A BILL TO BE ENTITLED
AN ACT to clarify allocation of trust income.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 105‑160.2 reads as rewritten:
"§ 105‑160.2.  Imposition of tax.
(a)	The tax imposed by this Part applies to the taxable income of estates and trusts as determined under the provisions of the Code except as otherwise provided in this Part. The taxable income of an estate or trust is the same as taxable income for such an estate or trust under the provisions of the Code, adjusted as provided in G.S. 105‑153.5 and G.S. 105‑153.6, except that the adjustments provided in G.S. 105‑153.5 and G.S. 105‑153.6 are apportioned between the estate or trust and the beneficiaries based on the distributions made during the taxable year.
(b)	The tax is computed on the amount of the taxable income of an estate or trust as follows:
(1)	On a nonresident estate or nonresident trust, but only to the extent that the income (i) is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State or (ii) is derived from a business, trade, profession, or occupation carried on in this State.
(2)	On a resident estate that is for the benefit of a resident current beneficiary.
(3)	On a resident trust that is for the benefit of a resident current beneficiary.
(4)	On a resident trust or a resident estate for the benefit of a nonresident current beneficiary, but only to the extent that the income (i) is derived from North Carolina sources and is attributable to the ownership of any interest in real or tangible personal property in this State or (ii) is derived from a business, trade, profession, or occupation carried on in this State.
For purposes of this subsection, taxable income and gross income is computed subject to the adjustments provided in G.S. 105‑153.5 and G.S. 105‑153.6.
(c)	The tax on the amount computed above is at the rates levied in G.S. 105‑153.7. The fiduciary responsible for administering the estate or trust shall pay the tax computed under the provisions of this Part.
(d)	The taxable income of resident estates and resident trusts described in subsection (b) of this section shall be apportioned between resident and nonresident current beneficiaries on a rational basis. The taxable income of a resident estate or resident trust shall be equally apportioned among all current beneficiaries unless the fiduciary apportions and reports the taxable income of such resident estate or resident trust using an alternative approach and attaches to its tax return items reflecting a rational basis for such alternative approach based upon governing law, the terms of the governing instrument, the resident estate's or resident trust's history of distributions to current beneficiaries, the age and means of current beneficiaries of the resident estate or resident trust, and other relevant facts and circumstances.
(e)	The following definitions apply in this section:
(1)	Current beneficiary. – A beneficiary who, on the date the beneficiary's qualification is determined, is a distributee or permissible distributee of income or principal of the estate or trust.
(2)	Nonresident estate. – An estate other than a resident estate.
(3)	Nonresident trust. – A trust other than a resident trust.
(4)	Resident estate. – The estate of a decedent who died a resident of North Carolina.
(5)	Resident trust. – A trust which has its principal place of administration in North Carolina, as defined in G.S. 36‑1‑103(13a)."
SECTION 2.  This act is effective for taxable years beginning on or after January 1, 2015.