GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	1 

HOUSE BILL 1099

Short Title:  Extend Corporate Loss Carryforward.	(Public)

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Sponsors: Representatives Neely, Blue, Cansler, Capps, Church, G. Robinson, Shaw, Shubert; and McComas.

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Referred to:  Finance.

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May 14, 1996

A BILL TO BE ENTITLED
AN ACT TO EXTEND THE CORPORATE INCOME TAX CARRYFORWARD FOR NET ECONOMIC LOSSES FROM FIVE YEARS TO FIFTEEN YEARS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-130.8 reads as rewritten:
"§ 105-130.8.  Net economic loss.
Net economic losses sustained by a corporation in any or all of the 15 preceding income years shall be allowed as a deduction to the corporation subject to the following limitations:
(1)	The purpose in allowing the deduction of a net economic loss of a prior year is to grant some measure of relief to the corporation that has incurred economic misfortune or is otherwise materially affected by strict adherence to the annual accounting rule in the determination of net income. The deduction allowed in this section does not authorize the carrying forward of any particular items or category of loss except to the extent that the loss results in the impairment of the net economic situation of the corporation so as to result in a net economic loss as defined in this section.
(2)	The net economic loss for any year means the amount by which allowable deductions for the year other than prior year losses exceed income from all sources in the year including any income not taxable under this Division.
(3)	Any net economic loss of prior years brought forward and claimed as a deduction in any income year may be deducted from net income of the year only to the extent that the loss carried forward from the prior years exceeds any income not taxable under this Division received in the same year in which the deduction is claimed, except that in the case of a corporation required to allocate and apportion to North Carolina its net income, only that proportionate part of the net economic loss of a prior year shall be deductible from total income allocable to this State as would be determined by the use of the allocation and apportionment provisions of G.S. 105-130.4 for the year of the loss.
(4)	A net economic loss carried forward from any year shall first be applied to, or offset by, any income taxable or nontaxable of the next succeeding year before any portion of the loss may be carried forward to a succeeding year.
(5)	For purposes of this section, any income item deductible in determining State net income under the provisions of G.S. 105-130.5 and any nonbusiness income not allocable to this State  under the provisions of G.S. 105-130.4 shall be considered as income not taxable under this Division.
(6)	No loss shall either directly or indirectly be carried forward more than 15 years.
(7)	A corporation claiming a deduction for a loss for the current year or carried forward from a prior year shall maintain and make available for inspection by the Secretary all records necessary to determine and verify the amount of the deduction.  The burden of proving eligibility for the deduction and the amount of the deduction shall rest upon the corporation, and no deduction shall be allowed to a corporation that fails to maintain adequate records or to make them available for inspection."
Sec. 2.  G.S. 105-130.5(b)(4) reads as rewritten:
"(4)	Losses in the nature of net economic losses sustained by the corporation in any or all of the 15 preceding years pursuant to the provisions of G.S. 105-130.8.  A corporation required to allocate and apportion its net income under the provisions of G.S. 105-130.4 shall deduct its allocable net economic loss only from total income allocable to this State pursuant to the provisions of G.S. 105-130.8."
Sec. 3.  This act is effective for taxable years beginning on or after January 1, 1996, and applies to losses incurred for taxable years beginning on or after January 1, 1990.