GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
H	1
HOUSE BILL 1350
     

 
Short Title:	Corporate Tax Disclosure.	()	
Sponsors:	Representatives Wainwright and Luebke (Primary Sponsors).	
Referred to:	Financial Institutions.	
April 12, 2001

A BILL TO BE ENTITLED
AN ACT TO MAKE PUBLIC CERTAIN CORPORATE TAX INFORMATION.

The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 105‑256(a) reads as rewritten:
"(a)	Reports. – The Secretary shall prepare and publish the following:
(1)	At least every two years, statistics concerning taxes imposed by this Chapter, including amounts collected, classifications of taxpayers, geographic distribution of taxes, and other facts considered pertinent and valuable.
(2)	At least every two years, a tax expenditure report that lists the tax expenditures made by a provision in this Chapter, other than a provision in Subchapter II, and gives an estimate of the amount by which revenue is reduced by each tax expenditure. A "tax expenditure" is an exemption, an exclusion, a deduction, an allowance, a credit, a refund, a preferential tax rate, or another device that reduces the amount of tax revenue that would otherwise be available to the State. An estimate of the amount by which revenue is reduced by a tax expenditure may be stated as ranging between two amounts if the Department does not have sufficient data to make a more specific estimate.
(3)	As often as required, a report that is not listed in this subsection but is required by another law.
(4)	As often as the Secretary determines is needed, other reports concerning taxes imposed by this Chapter.
(5)	At least once a year, a statement of the taxpayer's bill of rights, which sets forth in simple and nontechnical terms the following:
a.	The taxpayer's right to have the taxpayer's tax information kept confidential.
b.	The rights of a taxpayer and the obligations of the Department during an audit.
c.	The procedure for a taxpayer to appeal an adverse decision of the Department at each level of determination.
d.	The procedure for a taxpayer to claim a refund for an alleged overpayment.
e.	The procedure for a taxpayer to request information, assistance, and interpretations or to make complaints.
f.	Penalties and interest that may apply and the basis for requesting waiver of a penalty.
g.	The procedures the Department may use to enforce the collection of a tax, including assessment, jeopardy assessment, enforcement of liens, and garnishment and attachment.
(6)	At least once a year, a report containing the information itemized below for every taxpayer that is required to file a report under G.S. 105‑130.16(a1) and for every taxpayer that claims one or more corporate income tax credits or franchise tax credits under Article 3A, 3C, 3D, or 4 of this Chapter or under G.S. 105‑129.16A or G.S. 105‑129.16B. The report must contain the following information for each affected taxpayer for the most recent taxable year for which information is available, except that it may not contain any information the disclosure of which is prohibited by section 6013 of the Code.
a.	The name and address.
b.	The amount of corporate income tax and the amount of franchise tax payable under this Chapter by the taxpayer, less the amount of any credits allowable other than payments of tax by or on behalf of the taxpayer.
c.	The amount of each tax credit the taxpayer claimed under Article 3A, 3C, 3D, or 4 of this Chapter or under G.S. 105‑129.16A or G.S. 105‑129.16B
d.	The information the taxpayer reported under G.S. 105‑130.16(a1)."
SECTION 2.  G.S. 105‑259(b) is amended by adding a new subdivision to read:
"§ 105‑259.  Secrecy required of officials; penalty for violation.
. . .
(b)	Disclosure Prohibited. – An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person unless the disclosure is made for one of the following purposes:
. . .
(26)	To publish the report required by G.S. 105‑256(a)(6)."
SECTION 3.  G.S. 105‑130.16 reads as rewritten:
"§ 105‑130.16.  Returns.
(a)	Return. – Every corporation doing business in this State must file with the Secretary an income tax return showing specifically the items of gross income and the deductions allowed by this Part and any other facts the Secretary requires to make any computation required by this Part. The return of a corporation must be signed by its president, vice‑president, treasurer, assistant treasurer, secretary, or assistant secretary. The officer signing the return must furnish an affirmation verifying the return. The affirmation must be in the form required by the Secretary.
(a1)	Additional Schedules. – If a financial institution excludes or deducts from income taxable under this Part for the taxable year more than two hundred fifty thousand dollars ($250,000) of interest expense allocable to interest income exempt from taxation under this Part, the institution must file with the return a schedule itemizing specific issues with their interest income exempt from taxation under this Part and the amount of interest expense allocable to the income. The allocable portion of interest expense is the portion for which deduction would be disallowed for federal tax purposes pursuant to section 265(b) of the Code if the interest income were earned on tax‑exempt obligations as defined in section 265(b) of the Code. The schedule must include sufficient detail to disclose the nature and extent of the items and the methodology used in their calculation. The schedule must also include a calculation of what the institution's tax liability under this Part would have been if not for the exclusion or deduction of the expenses.
A corporation whose direct or indirect expenses related to dividends deducted under G.S. 105-130.7(b) for the taxable year exceed two hundred fifty thousand dollars ($250,000) must file with the return a schedule itemizing the dividends deductible under G.S. 105-130.7(b) for the taxable year and the direct or indirect expenses related to the dividends. The amount of direct or indirect expenses related to dividends deductible under G.S. 105-130.7(b) is presumed to be fifteen percent (15%) of the amount of the dividends, not to exceed the taxpayer's total expenses. A taxpayer who itemizes related expenses less than the presumed amount must maintain and make available for inspection by the Secretary all records necessary to determine and verify the amount itemized. The schedule required by this paragraph must include sufficient detail to disclose the nature and extent of the items and the methodology used in their calculation. The schedule must also include a calculation of what the corporation's tax liability under this Part would have been if not for the deduction of the expenses.
(b)	Correction of Distortions. – When the Secretary has reason to believe that any corporation so conducts its trade or business in such manner as to either directly or indirectly distort its true net income and the net income properly attributable to the State, whether by the arbitrary shifting of income, through price fixing, charges for service, or otherwise, whereby the net income is arbitrarily assigned to one or another unit in a group of taxpayers carrying on business under a substantially common control, the Secretary may require any facts the Secretary considers necessary for the proper computation of the entire net income and the net income properly attributable to the State, and in determining these computations, the Secretary must have regard to the fair profit that would normally arise from the conduct of the trade or business.
(c)	Other Corrections. – When any corporation liable to taxation under this Part conducts its business in such a manner as to either directly or indirectly benefit the members or stockholders thereof or any person interested in the business by selling its products or goods or commodities in which it deals at less than the fair price which might be obtained therefor, or when a corporation, a substantial portion of whose capital stock is owned either directly or indirectly by another corporation, acquires and disposes of the products of the corporation so owning a substantial portion of its stock in such a manner as to create a loss or improper net income for either of the corporations, or when a corporation, owning directly or indirectly a substantial portion of the stock of another corporation, acquires and disposes of the products of the corporation of which it so owns a substantial portion of the stock in such manner as to create a loss or improper net income for either of the corporations, the Secretary may determine the amount of taxable income of the such corporations for the calendar or fiscal year, having due regard to the reasonable profits which, but for such arrangement or understanding, might or could have been obtained by the corporations liable to taxation under this Part from dealing in such products, goods or commodities."
SECTION 4.  Section 3 of this act is effective for taxable years beginning on or after January 1, 2001.  Section 1 of this act becomes effective October 1, 2002.  The remainder of this act is effective when it becomes law.