North Carolina: Update on business tax reform

North Carolina tax reform

North Carolina’s governor on September 18, 2015, signed House Bill 97 that includes tax reform measures affecting business taxpayers. Corporate income tax and franchise tax changes included in House Bill 97, however, were “contingent”—that is, these measures would be repealed if certain companion legislation (House Bill 117 and House Bill 943) were not “ratified” prior to January 1, 2016. Information indicates that as of September 30, 2015, this companion legislation has been “ratified.”

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Accordingly, with House Bills 117 and 943 having been “ratified,” the corporate income and franchise tax changes will be effective as contemplated by House Bill 97. Read an October 2015 report [PDF 84 KB] prepared by KPMG LLP.  


Among the tax reform changes affecting business taxpayers are measures providing for:

  • A corporate income tax rate reduction to 3% if a threshold amount in the “general fund” is satisfied by taxes collected for the preceding fiscal year
  • A phase-in of the single sales factor apportionment over a three-year period
  • A required study of market-based sourcing and information reporting by certain taxpayers
  • Related-member interest disallowance rules
  • Changes to the adjustments to federal taxable income
  • Franchise tax base changes
  • Repeal of the bank privilege tax
  • Sales tax base expansion and other related measures
  • A historic preservation tax credit

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