NORTH CAROLINA GENERAL ASSEMBLY

1979 SESSION

 

 

CHAPTER 179

HOUSE BILL 227

 

 

AN ACT TO MAKE TECHNICAL REVISIONS OF CHAPTER 105 OF THE GENERAL STATUTES PERTAINING TO THE REVENUE LAWS OF NORTH CAROLINA.

 

The General Assembly of North Carolina enacts:

 

Section 1.  The Inheritance Tax Article of the Revenue Act, being Article 1 of Subchapter I of Chapter 105 of the General Statutes, is amended by adding thereto a new section, G.S. 105-7.1, to read as follows:

"§ 105-7.1.  Generation skipping transfer tax. — (a) A tax in addition to any other taxes imposed by this Article or by Article 6 of this Subchapter is hereby imposed upon every generation skipping transfer subject to the tax imposed by Chapter 13 of Subtitle B of the Internal Revenue Code of 1954, as amended, where the original transferor is a resident of this State at the date of said original transfer, in an amount equal to the amount allowable as credit for State inheritance taxes under Section 2602 of the Internal Revenue Code, to the extent such credit exceeds the aggregate amount of all taxes on the same transfer actually paid to the several states of the United States, other than this State.

(b)        A tax, in addition to all other taxes imposed by this Article and by Article 6 of this Subchapter, is hereby imposed upon every generation skipping transfer subject to the tax imposed by Chapter 13 of Subtitle B of the Internal Revenue Code of 1954 where the original transferor is not a resident of this State but the transfer includes real or personal property with a situs in this State, in an amount equal to the amount allowable as a credit for State inheritance taxes under Section 2602 of the Internal Revenue Code, reduced by an amount which bears the same ratio to the total State inheritance tax credit allowable for federal generation skipping transfer tax purposes as the value of the transferred property taxable by all other states bears to the value of the gross generation skipping transfer for federal generation skipping transfer tax purposes.

(c)        Every person required by the Internal Revenue Code of 1954, as amended, to file a return reporting a generation skipping transfer shall file a duplicate copy of said return with the Secretary of Revenue on or before the last day prescribed for filing the federal return.

(d)        The tax herein imposed shall be due upon a taxable distribution or taxable termination as determined under the provisions of the federal generation skipping transfer tax. The person liable for payment of the aforesaid federal tax shall also be liable for the tax imposed herein, and same shall be paid to the Secretary of Revenue on or before the last day allowed for filing the return required hereunder.

(e)        If after the filing of the duplicate federal return with the Secretary of Revenue as required by subsection (c) herein, the federal government shall thereafter increase or decrease the amount of the federal generation skipping transfer tax actually due, within 30 days of said increase or decrease, an amended return shall be filed with the Secretary of Revenue reflecting all changes made in the original return, and the amount of increase or decrease in the federal generation skipping transfer tax. Based thereon, and upon such evidence as he may otherwise acquire, the Secretary of Revenue shall reassess the tax imposed herein, and if he shall determine that there remains due additional tax, he shall thereafter issue a notice of proposed assessment in respect thereof pursuant to G.S. 105-241.1. If the notice required herein of the federal change in tax due is not so furnished, any additional tax which may be owing may be assessed at any time.

(f)         The administrative provisions of Article 1 and Article 6, wherever applicable, shall apply to the collection of the tax imposed by this section. To the extent that the same are not in conflict with the provisions of this section, the Secretary of Revenue may adopt such rules and regulations as are or may be promulgated with respect to the estate tax, gift tax, or generation skipping transfer tax provisions of the Internal Revenue Code of 1954, as amended."

Sec. 2.  The Income Tax Article of the Revenue Act, being Article 4 of Subchapter I of Chapter 105 of the General Statutes, is amended by:

(a)  substituting the date "January 1, 1979" for the date "January 1, 1977" in line 5 of G.S. 105-130.3, as the same appears in the 1977 Cumulative Supplement to 1972 Replacement Volume 2D of the General Statutes;

(b)  adding to G.S. 105-130.5(b) a new subdivision (11), to read as follows:

"(11)    The amount by which the deduction for an ordinary and necessary business expense on the corporation's federal income tax return was reduced or which was not allowed as a deduction because the corporation claimed in lieu of such amount a tax credit against its federal income tax liability for the income year."

(c)  rewriting G.S. 105-141(b)(9)a. to read as follows:

"a.        The value of meals or lodging furnished for the convenience of the employer to the extent that the value of such meals or lodging is excluded from gross income under the provisions of Section 119 of the Internal Revenue Code of 1954 as amended; and"

(d)  adding at the end of G.S. 105-141(b)(17) a new paragraph d., to read as follows:

"d.        An amount distributed from an annuity contract described in this subdivision or a custodial account described in this subdivision which qualifies for roll-over treatment as provided in the Internal Revenue Code of 1954 as amended, shall likewise qualify for roll-over hereunder and shall be excluded from gross income to the extent such amount is excluded from gross income as provided in the Internal Revenue Code of 1954 as amended unless such exclusion is contrary to the context and intent of State law."

(e)  adding at the end of G.S. 105-141(b) three new subsections (22), (23), and (24), to read as follows:

"(22)    In the case of a North Carolina resident any amounts excludable from gross income as income earned by individuals in certain camps under the provisions of Section 911 of the Internal Revenue Code of 1954 as amended and as exemptions for certain allowances received by civilian officers or employees of the government of the United States under the provisions of Section 912 of the Internal Revenue Code of 1954 as amended.

(23)      Educational expenses incurred by the employer for educational assistance to the employee to the extent excluded from federal gross income under the provisions of Section 127 of the Internal Revenue Code of 1954 as amended. No deduction or credit shall be allowed under any other section of this division for any amount excluded from income by reason of this section.

(24)      In the case of an individual whose principal residence is damaged or destroyed by fire, storm, or other casualty, or who is denied access to his principal residence by governmental authorities because of the occurrence or threat of occurrence of such a casualty, gross income does not include amounts received by such individual under an insurance contract which are paid to compensate or reimburse such individual for living expenses incurred for himself and members of his household resulting from the loss of use or occupance of such residence. The exclusion provided in this subdivision shall apply to amounts received by the taxpayer for living expenses incurred during any period only to the extent the amounts received do not exceed the amounts by which:

(1)        the actual living expenses incurred during such period for himself and members of his household resulting from the loss of use or occupancy of their residence, exceeds

(2)        the normal living expenses which would have been incurred for himself and members of his household during such period."

(f)   deleting from line 8 of G.S. 105-142(d), as the same appears in the 1977 Cumulative Supplement to 1972 Replacement Volume 2D of the General Statutes, the symbols and number "(5)", so that said line 8 will read, after amendment, "402(a) of the Internal Revenue Code of 1954 as amended, in the year in which";

(g)  rewriting G.S. 105-142(e) to read as follows:

"(e)       An individual, who patronizes or owns stock or has membership in a farmers' marketing or purchasing cooperative or mutual, organized under Subchapter 4 or Subchapter 5 of Chapter 54 of the General Statutes of North Carolina, shall include in his gross income for the year in which the allocation is made his distributive share of any savings, whether distributed in cash or credit, allocated by the cooperative or mutual association for each income year; provided, however, that such allocation or distribution shall not be includable in the gross income for the income year if it is excludable from gross income for federal income tax purposes under the provisions of Section 1385 of the Internal Revenue Code."

(h)  adding at the end of G.S. 105-144.2(c)(4) a new sentence, to read as follows:

"If a principal residence is sold in a sale to which paragraph (2) of subsection (d) applies within 18 months after the sale of the old residence, for purposes of applying the preceding sentence with respect to the old residence, the principal residence so sold shall be treated as the last residence used during such 18-month period."

(i)   rewriting G.S. 105-144.2(d) to read as follows:

"(d)      Limitation.

(1)        Subsection (a) shall not apply with respect to the sale of the taxpayer's residence if within 18 months before the date of such sale the taxpayer sold at a gain other property used by him as his principal residence, and any part of such gain was not recognized by reason of subsection (a).

(2)        Paragraph (1) of this subsection shall not apply with respect to the sale of the taxpayer's residence if

(A)       such sale was in connection with the commencement of work by the taxpayer as an employee or as a self-employed individual at a new principal place of work, and

(B)       if the residence so sold is treated as the former residence for purposes of Section 217 of the Internal Revenue Code (relating to moving expenses), the taxpayer would satisfy the conditions of subsection (c) of Section 217 (as modified by the other subsections of such section)."

(j)   adding at the end of G.S. 105-144.2 two new subsections (i) and (j), to read as follows:

"(i)        Individual whose tax home is outside of United States. The running of any period of time specified in subsection (a) or (c) of this section (other than the 18 months referred to in paragraph (4) of subsection (c)) shall be suspended during the time the taxpayer (or his spouse if the old residence and new residence are each used by the taxpayer and his spouse as their principal residence) has a tax home (as defined in Section 913 (j)(1)(B) of the Internal Revenue Code) outside of the United States after the date of the sale of the old residence; except that any such period of time as so suspended shall not extend beyond the date four years after the date of the sale of the old residence.

(j)         Statute of limitations. If the taxpayer during the taxable year sells at a gain property used by him as his principal residence, then

(1)        the statutory period for the assessment of any deficiency attributable to any part of such gain shall not expire before the expiration of three years from the date the secretary is notified by the taxpayer of

(A)       the taxpayer's cost of purchasing the new residence which the taxpayer claims results in nonrecognition of any part of such gain,

(B)       the taxpayer's intention not to purchase a new residence within the period specified in subsection (a) of this section, or

(C)       a failure to make such purchase within such period; and

(2)        such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment."

(k)  adding at the end of G.S. 105-147(1) a new subsection (f), to read as follows:

"(f)       As to a North Carolina resident any amounts deductible as certain expenses of living abroad under the provisions of Section 913 of the Internal Revenue Code of 1954 as amended."

(l)   rewriting G.S. 105-147(8) to read as follows:

"(8)      In the case of an individual moving from one location to another, moving expenses paid or incurred during the taxable year to the extent allowed or allowable for federal income tax purposes under the provisions of Section 217 of the Internal Revenue Code of 1954 as amended; except, that no individual, other than a resident of North Carolina who qualifies for moving expense deductions under the provisions of subsection (i) of Section 217 of the Internal Revenue Code of 1954 as amended, shall be allowed the deduction for such moving expenses unless the income earned at the new principal place of employment is reportable for taxation to North Carolina under the provisions of this Division for the period of time required under Section 217 of the Internal Revenue Code of 1954 as amended for qualifying for the moving expense deduction for federal income tax purposes and only to the extent allowed or allowable under that section for federal income tax purposes; provided, that if the reimbursement for the moving expenses is reportable for taxation to North Carolina under the provisions of G.S. 105-141(a)(21), the deduction for moving expenses shall be allowed to the extent allowed for federal income tax purposes; and provided further, that when only a portion of the income earned at the new principal place of employment is reportable for taxation to North Carolina under the provisions of this Division, the moving expense deduction shall be apportioned under rules and regulations prescribed by the Secretary of Revenue. Where joint federal returns are filed by husband and wife for federal income tax purposes, the deduction otherwise allowable under this subsection shall be limited to such amount as would have been allowable if separate federal income tax returns had been filed. The deduction allowed by this subdivision for moving expenses shall be allowed as a business expense deductible from gross income in arriving at adjusted gross income."

(m) deleting from line 5 of G.S. 105-147(9)(e), as the same appears in the 1977 Cumulative Supplement to 1972 Replacement Volume 2D of the General Statutes, the word and figures "of 1970", so that said line 5 will read, after amendment, "under the Disaster Relief Act may, at the election of the";

(n)  rewriting G.S. 105-158, to read as follows:

"§ 105-158.  Abatement of income taxes of certain members of the armed forces upon death. — In the case of any individual

(1)        who dies

a.         on or after January 1, 1964;

b.         while in active service as a member of the armed forces of the United States, and

c.         while serving in a combat zone (as determined under G.S. 105‑141(b)(12)); or

(2)        who dies

a.         on or after January 1, 1964; and

b.         as a result of wounds, disease or injury incurred while in active service as a member of the armed forces of the United States, and while serving in a combat zone on or after January 1, 1964.

No individual income tax imposed by the State of North Carolina shall apply with respect to the taxable year in which falls the date of his death, or with respect to any prior taxable year ending on or after the first day he so served in a combat zone; and any tax under this division and under the corresponding provisions of prior revenue laws for taxable years preceding those above specified which is unpaid at the date of his death (including interest, additions to the tax, and additional amounts) shall not be assessed and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment."

Sec. 3.  The Sales and Use Tax Article of the Revenue Act, being Article 5 of Subchapter I of Chapter 105 of the General Statutes, is amended by rewriting the second sentence in G.S. 105-164.6(4) to read as follows:

"Where a retail sales and use tax is due and has been paid with respect to said tangible personal property in another state by the purchaser thereof for storage, use or consumption in this State, said tax shall be credited upon the tax imposed by this Part."

Sec. 4.  The Intangible Personal Property Tax Article of the Revenue Act, being Article 7 of Subchapter I of Chapter 105 of the General Statutes, is amended by:

(a)  rewriting the first paragraph of G.S. 105-202, to read as follows:

"All bonds, notes, demands, claims, deposits or share accounts in out-of-state building and loan and savings and loan associations and other evidences of debt however evidenced whether secured by mortgage, deed of trust, judgment or otherwise, or not so secured, having a business, commercial or taxable situs in this State on December 31 of each year shall be subject to an annual tax which is hereby levied, of twenty-five cents (25˘) on every one hundred dollars ($100.00) of the actual value thereof, except that taxpayers reporting on a fiscal year basis for income tax purposes under the provisions of Article 4 shall report evidences of debt on the last day of such fiscal year ending during the year prior to the December 31 as of which such property would otherwise be reported; provided, that from the actual value of such bonds, notes, demands, claims and other evidences of debt there may be deducted like evidences of debt owed by the taxpayer as of the valuation date of the receivable evidences of debt. The term 'like evidences of debt' deductible under this section shall not include:

(1)        accounts payable; provided, however, that accounts payable to security brokers incurred directly for the purchase of bonds, debentures and similar investments taxable under this section shall be deductible;

(2)        taxes of any kind owing by the taxpayer;

(3)        reserves, secondary liabilities or contingent liabilities except upon satisfactory showing that the taxpayer will actually be compelled to pay the debt or liability;

(4)        evidences of debt owed to a corporation of which the taxpayer is parent or subsidiary or with which the taxpayer is closely affiliated by stock ownership or with which the taxpayer is subsidiary of same parent corporation, unless the credits created by such evidences of debt are listed, if so required by law for ad valorem or property taxation, for taxation at the situs of such credits; or

(5)        debts incurred to purchase assets which are not subject to taxation at the situs of such assets."

(b)  rewriting the first paragraph of G.S. 105-205, to read as follows:

"All funds on deposit with insurance companies on December 31 of each year, belonging to or held in trust for a resident of this State or having acquired a taxable situs in this State, shall be subject to an annual tax, which is hereby levied, of ten cents (10˘) on every one hundred dollars ($100.00) thereof. The term 'funds on deposit' as used in this section shall mean all funds accrued or accruing by virtue of the death of the insured or the original maturity of a policy contract where the party or parties entitled to receive such funds might withdraw same at their option upon stipulated notice; provided, that in the determination of the tax liability under this section the first twenty thousand dollars ($20,000) of such funds on deposit or paid over to and held by a bank as trustee shall be disregarded where such funds on deposit are payable wholly and exclusively to the spouse and/or children of the person deceased whose death created such funds on deposit."

(c)  repealing G.S. 105-210 in its entirety;

(d)  rewriting the fourth paragraph of G.S. 105-212, to read as follows:

"A clerk of any court of this State may, upon written application therefor, obtain from the Secretary of Revenue a certificate relieving a depository bank or stock-owned savings and loan association of such clerk from the duty of collecting the tax levied in this Article or schedule from deposits of said clerk; provided, that such clerk of court shall be liable under his official bond for the full and proper remittance to the Secretary of Revenue under the provisions of this Article or schedule of taxes due on any deposits so handled."

Sec. 5.  The General Administration Article of the Revenue Act, being Article 9 of Subchapter I of Chapter 105 of the General Statutes, is amended by deleting from line 27 of the third paragraph of G.S. 105-242(b), as the same appears in the 1977 Cumulative Supplement to 1972 Replacement Volume 2D of the General Statutes, the statutory citation "G.S. 105-407", and substituting therefor the statutory citation "G.S. 105-267.1".

Sec. 6.  Section 1 of this act shall be effective for all generation skipping transfers made on and after July 1, 1979. Subsections (a), (b), (d), (e), (f), (g), (k), and (m) of Section 2, and all of Section 4, shall be effective with respect to taxable years beginning on and after January 1, 1979. Subsections (c), (j) and (l) of Section 2 shall be effective with respect to taxable years beginning on and after January 1, 1978. Subsections (h) and (i) of Section 2 shall be effective in respect to sales and exchanges of residences after July 26, 1978. Subsection (n) of Section 2 shall be effective with respect to individuals dying on and after July 1, 1973. Sections 3 and 5 of this act shall be effective upon ratification.

In the General Assembly read three times and ratified, this the 22nd day of March, 1979.