North Carolina § 105-243 - 1. Collection of tax debts.

§ 105-243. 1. Collection of tax debts.

Definitions.- The following definitions apply in this section: Overdue tax debt. - Any part of a tax debt that remains unpaid 60 days or more after it becomes collectible under G.S. 105-241.22. The term does not include a tax debt for which the taxpayer entered into an installment agreement for the tax debt under G.S. 105-237 within 60 days after the tax debt became collectible, if the taxpayer has not failed to make any payments due under the installment agreement. Tax debt. - The total amount of tax, penalty, and interest collectible under G.S. 105-241.22. Outsourcing.- The Secretary may contract for the collection of tax debts owed by nonresidents and foreign entities. At least 30 days before the Department submits a tax debt to a contractor for collection, the Department must notify the taxpayer by mail that the debt may be submitted for collection if payment is not received within 30 days after the notice was mailed. [Outsourcing Limitation. - ] In determining the liability of any person for a tax, the Secretary may not employ an agent who is compensated in whole or in part by the State for services rendered on a contingent basis or any other basis related to the amount of tax, interest, or penalty assessed against or collected from the person. Secrecy.- A contract for the collection of tax debts is conditioned on compliance with G.S. 105-259. If a contractor violates G.S. 105-259, the contract is terminated, and the Secretary must notify the contractor of the termination. A contractor whose contract is terminated for violation of G.S. 105-259 is not eligible for an award of another contract under this section for a period of five years from the termination. These sanctions are in addition to the criminal penalties set out in G.S. 105-259. Fee. - A collection assistance fee is imposed on an overdue tax debt. In order to impose a collection assistance fee on a tax debt, the Department must notify the taxpayer that the fee will be imposed in accordance with this section at least 60 days prior to its imposition. The fee notice may be included on the notice of collection. The fee is collectible as part of the debt. The Secretary may waive the fee pursuant to G.S. 105-237 to the same extent as if it were a penalty. Use. - The fee is a receipt of the Department and must be applied to the costs of collecting and reducing the incidence of overdue tax debts. The proceeds of the fee must be credited to a special account within the Department and may be expended only as provided in this subsection. The proceeds of the fee may not be used for any purpose that is not directly and primarily related to collecting and reducing the incidence of overdue tax debts. The Department may apply the proceeds of the fee for the purposes listed in this subsection. The remaining proceeds of the fee may be spent only pursuant to appropriation by the General Assembly. The fee proceeds do not revert but remain in the special account until spent for the purposes listed in this subsection. The Department and the Office of State Budget and Management must account for all expenditures using accounting procedures that clearly distinguish costs allocable to the purposes listed in this subsection from costs allocable to other purposes and must demonstrate that none of the fee proceeds are used for any other purpose. To pay (i) contractors for collecting overdue tax debts under subsection (b) of this section and (ii) auditors responsible for identifying overdue tax debts. To pay the fee the United States Department of the Treasury charges for setoff to recover tax owed to North Carolina. To pay for taxpayer locator services, not to exceed three hundred fifty thousand dollars ($350,000) a year. To pay for postage or other delivery charges for correspondence directly and primarily relating to collecting overdue tax debts, not to exceed seven hundred fifty thousand dollars ($750,000) a year. To pay for operating expenses for Project Collection Tax and the Taxpayer Assistance Call Center. To pay for expenses of the Examination and Collection Division directly and primarily relating to collecting overdue tax debts. To pay the direct and indirect expenses of information technology upgrades to the Department of Revenue computer systems that are intended to upgrade Department of Revenue capabilities to (i) allow for electronic filing of returns by taxpayers and the electronic issuance of refunds by the Department for all remaining tax schedules and (ii) accomplish other mission-critical information technology tasks of the Department as approved by the Office of State Budget and Management in consultation with the State CIO. Reports. - The report of Department activities required by G.S. 105-256 contains information on the Department's efforts to collect tax debts and its use of the proceeds of the collection assistance fee. The amount of the collection assistance fee is twenty percent (20%) of the amount of the overdue tax debt. If a taxpayer pays only part of an overdue tax debt, the payment is credited proportionally to fee revenue and tax revenue. The Department may apply the fee proceeds for the following purposes: History (2001-380, ss. 2, 8; 2002-126, s. 22.2; 2003-349, s. 3; 2004-124, ss. 23.2(a), 23.3(c); 2004-170, s. 22.5; 2005-276, ss. 22.1(a), (b), 22.6(a); 2006-66, ss. 19.2, 19.3(a); 2007-323, s. 6.9(a); 2007-491, s. 33; 2012-152, s. 1; 2012-194, s. 61.5(b); 2014-3, s. 10.1(d); 2014-100, s. 26.1; 2015-109, s. 1; 2015-241, s. 28.2; 2019-169, s. 5.1(a); 2020-58, s. 6.4(a), (b).) Editor's Note. - Session Laws 2001-380, which enacted G.S. 105-243.1 , provides in s. 1: "The General Assembly finds that the Department of Revenue has documented that the State's cost of collecting overdue tax debts exceeds twenty percent (20%) of the amount of the overdue tax debts. The General Assembly finds that the cost of collecting overdue tax debts is currently borne by taxpayers who pay their taxes on time. It is the intent of the General Assembly by this act to shift this cost to the delinquent taxpayers who owe overdue tax debts." Session Laws 2001-424, s. 14D.1, provides: "Funds appropriated to the Department of Revenue for Project Collect Tax shall be transferred to a separate Fund Code in the Department's budget." Session Laws 2001-424, s. 14D.2, provides: "The Department of Revenue shall report to the Joint Legislative Commission on Governmental Operations and the Fiscal Research Division by October 1, 2001, and monthly thereafter regarding its progress in developing a request for proposal for a performance-based contract to collect overdue tax debts as defined in G.S. 105-243.1 . The report shall include a list of any funds expended in developing the request for proposal and the purposes for which the funds were spent. "The Department of Revenue shall consult with the Joint Legislative Commission on Governmental Operations prior to issuing the request for proposal for performance-based contracts." Session Laws 2001-424, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2001'." Session Laws 2001-424, s. 36.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2001-2003 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2001-2003 fiscal biennium." Session Laws 2001-424, s. 36.5 is a severability clause. Session Laws 2002-126, s. 22.4, provides: "The Department of Revenue may use up to six hundred thousand dollars ($600,000) during the 2002-2003 fiscal year from the collection assistance fee account created in G.S. 105-243.1 to be allocated as follows: "(1) Two hundred thousand dollars ($200,000) for contractual services related to system changes for managing and filing bankruptcies. "(2) Four hundred thousand dollars ($400,000) for identifying delinquent taxpayers." Session Laws 2002-126, ss. 22.6(a) to (c), as amended by Session Laws 2003-284, s. 23.1, and as amended by Session Laws 2004-124, ss. 23.1 and 23.3(a), provides: "(a) There is appropriated from the collection assistance fee account created in G.S. 105-243.1 to the Department of Revenue the sum of one million six hundred twenty-two thousand eight hundred ninety-six dollars ($1,622,896) for the 2003-2004 fiscal year and the sum of two million one hundred fifty-four thousand five hundred ninety-three dollars ($2,154,593) for the 2004-2005 fiscal year to pay for the costs of establishing and equipping a central taxpayer telecommunications service center for collections and assistance and for the costs associated with aligning local field offices with the new center. Of the funds appropriated in this subsection, the sum of three million dollars ($3,000,000) that was designated for the 2003-2005 biennium to pay for the costs of establishing and equipping a central taxpayer telecommunications service center does not revert at the end of the 2004-2005 fiscal year but remains available until June 30, 2006, for operating costs of the service center. "(b) Repealed by Session Laws 2003-284, s. 23.1, effective July 1, 2003. "(c) Beginning January 1, 2003, and ending six months following completion of the projects described in subsection (a) of this section, the Department of Revenue must report semiannually to the Joint Legislative Commission on Governmental Operations on the use of the funds and the progress of establishing the new center." Session Laws 2002-126, s. 1.2, provides: "This act shall be known as 'The Current Operations, Capital Improvements, and Finance Act of 2002'." Session Laws 2002-126, s. 31.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2002-2003 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2002-2003 fiscal year. For example, uncodified provisions of this act relating to the Medicaid program apply only to the 2002-2003 fiscal year." Session Laws 2002-126, s. 31.6 is a severability clause. Session Laws 2003-284, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2003'." Session Laws 2003-284, s. 49.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2003-2005 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2003-2005 fiscal biennium." Session Laws 2003-284, s. 49.5 is a severability clause. Session Laws 2004-124, s. 23.2(b), provides: "Funds are appropriated in this act from the collection assistance fee account created in G.S. 105-243.1 to the Department of Revenue for postage for correspondence directly and primarily relating to collecting overdue tax debts, for operating expenses for Project Collect Tax, and for expenses of the Examinations and Collections Division directly and primarily relating to collecting overdue tax debts as defined in G.S. 105-243.1 . The Department of Revenue and the Office of State Budget and Management must account for all expenditures using accounting procedures that clearly distinguish costs allocable to collecting overdue tax debts as defined in G.S. 105-243.1 from costs allocable to other purposes and must demonstrate that none of the fee proceeds are used for any purpose other than collecting overdue tax debts. "The Department of Revenue must report to the 2005 General Assembly on its implementation of this section." Session Laws 2004-124, s. 1.2, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2004'." Session Laws 2004-124, s. 33.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2004-2005 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2004-2005 fiscal year." Session Laws 2004-124, s. 33.5, contains a severability clause. Session Laws 2005-345, s. 37, repealed Session Laws 2005-276, s. 22.6, which had proposed to amend subsection (d) of this section by inserting "the actual cost of collection, not to exceed" preceding "twenty percent" in the second paragraph. Session Laws 2007-323, s. 6.9(b), as amended by Session Laws 2008-107, s. 23.1, provides: "The General Assembly finds that a computer system that records tax payments and determines when the payments are overdue directly and primarily relates to the collection of overdue tax debts and that the proceeds of the collection assistance fee imposed by G.S. 105-243.1 may be applied to the cost of the computer system. The Department of Revenue is authorized to use funds in the 20% Collection Assistance Fee Account, Budget Code 24704-2474, during the 2007-2008 and 2008-2009 fiscal years to replace the Department's current computer system, and these funds are appropriated to the Department for that purpose. For fiscal year 2007-2008, the Department shall not use more than fifteen million dollars ($15,000,000) from the Account to replace the Department's current computer system. For fiscal year 2008-2009, the Department shall not use more than twenty-five million dollars ($25,000,000) from the Account to replace the Department's current computer system. "Funds appropriated under this subsection may be transferred to Budget Code 24708-2478 to be applied to expenditures for a replacement computer system. Funds appropriated under this subsection that are not transferred to Budget Code 24708-2478 remain in the Account until they are transferred to that Budget Code or withdrawn for expenditures for a replacement computer system. Funds appropriated under this subsection that are not expended at the end of the 2007-2009 biennium remain available for expenditure for the purpose designated in this subsection." Session Laws 2007-323, s. 6.9(c), provides: "The Department of Revenue shall contract with private counsel with the pertinent information technology and computer law expertise to review requests for proposals and to negotiate and review contracts associated with the Integrated Tax Administration System. G.S. 114-2.3 does not apply to this subsection." Session Laws 2007-323, s. 1.2, provides: "This act shall be known as the 'Current Operations and Capital Improvements Appropriations Act of 2007'." Session Laws 2007-323, s. 32.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2007-2009 fiscal biennium, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2007-2009 fiscal biennium." Session Laws 2007-323, s. 32.5 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 [repealed] 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 2008-107, s. 1.2, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2008'." Session Laws 2008-107, s. 30.3, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2008-2009 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2008-2009 fiscal year." Session Laws 2008-107, s. 30.5 is a severability clause. Subsection (b1) was enacted by Session Laws 2012-152, s. 1, as subsection (a1). It was redesignated, and the bracketed subsection catchline was added, at the direction of the Revisor of Statutes. Session Laws 2012-152, s. 6, as amended by Session Laws 2012-194, s. 61.5(b), and as amended by Session Laws 2015-109, s. 1, provides: "Sections 1, 3, and 3.1 of this act become effective October 1, 2012. The Treasurer shall not renew any contingency fee-based contracts for these services after October 1, 2012. The Treasurer shall not assign further audits on a contingency fee basis to an auditing firm under a contract that meets all the following conditions: (i) the contract would have been prohibited under this act had the contract been entered into after October 1, 2012, and (ii) the contract allows the assignment of audits on a discretionary basis by the Treasurer. Sections 2, 4, and 5 of this act become effective July 1, 2013. After July 1, 2013, cities and counties shall not renew any contingency fee-based contracts for these services. After July 1, 2013, cities and counties shall not assign further audits on a contingency fee basis to an auditing firm under a contract that meets all the following conditions: (i) the contract would have been prohibited under this act had the contract been entered into after July 1, 2013, and (ii) the contract allows the assignment of audits on a discretionary basis. The remainder of the act is effective when the act becomes law." Session Laws 2014-100, s. 26.3, provides: "Notwithstanding the use requirements of G.S. 105-243.1(e) , for the 2014-2015 fiscal year, the Department of Revenue may use funds, not to exceed one million six hundred thousand dollars ($1,600,000) from the special account created by G.S. 105-243.1(e) , for the purchase of new document scanners." Session Laws 2014-100, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2014.'" Session Laws 2014-100, s. 38.4, provides: "Except for statutory changes or other provisions that clearly indicate an intention to have effects beyond the 2014-2015 fiscal year, the textual provisions of this act apply only to funds appropriated for, and activities occurring during, the 2014-2015 fiscal year." Session Laws 2014-100, s. 38.7, is a severability clause. Session Laws 2015-241, s. 1.1, provides: "This act shall be known as 'The Current Operations and Capital Improvements Appropriations Act of 2015.'" Session Laws 2015-241, s. 33.6, is a severability clause. Session Laws 2019-169, s. 5.1(b), as amended by Session Laws 2020-58, s. 6.4(b), made the amendment to subsection (d) by Session Laws 2019-169, s. 5.1(a), effective August 1, 2020, and applicable to tax debts that become collectible on or after that date. Session Laws 2020-58, s. 6.4(c), made the amendment of subsections (a) and (d) of this section by Session Laws 2020-58, s. 6.4(a), effective August 1, 2020, and applicable to tax debts that become collectible on or after that date. Effect of Amendments. - Session Laws 2001-380, s. 8, as amended by Session Laws 2003-384, s. 3, effective October 1, 2005, inserted "owed by nonresidents and foreign entities" at the end of the first sentence of subsection (b). Session Laws 2004-124, ss. 23.2(a) and 23.3(c), effective July 1, 2004, rewrote subsection (e); and in subsection (f), inserted "semiannually" following "report" near the beginning of the first sentence, and deleted the former second sentence. Session Laws 2004-170, s. 22.5, effective August 2, 2004, inserted the third sentence of subsection (e). Session Laws 2005-276, s. 22.1(a) and (b), effective July 1, 2005, in subsection (e), in the first paragraph, added the last sentence, and added subdivisions (e)(4) through (e)(6); and in subsection (f), added the second paragraph. Session Laws 2006-66, ss. 19.2 and 19.3(a), effective July 1, 2006, substituted "one hundred fifty thousand dollars ($150,000)" for "one hundred thousand dollars ($100,000)" in subdivision (e)(3); and inserted "not to exceed three hundred fifty-three thousand dollars ($353,000) a year" in subdivision (e)(4); and rewrote subsection (f), which detailed reporting requirements. Session Laws 2007-323, s. 6.9(a), effective July 1, 2007, substituted "five hundred thousand dollars ($500,000)" for "three hundred fifty three thousand dollars ($353,000)" at the end of subdivision (e)(4). Session Laws 2007-491, s. 33, effective January 1, 2008, in subdivision (a)(1), substituted "it becomes collectible under G.S. 105-241.22 " for "the notice of final assessment was mailed to the taxpayer" in the first sentence, and "the tax debt became collectible, if the taxpayer" for "the notice of final assessment was mailed and" in the last sentence; rewrote subdivision (a)(2); and substituted "the tax debt becomes collectible under G.S. 105-241.22 " for "the notice of final assessment for the tax debt was mailed to the taxpayer" in the next-to-last sentence in subsection (d). For applicability, see Editor's note. Session Laws 2012-152, s. 1, as amended by Session Laws 2012-194, s. 61.5(b), effective October 1, 2012, added subsection (a1). For redesignation of subsection and applicability, see editor's notes. Session Laws 2014-3, s. 10.1(d), effective May 29, 2014, substituted "five hundred thousand dollars ($500,000)" for "one hundred fifty thousand dollars ($150,000)" in subdivision (e)(3). Session Laws 2014-100, s. 25.3, effective July 1, 2014, in subdivision (e)(3), substituted "locator" for "locater" and substituted "three hundred fifty thousand dollars ($350,000)" for "five hundred thousand dollars ($500,000)." Session Laws 2015-241, s. 28.2, effective July 1, 2015, in subsection (e), in the introductory paragraph, substituted "collecting and reducing the incidence of overdue" for "collecting overdue" in the first and third sentences, substituted "the purposes listed in this subsection" for "the costs of collecting overdue tax debts" in the fifth sentence, and in the last sentence substituted "the purposes listed in this subsection" for "collecting overdue tax debts" and "other purpose" for "purpose other than collecting overdue tax debts", in subdivision (1), inserted "(i)" and substituted "this section" for "this section and (ii) auditors responsible for identifying overdue tax debts", substituted "seven hundred fifty thousand dollars ($750,000)" for "five hundred thousand dollars ($500,000" in subdivision (4), and added subdivision (7). Session Laws 2019-169, s. 5.1(a), in subsection (d), substituted "60" for "30" in the first and second sentences, substituted "tax debt is deemed collectible under G.S. 105-241.22 " for "fee notice required by this subsection is mailed to the taxpayer" in the first sentence, "notice of collection" for "fee notice" in the second sentence, and deleted the former third sentence, which read: "The Department may not mail the fee notice earlier than 60 days after the tax debt becomes collectible under G.S. 105-241.22 ." For effective date and applicability, see editor's note. Session Laws 2020-58, s. 6.4(a), substituted "60 days” for "90 days” twice in subdivision (a)(1); and rewrote the first paragraph of subsection (d). For effective date and applicability, see editor's note. § 105-244: Repealed by Session Laws 1998-212, s. 29A.14(o), effective January 1, 1999.