Legislature not aware of NC tax due date?

Here we are 44 days from April 15, 2015 and the NC Legislature still has not updated our tax law to account for changes to the federal law since December 31, 2013. Most North Carolina taxpayers are not affected but many, if not most, businesses are. Calendar year corporations are facing a March 15, 2015 deadline for federal purposes. The corporate NC tax due date is April 15, 2015 but many corporations have to know the NC tax law before they can complete their federal returns.

A bit of background

NC mostly follows the federal tax law as of a date certain. As of today, NC uses the Internal Revenue Code (IRC) as of December 31, 2013. At the end of 2013, quite a few federal provisions expired. Congress renewed most of them in December, you can read more in my posts here and here. The most common items Congress restored that NC has not are:

1. The tax deduction for expenses of elementary and secondary school teachers, lesser of $250 or actual expenses;
2. The tax exclusion for discharge of indebtedness for a principal residence;
3. The deduction for certain mortgage insurance premiums;
4. The deduction for qualified tuition and related expenses; and
5. The tax exemption for IRA distributions to charities.
6. Bonus depreciation;
7. Faster depreciation for certain leasehold improvements, restaurant and retail properties; and
8. The increased expensing allowance for business assets, computer software, and qualified real property (i.e., leasehold improvement, restaurant, and retail improvement property).

Some states automatically adjust to new provisions in the IRC but NC is not one of them.

Where does NC stand on updating the tax law?

The Legislature has known since at least December 16, 2014 that NC law needed to be updated. The Senate introduced S.B. 20 on February 3, 2015 and the House introduced H.B. 40 the same day. The House bill has been sitting in the Committee on Finance since February 4th. I suppose meetings with lobbyist are more important than the people’s business. On February 10th the Senate decided to change the gas tax rules and added that to their IRC conformity bill. The gas tax changes are an entire separate issue and should be in a separate piece of legislation.

A brief aside, the gas tax provisions are touted as a tax cut effective March 1, 2015 but the often omitted is that there is a big gas tax increase on July 1, 2015 also built into the act. Obviously, the cut is not in effect as of yesterday since the House took up the Senate’s bill and promptly referred it to the Committee on Finance on February 18th.

To the Senate’s credit, they passed the bill on February 12th, on the downside it included the gas tax changes that seem to be delaying things on the House side.

Why does this matter?

Businesses and some individuals are now stuck not being able to file until the law is updated. Which federal provisions will NC adopt and which will it not adopt? Right now, S.B. 20 pretty much fails to adopt almost all of the federal changes and follows what was done in 2013. Looks like Teachers might get their $250 teacher deduction. While we can guess what will happen, there is no way to know for sure. Who would have thought the Senate would tack an unrelated tax bill on to the IRS conformity legislation?

So the businesses, who employ the bulk of the people working in NC, are stuck unable to plan because they do not know how much tax they will owe for last year. Is the Legislature’s new motto “Lets stop the job creators”? And where is the Governor? He should be publicly encouraging the Legislature to put the gas tax changes into a separate bill and get the 2014 tax law updated.