North Carolina Provides Additional COVID-19 Relief to Taxpayers

On May 4, 2020, North Carolina Gov. Roy Cooper signed into law Senate Bill 7041 (SB 704) which provides COVID-19 relief to North Carolina taxpayers. Relief provisions include the following;

  1. a refundable tax credit for employer contributions to the Unemployment Insurance Fund paid on the April 30, 2020 report;
  2. an expansion of unemployment benefits for individuals impacted by COVID-19; and
  3. the abatement of interest on original income and franchise payments from April 15, 2020 to July 15, 2020.
Refundable Tax Credit for Employer Unemployment Insurance Fund Contributions

The SB 704 relief provisions provide for a tax credit equal to the contributions to the Unemployment Insurance Fund on the report filed on April 30, 2020 for all North Carolina employers. The credit will be applied to the contributions payable on the report filed on July 31, 2020. A refund will be provided if the contributions on the April 30, 2020 report exceed the amount of contributions payable on July 31, 2020. In order to qualify for the credit, a Taxpayer must file the contribution report by July 31, 2020.

Expansion of Unemployment Benefits for Individual Impacted by COVID-19

The enacted bill also expands relevant definitions of unemployment benefit eligibility in order to include individuals that are impacted by coronavirus. A North Carolina employee is eligible for unemployment benefits now if the employer ceased operations due to the coronavirus; if the employer reduced hours of employment due to the coronavirus; if the individual has a current diagnosis of the coronavirus; and if the individual is quarantined at the instruction of a healthcare provider or public official. There is no waiting week and no work search requirement under these circumstances.

The expanded coronavirus unemployment benefits are applicable from March 10, 2020 until the earlier of December 31, 2020 or the date that an executive order is signed rescinding the State of Emergency Executive Order No. 116. Executive Order No. 116 formally declared a state of emergency for the state of North Carolina to coordinate response and protective actions in response to COVID-19.

Interest Abatement on Income & Franchise Tax Payments Originally Due April 15, 2020

Finally, the legislation waives the accrual of interest accruing for the period between April 15, 2020 and July 15, 2020 for the underpayment of income and franchise tax for corporations, partnerships, individuals, and estates and trusts given that the North Carolina Department of Revenue has automatically extended the April 15, 2020 due date of returns to July 15, 2020. The abatement of penalties on the underpayment of tax for this period was previously provided by the North Carolina Department of Revenue; however, legislative action was required in order to grant an abatement of interest in the case of such deferred tax payments. Additionally, Taxpayers seeking refunds for individual income tax or corporate income and franchise tax are granted an automatic extension of the statute of limitations to July 15, 2020 if the statute of limitation

period ended on April 15, 2020. North Carolina has a three year statute of limitations, so the tax year 2016 statute of limitations would run on April 15, 2020 for calendar year end filers that did not request a six month extension. Similarly, Taxpayers that were required to request Departmental review between April 1, 2020 and July 15, 2020 will be considered to have timely filed the request if it is made by July 15, 2020. Taxpayers generally file requests for Department Review in response to a notice of assessment or a denial of refund by the North Carolina Department of Revenue.

DHG Recommendations

DHG recommends that North Carolina employers file the contribution report to the Unemployment Insurance Fund by July 31, 2020 in order to receive the benefit of the contributions on the April 30, 2020 report. North Carolina employers should file a request for unemployment benefits for employees that meet the qualifications for coronavirus unemployment benefits. North Carolina Taxpayers should evaluate if they are able to claim refunds for the tax periods with a statute of limitations period that is now ending on July 15, 2020. Finally, North Carolina Taxpayers should verify that they have responded to all notices and denials of refund before July 15, 2020.

For questions or more information, please reach out to us at tax@dhg.com.

Sources

  1. Full text available at: https://www.ncleg.gov/Sessions/2019/Bills/Senate/PDF/S704v5.pdf

ABOUT THE AUTHORS

Mary Stonecypher
Manager, State & Local Tax

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