Information Filings Due April 15, 2016 for Certain Corporate Taxpayers

Information Filings Due April 15, 2016 for Certain Corporate Taxpayers

Filing Requirement

C and S corporate taxpayers (other than excluded corporations and public utilities) that meet the following criteria with respect to the taxable year beginning in 2014 are required to file a CD-400 MS with the Department of Revenue. The criteria is as follows:

1. The taxpayer had apportionable income greater than ten million dollars ($10,000,000).
2. The taxpayer had a North Carolina apportionment percentage less than one hundred percent (100%).
3. The taxpayer was subject to apportionment of income based in whole or in part on the sales factor as determined under North Carolina state rules (G.S. 105-130.4).

The report for all corporations other than excluded corporations and public utilities will contain:

1. The three-factor apportionment percentage and sales factor used with respect to the corporation’s 2014 North Carolina corporate return (“Original”).
   The three-factor apportionment percentage and sales factor as calculated under market-based sourcing guidelines with respect to the corporation’s 2014 taxable year (“MBS”).
2. The MBS rules include a throwback provision for receipts for which the taxpayer cannot determine or reasonably approximate the state where the sales should be sourced
3. The primary economic sector under the North American Industry Classification System (“NAICS”) in which the corporation has business activities.
4. The taxpayer’s apportionable income.
5. Income apportioned to North Carolina using the Original three-factor apportionment percentage and income apportioned to North Carolina using the Original sales factor only.
6. Income apportioned to North Carolina using the MBS three-factor apportionment percentage and income apportioned to North Carolina using the MBS sales factor only.
7. Capital stock, surplus and undivided profits before apportionment.
8. Capital stock, surplus and undivided profits after apportionment using the Original three-factor apportionment percentage and capital stock, surplus and undivided profits after apportionment using the Original sales factor only.
9. Capital stock, surplus and undivided profits after apportionment using the MBS three-factor apportionment percentage and capital stock, surplus and undivided profits after apportionment using the MBS sales factor only.

Market Sourcing Guidelines

To assist taxpayers with the preparation of the CD-400 MS filings, the state has issued its, “Guidelines for Computing the Sales Factor Based on Market-Based Sourcing.” This is a 53 page document that defines what market sourcing is, and it explains how the NC sourcing rules are to be applied in various situations. The publication provides numerous examples.

An “excluded corporation” (referenced above) is any corporation engaged in business as a building or construction contractor, a securities dealer, or a loan company or a corporation that receives more than 50% of its ordinary gross income from intangible property.

If you have any questions or would like to discuss this matter further, please contact a member of Withum’s National Tax Services Group at [email protected].

John Daly 609-520-1188  [email protected]

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