North Carolina § 105-153 - 4. North Carolina taxable income defined.

§ 105-153. 4. North Carolina taxable income defined.

Residents. - For an individual who is a resident of this State, the term "North Carolina taxable income" means the taxpayer's adjusted gross income as modified in G.S. 105-153.5 and G.S. 105-153.6. Nonresidents. - For a nonresident individual, the term "North Carolina taxable income" means the taxpayer's adjusted gross income as modified in G.S. 105-153.5 and G.S. 105-153.6, multiplied by a fraction the denominator of which is the taxpayer's gross income as modified in G.S. 105-153.5 and G.S. 105-153.6, and the numerator of which is the amount of that gross income, as modified, 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, is derived from a business, trade, profession, or occupation carried on in this State, or is derived from gambling activities in this State. Part-year Residents. - If an individual was a resident of this State for only part of the taxable year, having moved into or removed from the State during the year, the term "North Carolina taxable income" has the same meaning as in subsection (b) of this section except that the numerator includes gross income, as modified under G.S. 105-153.5 and G.S. 105-153.6, derived from all sources during the period the individual was a resident. S Corporations and Partnerships. - In order to calculate the numerator of the fraction provided in subsection (b) of this section, the amount of a shareholder's pro rata share of S Corporation income, as modified in G.S. 105-153.5 and G.S. 105-153.6, that is includable in the numerator is the shareholder's pro rata share of the S Corporation's income attributable to the State, as defined in G.S. 105-131(b)(4). In order to calculate the numerator of the fraction provided in subsection (b) of this section for a partner in a partnership or a member of another unincorporated business that has one or more nonresident partners or members and operates in one or more other states, the amount of the partner's or member's distributive share of the total net income of the business, as modified in G.S. 105-153.5 and G.S. 105-153.6, plus any guaranteed payments made to a partner from the partnership that is includable in the numerator is determined in accordance with the provisions of G.S. 105-130.4. As used in this subsection, total net income means the entire gross income of the business less all expenses, taxes, interest, and other deductions allowable under the Code that were incurred in the operation of the business. Tax Year. - A taxpayer must compute North Carolina taxable income on the basis of the taxable year used in computing the taxpayer's income tax liability under the Code. History (1989, c. 728, s. 1.4; 1995, c. 17, s. 4; 2005-276, s. 31.1(aa); 2005-344, s. 10.4; 2011-145, s. 31A.1(b); 2012-79, s. 1.2; 2013-414, s. 55; 2013-316, ss. 1.1(a), 1.3(c); 2015-6, s. 2.22(a); 2017-204, s. 1.9(c), (d).) Editor's Note. - This section was former G.S. 105-134.5 . It was recodified as G.S. 105-153.4 by Session Laws 2013-316, s. 1.1(a), effective for taxable years beginning on or after January 1, 2014. Session Laws 2013-316, s. 9(a), provides: "This act does not affect the rights or liabilities of the State, a taxpayer, or another person arising under a statute amended or repealed by this act before the effective date of its amendment or repeal; nor does it affect the right to any refund or credit of a tax that accrued under the amended or repealed statute before the effective date of its amendment or repeal." Session Laws 2017-204, s. 1.9(g), provides: "The General Assembly finds that the amendments made by this section clarify the intent of the existing law and do not represent a change in the law. Accordingly, subsections (a) and (c) of this section apply to taxable years beginning before January 1, 2014, subsections (b) and (d) of this section apply to taxable years beginning on or after January 1, 2014, and subsection (f) of this section applies to all taxable years." Session Laws 2017-204, s. 7.1, is a severability clause. Effect of Amendments. - Session Laws 2011-145, s. 31A.1(b), effective for taxable years beginning on or after January 1, 2012, rewrote the section. Session Laws 2012-79, s. 1.2, effective June 26, 2012, in subsection (b), deleted "adjusted" preceding the second and third occurrences of "gross income"; and in subsection (c), deleted "adjusted" preceding "gross income". Session Laws 2013-316, s. 1.3(c), effective for taxable years beginning on or after January 1, 2014, substituted "G.S. 105-153.5 and G.S. 105-153.6 " for "G.S. 105-134.6" in subsections (a) through (c). Session Laws 2013-414, s. 55, effective August 23, 2013, inserted "and G.S. 105-134.6 A" in subsection (a), twice in subsection (b), and in subsection (c). Session Laws 2015-6, s. 2.22(a), effective for taxable years beginning on or after January 1, 2015, deleted "and G.S. 105-134.6 A" following "G.S. 105-153.6" throughout subsections (a) through (c); and in subsection (d), inserted "as modified in G.S. 105-153.5 and G.S. 105-153.6 " throughout, substituted "the total net income" for "income" and "in accordance with the provisions" for "by multiplying the total net income of the business by the ratio ascertained under the provisions" in the second sentence. Session Laws 2017-204, s. 1.9(c), (d), rewrote the second sentence in subsection (d). For effective date and applicability, see editor's note.