North Carolina § 105-163 - 41. Underpayment.

§ 105-163. 41. Underpayment.

Except as provided in subsection (d), if the amount of estimated tax paid by a corporation during the taxable year is less than the amount of tax imposed upon the corporation under Article 4 of this Chapter for the taxable year, the corporation must be assessed interest in an amount determined by multiplying the amount of the underpayment as determined under subsection (b), for the period of the underpayment as determined under subsection (c), by the percentage established as the rate of interest on assessments under G.S. 105-241.21 that is in effect for the period of the underpayment. For the purpose of this section, the amount of tax imposed under Article 4 of this Chapter is the net amount after subtracting the credits against the tax allowed by this Chapter other than the credit allowed by this Article. The amount of the underpayment shall be the difference between: The amount of the installment the corporation would have been required to pay if the corporation's estimated tax equalled ninety percent (90%) of the tax imposed under Article 4 for the taxable year, assuming the same schedule of installments, or ninety percent (90%) of the tax imposed for the taxable year if the corporation made no installment payments; and The amount, if any, of the corresponding installment timely paid by the corporation. The period of the underpayment runs from the date the installment was required to be paid to the earlier of: The 15th day of the fourth month following the close of the taxable year, or With respect to any portion of the underpayment, the date on which the portion is paid. An installment payment of estimated tax is considered a payment of any previous underpayment only to the extent the payment exceeds the amount of the installment determined under subdivision (1) of subsection (b) for that installment date. Except as provided in subdivision (5) of this subsection, the interest for underpayment imposed by this section shall not be imposed if the total amount of all payments of estimated tax made on or before the last date prescribed for the payment of the installments equals or exceeds the amount that would have been required to be paid on or before that date if the estimated tax was equal to the least of: The tax shown on the return of the corporation for the preceding taxable year, if the corporation filed a return for the preceding taxable year and the preceding year was a taxable year of 12 months; An amount equal to the tax computed at the rates applicable to the taxable year but otherwise on the basis of the facts shown on the return of the corporation for, and the law applicable to, the preceding taxable year; or An amount equal to ninety percent (90%) of the tax for the taxable year computed by placing on an annualized basis the taxable income: For the first three months of the taxable year, in the case of the installment required to be paid in the 4th month; For the first three months or for the first five months of the taxable year, in the case of the installment required to be paid in the 6th month; For the first six months or for the first eight months of the taxable year, in the case of the installment required to be paid in the 9th month; and For the first nine months or for the first 11 months of the taxable year, in the case of the installment required to be paid in the 12th month of the taxable year. For purposes of this subdivision, the taxable income shall be placed on an annualized basis by multiplying by 12 the taxable income referred to in the preceding sentence, and dividing the resulting amount by the number of months in the taxable year (3, 5, 6, 8, 9, or 11 as the case may be) referred to in that sentence. In the case of a large corporation, as defined in section 6655 of the Code, subdivisions (1) and (2) of this subsection shall not apply. History (1959, c. 1259, s. 1A; 1973, c. 476, s. 193; 1977, c. 1114, s. 9; 1983, c. 713, s. 86; 1987 (Reg. Sess., 1988), c. 994, ss. 2, 3; 2001-414, s. 13; 2005-276, s. 6.37(m); 2007-491, s. 44(1)a; 2013-414, s. 3.) Editor's Note. - Session Laws 2005-276, s. 6.37(w), provides: "The Office of State Budget and Management shall develop a methodology for computing the actual costs of collection of civil penalties by State departments and agencies. This methodology shall apply to all State departments and agencies, effective July 1, 2006." Session Laws 2005-276, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2005'." Session Laws 2005-276, s. 46.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2005-2007 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2005-2007 fiscal biennium." Session Laws 2005-276, s. 46.5 is a severability clause. Session Laws 2007-491, s. 47, provides: "G.S. 105-241.10, as enacted by Section 1 of this act, and Sections 6, 15, 16, 17, and 22 are effective for taxable years beginning on or after January 1, 2007. Section 14 is effective for taxable years beginning on or after January 1, 2008. Sections 45, 46, and 47 are effective when they become law. The remainder of this act becomes effective January 1, 2008. The procedures for review of disputed tax matters enacted by this act apply to assessments of tax that are not final as of the effective date of this act and to claims for refund pending on or filed on or after the effective date of this act. This act does not affect matters for which a petition for review was filed with the Tax Review Board under G.S. 105-241.2 before the effective date of this act. The repeal of G.S. 105-122(c) and G.S. 105-130.4(t) and Sections 11 and 12 apply to requests for alternative apportionment formulas filed on or after the effective date of this act. A petition filed with the Tax Review Board for an apportionment formula before the effective date of this act is considered a request under G.S. 105-122(c1) or G.S. 105-130.4(t1) , as appropriate." Session Laws 2009-451, s. 27A.1(c), provides in part: "Notwithstanding the provisions of G.S. 105-163.15 and G.S. 105-163.41 , no addition to tax may be made under those statutes for a taxable year beginning on or after January 1, 2009, and before January 1, 2011, with respect to any underpayment of income tax to the extent the underpayment was created or increased by this section." Session Laws 2009-451, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2009'." Session Laws 2009-451, s. 28.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2009-2011 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2009-2011 fiscal biennium." Session Laws 2009-451, s. 28.5 is a severability clause. Session Laws 2020-3, s. 1.1(a)-(d), provides: "(a) Interest Waiver. - As a result of the COVID-19 outbreak, the Secretary of Revenue has extended the franchise, corporate income, and individual income tax payment deadline from April 15, 2020, to July 15, 2020, and pursuant to G.S. 105-249.2 , the Secretary will not assess a penalty for failure to file a return or pay a tax due as long as the return is filed and the tax due is paid by July 15, 2020. Notwithstanding G.S. 105-241.21(b) , the Secretary of Revenue shall also waive the accrual of interest from April 15, 2020, through July 15, 2020, on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, due from April 15, 2020, through July 15, 2020. The relief from accrual of interest from April 15, 2020, through July 15, 2020, also includes interest imposed pursuant to G.S. 105-163.15 and G.S. 105-163.41 for payments due on or before July 15, 2020. "(b) Refund Request. - For franchise, corporate income, and individual income tax, the statute of limitations for obtaining a refund is extended to July 15, 2020, for refund claims for which the statute of limitations to seek a refund expires on or after April 15, 2020, and before July 15, 2020. "(c) Time-Sensitive Actions. - Certain actions required to be taken by a taxpayer on or after April 1, 2020, and before July 15, 2020, will be considered timely if the request or petition is filed on or before July 15, 2020. This subsection applies to requests for Departmental review under G.S. 105-241.11 , petitions for a contested case hearing at the Office of Administrative Hearings under Article 3 of Chapter 150B of the General Statutes and G.S. 105-241.15 , and petitions for judicial review under Article 4 of Chapter 150B of the General Statutes and G.S. 105-241.16 . "(d) This section is effective when it becomes law." Session Laws 2020-3, s. 5, is a severability clause. Effect of Amendments. - Session Laws 2005-276, s. 6.37(m), effective July 1, 2005, deleted "Penalty for" from the section heading; in subsection (a), substituted "interest" for "an additional tax as a penalty"; and in subsection (d), in the introductory paragraph, substituted "interest" for "penalty" and added "imposed by this section." Session Laws 2007-491, s. 44(1)a., effective January 1, 2008, substituted "G.S. 105-241.21" for "G.S. 105-241.1(i)" in subsection (a). For applicability, see Editor's note. Session Laws 2013-414, s. 3, effective August 23, 2013, in subsection (c), substituted "runs from" for "shall run from" in the introductory language; substituted "fourth month" for "3rd month" in subdivision (c)(1); and substituted "is considered" for "shall be considered" in the second sentence of subdivision (c)(2).