New tax reform law reduces North Carolina corporate tax rate to 4% and provides fiscally-responsible tax relief to all state taxpayers.
The new tax reform:
- Reduces the corporate income tax to 4% in 2016, a 42% rate reduction since 2013.
- If the state meets revenue targets (i.e. if there is additional tax revenue growth due to a growing economy), the corporate income tax will drop to 3% in future years.
Corporate Income Tax
- Single Sales Factor Phase-In. Effective for tax years beginning on January 1, 2016, North Carolina will have a triple-weighted sales factor. For tax years beginning on or after January 1, 2017, the sales factor will be quadruple-weighted. Public utilities, excluded corporations, and qualified capital intensive corporations will continue to apportion using a single-sales factor for the 2016 and 2017 tax years. For tax years beginning on or after January 1, 2018, North Carolina will impose a single-sales apportionment factor for all corporate taxpayers.
- $1.50 per $1,000 of the largest of the following:
- Capital stock, surplus, and undivided profits
- Appraised value of tangible property in NC
- Actual investments in tangible property in NC
Unemployment Insurance Tax
- Standard beginning rate is 1.2%.
- The taxable wage base is $21,400.
- Minimum rate is 0%; Maximum rate is 6.84%; Average rate is 1.7%
- Index Rate is 1.85 per $100 of payroll
- Self-insurance is permitted
- Insurance rates are lower than the standard rates for qualifying firms
- A clear-cut, on the job accident is a condition for benefit compensation
Free-accident—prevention workshops designed for each product manufactured
6.75% for all counties except New Hanover, Robeson, and Sampson where the rate is 7%
Local property taxes range from .4425/$100 valuation to $1.03/$100 valuation
Example: taxation on $3,000,000 value of building & equipment
- based on .50 tax rate
- 3,000,000 X .0050 = $15,000
- property tax for M&E is aligned with depreciation schedule
- Industrial machinery and equipment is exempt from sales and use tax but is subject to an excise tax. This rate is 1 percent with a maximum of $80 per item.
- Parts and accessories to manufacturing machinery, which include most supplies used in the manufacturing process but not becoming a part of the manufactured product, including pollution abatement equipment, are taxed at 1 percent.
- Purchases of ingredients or component parts of manufactured products are exempt from sales or use tax.
- Packaging containers and items that become part of a manufactured product and are delivered with the product to the customer are exempt from sales and use tax.
- Air courier services; Aircraft manufacturing; Bioprocessing; Financial services, securities operations and related systems development; Motor vehicle manufacturing; Paper-from-pulp manufacturing; Pharmaceutical and medical manufacturing and distribution; Semiconductor manufacturing; Solar electricity generating materials manufacturing; and Turbine manufacturing companies may receive a refund of sales taxes on purchases of building materials, fixtures and equipment if the facility costs at least $50 million in Tier 1 counties and $100 million in Tier 2 and 3 counties.
- Sales of electricity to manufacturers and farmers are exempt from sales and use tax.
- Sales of electricity and eligible business property to an internet datacenter or software publishing datacenter business that invests at least $250 million in private funds are exempt from sales and use tax.
- Piped natural gas is exempt from sales and use tax but is subject to an excise tax. This tax rate is based on the number of therms of gas consumed in a month.
- Fuel purchased by a manufacturer for use in connection with the operation of a manufacturing facility is not subject to the privilege tax.
- Motor vehicles are exempt from sales and use tax but are subject to the highway use tax. Highway use tax is 3 percent of the retail value of the motor vehicle with a maximum tax of $1,500 per recreational vehicle and $1,000 maximum per Class A or B motor vehicles.
- Aircraft and boats are taxed at 3 percent with a maximum tax of $1,500 per item.
- Computer software or digital property that becomes a component part of other computer software or digital property is exempt from sales and use tax.