioritized credit requests or (ii) all nonprioritized credit requests, then the Secretary shall prorate the total requested credits based on the proportion of each requested credit to the total requested credits.
(2) If the total requested credits are (i) a combination of prioritized credit requests and nonprioritized credit requests and (ii) the amount of prioritized credit requests is equal to or less than the prioritized amount, the Secretary shall first allow the prioritized credit requests. The Secretary shall then prorate the cap remainder based on the proportion of each of the remaining requested credits to the total requested credits less the prioritized amount.
(3) If the total amount of requested credits is (i) a combination of prioritized credit requests and nonprioritized credit requests and (ii) the amount of prioritized credit requests is greater than the prioritized amount, the Secretary shall first prorate the prioritized credit requests based on the proportion of each prioritized credit request to the prioritized amount. The Secretary shall then prorate the cap remainder, including the remainder of any prioritized credit requests, based on the proportion of each of the remaining requested credits to the total requested credits less the prioritized amount.

Subsection (j), previously codified as subsection (g), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-130.34A. In addition, language was added to require the Department to include the total amount of qualified donations in the economic incentives report required by G.S. 105-256.

As rewritten, subsection (j) provides:

(j) Report. – The Department must include in the economic incentives report required by G.S. 105-256 the following information:

(1) The number of C Corporations that requested the credit allowed under subsection (a) of this section. 
(2) The total amount of allocated credits identified by public benefit as listed in subdivision (7) of subsection (b) of this section. 
(3) The total amount of credits carried forward. 
(4) The total cost to the General Fund of the credits taken. 
(5) The total amount of qualified donations.

(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; HB 74, s. 9.1(a), S.L. 2025-4.)

The 2024 General Assembly amended this subdivision 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 apply 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.)

This section was amended to require the gross premiums tax revenue amounts used to pay for the states’s share of the costs of NC Health Works Medicaid coverage be transferred from the Department of Revenue to a Special Fund in the Depart of Health and Human Services instead of to the General Fund.

(Effective July 1, 2025; HB 125, s. 2B.12.(a), S.L. 2025-125.)

This section was amended to replace “shall be” with “is” in referencing the insurance regulatory charge under this statute as six and a half percent (6.5%). This charge is a percentage of gross premiums tax liability.

(Effective June 26, 2025; HB 40, s. 6., S.L. 2025-25.)