The North Carolina legislature today voted to override the governor’s veto of an appropriations bill that includes reductions in the rates of the state’s corporate income tax and individual income tax.
Senate Bill 257, the Appropriations Act of 2017, was vetoed by Governor Roy Cooper on June 27, 2017. In his veto message [PDF 436 KB], the governor said that the budget “prioritizes tax breaks for the wealthy and corporations” and “lacks structural integrity by failing to account for population growth, inflation and looming federal reductions.” The legislature on June 28, 2017, voted to override the veto.
North Carolina’s corporate tax rate has been reduced several times over the last few years. Senate Bill 257 adopts an additional corporate income tax rate reduction.
The corporate income tax rate of 3% that applies for tax years beginning on or after January 1, 2017, will be further reduced to 2.5% effective for tax years beginning on or after January 1, 2019. This rate reduction is automatic and is not contingent on state revenue collections meeting or exceeding certain thresholds.
Senate Bill 257 also reduces the franchise tax for S corporations by essentially exempting the first $1 million of tax base.
Concerning the state’s individual (personal) income tax, the tax rate is reduced from 5.499% to 5.25% effective for tax years beginning on or after January 1, 2019. The standard deduction for individuals is increased.
Senate Bill 257 also makes various sales and use tax changes.
For more information, contact a tax professional with KPMG’s State and Local Tax practice:
Adam McLamb | +1 704 371 8216 | firstname.lastname@example.org
Nikki Emanuel | +1 704 335 5344 | email@example.com
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