On September 18, 2015, North Carolina Governor Pat McCrory signed H.B. 97, which provides for a three-year phase-in of the single sales factor method for corporations required to apportion their income to North Carolina. The phase-in will begin with the change to a triple-weighted sales factor for taxable years beginning on or after January 1, 2016, then to a quadruple-weighted sales factor for taxable years beginning on or after January 1, 2017 and end with full phase-in of the single sales factor for taxable years beginning on or after January 1, 2018.
As part of the legislation, corporate taxpayers that meet the following requirements, based on information reported on their 2014 North Carolina Corporate Income Tax Returns, must complete Form CD-400 MS, Market-Based Sourcing Informational Report:
- Apportionable income reported of greater than $10 million.
- Apportionment factor of less than 100%.
- Apportionment factor based in whole or in part on the sales factor as determined under G.S. 105-130.4(l).
Please note that Form CD-400 MS is required to be filed by April 15, 2016. The Form should not be filed with the taxpayer's 2015 North Carolina Corporate Income Tax Return, and there is no extension of time to file the report. Taxpayers that fail to comply with this reporting requirement will be assessed a penalty of $5,000.
We encourage you to contact a member of our State and Local Tax Team if you need assistance with determining your filing requirements, or with completing the report. Visit our State and Local Tax blog for similar articles.