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North Carolina enacts significant tax legislation and proposes market-based sourcing provisions

North Carolina Gov. Pat McCrory recently signed into law several different bills that significantly change the state’s corporation income and sales tax regimes. The corporate income tax provisions formally propose market-based sourcing concepts in the area of apportionment, reduce the allowable deduction for related-party interest expense and exclude certain receipts from financial transactions from the sales factor. In addition, Gov. McCrory announced on Aug. 2, 2016, that the state exceeded its general fund target amount, triggering a prospective corporate income tax rate reduction. Enacted sales tax provisions modify several key definitions and expand the grounds for compromise that may be employed by the North Carolina Department of Revenue. Finally, the legislation provides for the publication of written determinations by the Department regarding state tax matters.

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