GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

H	1 

HOUSE BILL 1242

Short Title:  Corporate Tax Fairness.	(Public)
─────────────────────────────────────── 
Sponsors: Representatives Stamey; and Easterling.
─────────────────────────────────────── 
Referred to:  Finance.
─────────────────────────────────────── 

May 10, 1991

A BILL TO BE ENTITLED
AN ACT TO PROVIDE TAX FAIRNESS AND TAX RESTRUCTURING FOR CORPORATIONS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-130.2 reads as rewritten:
"§ 105-130.2.  Definitions.
The following definitions apply in this Division:
(1)	Code. – The Internal Revenue Code as enacted as of January 1, 1991, including any provisions enacted as of that date which become effective either before or after that date.
(1a)	Corporation. – This term includes joint-stock companies or associations and insurance companies.
(1b)	C Corporation. – A corporation that is not an S Corporation.
(1c)	Department. – The Department of Revenue.
(2)	Domestic corporation. – A corporation organized under the laws of this State.
(3)	Fiscal year. – An income year, ending on the last day of any month other than December. A corporation which pursuant to the provisions of the Code has elected to compute its income tax liability to the United States on the basis of an annual period varying from 52 to 53 weeks shall compute its taxable income for the purposes of this division on the basis of the same period used by the corporation in accordance with the Code in computing its tax liability to the United States for such income year.
(4)	Foreign corporation. – Any corporation other than a domestic corporation.
(5)	Income year. – The calendar year or the fiscal year upon the basis of which the net income is computed under this Division.  If no fiscal year has been established, the income year is the calendar year. In the case of a return made for a fractional part of a year under the provisions of this Division or under rules or regulations prescribed by the Secretary, the income year is the period for which the return is made.
(5a)	S Corporation. – Defined in G.S. 105-131(b).
(5b)	Secretary. – The Secretary of Revenue.
(5c)	State net income. – Federal taxable income adjusted as provided in G.S. 105-130.5 and, in the case of a corporation that has income from business activity that is taxable both within and without this State, allocated and apportioned to this State as provided in G.S. 105-130.4.
(5d)	Taxable year. – Income year.
(6)	Taxpayer. – A corporation subject to the tax imposed by this Division."
Sec. 2.  G.S. 105-130.3 reads as rewritten:
"§ 105-130.3.  Corporations.
(a)	C Corporations.  A tax is imposed on the State net income of every C Corporation doing business in this State at the following percentages of the C Corporation's State net income:
On the State net income up to fifty thousand dollars ($50,000), five percent (5%).
On the amount over fifty thousand dollars ($50,000) and up to seventy-five thousand dollars ($75,000), six percent (6%).
On the amount over seventy-five thousand dollars ($75,000) and up to one hundred thousand dollars ($100,000), seven percent (7%).
On the amount over one hundred thousand dollars ($100,000), eight percent (8%).
(b)	S Corporations.  A tax is imposed on the State net income of every S Corporation doing business in this State at three percent (3%) of the S Corporation's State net income.  In addition, a shareholder's pro rata share of an S Corporation's income is taxable as provided in Division I-S of this Article.
	."
Sec. 3.  G.S. 105-131.1 reads as rewritten:
"§ 105-131.1.  Taxation of an S Corporation and its shareholders.
(a)	An S Corporation is subject to the tax levied in G.S. 105-130.3(b).
(b)	Each shareholder's pro rata share of an S Corporation's income attributable to the State and each resident shareholder's pro rata share of income not attributable to the State, shall be taken into account by the shareholder in the manner and subject to the adjustments provided in Division II of this Article and section 1366 of the Code and shall be subject to the tax levied under Division II of this Article."
Sec. 4.  Notwithstanding G.S. 105-163.41, no addition to tax may be made under that statute for a taxable year beginning on or after January 1, 1991, and before January 1, 1992, with respect to an underpayment of corporation income tax to the extent the underpayment was created or increased by this act.
Sec. 5.  This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended by this act before its amendment; nor does it affect the right to any refund or credit of a tax that would otherwise have been available under the amended statute before its amendment.
Sec. 6.  This act is effective for taxable years beginning on or after January 1, 1991.