LAST WEEK IN RALEIGH:
HB104/SB112/HB334: Align PPP Tax Treatment to Federal Treatment
These bills would align North Carolina with federal treatment on the issue of Paycheck Protection Program (PPP) loan deductibility, allowing North Carolina businesses to deduct expenses paid for with the proceeds of forgiven PPP loans for state income tax purposes. Senate Bill 104 would enact these measures beginning with the 2020 taxable year, while Senate Bill 112 and House Bill 334 would make these measures effective for the 2020 taxable year only. Latest Action: On Thursday, April 22nd, HB334 was referred to the Senate Rules and Operations Committee on Monday, April 26th.
SB322: 2021 Revenue Law Changes
This bill would make numerous changes to NC's tax laws. Of particular benefit to employers, it would enable businesses in the state, for taxable years 2021-2025, to deduct a larger percentage of their net interest expense when calculating state income taxes. This would benefit job creators in all industries as NC mounts its economic relaunch. It would also provide additional recurring funding for state-managed transportation projects by ensuring all net proceeds of taxes collected on short-term motor vehicle rentals are transferred to the Highway Fund after the end of each fiscal year, effective 10/1/2021. The NC Chamber supports this legislation. Primarily on the issue of deductible net interest expense. IRS Code section 163(j) limits this to 30 percent of a company's adjusted taxable income for federal tax purposes, thought the CARES Act increased this to 50 percent for taxable years 2019 and 2020. NC previously decoupled from that provision, requiring tax payers to add back the extra amount deductible under the CARES Act when calculating state income tax obligations. This bill would permit tax payers to recover this addback by deducting 20% of the addback in each of the taxable years 2021-2025. Additionally, the measure to transfer revenue from short-term vehicle rentals to the Highway Fund represents a small but important step toward a more modernized transportation funding model. Latest Action: On Wednesday, April 28, a committee substitute version of SB 322 was adopted by the Senate Finance Committee - the bill was then sent the same day to the Senate Rules and Operations Committee, then withdrawn and re-referred to the Senate Appropriates/Base Budget Committee.
