Tax News

CCH (cch.taxgroup.com) reports:

North Carolina Governor Mike Easley signed a budget bill on July 31, 2007, with numerous tax law changes affecting corporate income tax, personal income tax, sales and use tax, property tax, motor fuels tax, insurance and public utility regulatory fees, and the tobacco products tax. Most notably, the bill enacts the following provisions.
Income and franchise tax changes:
-- effective July 31, 2007, conforms to the Internal Revenue Code (IRC) as enacted as of January 1, 2007 (formerly, January 1, 2006);
-- effective for taxable years beginning on or after January 1, 2008, enacts an earned income tax credit;
-- effective for taxable years beginning on or after January 1, 2007, mandates that the Department of Revenue include language in its printed booklets for the individual income tax return that identifies the availability of the state and federal earned income tax credit;
-- effective for taxable years beginning on or after January 1, 2007, re-enacts the long-term care credit;
-- effective for taxable years beginning on or after January 1, 2007, enacts an adoption tax credit;
-- effective for taxable years beginning on or after January 1, 2007, enhances the tax credit for research and development expenditures;
-- effective for taxable years beginning on or after January 1, 2007, modifies the tax credit for constructing renewable fuel facilities;
-- effective for taxable years beginning on or after January 1, 2007, provides an alternative for addressing a corporation's attempt to avoid state taxes through the use of a real estate investment trust (REIT);
-- enhances the IRC Sec. 529 plan income tax deduction (adjustments to taxable income are effective for taxable years beginning on or after January 1, 2007, and other changes to these provisions are effective July 31, 2007);
-- effective for taxable years beginning on or after January 1, 2007, enacts a state work opportunity tax credit;
-- effective January 1, 2007, enacts a tax incentive for railroad intermodal facilities;
-- effective for taxable years beginning on or after January 1, 2007, enacts a firefighter and rescue squad tax deduction; and
-- effective and applicable September 1, 2007, changes corporate annual report fees (changes regarding annual report fees paid by limited liability companies subject to the franchise tax are effective for taxable years beginning on or after January 1, 2007).
Sales and use tax changes:
-- effective July 31, 2007, the permanent extension of the additional 0.25% state sales and use tax rate (which was scheduled to expire on August 1, 2007) that results in a total general state tax rate of 4.25%;
-- effective and applicable October 1, 2007, imposes a privilege tax on software publishers' machinery and equipment;
-- effective and applicable July 1, 2007, expands the sales and use tax refund for certain aircraft manufacturers;
-- effective and applicable October 1, 2007, amends the sales tax holiday provisions;
-- levies a one-quarter cent county sales and use tax subject to a referendum;
-- provides a sales and use tax refund for analytical services supplies (the refund provision is effective July 1, 2007, and the definition of "analytical services" is effective July 31, 2007); and
-- effective and applicable October 1, 2007, modifies the exemption for data centers and imposes a privilege tax on certain eligible data centers.
Property tax and other tax changes:
-- effective July 31, 2007, sets the insurance regulatory fee;
-- effective July 1, 2007, sets the public utility regulatory fee;
-- effective July 31, 2007, caps the variable wholesale component of the motor fuels tax rate for two years;
-- effective July 31, 2007, provides for the levy of a local land transfer tax subject to a referendum; and
-- effective October 1, 2007, an increase in the tax rate applicable to tobacco products other than cigarettes.
In addition, the budget bill provides for the assumption by the state of 25% of the nonfederal share of Medical Assistance Program costs and Medicare Part D clawback payments currently borne by the counties, effective October 1, 2007.
Ch. 323 (H.B. 1473), Laws 2007, effective as noted above