GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2013

H                                                                                                                                                    1

HOUSE BILL 998

 

 

Short Title:        Simplify Adjustment to Federal Taxable Income.

(Public)

Sponsors:

Representatives Lewis, Setzer, Moffitt, and Szoka (Primary Sponsors).

For a complete list of Sponsors, refer to the North Carolina General Assembly Web Site.

Referred to:

Finance.

April 18, 2013

A BILL TO BE ENTITLED

AN ACT to simplify the readability of adjustments to federal taxable income when the state decouples from federal accelerated DEPRECIATION and expensing.

The General Assembly of North Carolina enacts:

SECTION 1.(a)  G.S. 105-130.5(a)(15), (15a), (15b), (23), and (23a) are repealed.

SECTION 1.(b)  G.S. 105-130.5(b)(21), (21a), (21b), (26), and (26a) are repealed.

SECTION 1.(c)  G.S. 105-130.5(a) is amended by adding a new subdivision to read:

"(a)       The following additions to federal taxable income shall be made in determining State net income:

(24)      The amount required to be added under G.S. 105-130.5B when the State decouples from federal accelerated depreciation and expensing."

SECTION 1.(d)  G.S. 105-130.5(b) is amended by adding a new subdivision to read:

"(b)      The following deductions from federal taxable income shall be made in determining State net income:

(27)      The amount allowed as a deduction under G.S. 105-130.5B as a result of an add-back for federal accelerated depreciation and expensing."

SECTION 1.(e)  Part 1 of Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:

" 105-130.5B.  Adjustments when State decouples from federal accelerated depreciation and expensing.

(a)        Special Accelerated Depreciation. - A taxpayer who places property in service during a taxable year listed in the table below and who takes a special accelerated depreciation deduction for that property under section 168(k) or 168(n) of the Code must add to the taxpayer's federal taxable income eighty-five percent (85%) of the amount taken for that year under those Code provisions.

A taxpayer is allowed to deduct twenty percent (20%) of the add-back in each of the first five taxable years following the year the taxpayer is required to include the add-back in income. The table below indicates the applicable five-year period.

Taxable Year of                           Five Taxable Years of

85% Add-Back                            20% Deduction

2010                                              2011 through 2015

2011                                              2012 through 2016

2012                                              2013 through 2017

2013                                              2014 through 2018

(b)        2009 Depreciation Exception. - A taxpayer who placed property in service during the 2009 taxable year and whose North Carolina taxable income for the 2009 taxable year reflected a special accelerated depreciation deduction allowed for the property under section 168(k) of the Code must add eighty-five percent (85%) of the amount of the special accelerated depreciation deduction to its federal taxable income for the 2010 taxable year. A taxpayer is allowed to deduct this add-back under subsection (a) of this section as if it were for property placed in service in 2010.

(c)        Section 179 Expense. - For purposes of this subdivision, the definition of section 179 property has the same meaning as under section 179 of the Code as of January 1, 2011. A taxpayer who places section 179 property in service during a taxable year in subsection (a) of this section must add to the taxpayer's federal taxable income eighty-five percent (85%) of the amount by which the taxpayer's expense deduction under section 179 of the Code exceeds the amount that would have been allowed for that taxable year under section 179 of the Code as of May 1, 2010.

A taxpayer is allowed to deduct twenty percent (20%) of the add-back in each of the first five taxable years following the year the taxpayer is required to include the add-back in income. The table in subsection (a) of this section indicates the applicable five-year period.

(d)        Asset Basis. - The adjustments made in this section do not result in a difference in basis of the affected assets for State and federal income tax purposes."

SECTION 2.(a)  G.S. 105-134.6(b)(17), (17a), (17b), (21), and (21a) are repealed.

SECTION 2.(b)  G.S. 105-134.6(c)(8), (8a), (8b), (15), and (15a) are repealed.

SECTION 2.(c)  G.S. 105-134.6(b) is amended by adding the following new subdivision to read:

"(b)      Deductions. - The following deductions from taxable income shall be made in calculating North Carolina taxable income, to the extent each item is included in taxable income:

(23)      The amount allowed as a deduction under G.S. 105-134.6A as a result of an add-back for federal accelerated depreciation and expensing."

SECTION 2.(d)  G.S. 105-134.6(c) is amended by adding the following new subdivision to read:

"(c)       Additions. - The following additions to taxable income shall be made in calculating North Carolina taxable income, to the extent each item is not included in taxable income:

(16)      The amount required to be added under G.S. 105-134.6A when the State decouples from federal accelerated depreciation and expensing."

SECTION 2.(e)  Part 2 of Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:

" 105-134.6A.  Adjustments when State decouples from federal accelerated depreciation and expensing.

(a)        Special Accelerated Depreciation. - A taxpayer who places property in service during a taxable year listed in the table below and who takes a special accelerated depreciation deduction for that property under section 168(k) or 168(n) of the Code must add to the taxpayer's federal taxable income or adjusted gross income, as appropriate, eighty-five percent (85%) of the amount taken for that year under those Code provisions. For taxable years before 2013, the taxpayer must add the amount to the taxpayer's federal taxable income. For taxable year 2013 and after, the taxpayer must add the amount to the taxpayer's adjusted gross income.

A taxpayer is allowed to deduct twenty percent (20%) of the add-back in each of the first five taxable years following the year the taxpayer is required to include the add-back in income. The table below indicates the applicable five-year period.

Taxable Year of                           Five Taxable Years of

85% Add-Back                            20% Deduction

2010                                              2011 through 2015

2011                                              2012 through 2016

2012                                              2013 through 2017

2013                                              2014 through 2018

(b)        2009 Depreciation Exception. - A taxpayer who placed property in service during the 2009 taxable year and whose North Carolina taxable income for the 2009 taxable year reflected a special accelerated depreciation deduction allowed for the property under section 168(k) of the Code must add eighty-five percent (85%) of the amount of the special accelerated depreciation deduction to its federal taxable income for the 2010 taxable year. A taxpayer is allowed to deduct this add-back under subsection (a) of this section as if it were for property placed in service in 2010.

(c)        Section 179 Expense. - For purposes of this subdivision, the definition of section 179 property has the same meaning as under section 179 of the Code as of January 1, 2011. A taxpayer who places section 179 property in service during a taxable year listed in the table below must add to the taxpayer's federal taxable income or adjusted gross income as appropriate, eighty-five percent (85%) of the amount by which the taxpayer's expense deduction under section 179 of the Code exceeds the amount that would have been allowed for that taxable year under section 179 of the Code as of May 1, 2010. For taxable years before 2013, the taxpayer must add the amount to the taxpayer's federal taxable income. For taxable year 2013 and after, the taxpayer must add the amount to the taxpayer's adjusted gross income.

A taxpayer is allowed to deduct twenty percent (20%) of the add-back in each of the first five taxable years following the year the taxpayer is required to include the add-back in income. The table in subsection (a) of this section indicates the applicable five-year period.

(d)        Asset Basis. - The adjustments made in this section do not result in a difference in basis of the affected assets for State and federal income tax purposes."

SECTION 3.  This act is effective when it becomes law.