A BILL TO BE ENTITLED
AN ACT to extend the sunset on the credits for research and development, LOW‑INCOME HOUSING, MILL REHABILITATION, and the state ports authority; TO CONFORM TO CHANGES IN THE INTERNAL REVENUE CODE AND to REQUIRE AN ADDBACK OF EIGHTY‑FIVE PERCENT OF BONUS DEPRECIATION; 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:
extend credit for research and development
SECTION 1.(a)  G.S. 105‑129.51(b) reads as rewritten:
"(b)	This Article is repealed for taxable years beginning on or after January 1, 2014."
SECTION 1.(b)  This section is effective when it becomes law.

extend low‑income housing credit
SECTION 2.(a)  G.S. 105‑129.45 reads as rewritten:
"§ 105‑129.45.  Sunset.
This Article is repealed effective January 1, 2015. The repeal applies to developments to which federal credits are allocated on or after January 1, 2015."
SECTION 2.(b)  This section is effective when it becomes law.

extend mill rehabilitation credit
SECTION 3.(a)  G.S. 105‑129.70 reads as rewritten:
"§ 105‑129.70.  Definitions.
The following definitions apply in this Article:
(1)	Certified historic structure. – Defined in section 47 of the Code.
(2)	Certified rehabilitation. – Defined in G.S. 105‑129.36.
(3)	Cost certification. – The certification obtained by the State Historic Preservation Officer from the taxpayer of the amount of the qualified rehabilitation expenditures or the rehabilitation expenses incurred with respect to a certified rehabilitation of an eligible site.
(3a)	Development tier area. – Defined in G.S. 143B‑437.08.
(4)	Eligibility certification. – The certification obtained from the State Historic Preservation Officer that the applicable facility comprises an eligible site.
(5)	Eligible site. – A site located in this State that satisfies all of the following conditions:
a.	It was used as a manufacturing facility or for purposes ancillary to manufacturing, as a warehouse for selling agricultural products, or as a public or private utility.
b.	It is a certified historic structure or a State‑certified historic structure.
c.	It has been at least eighty percent (80%) vacant for a period of at least two years immediately preceding the date the eligibility certification is made.
	(6)	Repealed by Session Laws 2006‑252, s. 2.22, effective January 1, 2007.
(7)	Pass‑through entity. – Defined in G.S. 105‑228.90.
(8)	Qualified rehabilitation expenditures. – Defined in section 47 of the Code.
(9)	Rehabilitation expenses. – Defined in G.S. 105‑129.36.
(10)	State‑certified historic structure. – Defined in G.S. 105‑129.36.
(11)	State Historic Preservation Officer. – Defined in G.S. 105‑129.36."
SECTION 3.(b)  G.S. 105‑129.71(a) reads as rewritten:
"(a)	Credit. – A taxpayer who is allowed a credit under section 47 of the Code for making qualified rehabilitation expenditures of at least three million dollars ($3,000,000) with respect to a certified rehabilitation of an eligible site is allowed a credit equal to a percentage of the expenditures that qualify for the federal credit. The credit may be claimed in the year in which the eligible site is placed into service. When the eligible site is placed into service in two or more phases in different years, the amount of credit that may be claimed in a year is the amount based on the qualified rehabilitation expenditures associated with the phase placed into service during that year. In order to be eligible for a credit allowed by this Article, the taxpayer must provide to the Secretary a copy of the eligibility certification and the cost certification. The amount of the credit is as follows:
(1)	For an eligible site located in a development tier one or two area, determined as of the date of the eligibility certification, the amount of the credit is equal to forty percent (40%) of the qualified rehabilitation expenditures.
(2)	For an eligible site located in a development tier three area, determined as of the date of the eligibility certification, the amount of the credit is equal to thirty percent (30%) of the qualified rehabilitation expenditures."
SECTION 3.(c)  G.S. 105‑129.72(a) reads as rewritten:
"(a)	Credit. – A taxpayer who is not allowed a federal income tax credit under section 47 of the Code and who makes rehabilitation expenses of at least three million dollars ($3,000,000) with respect to a certified rehabilitation of an eligible site is allowed a credit equal to a percentage of the rehabilitation expenses. The entire credit may not be taken for the taxable year in which the property is placed in service, but must be taken in five equal installments beginning with the taxable year in which the property is placed in service. When the eligible site is placed into service in two or more phases in different years, the amount of credit that may be claimed in a year is the amount based on the rehabilitation expenses associated with the phase placed into service during that year. In order to be eligible for a credit allowed by this Article, the taxpayer must provide to the Secretary a copy of the eligibility certification and the cost certification. For an eligible site located in a development tier one or two area, determined as of the date of the eligibility certification, the amount of the credit is equal to forty percent (40%) of the rehabilitation expenses. No credit is allowed for a site located in a development tier three area."
SECTION 3.(d)  G.S. 105‑129.75 reads as rewritten:
"§ 105‑129.75.  Sunset.
This Article expires January 1, 2011, for rehabilitation projects for which an application for an eligibility certification is submitted on or after that date."
SECTION 3.(e)  This section is effective for taxable years beginning on or after January 1, 2008.

extend sunset for state ports tax credit
SECTION 4.(b)  G.S. 105‑130.41(d) reads as rewritten:
"(d)	Sunset. – This section is repealed effective for taxable years beginning on or after January 1, 2014."
SECTION 4.(d)  G.S. 105‑151.22(d) reads as rewritten:
"(d)	Sunset. – This section is repealed effective for taxable years beginning on or after January 1, 2014."
SECTION 4.(e)  This section is effective when it becomes law.

irc update
SECTION 5.(a)  G.S. 105‑228.90(b)(1b) reads as rewritten:
"(1b)	Code. – The Internal Revenue Code as enacted as of May 1, 2008, including any provisions enacted as of that date which become effective either before or after that date."
SECTION 5.(b)  Notwithstanding subsection (a) of this section, any amendments to the Internal Revenue Code enacted after January 1, 2007, that increase North Carolina taxable income for the 2007 taxable year become effective for taxable years beginning on or after January 1, 2008.
SECTION 5.(c)  G.S. 105‑130.5(a) reads as rewritten:
"(a)	The following additions to federal taxable income shall be made in determining State net income:
…
(15)	For taxable years 2002‑2005, the applicable percentage of the amount allowed as a special accelerated depreciation deduction under section 168(k) or section 1400L of the Code, as set out in the table below. In addition, a taxpayer who was allowed a special accelerated depreciation deduction under section 168(k) or section 1400L of the Code in a taxable year beginning before January 1, 2002, and whose North Carolina taxable income in that earlier year reflected that accelerated depreciation deduction must add to federal taxable income in the taxpayer's first taxable year beginning on or after January 1, 2002, an amount equal to the amount of the deduction allowed in the earlier taxable year. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes. The applicable percentage is as follows:
Taxable Year	Percentage
2002	100%
2003	70%
2004	70%
2005	0%
…."
SECTION 5.(d)  G.S. 105‑130.5(a) is amended by adding a new subdivision to read:
"(a)	The following additions to federal taxable income shall be made in determining State net income:
…
(15a)	The applicable percentage of the amount allowed as a special accelerated depreciation deduction under section 168(k) of the Code for property placed in service after December 31, 2007, but before January 1, 2009. In addition, a taxpayer who was allowed a special accelerated depreciation deduction in taxable year 2007 for property placed in service during that period, and whose North Carolina taxable income for that year reflected that accelerated depreciation deduction must add to federal taxable income in the taxpayer's 2008 taxable year an amount equal to the applicable percentage of the deduction amount allowed in the 2007 taxable year. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes. The applicable percentage under this subdivision is eighty‑five percent (85%).
…."
SECTION 5.(e)  G.S. 105‑134.6(c) reads as rewritten:
"(c)	Additions. – The following additions to taxable income shall be made in calculating North Carolina taxable income, to the extent each item is not included in taxable income:
…
(8)	For taxable years 2002‑2005, the applicable percentage of the amount allowed as a special accelerated depreciation deduction under section 168(k) or section 1400L of the Code, as set out in the table below. In addition, a taxpayer who was allowed a special accelerated depreciation deduction under section 168(k) or section 1400L of the Code in a taxable year beginning before January 1, 2002, and whose North Carolina taxable income in that earlier year reflected that accelerated depreciation deduction must add to federal taxable income in the taxpayer's first taxable year beginning on or after January 1, 2002, an amount equal to the amount of the deduction allowed in the earlier taxable year. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes. The applicable percentage is as follows:
Taxable Year	Percentage
2002	100%
2003	70%
2004	70%
2005	0%
…."
SECTION 5.(f)  G.S. 105‑134.6(c) is amended by adding a new subdivision to read:
"(c)	Additions. – The following additions to taxable income shall be made in calculating North Carolina taxable income, to the extent each item is not included in taxable income:
…
(8a)	The applicable percentage of the amount allowed as a special accelerated depreciation deduction under section 168(k) of the Code for property placed in service after December 31, 2007, but before January 1, 2009. In addition, a taxpayer who was allowed a special accelerated depreciation deduction in taxable year 2007 for property placed in service for that period, and whose North Carolina taxable income for that year reflected that accelerated depreciation deduction must add to federal taxable income in the taxpayer's 2008 taxable year an amount equal to the applicable percentage of the deduction amount allowed in the 2007 taxable year. These adjustments do not result in a difference in basis of the affected assets for State and federal income tax purposes. The applicable percentage under this subdivision is eighty‑five percent (85%).
…."
SECTION 5.(g)  G.S. 105‑130.5(b) is amended by adding a new subdivision to read:
"(b)	The following deductions from federal taxable income shall be made in determining State net income:
…
(21a)	In each of the taxpayer's first five taxable years beginning on or after January 1, 2009, an amount equal to twenty percent (20%) of the amount added to taxable income in taxable year 2008 as accelerated depreciation under subdivision (a)(15a) of this section.
…."
SECTION 5.(h)  G.S. 105‑134.6(b) is amended by adding a new subdivision to read:
"(b)	Deductions. – The following deductions from taxable income shall be made in calculating North Carolina taxable income, to the extent each item is included in taxable income:
…
(17a)	In each of the taxpayer's first five taxable years beginning on or after January 1, 2009, an amount equal to twenty percent (20%) of the amount added to taxable income in taxable year 2008 as accelerated depreciation under subdivision (c)(8a) of this section.
…."
SECTION 5.(i)  Subsections (c) through (h) of this section are effective for taxable years beginning on or after January 1, 2008. The remainder of this section is effective when it becomes law.

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
SECTION 6.(a)  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 6.(b)  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 6.(c)  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 6.(d)  This section is effective for taxable years beginning on or after January 1, 2009.

Publicly Traded Partnerships
SECTION 7.(a)  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 publicly traded partnership that is described in 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 7.(b)  This section is effective for taxable years beginning on or after January 1, 2008.

effective dates
SECTION 8.  Except as otherwise provided, this act is effective when it becomes law.