North Carolina Administrative Code

17 NCAC 05B .1303 TREATMENT OF CONSTRUCTION IN PROGRESS History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017; Expired Eff. Octobe…

17 NCAC 05B .1304 CARRIER OPERATIONS PROPERTY EXEMPT FROM INVESTMENT BASE History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; Repealed Eff. October 1, 1998.

17 NCAC 05B .1305 INDEBTEDNESS DEDUCTION History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Repealed Eff. October 31, 1981.

17 NCAC 05B .1306 REFINANCING OF A LOAN History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; October 31, 1981; Expired Eff. September 1, 2017 pursuant to G.S. 150B-21.3A.

17 NCAC 05B .1309 DETERMINATION OF INCLUSION BY DEPRECIATION History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017; Expired Eff. O…

17 NCAC 05B .1310 NO LIMITATION ON HOLDING COMPANIES History Note: Authority G.S. 105-120.2; 105-262; Eff. February 1, 1976; Repealed Eff. October 1, 1993.

SECTION .1400 - APPRAISED VALUATION OF TANGIBLE AND INTANGIBLE PROPERTY BASE 17 NCAC 05B .1401 BASIS FOR TANGIBLE PROPERTY History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Repealed Eff. October 31, 1981.

17 NCAC 05B .1402 CARRIER OPERATIONS APPRAISED PROPERTY EXEMPT History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; Repealed Eff. May 1, 1998.

17 NCAC 05B .1405 NO LIMITATION ON HOLDING COMPANIES History Note: Authority G.S. 105-120.2; 105-262; Eff. February 1, 1976; Repealed Eff. October 1, 1993.

17 NCAC 05B .1406 INVESTMENT BASE PROPERTY INCLUDED History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Readopted Eff. May 1, 2018; Expired Eff. October 1, 2025 pursuant to G.S. 150B-21.3A.

SECTION .1500 - CHANGE OF INCOME YEAR 17 NCAC 05B .1501 COMPUTATION OF TAX A change in income year automatically establishes a new franchise year. A combined franchise and income tax return is required for the short income period. Credit is permitted on such return against the fr…

17 NCAC 05B .1502 COMPUTATION OF TAX WHEN MERGER IS INVOLVED (a) Since franchise tax is prepaid, a special computation is sometimes required to prevent a duplication of tax when two, or more, corporations with different income years merge or otherwise transfer the entire assets f…

17 NCAC 05B .1703 FRANCHISE MOTOR CARRIERS History Note: Authority G.S. 105-122; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; Repealed Eff. May 1, 1998.

17 NCAC 05B .1704 REGULATED INVESTMENT COMPANIES History Note: Authority G.S. 105-125; 105-262; Eff. February 1, 1976; Repealed Eff. October 31, 1981.

SUBCHAPTER 05C - CORPORATE INCOME TAX SECTION .0100 - CORPORATIONS SUBJECT TO THE TAX: TAX RATE AND ALLOCATION 17 NCAC 05C .0101 DOMESTIC AND FOREIGN CORPORATIONS REQUIRED TO FILE (a) A foreign corporation operating in North Carolina may be liable for income tax even if it is not…

17 NCAC 05C .0102 DOING BUSINESS DEFINED (a) For income tax purposes, the term "doing business" means the operation of any business enterprise or activity in North Carolina for economic gain, including, but not limited to, the following: (1) the maintenance of an office or other …

17 NCAC 05C .0103 CORPORATIONS OPERATING IN INTERSTATE COMMERCE The fact that a foreign corporation's activities or operations in North Carolina are a part of its over-all interstate business does not exempt the corporation from income tax liability. A corporation doing business …

17 NCAC 05C .0304 ATTRIBUTION OF EXPENSES TO NONTAXABLE INCOME (a) Direct Expenses - All expenses directly connected with the production of income which is not subject to tax in this State shall be used to compute the net amount of such untaxed income. (b) Interest Expenses - Whe…

SECTION .0400 - INTEREST INCOME ON GOVERNMENT OBLIGATIONS 17 NCAC 05C .0401 NORTH CAROLINA OBLIGATIONS Net interest income received by a corporation on obligations of the State of North Carolina and any of its cities, towns or counties is exempt from income taxes imposed by this …

17 NCAC 05C .0402 OBLIGATIONS OF OTHER STATES Net interest income earned by a corporation on its investments in obligations issued by states and their political subdivisions other than the State of North Carolina, represents taxable income and is subject to this state's income ta…

17 NCAC 05C .0403 U.S. OBLIGATIONS (a) Net interest income earned on bonds, notes, or other obligations of the United States or its possessions is exempt from income taxation in this State so long as interest on obligations of the State of North Carolina and its political subdivi…

17 NCAC 05C .0404 SALES OR EXCHANGES (a) Gain or loss realized on the sale or other disposition of any type of obligation of the United States or its possessions, the State of North Carolina (not exempted by the specific obligation), or its political subdivisions, any other state…

17 NCAC 05C .0405 OBLIGATIONS OF FEDERAL NATIONAL MORTGAGE ASSOCIATION Interest income or other income realized on obligations of Federal National Mortgage Association is taxable income since the obligations are not those of the United States. History Note: Authority G.S. 105-130…

17 NCAC 05C .0406 MORTGAGE BACKED CERTIFICATE GUARANTEED BY GNMA Interest paid by the issuer to the holder of a mortgage backed certificate guaranteed by Government National Mortgage Association (GNMA) is not income from an obligation of the United States and is taxable. History …

17 NCAC 05C .0407 REPURCHASE AGREEMENTS Income attributable to or received from repurchase agreements of U.S. government securities, an agreement to repurchase securities at an agreed price and date, is not considered income derived directly from federal obligations and is taxabl…

SECTION .0600 - TAXABLE IN ANOTHER STATE 17 NCAC 05C .0601 PRELIMINARY STATEMENT A taxpayer must have income from business activity taxable by this state and at least one other state, to allocate and apportion income. Income from business activity includes apportionable or nonapp…

17 NCAC 05C .0602 DEFINITION OF TAXPAYER The word "taxpayer" includes any corporation subject to the tax imposed by Article 4 of Chapter 105 of the General Statutes. History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Pursuant to G.S. 150B-21.3A, rule is neces…

17 NCAC 05C .0603 IN GENERAL History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Repealed Eff. October 1, 1993.

17 NCAC 05C .0604 WHEN A TAXPAYER IS SUBJECT TO TAX (a) If the taxpayer voluntarily files and pays an income tax to a state other than North Carolina when not required to do so by the laws of that state or pays a minimal fee for qualification, organization or for the privilege of…

17 NCAC 05C .0605 WHEN A STATE HAS JURISDICTION In the case of any "state," as defined in G.S. 105-130.4, other than a state of the United States or political subdivision of such state, the determination of whether such "state" has jurisdiction to subject the taxpayer to a net in…

SECTION .0700 - APPORTIONABLE AND NONAPPORTIONABLE INCOME 17 NCAC 05C .0701 DIVISION OF INCOME: IN GENERAL (a) When a taxpayer has income from sources within this state as well as income from sources outside this state, the division of income and the resulting determination of th…

17 NCAC 05C .0702 BUSINESS AND NONBUSINESS INCOME DEFINED History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; Repealed Eff. July 1, 2000.

17 NCAC 05C .0703 BUSINESS AND NONBUSINESS INCOME History Note: Authority G.S. 105-130.4; 105-262. Eff. February 1, 1976; Amended Eff. August 1, 2002; July 1, 2000; July 1, 1999; January 1, 1994; April 1, 1991; October 31, 1981; Repealed Eff. August 1, 2003.

17 NCAC 05C .0704 PRORATION OF DEDUCTIONS Any allowable deduction that is applicable both to apportionable and nonapportionable income or to more than one "trade or business" of the taxpayer shall be prorated to those classes of income or trades or businesses in determining incom…

SECTION .0800 - PROPERTY FACTOR 17 NCAC 05C .0801 IN GENERAL (a) The property factor as provided in G.S. 105-130.4 shall include all real and tangible personal property owned or rented and used during the income year to produce apportionable income. The term "real and tangible pe…

17 NCAC 05C .0802 PROPERTY USED FOR THE PRODUCTION OF APPORTIONABLE INCOME History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 2005; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017…

17 NCAC 05C .0803 CONSISTENCY IN REPORTING History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017; Expired Eff. October 1, 2025 pursuant to G.S. 150B-21.3A.

17 NCAC 05C .0804 NUMERATOR History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017; Expired Eff. October 1, 2025 pursuant to G.S.…

17 NCAC 05C .0805 VALUATION OF OWNED PROPERTY History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Amended Eff. December 1, 1994; January 1, 1994; October 31, 1981; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 1…

SECTION .0900 - PAYROLL FACTOR 17 NCAC 05C .0901 IN GENERAL History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Repealed Eff. November 1, 1993.

17 NCAC 05C .0902 PAYROLL ACCOUNTING METHOD History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017; Expired Eff. October 1, 2025 pursuant to G.S. 150B-21.3A.

17 NCAC 05C .0903 COMPENSATION History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017; Expired Eff. October 1, 2025 pursuant to G…

17 NCAC 05C .0904 THE TERM EMPLOYEE History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Repealed Eff. November 1, 1993.

17 NCAC 05C .0905 INCLUDE IN PAYROLL FACTOR History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Repealed Eff. October 31, 1981.

17 NCAC 05C .0906 DENOMINATOR OF PAYROLL FACTOR History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 2005; October 31, 1981; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017; Expired…

17 NCAC 05C .0907 NUMERATOR OF PAYROLL FACTOR History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 2005; January 1, 1994; October 31, 1981; Readopted Eff. May 1, 2018; Expired Eff. October 1, 2025 pursuant to G.S. 150B-21.3A.

17 NCAC 05C .0908 CORPORATIONS UTILIZING COMMON PAYMASTER History Note: Authority G.S. 105-130.4; 105-262; Eff. November 1, 1991; Amended Eff. January 1, 1994; Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. August 19, 2017; Expired Eff. Oc…

SECTION .1000 - SALES FACTOR 17 NCAC 05C .1001 SALES MADE IN GENERAL BUSINESS OPERATIONS For purposes of G.S. 105-130.4, `sales' by a taxpayer whose business activity consists of manufacturing and selling or purchasing and reselling goods or products includes all gross receipts f…

17 NCAC 05C .1002 SALES INCIDENTAL TO GENERAL BUSINESS OPERATIONS (a) The term "sales" also includes gross receipts derived by a taxpayer from business transactions or activities which are incidental to its principal business activity and which are includible in apportionable inc…

17 NCAC 05C .1003 SALES MADE IN OTHER TYPE OF BUSINESS ACTIVITY As applied to a taxpayer engaged in business activity other than the manufacturing and selling or purchasing and reselling of property, "sales" includes the gross receipts as defined in Rule .1001 of this Section (Sa…