NC Franchise Tax Refund Opportunity For Contractors

Posted on 08.25.10

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We have recently become aware of a potential refund opportunity in North Carolina. Contractors using the percentage of completion methods that operate in North Carolina may have a franchise tax refund opportunity. The North Carolina Department of Revenue recently issued a notice regarding franchise tax paid on billings in excess of costs. The 2009 NC legislature provided an exemption for the “billings in excess of costs” liability account from the capital stock, surplus, and undivided profits base of the state’s franchise tax, effective for taxable years beginning on or after January 1, 2010. A recent amendment makes these changes effective retroactively to taxable years beginning on or after January 1, 2007, and authorizes taxpayers that paid franchise tax on the “billings in excess of costs” liability in taxable years 2007, 2008, and 2009 to apply for a refund of the franchise tax paid attributable to those amounts. The Department of Revenue issued a notice providing that taxpayers that paid franchise tax on their “billings in excess of costs” liability account for tax years in which the taxes were due in 2007, 2008, or 2009 may request a refund by filing either an amended income and franchise tax return (CD-405 or CD-401S) or Form NC-19 (Claim for Refund of Taxes). According to the notice, taxpayers are instructed to enter “Franchise Tax Paid on Billings in Excess of Costs” in the explanation section of the request for refund. To be considered timely, a request for refund must be received by the Department no later than January 1, 2011, and any refund requests received after that date will be barred. Source: http://www.dor.state.nc.us/taxes/corporate/impnotice_7-10.pdf (PDF)

Please do not hesitate to contact us for additional information or for assistance in filing claims for refunds.