Major Tax Reform Legislation Introduced - State of North Carolina
There is potential new legislation by the State of North Carolina that could significantly affect Personal, Corporate and Sales and Use taxes.
Personal Income Tax:
The proposed legislation would eliminate the personal income tax graduated rates and replace them with a single rate of 6%. The personal exemption would be replaced with a personal credit of at least $200 and up to $800, amount dependent upon the taxpayer's adjusted gross income and filing status. There are also possible changes and limitations to the additions and deductions from federal adjusted income in determining North Carolina taxable income. In addition, the child credit and contributions credit would be revised and several would be repealed, including the child and dependent care expenses credit.
Corporate Income Tax:
The corporate income tax rate would be reduced from 6.9% to 6.0%. A significant number of income tax credits would also be repealed.
If enacted, the state sales tax rate (not local rates) would be reduced from 4.75% to 4.5% effective 9/1/14 and would provide for further automatic decreases of 0.1% if the amount of sales and use tax collected in the fiscal year exceeded the amount certified by the State Budget Officer by at least $160 million. Food would be subject to a 1% state rate and an additional 1% local rate. Currently, sales of food are generally exempt from state sales and use taxes but are subject to a 2% local tax.
If enacted, the sales and use tax base would be expanded to apply to the following services: property care and maintenance services, including certain exterminating, landscaping, and cleaning services; and security services, including guard or security patrol services, armored car services, remote monitoring of a security alarm system, locksmith services, and telematics services that provide communication, tracking, and emergency response services to motor vehicle owners.
In addition, if the bill is enacted, the annual sales tax holiday for certain clothing, footwear, school supplies, computers, and computer supplies, and the annual Energy Star sales tax holiday would be repealed effective 7/1/13.
Annual Reporting Requirements:
The legislation would also eliminate fees for annual reporting by businesses to the Secretary of State. Additionally, provisions governing annual report contents and requirements would be amended.
Franchise and Privilege Taxes:
If enacted, the legislation would replace the franchise tax and many of the state and local business privilege taxes with a new state privilege tax that would apply to all limited liability entities, generally effective beginning with the 2015 tax year.
As you can see, there are numerous possible changes in the proposed legislation that would every taxpayer in the State, from businesses to individuals. Stay informed and in the know of how these possible changes will affect you!