North Carolina has released two notices to provide guidance regarding the new combined filing legislation taking effect January 1, 2012 and how it impacts taxpayers with existing agreements with North Carolina and the procedures for corporations without an existing agreement to request a review of their intercompany transactions.

Notice # 1

Session Law 2011-411, effective for tax years beginning on or after January 1, 2012, provides that, if the Secretary has reason to believe that a corporation’s State net income is not accurately reported on a separate return filed by the corporation because of intercompany transactions, the Secretary and the corporation may mutually agree to an alternative filing methodology that accurately reports the corporation’s State net income under a voluntary redetermination.

The Department has received inquiries from corporations with existing agreements as to how the legislation affects their existing agreements and the procedures to obtain a voluntary redetermination. The Department has also received inquiries from corporations and tax professionals as to how a corporation that did not participate in the Resolution Initiative can determine whether its intercompany transactions will be adjusted or whether the corporation will be required to file a combined income tax return with its affiliates.

The Notice sets out the effect of the legislation on existing agreements and the procedures for a corporation that does not have an agreement to initiate a review of its intercompany transactions by the Department.

Notice # 2

On June 30, 2011, Governor Perdue signed into law Session Law 2011-390 (House Bill 619) passed by the General Assembly. This law repeals the Secretary’s existing statutory authority in G.S. 105-130.6, 105-130.15 and 105-130.16 to adjust a corporation’s net income or require a combined return. As originally enacted, the repeal of existing statutory authority was effective January 1, 2012. On September 15, 2011, Governor Perdue signed into law Session Law 2011-411 (Senate Bill 580) passed by the General Assembly. This law revises the effective date of the repeal of the Secretary’s existing statutory authority to now be effective for tax years beginning on or after January 1, 2012.

The repealed statutory provisions have been replaced with a new statute, G.S. 105-130.5A, which authorizes the Secretary to adjust the net income of a corporation or to require a corporation to file a combined return. The new statute remains effective for tax years beginning on or after January 1, 2012.

See the Notice for more info.