North Carolina Administrative Code

17 NCAC 05C .1004 NUMERATOR The numerator of the sales factor will include the gross receipts from sales which are attributable to this state, and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to such sales regardle…

17 NCAC 05C .1005 WHAT SALES OF TANGIBLE PERSONAL PROPERTY ARE IN THIS STATE (a) Gross receipts from the sales of tangible personal property are in this state if the property is delivered or shipped to a purchaser within this state regardless of the f.o.b. point or other conditio…

17 NCAC 05C .1006 SALES FACTOR: SALES TO UNITED STATES GOVERNMENT (a) For the purposes of G.S. 105-130.4, gross receipts from the sales of tangible personal property to the United States Government are in this state if the property is shipped to or received or accepted by the Uni…

17 NCAC 05C .1007 NUMERATOR: OTHER RECEIPTS CONSTITUTING BUSINESS INCOME History Note: Authority G.S. 105-130.4; 105-262; Eff. February 1, 1976; Repealed Eff. October 31, 1981.

SECTION .1400 - AMORTIZATION OF BOND PREMIUMS 17 NCAC 05C .1401 PRELIMINARY STATEMENT If a corporation purchases a bond at more than its face value, the amount of premium paid may be amortized over the life of the bond. However, the allowance of a deduction against net income for…

17 NCAC 05C .1402 TAX-EXEMPT BONDS The amount of premium paid upon the purchase of a tax-exempt bond is amortized over the life of the bond. Amortization for the taxable year is accomplished by reducing the original cost of the bond by a portion of the premium paid, with no deduc…

17 NCAC 05C .1403 TAXABLE BONDS A portion of the premium paid upon the purchase of a taxable bond may be deducted in the taxable year only if an adjustment is made to the basis of the bond. If a taxpayer elects to amortize the premium, the basis for determining gain or loss will …

17 NCAC 05C .1404 DEFINITION OF BOND The term "bond" means any bond, debenture, note or certificate or other evidence of indebtedness issued by any corporation and bearing interest and includes any like obligation issued by any government or political subdivision thereof. History…

17 NCAC 05C .1506 CORPORATIONS APPORTIONING THEIR NET INCOME A corporation required to apportion its net income or net loss under G.S. 105-130.4 may carry forward only a portion of its State net loss. For example, a corporation apportioning 50 percent of its net income or loss to…

17 NCAC 05C .1507 CORPORATION SUSTAINING LOSS ENTITLED TO DEDUCTION History Note: Authority G.S. 105-130.8; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; October 31, 1981; April 1, 1979; Expired Eff. September 1, 2017 pursuant to G.S. 150B-21.3A.

SECTION .1700 - PARTNERSHIPS AND THE CORPORATE PARTNER 17 NCAC 05C .1701 REPORTING PARTNERSHIP NET INCOME A corporation which is a member of a partnership or joint venture doing business in North Carolina is subject to North Carolina income tax and is required to include in the t…

17 NCAC 05C .1702 APPORTIONABLE INCOME OR NONAPPORTIONABLE INCOME Income shall be classified as nonapportionable income where the corporate partner limits its connection to the partnership to the investment of funds or property and does not regularly or materially participate in …

17 NCAC 05C .1904 OVERPAYMENTS APPLIED TO NEXT YEAR (a) A corporation may elect to have an income tax refund applied to estimated income tax for the following tax year. A return reflecting an election to apply a refund to estimated tax for the following year must be filed by the …

17 NCAC 05c .1905 electronic filing of corporation income tax returns The Department of Revenue participates in the Federal/State Electronic Filing Program and accepts corporation income tax returns filed under that program. History Note: Authority G.S. 105-262; Eff. March 1, 200…

17 NCAC 05C .2003 INTEREST AND PENALTIES History Note: Authority G.S. 105-236; 105-262; Eff. February 1, 1976; Amended Eff. November 2, 1992; October 23, 1977; Repealed Eff. July 1, 2000.

17 NCAC 05C .2004 EXTENSION OF FILING DATE (a) A corporation shall receive an extension of time to file its corporate franchise and income tax return either: (1) In accordance with G.S. 105-263(c), or (2) If the corporation timely files Form CD-419, Application for Extension for …

SECTION .2100 - DISSOLUTIONS AND WITHDRAWALS 17 NCAC 05C .2101 REQUIREMENTS WHEN CORPORATION ENDS A domestic corporation that is dissolved, whether voluntarily, administratively, or judicially, or a foreign corporation that withdraws from the State or has its certificate of autho…

17 NCAC 05C .2102 WITHDRAWALS/FILING REQUIREMENTS History Note: Authority G.S. 55-15-20; 105-130.15; 105-262; Eff. February 1, 1976; Amended Eff. January 1, 1994; November 1, 1991; April 1, 1991; Repealed Eff. July 1, 1999.

SECTION .2400 - DOMESTIC INTERNATIONAL SALES CORPORATION 17 NCAC 05C .2401 DOING BUSINESS ACTIVITIES OF DISC A domestic international sales corporation (DISC) is a domestic corporation whose income is derived from export sales. The DISC transacts business by exporting the product…

17 NCAC 05C .2402 DETERMINATION OF DISC NET INCOME History Note: Authority G.S. 105-130.3; 105-262; Eff. December 5, 1976; Repealed Eff. January 1, 1994.

17 NCAC 05C .2403 APPORTIONMENT OF DISC NET INCOME The net income of a DISC subject to a tax measured by net income both within and without this state shall be apportioned to this state by use of the applicable apportionment formula set out in G.S. 105-130.4. The ratio determined…

17 NCAC 05C .2404 DIVIDENDS RECEIVED FROM DISC Dividends received by a corporate shareholder from a DISC must be included in the corporate shareholder's taxable income. Dividends received from a DISC by a corporate shareholder taxable in another state must be included in the corp…

17 NCAC 05C .2405 EARNINGS OF DISC NOT PREVIOUSLY TAXED History Note: Authority G.S. 105-130.1; 105-130.6; 105-130.15; 105-130.16; 105-262; Eff. November 1, 1984; Repealed Eff. April 1, 1991.

SECTION .2600 - REINSTATEMENT OF CORPORATE CHARTER 17 NCAC 05C .2601 REINSTATEMENT OF CORPORATE CHARTER History Note: Authority G.S. 105-230; 105-232; Eff. November 1, 1991; Repealed Eff. October 1, 1993.

17 NCAC 05D .0107 PURPOSE The Secretary of Revenue or his designee will consider requests from corporate taxpayers for use of an alternative apportionment formula in determining tax bases for franchise and income taxes. History Note: Authority G.S. 105-122(c1)(2); 105-130.4(t1); …

17 NCAC 05D .0108 WHO MAY SUBMIT REQUEST (a) Any C-Corporation, S-Corporation, or Limited Liability Company electing to be treated as either a C-Corporation or S-Corporation for federal income tax purposes, which believes that the method of allocation or apportionment as administ…

17 NCAC 05D .0109 REQUEST FOR ALTERNATIVE APPORTIONMENT FORMULA The corporation shall file a request with the Secretary setting forth the facts upon which the corporation's belief is based and its argument with respect to the application of the allocation formula as set forth und…

17 NCAC 05D .0110 TIME FOR FILING The request shall be filed with the Secretary not later than 90 days after the regular or extended due date of the tax return. History Note: Authority G.S. 105-122(c1)(2); 105-130.4(t1); 105-262; Eff. February 1, 2008; Pursuant to G.S. 150B-21.3A…

17 NCAC 05D .0111 NOTICE OF CONFERENCE The Secretary shall schedule a conference to hear the corporation's request and will give notice of the time, date and place of the conference to the taxpayer at least 30 days prior thereto. Notice will be by United States Mail sent to the t…

17 NCAC 05D .0112 WHO SHALL ATTEND THE CONFERENCE The Secretary or their designee and the Director of the Corporate Tax Division or their designee, along with any other Department personnel the Secretary or Director shall deem appropriate, shall attend any conference pursuant to …

17 NCAC 05D .0113 CONDUCT OF THE CONFERENCE (a) If the corporation or its representative fails to appear after proper service of notice, the Secretary may proceed with the conference and make his decision in the absence of the party. (b) The taxpayer shall be given an opportunity…

17 NCAC 05D .0114 REMEDY (a) If the Secretary finds that the statutory formula does not fairly represent the corporation's business activity in North Carolina, he may require: (1) separate accounting; (2) the exclusion of any one or more of the factors; (3) the inclusion of one o…

17 NCAC 05D .0115 FINAL DECISION A final decision shall be furnished to the requesting corporation within 60 days from the date of the conference or within 60 days after the date any additional information requested by the Secretary during the conference is provided. History Note…

SUBCHAPTER 5E - INSURANCE PREMIUMS TAX AND REGULATORY SURCHARGE SECTION .0100 - GENERAL PROVISIONS 17 NCAC 05E .0101 REDUCED INSTALLMENT PAYMENTS The Secretary may reduce the installment payment requirements for the quarterly insurance gross premiums tax and the regulatory surcha…

17 NCAC 05E .0102 ADDITIONAL FIRE AND LIGHTNING TAXES History Note: Authority G.S. 105-228.5; 105-262; Eff. February 1, 1976; Readopted Eff. February 28, 1978; Transferred and Recodified from 11 NCAC 11E .0202 Eff. January 15, 1998; Amended Eff. August 1, 1998; Repealed Eff. Febr…

17 NCAC 05E .0103 PREMIUM FINANCE CHARGES AND OTHER CHARGES Gross premiums from business in this State include premium finance charges and installment payment charges or other charges received as a result of the partial payment of premiums by a policyholder. These charges are the…

17 NCAC 05E .0104 DIVIDENDS APPLIED TO PURCHASE ADDITIONAL PAID-UP LIFE Dividends applied to purchase additional paid-up life insurance are not taxable under G.S. 105-228.5 since gross premiums are deemed to be the amounts specified in the life insurance policy contracts when iss…

17 NCAC 05E .0105 GROUP PREMIUMS History Note: Authority G.S. 105-228.5; 105-262; Eff. February 1, 1976; Readopted Eff. February 28, 1978; Transferred and Recodified from 11 NCAC 11E .0304 Eff. January 15, 1998; Amended Eff. August 1, 1998; Repealed Eff. February 1, 2008.

17 NCAC 05E .0106 EMPLOYEE BENEFIT PLAN CONTRIBUTIONS Insurance company contributions or subsidies in the self-insurance of life and accident and health insurance coverage as an employee benefit plan are not taxable under G.S. 105-228.5. History Note: Authority G.S. 105-228.5; 10…

SUBCHAPTER 05F – SECRETARY'S AUTHORITY TO ADJUST NET INCOME OR TO REQUIRE A COMBINED RETURN SECTION .0100 - GENERAL 17 NCAC 05F .0101 scope The rules in this Subchapter apply to the Secretary's authority under G.S. 105-130.5A to adjust net income or to require a combined return f…

17 NCAC 05F .0102 DEFINITIONS As used in G.S. 105-130.5A and this Subchapter, the following definitions shall apply: (1) "Centralized cash management" means a process by which an affiliated group of businesses makes all or most cash management decisions from one location, such as…

SECTION .0200 – ECONOMIC SUBSTANCE 17 NCAC 05F .0201 ECONOMIC SUBSTANCE TEST BURDEN OF PROOF The taxpayer has the burden of proving that a transaction meets both prongs of the economic substance test as specified in G.S. 105-130.5A(g). History Note: Authority G.S. 105-130.5A; 105…

17 NCAC 05F .0202 REASONABLE BUSINESS PURPOSES (a) In proving that a transaction, or series of transactions of which the transaction is a part, has one or more reasonable business purposes other than the creation of State income tax benefits, the taxpayer must show: (1) The busin…

17 NCAC 05F .0203 ECONOMIC EFFECTS (a) In proving that a transaction, or series of transactions of which the transaction is a part, has economic effects beyond the creation of State income tax benefits, the taxpayer must show by objective evidence that a reasonable likelihood of …

17 NCAC 05F .0204 ECONOMIC SUBSTANCE DOCTRINE The Secretary shall rely on general principles of the common law economic substance doctrine as established under federal and state case law in applying each prong of the two pronged test under G.S. 105-130.5A(g), except where case la…

17 NCAC 05F .0205 ECONOMIC SUBSTANCE FACTORS Determining whether or not a transaction has economic substance is a fact-intensive inquiry that is dependent upon the facts and circumstances of each transaction made by a taxpayer. The Secretary shall consider or analyze all the fact…

17 NCAC 05F .0206 WHEN STATE INCOME TAX Benefits ARE CONSIDERED (a) State income tax benefits resulting from a transaction are considered by the Secretary in determining whether a transaction has reasonable business purposes and economic substance when the State income tax benefi…

17 NCAC 05F .0207 Centralized Cash Management Although the existence of a centralized cash management system among members of an affiliated group is not conclusive evidence that a transaction lacks economic substance, the Secretary shall analyze the transactions for reasonable bu…

SECTION .0300 – FAIR MARKET VALUE 17 NCAC 05F .0301 DETERMINATION OF FAIR MARKET VALUE (a) For purposes of determining whether or not transactions between members of an affiliated group were made at fair market value under the standards contained in the regulations adopted under …

SECTION .0400 - ADJUSTMENTS 17 NCAC 05F .0401 ADJUSTMENTS TO STATE NET INCOME Adjustments the Secretary may make to intercompany transactions that are found to lack economic substance or not to be at fair market value include the following: (1) Disallowing deductions in whole or …