- A handful of states have, either legislatively or administratively, reacted to the changes to the Internal Revenue Code (the “Code”) as amended by the One Big Beautiful Bill Act (“OBBBA”).
- State adoption of the OBBBA provisions are contingent on the date that the state conforms to the Code, its starting point in computing taxable income considering the conformity date, and whether it has decoupled from any Code provisions.
- While North Carolina has not responded legislatively, the Department of Revenue (the “Department”) has issued an “Important Notice” that advises taxpayers as to the implications of the OBBBA provisions as of the date of the notice.
Background
North Carolina has issued a notice advising taxpayers as to the implications of changes to the Code because of the OBBBA for purposes of calculating North Carolina corporate and personal income taxes. North Carolina is a static conformity state – the tax laws incorporate the Code as of January 1, 2023, in the statute as a reference point for determining tax due.
Starting Point for Calculating North Carolina Income Tax
North Carolina starts with adjusted gross income for calculating individual income taxes; for corporate income taxes, the starting point is federal taxable income. Since the General Assembly has not updated the reference point for the Code, these calculations must be made using the Code as it was in effect on January 1, 2023. Thus, the changes brought about by virtue of the changes to the Code under the OBBBA, signed on July 4, 2025, are not effective for purposes of taxpayers’ 2025 tax returns. The notice uses changes made to research and experimentation expenses under §§ 174 and 174A of the Code, and changes made to bonus depreciation under §168(k) of the Code, as examples of provisions that are not currently effective in North Carolina.
Forvis Mazars Insight: The examples are some of the most significant changes enacted in OBBBA affecting taxpayers, but any changes wrought by the OBBBA are nonetheless not in effect in North Carolina because of the conformity date.
What’s Next
While the General Assembly is scheduled to reconvene for shorter, focused sessions, it is not slated to convene for a full session until after April 15th, which is the filing deadline for many taxpayers. Considering this, the Notice emphasizes that taxpayers may either choose to file an extension or file the return (with an appropriate payment) in accord with the rules set forth above. Taxpayers are required to file a schedule reconciling adjusted gross income or federal taxable income for 2025 with these calculations under the Code as it was in effect on January 1, 2023. The General Assembly may, or may not, take subsequent action that may or may not affect taxpayers’ 2025 returns and/or of those of future years, but it should be noted that the General Assembly has some recent history with making retroactive tax law changes that impact previously filed returns. North Carolina is also operating without an approved biennial budget and it is possible that any determinations on conformity to the OBBBA could be made as part of the General Assembly’s overall budget. Depending on the course of action that the General Assembly and the Governor take, amended returns may be required.
How Forvis Mazars Can Help
Forvis Mazars can help you understand the implications of North Carolina’s static conformity date on your 2025 North Carolina returns and help you determine an appropriate course of action. Additionally, we will keep you apprised of changes as they are enacted in North Carolina and how they will affect your 2025 returns as well as your future tax liabilities.