GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

H	1 

HOUSE BILL 1157

Short Title:  Various State Tax Law Changes.	(Public)

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Sponsors: Representatives Morris; Cansler and Nichols.

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Referred to:  Finance.

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April 24, 1997

A BILL TO BE ENTITLED
AN ACT TO EXTEND THE STATUTES OF LIMITATIONS FOR TAX REFUNDS, TO CLARIFY THE CORPORATE INCOME TAX ON CERTAIN TAX-EXEMPT OBLIGATIONS, AND TO DELETE THE CAP ON CORPORATE INCOME TAX DEDUCTIONS OF DIVIDENDS RECEIVED FROM REGULATED INVESTMENT COMPANIES.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-267 reads as rewritten:
"§ 105-267.  Taxes to be paid; suits for recovery of taxes.
No court of this State shall entertain a suit of any kind brought for the purpose of preventing the collection of any tax to which this Article applies. Whenever a person has a valid defense to the enforcement of the collection of a tax, the person shall pay the tax to the proper officer, and that payment shall be without prejudice to any defense of rights the person may have regarding the tax. At any time within the applicable protest period, the taxpayer may demand a refund of the tax paid in writing from the Secretary and if the tax is not refunded within 90 days thereafter, may sue the Secretary in the courts of the State for the amount demanded. The protest period for a tax levied in Article 2A, 2B, 2C, or 2D of this Chapter is 30 days after payment. The protest period for all other taxes is the period set by the statute of limitations in G.S. 105-266(c).
The suit may be brought in the Superior Court of Wake County, or in the Superior Court of the county in which the taxpayer resides at any time within three years after the expiration of the 90-day period allowed for making the refund. If upon the trial it is determined that all or part of the tax was levied or assessed for an illegal or unauthorized purpose, or was for any reason invalid or excessive, judgment shall be rendered therefor, with interest, and the judgment shall be collected as in other cases. The amount of taxes for which judgment is rendered in such an action shall be refunded by the State. G.S. 105-241.2 provides an alternate procedure for a taxpayer to contest a tax and is not in conflict with or superseded by this section.”
Section 2.  G.S. 105-266(c) reads as rewritten:
"(c)	Statute of Limitations. – The period in which a refund must be demanded or discovered under this section is determined as follows:
(1)	General Rule. – No overpayment shall be refunded, whether upon discovery or receipt of written demand, if the discovery is not made or the demand is not received within three years after the date set by the statute for the filing of the return or within two years after the payment of the tax alleged to be an overpayment, whichever is later.
(2)	Worthless Debts or Securities. – Section 6511(d)(1) of the Code applies to an overpayment of the tax levied in Division II or III of Article 4 of this Chapter to the extent the overpayment is attributable to either of the following:
a.	The deductibility by the taxpayer under section 166 of the Code of a debt that becomes worthless, or under section 165(g) of the Code of a loss from a security that becomes worthless.
b.	The effect of the deductibility of a debt or loss described in subpart a. of this subdivision on the application of a carryover to the taxpayer.
(3)	Capital Loss and Net Operating Loss Carrybacks. – Section 6511(d)(2) of the Code applies to an overpayment of the tax levied in Division II or III of Article 4 of this Chapter to the extent the overpayment is attributable to a capital loss carryback under section 1212(c) of the Code or to a net operating loss carryback under section 172 of the Code.
(4)	Federal Determination. – When a taxpayer files with the Secretary a return that reflects a federal determination and the return is filed within the required time, the period in which a refund must be demanded or discovered is one year after the return reflecting the federal determination is filed or three years after the original return was filed or due to be filed, whichever is later."
Section 3.  G.S. 105-130.5(b) is amended by adding a new subdivision to read:
"(1a)	Interest upon the obligations of any of the following, net of related expenses, to the extent included in federal taxable income:
a.	This State, a political subdivision of this State, or a commission, an authority, or another agency of this State or of a political subdivision of this State.
b.	A nonprofit educational institution organized or chartered under the laws of this State."
Section 4.  G.S. 105-130.7 reads as rewritten:
"§ 105-130.7.  Deductible portion of dividends.
(a)	Regulated Investment Companies. – A corporation may deduct the proportionate part of dividends received by it from a regulated investment company or a real estate investment trust, as defined in G.S. 105-130.12, as represents and corresponds to income received by the regulated investment company or real estate investment trust that would not be taxed by this State if received directly by the corporation.
(b)	Subsidiary Dividends. – A corporation that, at the close of its taxable year, has its commercial domicile within North Carolina may deduct all dividends received from corporations in which it owns more than fifty percent (50%) of the outstanding voting stock.
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Section 5.  Sections 1 and 2 of this act become effective November 1, 1997, and apply to taxes paid on or after that date.  The remainder of this act is effective for taxable years beginning on or after January 1, 1997.