2025 Personal Taxes Law Changes

The 2024 General Assembly reenacted the conservation tax credit for certain real property donations, repealed by Session Law 2013-316, and modified the conservation purposes for which the tax credit can be claimed, (collectively, the “NC Conservation Tax Credit”).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 made changes to the NC Conservation Tax Credit, including a change to this sub-subdivision to prohibit a taxpayer that is allowed the NC Conservation Tax Credit pursuant to G.S. 105-153.11(a) from including the same qualified donation that was the basis of the NC Conservation Tax Credit in the amount of charitable contributions that can be deducted under G.S. 105-153.5(a)(2).

(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.(d), S.L. 2025-4.)

The 2023 General Assembly amended this subsection to accelerate the reduction in the individual income tax rate imposed on North Carolina taxable income for tax years 2024, 2025, and 2026. The rate was reduced to 4.5% for tax years beginning in 2024, 4.25% for tax years beginning in 2025, and 3.99% for tax years beginning after 2025.

(Effective October 3, 2023; HB 259, s. 42.1.(a), S.L. 2023-134.)

This section was added to allow a resident taxpayer or spouse to enroll in the organ and tissue donation program by means of the individual income tax return.

Subsection (a) was added to require the Department to include a section on the individual income tax return titled “Organ and Tissue Donation Election” that allows a resident taxpayer or a spouse to elect to become a donor in accordance with G.S. 130A-412. This new subsection includes the following four new subdivisions:

Subdivision (a)(1) includes the following two sub-subdivisions:

Sub-subdivision (a)(1)a. was added to require the Department to include on the individual income tax return a fillable check box and a statement that reads, “Check here if resident taxpayer authorizes an organ and tissue donation in the event of death.” This sub-subdivision also requires the Department to request the month, day, and year of the resident taxpayer’s date of birth, specified in the date format of mm-dd-yyyy.

Sub-subdivision (a)(1)b. was added to require the Department to include on the individual income tax return a fillable check box and a statement that reads, “Check here if spouse authorizes an organ and tissue donation in the event of death.” This sub-subdivision also requires the Department to request the month, day, and year of the spouse’s date of birth, specified in the date format of mm-dd-yyyy.

Subdivision (a)(2) was added to require the Department to explain that the resident taxpayer or spouse, if applicable, is authorizing an anatomical gift of his or her organs, eyes, and tissue to take effect after the donor’s death.

Subdivision (a)(3) was added to require the Department to explain that the resident taxpayer or spouse is not required to record a response to the organ and tissue donation election section to file an income tax return, pay taxes, or receive a refund.

Subdivision (a)(4) was added to require the Department to describe the process for amending or revoking the donor’s election to become an organ and tissue donor.

Subsection (b) was added to permit the Department to request any information necessary from a resident taxpayer or spouse on the income tax return to facilitate the resident taxpayer’s or spouse’s election to become an organ and tissue donor in accordance with Part 3A of Chapter 130A of the General Statutes.

(Effective on January 1, 2027, and for tax returns for taxable years beginning on or after January 1, 2027.; SB 600, s. 2.(a)., S.L. 2025-60.)

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 made 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. 105-153.11. Language was added to the subsection to require a pass-through entity to allocate the NC Conservation Tax Credit to its owners as outlined in G.S. 105-153.11(f), and to clarify that the amount of NC Conservation Tax Credit allowed to an individual or pass-through entity cannot exceed the limits in G.S. 105-153.11(e) and G.S. 105-153.11(f). 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. 105-153.11], an individual or a pass-through entity that makes a qualified donation is allowed a [NC Conservation Tax Credit] against [North Carolina individual income tax] equal to twenty-five percent (25%) of the fair market value of the qualified donation. A pass-through entity must pass through the [NC Conservation Tax Credit] to its owners as required under [G.S. 105-153.11(f)]. The amount of [NC Conservation Tax Credit] allowed to an individual or pass-through entity may not exceed the limitations provided under [G.S. 105-153.11(e) and G.S. 105 153.11(f)]. The [NC Conservation Tax 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 [NC Conservation Tax Credit] becomes effective as provided in [G.S. 105-153.11(c)].

Subsection (b) was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11.

Previously the subsection defined only the term “qualified donation.” As amended, the definition of “qualified donation” has been substantively changed and definitions have been added for additional terms used throughout G.S. 105-153.11. In addition, the title of the subsection was changed from “Qualified Donation” to “Definitions.”

As rewritten, subsection (b) provides:

(b) Definitions. – The following definitions apply in [G.S. 105-153.11]:
(1) Allocated credit. - A requested credit minus the reduction required under [G.S. 105-153.11(l)].
(2) Cap remainder. - The amount that is the difference between the maximum amount and the amount of prioritized credit requests allowed.
(3) Maximum amount. - The amount set out in [G.S. 105-153.11(l)] that is the total aggregate amount of all credits allowed to taxpayers under this section and G.S. 105-130.34A for qualified donations made in a calendar year. 
(4) Nonprioritized credit request. - A credit request under [G.S. 105-153.11] or G.S. 105-130.34A that is for a qualified donation for a use other than forestland or farmland preservation.
(5) Pass-through entity. - As it is defined in G.S. 105-228.90(b)(21). 
(6) Prioritized amount. - The amount set out in [G.S. 105-153.11(l)] that is for prioritized credit requests. 
(7) Prioritized credit request. - A credit requested under this section or G.S. 105 130.34A that is for a qualified donation for forestland or farmland preservation. 
(8) Qualified donation. – A qualified donation is a donation of a qualified real property interest located in North Carolina that meets all of the following conditions:

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 military 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 or 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 under the [Internal Revenue] Code. 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].

(9) Qualified real property interest. – As defined in section 170(h)(2) of the [Internal Revenue] Code. 
(10) Total allocated credits. – Total requested credits less any reduction required under [G.S. 105-153.11(l)] and G.S. 105-130.34A(h). 
(11) Taxed pass-through entity. – As defined in G.S. 105-153.3. 
(12) Total requested credits. – The sum of nonprioritized credit requests and prioritized credit requests.

Subsection (c) was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11.

As rewritten, subsection (c) provides:

(c) Application. – An individual or a pass-through entity 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. 105-153.11(b)(8)] 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, an individual or pass through entity 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) was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11.

As rewritten, subsection (d) provides:

(d) Substantiation. – An individual or pass-through entity 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. 105-153.11(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) was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11. In addition, the title of the subsection was changed from “Individuals” to “Limitation for Individuals.”

As rewritten, subsection (e) provides:

(e) Limitation for Individuals. – The allocated credit allowed under [G.S. 105-153.11(a)] may not exceed two hundred fifty thousand dollars ($250,000), whether the individual makes, directly or indirectly as an owner of a pass-through entity, one or more qualified donations during the calendar year. In the case of property owned by a married couple, if both spouses are required to file North Carolina income tax returns, the [North Carolina Conservation Tax Credit] allowed under [G.S. 105-153.11(a)] may be claimed only if the spouses file a joint return. The allocated credit allowed on the joint tax return may not exceed five hundred thousand dollars ($500,000). If only one spouse is required to file a North Carolina income tax return, the allocated credit to that spouse may not exceed two hundred fifty thousand dollars ($250,0000).

Subsection (f) was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11. In addition, language was added requiring a pass-through entity to allocate to each eligible owner their distributive share of the NC Conservation Tax Credit for which the entity qualified. Lastly, the title of the subsection was changed from “Pass-through Entity” to “Limitation for Pass-Through Entities.”

As rewritten, subsection (f) provides:

(f) Limitation for Pass-Through Entities. – The allocated credit allowed under [G.S. 105 153.11(a)] may not exceed five hundred thousand dollars ($500,000), whether the pass through entity makes directly, or indirectly as an owner of another pass-through entity, one or more qualified donations during the calendar year. The pass-through entity must pass through to each of its owners the owner’s distributive share of the [NC Conservation Tax Credit] for which the pass-through entity qualifies, not to exceed the amounts listed in [G.S. 105-153.11(f)(1) and G.S. 105-153.11(f)(2)]. The pass-through entity may allocate the [NC Conservation Tax Credit] only to owner that was an owner of the pass through entity as of the last day of the calendar year in which the [NC Conservation Tax Credit] was allocated. If an owner’s share of the pass-through entity’s [NC Conservation Tax Credit] is limited due to the maximum allowable credit under [G.S. 105-153.11(f)] for a taxable year, the pass-through entity and its owners may not reallocate the unused credit among the other owners. The maximum allowable credit amounts are:

(1) Two hundred fifty thousand dollars ($250,000) to an owner who is an individual. 
(2) Five hundred thousand dollars ($500,000) to an owner that is a C Corporation or a pass-through entity.

Subsection (g) was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11. In addition, the definition of “taxed pass-through entity” was deleted from the subsection because the term is now defined in G.S. 105-153.11(b). Lastly, the title of the subsection was changed from “Taxed Pass-Through Entity” to “Taxed Pass Through Entities.”

As rewritten, subsection (g) provides:

(g) Taxed Pass-Through Entities. – A taxed pass-through entity that engages in an activity that makes it eligible for a credit under [G.S. 105-153.11(a)] as an entity may not take the credit at the entity level but must pass through to each of its owners the owner’s distributive share of the credit for which the taxed pass-through entity qualifies. The maximum allowable credit amounts and other limitations apply in determining the amount of credit available to an owner of a pass-through entity apply to the same extent in determining the amount of a credit for which the taxed pass-through entity qualifies.

Subsection (h) was amended to make technical and stylistic changes consistent with the updates throughout G.S. 105-153.11. In addition, the title of the subsection was changed from “Limitation” to “Cap.”

As rewritten, subsection (h) provides:

(h) 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 individual or pass-through entity.

Subsection (i) was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11.

As rewritten, subsection (i) provides:

(i) Carryforward. - If the allocated credit exceeds the cap under [G.S. 105-153.11(h)], any unused portion of the allocated credit may be carried forward for the next succeeding five years.

Subsection (j) was repealed. Similar language was added to G.S. 105-153.5(a)(2)a to prevent an individual or a pass-through entity from obtaining a “double benefit” by claiming both the NC Conservation Tax Credit and a charitable contribution based on the same qualified donation.

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

As written, subsection (k) provides:

(k) Transferability. - Except as otherwise provided in [G.S. 105-153.11(k)], an allocated credit allowed under [G.S. 105-153.11(a)] may not be transferred. A taxpayer that is allowed, but has not used, an allocated credit under [G.S. 105-153.11(a)] may provide through a will, bequest, or other instrument of transfer that, upon the taxpayer's death, the unused allowable credit shall be transferred to a designated beneficiary. If a taxpayer that is allowed, but has not used, an allocated credit under [G.S. 105-153.11(a)] dies without a will, the unused allowable credit shall be transferred to the next person who is eligible to receive [the credit] according to the rules of intestate succession as described in Chapter 29 of the General Statutes. The carryover period for credits transferred under [G.S. 105-153.11(k)] are subject to the original carryover period provided in [G.S. 105 153.11(i)] and shall not be extended.

Subsection (l), previously codified as subsection (g), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11. In addition, language was added to require the Secretary to allocate the amount of NC Conservation Tax Credits allowed to 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 (l) provides:

(l) Ceiling; Use; Allocation. – The amount of total allocated credits under [G.S. 105 153.11] and G.S. 105-130.34A 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. 105-153.11(l)].

Subsection (m), previously codified as subsection (l), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11. 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 (m) provides:

(m) Reduction. - If the total requested credits exceed the maximum amount, the Secretary shall prorate the total requested credits in accordance with this subsection. If a requested credit is reduced as provided in this subsection, the Secretary shall notify the individuals or pass-through entities 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 subsection (c) of this section are final and shall not be adjusted to account for credits requested but reduced under this subsection. 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 (n), previously codified as subsection (m), was amended to make technical and stylistic changes consistent with updates throughout G.S. 105-153.11. 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 (n) provides:

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

(1) The number of individuals and pass-through entities that requested the credit allowed under [G.S. 105-153.11(a)]. 
(2) The total amount of allocated credits identified by public benefit as listed in [G.S. 105-153.11(b)(8)]. 
(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, S.L. 2025-4.)