Johnson Price Sprinkle PA (JPS), an accounting firm providing small to middle market businesses with tax, business consulting, and audit services, provides an update on tax provisions in North Carolina’s current budget bill.
Late last week, NC’s General Assembly approved a $23 billion budget and sent it to the Governor’s office for signature. While Governor Cooper has indicated his intent to veto the bill, legislators have signaled their plan to override the veto. Following are tax provisions included in the budget:
Personal Income Tax
• Lower the personal income tax rate from 5.499% to 5.25% effective for 2019.
• Increase the standard deduction effective for 2019.
• Convert the child tax credit to a deduction effective for 2018.
Corporate Income and Franchise Tax
• Lower the corporate income tax rate from 3% to 2.5% effective for 2019. This continues the trend of lowering corporate income tax rates, which have already declined by more than 50% in the past 4 years.
• Cap the franchise tax rate for S corporations at $200 for the first $1 million of franchise tax base, beginning with the 2019 franchise tax year. Historically, C and S corporations were taxed at the same rate. Currently, $1 million of franchise tax base would trigger $1,500 in franchise tax, so the cap will result in savings for S corporations.
Mill Machinery Tax and Sales Tax
• Repeal the mill machinery tax July 1, 2018. The mill machinery tax is somewhat of a misnomer, as it applies to many more assets other than those used in mills. Machinery and equipment used in manufacturing and production facilities are generally exempt from sales tax, being subject to the mill machinery tax instead. While the mill machinery tax is much lower than sales tax, it is self-assessed and can be cumbersome to calculate.
• Items currently subject to the mill machinery tax would continue to be exempt from sales tax, but a study is to be undertaken to consider the proper scope of the exemption.
• Ready-mix concrete mills would enjoy a new sales and use tax exemption on repair or replacement parts, effective July 1, 2018.
A few other, less widely applicable, tax provisions are also included in the bill.
Should you have any questions about the proposed changes or the impact on you or your business, contact JPS. We’re here to translate and guide you through today’s financial complexities.
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