North Carolina General Statutes 105-153.4. North Carolina taxable income defined
Terms Used In North Carolina General Statutes 105-153.4
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories, so called; and the words "United States" shall be construed to include the said district and territories and all dependencies. See North Carolina General Statutes 12-3
(a) Residents. – For an individual who is a resident of this State, the term “North Carolina taxable income” means the taxpayer’s adjusted gross income as modified in N.C. Gen. Stat. § 105-153.5 and N.C. Gen. Stat. § 105-153.6
(b) Nonresidents. – For a nonresident individual, the term “North Carolina taxable income” means the taxpayer’s adjusted gross income as modified in N.C. Gen. Stat. § 105-153.5 and N.C. Gen. Stat. § 105-153.6, multiplied by a fraction the denominator of which is the taxpayer’s gross income as modified in N.C. Gen. Stat. § 105-153.5 and N.C. Gen. Stat. § 105-153.6, and the numerator of which is the amount of that gross income, as modified, that is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State, is derived from a business, trade, profession, or occupation carried on in this State, or is derived from gambling activities in this State.
(c) Part-year Residents. – If an individual was a resident of this State for only part of the taxable year, having moved into or removed from the State during the year, the term “North Carolina taxable income” has the same meaning as in subsection (b) of this section except that the numerator includes gross income, as modified under N.C. Gen. Stat. § 105-153.5 and N.C. Gen. Stat. § 105-153.6, derived from all sources during the period the individual was a resident.
(d) S Corporations and Partnerships. – In order to calculate the numerator of the fraction provided in subsection (b) of this section, the amount of a shareholder’s pro rata share of S Corporation income, as modified in N.C. Gen. Stat. § 105-153.5 and N.C. Gen. Stat. § 105-153.6, that is includable in the numerator is the shareholder’s pro rata share of the S Corporation’s income attributable to the State, as defined in N.C. Gen. Stat. § 105-131(b)(4). In order to calculate the numerator of the fraction provided in subsection (b) of this section for a partner in a partnership or a member of another unincorporated business that has one or more nonresident partners or members and operates in one or more other states, the amount of the partner’s or member’s distributive share of the total net income of the business, as modified in N.C. Gen. Stat. § 105-153.5 and N.C. Gen. Stat. § 105-153.6, plus any guaranteed payments made to a partner from the partnership that is includable in the numerator is determined in accordance with the provisions of N.C. Gen. Stat. § 105-130.4 As used in this subsection, total net income means the entire gross income of the business less all expenses, taxes, interest, and other deductions allowable under the Code that were incurred in the operation of the business.
(d1) Sole Proprietorships. – In order to calculate the numerator of the fraction provided in subsection (b) of this section for an individual that operates a business in one or more other states, the amount of an individual’s total net income of the business, as modified in N.C. Gen. Stat. § 105-153.5 and N.C. Gen. Stat. § 105-153.6, that is includable in the numerator is determined in accordance with the provisions of N.C. Gen. Stat. § 105-130.4 As used in this subsection, total net income means the entire gross income of the business less all expenses, taxes, interest, and other deductions allowable under the Code that were incurred in the operation of the business.
(e) Tax Year. – A taxpayer must compute North Carolina taxable income on the basis of the taxable year used in computing the taxpayer’s income tax liability under the Code. (1989, c. 728, s. 1.4; 1995, c. 17, s. 4; 2005-276, s. 31.1(aa); 2005-344, s. 10.4; 2011-145, s. 31A.1(b); 2012-79, s. 1.2; 2013-414, s. 55; 2013-316, ss. 1.1(a), 1.3(c); 2015-6, s. 2.22(a); 2017-204, s. 1.9(c), (d); 2023-12, s. 1.3.)