A BILL TO BE ENTITLED
AN ACT TO MAKE TECHNICAL AND CLARIFYING CHANGES TO THE REVENUE LAWS AND RELATED STATUTES.
The General Assembly of North Carolina enacts:
SECTION 1.  Section 10 of S.L. 2002‑87 reads as rewritten:
"SECTION 10.  Section 9 of this act is effective on and after January 1, 2002, and applies to the estates of decedents dying on or after that date, except that if the amendments made by Section 9 would create an increase in tax for a decedent dying before August 22, 2002, then the tax may be calculated under the prior law. The remainder of this act is effective when it becomes law. Section 2 of this act applies to credits for buildings  for which a federal tax credit is first claimed for a taxable year beginning on or after January 1, 2002."
SECTION 2.  S.L. 2002‑172 is reenacted.
SECTION 3.  G.S. 105‑129.40 reads as rewritten:
"§ 105‑129.40.  (See Editor's note for repeal) Scope and definitions.
(a)	Scope. – G.S. 105‑129.41 applies to buildings that are awarded a federal credit allocation before January 1, 2003. G.S. 105‑129.42 applies to buildings that are awarded a federal credit allocation on or after January 1, 2003.
(b)	Definitions. – The definitions in section 42 of the Code and the following definitions apply in this Article:
(1)	Housing Finance Agency. – The North Carolina Housing Finance Agency established in G.S. 122A‑4.
(2)	Pass-through entity. – Defined in G.S.  105‑228.90."
SECTION 4.(a)  G.S. 105‑163.010(7) reads as rewritten:
"(7)	Pass‑through entity. – Defined in G.S. 105‑228.90. "
SECTION 4.(b)  G.S. 105‑163.1(9) reads as rewritten:
"(9)	Pass‑through entity. – Defined in  G.S. 105‑228.90."
SECTION 4.(c)  G.S. 105‑129.35(c) reads as rewritten:
"(c)	Definitions. – The following definitions apply in this section:
(1)	Certified historic structure. – Defined in section 47 of the Code.
(2)	Pass‑through entity. – Defined in G.S. 105‑228.90. (3)	Qualified rehabilitation expenditures. – Defined in section 47 of the Code."
SECTION 4.(d)  G.S. 105‑228.90(b) is amended by adding a new subdivision to read:
"(b)	Definitions. – The following definitions apply in this Article:
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(4d)	Pass‑through entity. – An entity or business, including a limited partnership, a general partnership, a joint venture, a Subchapter S Corporation, or a limited liability company, all of which is treated as owned by individuals or other entities under the federal tax laws, in which the owners report their share of the income, losses, and credits from the entity or business on their income tax returns filed with this State. For the purpose of this section, an owner of a pass‑through entity is an individual or entity who is treated as an owner under the federal tax laws."
SECTION 5.(a)  G.S. 105‑130.4(a)(1) reads as rewritten:
"(1)	'Apportionable income' means all income that is apportionable under the United States Constitution."
SECTION 5.(b)  G.S. 105‑130.4(a)(5) reads as rewritten:
"(5)	'Nonapportionable income' means all income other than apportionable income."
SECTION 5.(c)  G.S. 105‑130.4(c) reads as rewritten:
"(c)	Rents and royalties from real or tangible personal property, gains and losses, interest, dividends less the portion deductible under G.S. 105‑130.7, patent and copyright royalties and other kinds of income, to the extent that they constitute nonapportionable income, less related expenses shall be allocated as provided in subsections (d) through (h) of this section."
SECTION 5.(d)  G.S. 105‑130.4(i) reads as rewritten:
"(i)	All apportionable income of corporations other than public utilities and excluded corporations shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus twice the sales factor, and the denominator of which is four. Provided, that where the sales factor does not exist, the denominator of the fraction shall be the number of existing factors and where the sales factor exists but the payroll factor or the property factor does not exist, the denominator of the fraction shall be the number of existing factors plus one."
SECTION 5.(e)  G.S. 105‑130.4(j)(2) reads as rewritten:
"(2)	Property owned by the corporation is valued at its original cost. Property rented by the corporation is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the corporation less any annual rental rate received by the corporation from subrentals except that subrentals shall not be deducted when they constitute apportionable income. Any property under construction and any property the income from which constitutes nonapportionable income shall be excluded in the computation of the property factor."
SECTION 5.(f)  G.S. 105‑130.4(k)(1) reads as rewritten:
"(k)	(1)	The payroll factor is a fraction, the numerator of which is the total amount paid in this State during the income year by the corporation as compensation, and the denominator of which is the total compensation paid everywhere during the income year. All compensation paid to general executive officers and all compensation paid in connection with nonapportionable income shall be excluded in computing the payroll factor. General executive officers shall include the chairman of the board, president, vice‑presidents, secretary, treasurer, comptroller, and any other officers serving in similar capacities."
SECTION 5.(g)  G.S. 105‑130.4(l)(1) reads as rewritten:
"(l)	(1)	The sales factor is a fraction, the numerator of which is the total sales of the corporation in this State during the income year, and the denominator of which is the total sales of the corporation everywhere during the income year. Notwithstanding any other provision under this Part, the receipts from any casual sale of property shall be excluded from both the numerator and the denominator of the sales factor. Where a corporation is not taxable in another state on its apportionable income but is taxable in another state only because of nonapportionable income, all sales shall be treated as having been made in this State."
SECTION 5.(h)  G.S. 105‑130.4(m) through (s) read as rewritten:
"(m)	All apportionable income of a railroad company shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the "railway operating revenue" from business done within this State and the denominator of which is the "total railway operating revenue" from all business done by the company as shown by its records kept in accordance with the standard classification of accounts prescribed by the Interstate Commerce Commission.
"Railway operating revenue" from business done within this State shall mean "railway operating revenue" from business wholly within this State, plus the equal mileage proportion within this State of each item of "railway operating revenue" received from the interstate business of the company. "Equal mileage proportion" shall mean the proportion which the distance of movement of property and passengers over lines in this State bears to the total distance of movement of property and passengers over lines of the company receiving such revenue. "Interstate business" shall mean "railway operating revenue" from the interstate transportation of persons or property into, out of, or through this State. If the Secretary of Revenue  finds, with respect to any particular company, that its accounting records are not kept so as to reflect with exact accuracy such division of revenue by State lines as to each transaction involving interstate revenue, the Secretary of Revenue may adopt such regulations, based upon averages, as will approximate with reasonable accuracy the proportion of interstate revenue actually earned upon lines in this State. Provided, that where a railroad is being operated by a partnership which is treated as a corporation for income tax purposes and pays a net income tax to this State, or if located in another state would be so treated and so pay as if located in this State, each partner's share of the net profits shall be considered as dividends paid by a corporation for purposes of this Part and shall be so treated for inclusion in gross income, deductibility, and separate allocation of dividend income.
(n)	All apportionable income of a telephone company shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is gross operating revenue from local service in this State plus gross operating revenue from toll services performed wholly within this State plus the proportion of revenue from interstate toll services attributable to this State as shown by the records of the company plus the gross operating revenue in North Carolina from other service less the uncollectible revenue in this State, and the denominator of which is the total gross operating revenue from all business done by the company everywhere less total uncollectible revenue. Provided, that where a telephone company is required to keep its records in accordance with the standard classification of accounts prescribed by the Federal Communications Commission the amounts in such accounts shall be used in computing the apportionment fraction as provided in this subsection.
(o)	All apportionable income of a motor carrier of property shall be apportioned by multiplying the income by a fraction, the numerator of which is the number of vehicle miles in this State and the denominator of which is the total number of vehicle miles of the company everywhere. The words "vehicle miles" shall mean miles traveled by vehicles owned or operated by the company hauling property for a charge or traveling on a scheduled route.
(p)	All apportionable income of a motor carrier of passengers shall be apportioned by multiplying the income by a fraction, the numerator of which is the number of vehicle miles in this State and the denominator of which is the total number of vehicle miles of the company everywhere. The words "vehicle miles" shall mean miles traveled by vehicles owned or operated by the company carrying passengers for a fare or traveling on a scheduled route.
(q)	All apportionable income of a telegraph company shall be apportioned by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three.
The property factor shall be as defined in subsection (j) of this section, the payroll factor shall be as defined in subsection (k) of this section, and the sales factor shall be as defined in subsection (l) of this section.
(r)	All apportionable income of an excluded corporation and of all other public utilities shall be apportioned by multiplying the income by the sales factor as determined under subsection (l) of this section.
(s)	All apportionable income of an air or water transportation corporation shall be apportioned by a fraction, the numerator of which is the corporation's revenue ton miles in this State and the denominator of which is the corporation's revenue ton miles everywhere. The term "revenue ton mile" means one ton of passengers, freight, mail, or other cargo carried one mile. In making this computation, a passenger is considered to weigh two hundred pounds."
SECTION 5.(i)  G.S. 105‑130.8(a)(5) reads as rewritten:
"(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 nonapportionable income not allocable to this State under the provisions of G.S. 105‑130.4 shall be considered as income not taxable under this Part. The amount of the income item considered income not taxable under this Part is determined after subtracting related expenses for which a deduction was allowed under this Part."
SECTION 5.(j)  G.S. 105‑122(c)(1) reads as rewritten:
"(c)	(1)	After ascertaining and determining the amount of its capital stock, surplus and undivided profits, as provided herein, every corporation permitted to allocate and apportion its net income for income tax purposes under the provisions of Article 4 of this Chapter shall apportion its capital stock, surplus and undivided profits to this State through use of the fraction computed for apportionment of its apportionable income under that Article. A corporation that is subject to franchise tax under this Article but is not subject to income tax under Article 4 of this Chapter must apportion its capital stock, surplus, and undivided profits to this State by using the apportionment formula that would apply to the corporation if it were subject to Article 4.
 Notwithstanding the foregoing, if a corporation is authorized by the Tax Review Board to apportion its apportionable income by use of an alternative formula or method, the corporation may not use this alternative formula or method for apportioning its capital stock, surplus and undivided profits unless specifically authorized to do so by order of the Tax Review Board.
 A corporation that is required to pay an income tax to this State on its entire net income shall apportion its entire capital stock, surplus and undivided profits to this State."
SECTION 6.  G.S. 105‑129.42(a)(3) reads as rewritten:
"(a)	Definitions. – The following definitions apply in this section:
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(3)	Qualified residential unit.  – A housing unit that meets the requirements of section 42 of the Code."
SECTION 7.  G.S. 105‑129.42(g) reads as rewritten:
"(g)	Return and Payment. – A taxpayer may claim the credit allowed by this section on a return filed for the taxable year in which the taxpayer receives a carryover allocation of a federal low‑income housing credit. The return must state the name and location of the qualified low‑income housing development for which the credit is claimed.
If a taxpayer chooses the loan method for receiving the credit allowed under this section, the Secretary must transfer to the Housing Finance Agency the amount of credit allowed the taxpayer. The Agency must loan the taxpayer the amount of the credit on terms consistent with the Qualified Allocation Plan. The Housing Finance Agency is not required to make a loan to a qualified North Carolina low‑income housing development until the Secretary transfers the credit amount to the Agency.
If the taxpayer chooses the direct tax refund method for receiving the credit allowed under this section, the Secretary must transfer to the Housing Finance Agency the refundable excess of the credit allowed the taxpayer. The Agency holds the refund due the taxpayer in escrow, with no interest accruing to the taxpayer during the escrow period. The Agency must release the refund to the taxpayer upon the occurrence of the earlier of the following:
(1)	The Agency determines that the taxpayer has complied with the Qualified Allocation Plan and has completed at least fifty percent (50%) of the activities included in the development's eligible basis.
(2)	Within 30 days after the date the development is placed in service."
SECTION 8.  G.S. 105‑129.42(i) reads as rewritten:
"(i)	Liability From Forfeiture. – A taxpayer that forfeits all or part of the credit allowed under this section is liable for all past taxes avoided and any refund claimed as a result of the credit plus interest at the rate established under G.S. 105‑241.1(i). The interest is computed from the date the Secretary transferred the credit amount to the Housing Finance Agency. The past taxes, refund, and interest are due 30 days after the date the credit is forfeited. A taxpayer that fails to pay the taxes, refund, and interest by the due date is subject to the penalties provided in G.S. 105‑236."
SECTION 9.  G.S. 105‑299 reads as rewritten:
"§ 105‑299.  (Effective for taxes imposed for taxable years beginning on or after July 1, 2003) Employment of experts.
The board of county commissioners may employ appraisal firms, mapping firms or other persons or firms having expertise in one or more of the duties of the assessor to assist the assessor in the performance of these duties. The county may also assign to county agencies, or contract with State or federal  agencies for, any duties involved with the approval or auditing of use‑value accounts. The county may make available to these persons any information it has that will facilitate the performance of a contract entered into pursuant to this section. Persons receiving this information are subject to the provisions of G.S. 105‑289(e) and G.S. 105‑259 regarding the use and disclosure of information provided to them by the county. Any person employed by an appraisal firm whose duties include the appraisal of property for the county must be required to demonstrate that he or she is qualified to carry out these duties by achieving a passing grade on a comprehensive examination in the appraisal of property administered by the Department of Revenue. In the employment of these firms, primary consideration must be given to the firms registered with the Department of Revenue pursuant to G.S. 105‑289(i). A copy of the specifications to be submitted to potential bidders and a copy of the proposed contract may be sent by the board to the Department of Revenue for review before the invitation or acceptance of any bids. Contracts for the employment of these firms or persons are contracts for personal services and are not subject to the provisions of Article 8, Chapter 143, of the General Statutes."
SECTION 10.  G.S. 105‑358(a) reads as rewritten:
"(a)	Waiver. – A tax collector may, upon making a record of the reasons therefor, reduce or waive the penalty imposed on giving a worthless check under G.S. 105‑357(b)(2)."
SECTION 11.  G.S. 20‑305.2(a)(7) reads as rewritten:
"§ 20‑305.2.  Unfair methods of competition.
(a)	It is unlawful for any motor vehicle manufacturer, factory branch, distributor, distributor branch, or subsidiary thereof, to directly or indirectly through any subsidiary or affiliated entity, own any ownership interest in, operate, or control any motor vehicle dealership in this State, provided that this section shall not be construed to prohibit:
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(7)	The ownership, operation, or control of a dealership that sells primarily recreational vehicles as defined in  G.S. 20‑4.01 by a manufacturer, factory branch, distributor, or distributor branch, or subsidiary thereof, if the manufacturer, factory branch, distributor, or distributor branch, or subsidiary thereof, owned, operated, or controlled the dealership as of October 1, 2001.
(b)	This section does not apply to manufacturers or distributors of trailers or semitrailers that are not recreational vehicles as defined in G.S. 20‑4.01."
SECTION 12.  Subchapter I of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-1.1. Supremacy of State Constitution.
The State's power of taxation is vested in the General Assembly. Under Article V, Section 2(1), of the North Carolina Constitution, this power cannot be surrendered, suspended, or contracted away. In the exercise of this power, the General Assembly may amend or repeal any provision of this Subchapter in its discretion. No provision of this Subchapter constitutes a contract that the provision will remain in effect in future years, and any representation made to the contrary is of no effect."
SECTION 13.  This act is effective when it becomes law.