A BILL TO BE ENTITLED
AN ACT to close franchise tax loopholes by requiring a limited liability company that elects to be treated as a corporation and a captive REIT to pay franchise tax and to require publicly traded partnerships to give the department of revenue a list of the partners who received more than five hundred dollars of income from the partnership.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 105‑114(b) reads as rewritten:
"(b)	Definitions. – The following definitions apply in this Article:
…
(2)	Corporation. – A domestic corporation, a foreign corporation, an electric membership corporation organized under Chapter 117 of the General Statutes or doing business in this State, or an association that is organized for pecuniary gain, has capital stock represented by shares, whether with or without par value, and has privileges not possessed by individuals or partnerships. The term includes a mutual or capital stock savings and loan association or building and loan association chartered under the laws of any state or of the United States. The term includes a limited liability company that elects to be taxed as a corporation under the Code, but does not otherwise include a limited liability company.
…."
SECTION 2.  G.S. 105‑114.1(a)(5) reads as rewritten:
"(5)	Noncorporate limited liability company. – A limited liability company that does not elect to be taxed as a corporation under the Code."
SECTION 3.  G.S. 105‑125(b) reads as rewritten:
"(b)	Certain Investment Companies. –A corporation doing business in North Carolina that meets one or more of the following conditions may, in determining its basis for franchise tax, deduct the aggregate market value of its investments in the stocks, bonds, debentures, or other securities or evidences of debt of other corporations, partnerships, individuals, municipalities, governmental agencies, or governments:
(1)	A regulated investment company. – A regulated investment company is an entity that qualifies as a regulated investment company under section 851 of the Code.
(2)	A REIT, unless the REIT is a captive REIT. – The terms 'REIT' and 'captive REIT' have the same meanings as defined in G.S. 105‑130.12."
SECTION 4.  G.S. 105‑154 reads as rewritten:
"§ 105‑154.  Information at the source returns.
(a)	Repealed by Session Laws 1993, c. 354, s. 14.
(b)	Information Returns of Payers. – A person who is a resident of this State, has a place of business in this State, or has an employee, an agent, or another representative in any capacity in this State shall file an information return as required by the Secretary if the person directly or indirectly pays or controls the payment of any income to any taxpayer. The return shall contain all information required by the Secretary. The filing of any return in compliance with this section by a foreign corporation is not evidence that the corporation is doing business in this State.
(c)	Information Returns of Partnerships. – A partnership doing business in this State and required to file a return under the Code shall file an information return with the Secretary. A partnership that the Secretary believes to be doing business in this State and to be required to file a return under the Code shall file an information return when requested to do so by the Secretary. The information return shall contain all information required by the Secretary. It shall state specifically the items of the partnership's gross income, the deductions allowed under the Code, and the adjustments required by this Part. The information return shall also include the name and address of each person who would be entitled to share in the partnership's net income, if distributable, and the amount each person's distributive share would be. The information return shall specify the part of each person's distributive share of the net income that represents corporation dividends. The information return shall be signed by one of the partners under affirmation in the form required by the Secretary.
A partnership that files an information return under this subsection shall furnish to each person who would be entitled to share in the partnership's net income, if distributable, any information necessary for that person to properly file a State income tax return. The information shall be in the form prescribed by the Secretary and must be furnished on or before the due date of the information return.
(d)	Payment of Tax on Behalf of Nonresident Owner or Partner. – If a business conducted in this State is owned by a nonresident individual or by a partnership having one or more nonresident members, the manager of the business shall report the earnings of the business in this State, the distributive share of the income of each nonresident owner or partner, and any other information required by the Secretary. The manager of the business shall pay with the return the tax on each nonresident owner or partner's share of the income computed at the rate levied on individuals under G.S. 105‑134.2(a)(3). The business may deduct the payment for each nonresident owner or partner from the owner or partner's distributive share of the profits of the business in this State. If the nonresident partner is not an individual and the partner has executed an affirmation that the partner will pay the tax with its corporate, partnership, trust, or estate income tax return, the manager of the business is not required to pay the tax on the partner's share. In this case, the manager shall include a copy of the affirmation with the report required by this subsection.
(e)	Publicly Traded Partnership. – The information return and payment requirements under this section are modified as follows for a partnership that qualifies as a publicly traded partnership under section 7704(c) of the Code:
(1)	The information return required under subsection (c) of this section is limited to partners whose distributive share of the partnership's net income during the tax year was more than five hundred dollars ($500.00).
(2)	The payment requirements under subsection (d) of this section do not apply."
SECTION 5.  Sections 1 through 3 of this act are effective for taxable years beginning on or after January 1, 2009. Section 4 of this act is effective for taxable years beginning on or after January 1, 2008. The remainder of this act is effective when it becomes law.