GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

H	1 

HOUSE BILL 2072*

Short Title:  Modify Taxation of N.C. Enterprise Corp.   	(Public)
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Sponsors: Representatives Lilley, Abernethy, Brawley, Craven, Hasty, Wiser; and Perdue.
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Referred to:  Finance.
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May 24, 1990

A BILL TO BE ENTITLED
AN ACT TO REVISE THE TAXATION OF A NORTH CAROLINA ENTERPRISE CORPORATION AND TO EXTEND THE TAX CREDIT FOR INVESTMENTS IN AN ENTERPRISE CORPORATION.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-125 reads as rewritten:
"§ 105-125. Corporations not mentioned.
None of the taxes levied in this Article shall apply to charitable, religious, fraternal, benevolent, scientific or educational corporations, not operating for a profit; nor to insurance companies; nor to mutual ditch or irrigation associations, mutual or cooperative telephone associations or companies, mutual canning associations, cooperative breeding associations, or like organizations or associations of a purely local character deriving receipts solely from assessments, dues, or fees collected from members for the sole purpose of meeting expenses; nor to cooperative marketing associations operating solely for the purpose of marketing the products of members or other farmers, which operations may include activities which are directly related to such marketing activities, and turning back to them the proceeds of sales, less the necessary operating expenses of the association, including interest and dividends on capital stock on the basis of the quantity of product furnished by them; nor to production credit associations organized under the act of Congress known as the Farm Credit Act of 1933; nor to business leagues, boards of trade, clubs organized and operated exclusively for pleasure, recreation and other nonprofitable purposes, civic leagues operated exclusively for the promotion of social welfare, or chambers of commerce and merchants' associations not organized for profit, and no part of the net earnings of which inures to the benefit of any private stockholder, individual or other corporations; nor to corporations or organizations, such as condominium associations, homeowner associations or cooperative housing corporations not organized for profit, the membership of which is limited to the owners or occupants of residential units in the condominium, housing development, or cooperative housing corporation, and operated exclusively for the management, operation, preservation, maintenance or landscaping of the common areas and facilities owned by such corporation or organization or its members situated contiguous to such houses, apartments or other dwellings or for the management, operation, preservation, maintenance and repair of such houses, apartments or other dwellings owned by the corporation or organization or its members, but only if no part of the net earnings of such corporation or organization inures (other than through the performance of related services for the members of such corporation or organization) to the benefit of any member of such corporation or organization or other person. In addition, absent a specific provision to the contrary, the taxes levied in this Article do not apply to any organization that is exempt from federal income tax under the Code.
Provided, that each such corporation must, upon request by the Secretary of Revenue, establish in writing its claim for exemption from said provisions. The provisions of G.S. 105-122 and 105-123 shall apply to electric light, power, gas, water, Pullman, sleeping and dining car, express, telegraph, telephone, motor bus, and truck corporations to the extent and only to the extent that the franchise taxes levied in G.S. 105-122 and 105-123 exceed the franchise taxes levied in other sections of this Article or schedule; except that the provisions of G.S. 105-122 and 105-123 shall not apply to businesses taxed under G.S. 105-120.1. The exemptions in this section shall apply only to those corporations specially mentioned, and no other.
””””The following corporations may deduct the aggregate market value of their investments in the stocks, bonds, debentures, or other securities or evidences of debt of other entities in determining their basis for franchise tax:
(1)	A regulated investment company under section 851 of the Code that files an election with the Department to be treated as a regulated investment company.
(2)	A real estate investment trust under section 856 of the Code that files an election with the Department to be treated as a real estate investment trust.
(3)	A North Carolina Enterprise Corporation established under Article 3 of Chapter 53A of the General Statutes."
Sec. 2.  G.S. 105-130.7(3) reads as rewritten:
"(3)	A corporation may deduct dividends received from a corporation listed in this subdivision to the extent the dividends are attributable to income that would be exempt from tax under this Division if received by the corporation claiming the deduction:
a.	A regulated investment company under section 851 of the Code that files an election with the Department to be treated as a regulated investment company.
b.	A real estate investment trust under section 856 of the Code that files an election with the Department to be treated as a real estate investment trust.
c.	A North Carolina Enterprise Corporation established under Article 3 of Chapter 53A of the General Statutes."
Sec. 3.  G.S. 105-130.12 reads as rewritten:
"§ 105-130.12. Corporations taxed on undistributed income.
””””The following corporations shall be taxed under this Division upon only that part of their net income that is not distributed or declared for distribution to shareholders during the income year or by the time required by law for the filing of the return for the income year including the period of any extension of time granted for filing the return:
(1)	A regulated investment company under section 851 of the Code that files an election with the Department to be treated as a regulated investment company.
(2)	A real estate investment trust under section 856 of the Code that files an election with the Department to be treated as a real estate investment trust.
(3)	A North Carolina Enterprise Corporation established under Article 3 of Chapter 53A of the General Statutes."
Sec. 4.  G.S. 105-212(c) reads as rewritten:
"(c)	””””The following entities are exempt from the taxes levied in this Article:
(1)	A regulated investment company under section 851 of the Code that files an election with the Department to be treated as a regulated investment company.
(2)	A real estate investment trust under section 856 of the Code that files an election with the Department to be treated as a real estate investment trust.
(3)	A North Carolina Enterprise Corporation established under Article 3 of Chapter 53A of the General Statutes."
Sec. 5.  G.S. 105-163.011(a) reads as rewritten:
"(a)	Corporations. – Subject to the limitations contained in G.S. 105-163.012, a corporation that invests in the equity securities of a North Carolina Capital Resource Corporation, a North Carolina Enterprise Corporation, or a qualified investment organization is allowed as a credit against the income tax imposed by Division I of this Article, the franchise tax imposed by G.S. 105-116, 105-120.2, and 105-122, or the gross premiums tax imposed by G.S. 105-228.5 and 105-228.8 for the taxable year an amount equal to twenty-five percent (25%) of the amount invested or seven hundred fifty thousand dollars ($750,000), whichever is less.  The credit may not be taken for the year in which the investment is made but shall be taken for the taxable year beginning during the calendar year following the calendar year in which the investment was made."
Sec. 6.  G.S. 105-163.012(a) reads as rewritten:
"(a)	The credit allowed a taxpayer under G.S. 105-163.011 may not exceed the amount of income tax imposed by Division I or II of this Article, the amount of franchise tax imposed by Article 3 of this Chapter, or the amount of gross premiums tax imposed by Article 8B of this Chapter, as appropriate, for the taxable year reduced by the sum of all other credits allowable except tax payments made by or on behalf of the taxpayer.  The amount of unused credit allowed under G.S. 105-163.011 may be carried forward for the next five succeeding years."
Sec. 7.  This act is effective for taxable years beginning on or after January 1, 1990.