The North Carolina legislature has introduced S.B. 622, which would make significant changes to a wide range of North Carolina taxes.
Among those changes, the legislation would allow a deduction, to the extent included in federal taxable income, for amounts received from specified economic incentive programs in North Carolina—the Job Maintenance and Capital Development Fund, the Job Development Investment Grant, and the One North Carolina Fund. S.B. 622, § 5.1.(a)-(b). These state programs are discretionary incentives that offer cash grants to businesses to relocate or expand in the state, and are generally awarded through an incentive agreement with the state. The provision under S.B. 622 would apply to amounts received under agreements entered into on or after January 1, 2019, and would be effective for tax years beginning on or after that date.
Notably, the legislation does not appear to decouple from I.R.C. § 118 generally. Under I.R.C. § 118, as amended by the 2017 Tax Cuts and Jobs Act, contributions of money or property from governmental entities generally are now includible in a corporate taxpayer’s federal gross income. See Many State Tax Incentives Are Now Taxable Due to Federal Tax Reform (Jan. 8, 2018). In response, some states—e.g., Georgia and Tennessee—have expressly decoupled from I.R.C. § 118.