North Carolina 'market-based sourcing' report due April 15; no extensions
Multistate tax alert | February 12, 2016
This tax alert summarizes an informational report filing requirement included in House Bill 97, which made various modifications to North Carolina tax law.
On October 2, 2015, we issued a tax alert summarizing House Bill 97 (H.B. 97),1 which made various modifications to North Carolina tax law.2 Among the changes is a requirement that corporate taxpayers with apportionable income greater than $10 million must file an informational report (Form NCDOR CD-400 MS, available here) with the Department of Revenue (Department) showing the calculation of the taxable year 2014 sales factor using market-based sourcing.3 The 2014 sales factor is required to be computed based on the market-based provisions outlined in H.B. 97 (e.g., sales of services are to be sourced based on the “delivered to” location), as well as the model market-sourcing regulations drafted by the Multistate Tax Commission (MTC).4
Along with other required information, the informational report is due April 15, 2016 for all taxpayers and must include:
- The corporation’s apportionment percentage used on the corporation’s 2014 North Carolina corporate tax return,
- The corporation’s 2014 apportionment percentage as calculated under the market-based sourcing rules provided in H.B. 97,
- The corporation’s primary industry code under the North American Industry Classification System, and
- Any other information prescribed by the Secretary of the Department.5
All corporate taxpayers must file the informational report by April 15, 2016, regardless of whether they are calendar year or fiscal year taxpayers.6
A taxpayer may not request an extension of time to file the informational report, and a penalty of $5,000 shall be assessed for failure to file the report in a timely manner.7
If you have questions regarding this informational report filing requirement or other North Carolina tax matters, please contact any of the following Deloitte Tax professionals:
John Galloway, partner, Deloitte Tax LLP, Charlotte, +1 704 887 1619
Kent Clay, director, Deloitte Tax LLP, Charlotte, +1 704 227 7956
Arthur Tilley, director, Deloitte Tax LLP, Charlotte, +1 704 887 1551
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1 Ch. S.L. 2015-241 (H.B. 97, signed by Governor Pat McCrory on Sept. 18, 2015). A copy of the adopted law is accessible here.
2 Our Tax Alert, “North Carolina enacts significant tax law changes,” issued on Oct. 2, 2015, is available here.
3 H.B. 97, Sec. 32.14A.(a), (b).
4 H.B. 97, Sec. 32.14A.(b), (c). The Department may also publish additional market-based souring guidelines consistent with the MTC regulations. H.B. 97, Sec. 32.14A.(c).
5 H.B. 97, Sec. 32.14A.(d).
6 Ch. S.L. 2015-268 (H.B. 259, signed by Governor Pat McCrory on Oct. 1, 2015). Sec. 32.14A.(e).
7 Id. Note, however, “The Secretary may reduce or waive the penalty as provided in N.C. Gen. Stat. §105-237.” Id.