GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
S	1
SENATE BILL 859

 
 
Short Title:	 Interstate Reciprocal Tax Agreements.	()	
Sponsors:	Senators Webster;  Allran, Ballance, Ballantine, Berger, Bingham, Carpenter, Carrington, Clodfelter, Cunningham, Forrester, Foxx, Garrou, Garwood, Harris, Hartsell, Horton, Hoyle, Kerr, Lucas, Moore, Rand, Robinson, Rucho, Shaw of Cumberland, Shaw of Guilford, Swindell, and Thomas.	
Referred to:	Finance.	
April 4, 2001

	A BILL TO BE ENTITLED
AN ACT TO EXCLUDE FROM INCOME TAX WAGES RECEIVED BY A NONRESIDENT FROM WORK PERFORMED IN THIS STATE IF THAT INDIVIDUAL'S HOME STATE HAS A SIMILAR LAW AND TO MAKE CONFORMING CHANGES.

The General Assembly of North Carolina enacts:
SECTION 1.(a)  G.S. 105‑134.2 reads as rewritten:
"§ 105‑134.2.  Individual income tax imposed.
(a)	 Except as provided in subsection (c) of this section, a tax is imposed upon the North Carolina taxable income of every individual. The tax  must be levied, collected, and paid annually and  is computed at the following percentages of the taxpayer's North Carolina taxable income.
(1)	For married individuals who file a joint return under G.S. 105-152 and for surviving spouses, as defined in section 2(a) of the Code:
On the North Carolina taxable income up to twenty-one thousand two hundred fifty dollars ($21,250), six percent (6%).
On the amount over twenty-one thousand two hundred fifty dollars ($21,250) and up to one hundred thousand dollars ($100,000), seven percent (7%).
On the amount over one hundred thousand dollars ($100,000), seven and seventy-five one-hundredths percent (7.75%).
(2)	For heads of households, as defined in section 2(b) of the Code:
On the North Carolina taxable income up to seventeen thousand dollars ($17,000), six percent (6%).
On the amount over seventeen thousand dollars ($17,000) and up to eighty thousand dollars ($80,000), seven percent (7%).
On the amount over eighty thousand dollars ($80,000), seven and seventy-five one-hundredths percent (7.75%).
(3)	For unmarried individuals other than surviving spouses and heads of households:
On the North Carolina taxable income up to twelve thousand seven hundred fifty dollars ($12,750), six percent (6%).
On the amount over twelve thousand seven hundred fifty dollars ($12,750) and up to sixty thousand dollars ($60,000), seven percent (7%).
On the amount over sixty thousand dollars ($60,000), seven and seventy-five one-hundredths percent (7.75%).
(4)	For married individuals who do not file a joint return under G.S. 105-152:
On the North Carolina taxable income up to ten thousand six hundred twenty-five dollars ($10,625), six percent (6%).
On the amount over ten thousand six hundred twenty-five dollars ($10,625) and up to fifty thousand dollars ($50,000), seven percent (7%).
On the amount over fifty thousand dollars ($50,000), seven and seventy-five one-hundredths percent (7.75%).
(b)	 Except as provided in subsection (c) of this section, in lieu of the tax imposed by subsection (a) of this section, there is imposed for each taxable year upon the North Carolina taxable income of every individual a tax determined under tables, applicable to the taxable year, which may be prescribed by the Secretary. The amounts of the tax determined under the tables  must be computed on the basis of the rates prescribed by subsection (a) of this section. This subsection does not apply to an individual making a return under section 443(a)(1) of the Code for a period of less than 12 months on account of a change in the individual's annual accounting period, or to an estate or trust. The tax imposed by this subsection is treated as the tax imposed by subsection (a) of this section.
(c)	The Department may enter into a reciprocal agreement with a state that borders this State to exempt from the tax imposed by this Part wages earned in this State by a resident of that other state. The Department may enter into this type of agreement only if (i) the other state imposes a tax on income similar to that imposed by this Part, (ii) the other state agrees to exempt from its income tax wages earned in that state by a North Carolina resident, and (iii) at least one of the states that is a party to the agreement has at least five years of experience with this type of agreement."
SECTION 1.(b)  The Department shall enter into negotiations with the Commonwealth of Virginia to establish an agreement under G.S. 105‑134.2(c), as enacted by this act.  The Department shall report to the Revenue Laws Study Committee no later than March 1, 2002, on the status of these negotiations.
SECTION 2.  G.S. 105-134.5(b) reads as rewritten:
"(b)	Nonresidents. – For nonresident individuals, the term "North Carolina taxable income" means the taxpayer's taxable income as determined under the Code, adjusted as provided in G.S. 105‑134.6 and G.S. 105‑134.7, multiplied by a fraction. The denominator of  the fraction is the taxpayer's gross income as determined under the Code, adjusted as provided in G.S. 105‑134.6 and G.S.  105-134.7. The numerator of  the fraction is the amount of that gross income, as adjusted, that is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State or is derived from a business, trade, profession, or occupation carried on in this State. The numerator does not include wages that are exempt from the tax imposed by this Part pursuant to G.S. 105-134.2(c)."
SECTION 3.  G.S. 105‑152(a) reads as rewritten:
"(a)	Who Must File. – The following individuals  must file with the Secretary an income tax return under affirmation:
(1)	Every resident required to file an income tax return for the taxable year under the Code and every nonresident who (i) derived gross income from North Carolina sources during the taxable year attributable to the ownership of any interest in real or tangible personal property in this State or derived from a business, trade, profession, or occupation carried on in this State and (ii) is required to file an income tax return for the taxable year under the Code. However, if a nonresident's only gross income derived from North Carolina sources is wages that are exempt from the tax imposed by this Part pursuant to G.S. 105-134.2(c), the nonresident is not required to file an income tax return.
(2)	Repealed by Session Laws 1991 (Reg. Sess., 1992), c. 930, s. 1.
(3)	Any individual whom the Secretary believes to be liable for a tax under this Part, when so notified by the Secretary and requested to file a return."
SECTION 4.  G.S. 105‑163.2(a) reads as rewritten:
"(a)	Withholding Required. –  Except as provided in subsection (a1) of this section, an employer  must deduct and withhold from the wages of each employee the State income taxes payable by the employee on the wages. For each payroll period, the employer  must withhold from the employee's wages an amount that would approximate the employee's income tax liability under Article 4 of this Chapter if the employer withheld the same amount from the employee's wages for each similar payroll period in a calendar year. In calculating an employee's anticipated income tax liability, the employer  must allow for the exemptions, deductions, and credits to which the employee is entitled under Article 4 of this Chapter. The amount of State income taxes withheld by an employer is held in trust for the Secretary."
SECTION 5.  G.S. 105‑163.2 is amended by adding a new subsection to read:
"(a1)	Withholding Not Required. – If an employee's wages are exempt from the tax imposed by Article 4 of this Chapter pursuant to G.S. 105-134.2(c) and the employer withholds from the employee's wages the state income taxes payable by the employee to the employee's state of residence, then the employer is not required to withhold North Carolina income taxes from that employee's wages under this Article."
SECTION 6.  This act is effective for taxable years beginning on or after January 1, 2002.