GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1999

S	1 

SENATE BILL 811

Short Title:  Alternative R & D Credit.	(Public)

─────────────────────────────────────── 
Sponsors: Senators Reeves; and Clodfelter.

─────────────────────────────────────── 
Referred to:  Finance.

─────────────────────────────────────── 

April 12, 1999

A BILL TO BE ENTITLED
AN ACT TO PERMIT AN ALTERNATIVE COMPUTATION OF THE STATE TAX CREDIT FOR RESEARCH AND DEVELOPMENT.
The General Assembly of North Carolina enacts:
Section 1.  The title of Article 3B of Chapter 105 of the General Statutes reads as rewritten:
"ARTICLE 3B.
"Business Tax Credits."
Section 2.  Article 3B of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-129.16A. Elective credit for research and development.
(a)	Credit. – In lieu of the credit for research and development allowed under Article 3A of this Chapter, a taxpayer may elect a credit under this section for its research and development expenses incurred in this State.  The credit allowed is equal to one percent (1%) of the taxpayer's qualified research expenses incurred in this State during the taxable year that are part of the taxpayer's business activities.
(b)	No Double Credit. – A taxpayer that elects the credit allowed under this section is not allowed a credit for research and development under Article 3A of this Chapter with respect to the taxpayer's qualified research expenses.  An election of the credit allowed under this section is binding for the current taxable year and all subsequent taxable years until this section is repealed or the Secretary gives the taxpayer permission to elect a different credit."
Section 3.  G.S. 105-129.15 reads as rewritten:
"§ 105-129.15. Definitions.
The following definitions apply in this Article:
(1)	Business property. – Tangible personal property that is used by the taxpayer in connection with a business or for the production of income and is capitalized by the taxpayer for tax purposes under the Code. The term does not include, however, a luxury passenger automobile taxable under section 4001 of the Code or a watercraft used principally for entertainment and pleasure outings for which no admission is charged.
(2)	Cost. –  In the case of property owned by the taxpayer, cost is determined pursuant to regulations adopted under section 1012 of the Code, subject to the limitation on cost provided in section 179 of the Code. In the case of property the taxpayer leases from another, cost is value as determined pursuant to G.S. 105-130.4(j)(2).
(2a)	Qualified research expenditures. – Defined in section 41 of the Internal Revenue Code as enacted as of January 1, 1999.
(3)	Purchase. – Defined in section 179 of the Code."
Section 4.  G.S. 105-129.17 reads as rewritten:
"§ 105-129.17.  Tax election; cap.
(a)	Tax Election. – The credits allowed in this Article are allowed against the franchise tax levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which the first installment of the credit is claimed. This election is binding. Any carryforwards of a credit must be claimed against the same tax.
(b)	Cap. – The business property credit allowed in this Article may not exceed fifty percent (50%) of the tax against which it is claimed for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the taxpayer. The research and development credit allowed in this Article may not exceed the tax against which it is claimed for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the taxpayer.  These limitations apply to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this Article against each tax for the taxable year. Any unused portion of the business property credit may be carried forward for the succeeding five years. Any unused portion of the research and development credit may be carried forward for the succeeding 15 years."
Section 5.  This act is effective for taxable years beginning on or after January 1, 1999.