fbpx

Key Provisions of the new North Carolina State Budget for Business Owners

|

On November 18, 2021, Governor Roy Cooper signed the 2021-2022 Budget for the State of North Carolina. At the time of its signing, North Carolina was the last state in the United States to enact a budget. This is also the first budget signed into law by Governor Cooper.

While the budget itself is quite lengthy and touches a variety of issues, there are a few important provisions for North Carolina business owners and entrepreneurs to be aware of. This article provides a summary:

Corporate Income Tax Phase-Out

North Carolina’s corporate tax rate for 2021 was a nation-low 2.5%. The new budget states that NC will begin the process of phasing out the 2.5% corporate tax rate in 2025, with the tax reaching 0% in 2029. With this proposed corporate tax reduction, North Carolina will become just the seventh state in the US with no corporate income tax. This may be a response to Apple, Inc. plans to open a $1billion campus near Raleigh. At any rate, this only makes NC a more attractive location for all types of corporations!

Franchise Tax

S Corporations also received a significant victory in the new budget. Generally, S Corporations do not pay any corporate income tax, instead the tax passes through and falls on the shoulders of the individual shareholders. In North Carolina, S Corps pay a “Franchise Tax” in addition to the pass-through taxation on the members. The new budget lowers the cap on this tax to $150,000 per business. Further, the budget provides a simplified method for calculating the amount of Franchise Tax a business will pay based on net worth.

SALT Tax

The SALT deduction is a federally established limit on the amount of state and local taxes that can be deducted from income. S corporations, partnerships, and LLCs that are treated as partnerships have particular interest in the SALT deduction, as this allows their legal entity to deduct money. The NC budget now allows for pass-through entities to elect to pay entity taxes at the state level and avoid the federal SALT limitation.

PPP Loans

In the midst COVID-19, many businesses applied for Paycheck Protection Program (PPP) loans, which were federally funded loans to allow employers to continue paying their employees. The new budget follows the federal trend and allows deductions for business expenses that used funds from PPP loans. This protection will last through 2022.

If you have questions about how to start or structure your North Carolina business in 2022, give us a call! Our team looks forward to helping your grow your business from the ground up.

Client Reviews

Swipe left to read more reviews!

Let's talk.


  • Disclaimer: In communicating with us in response to this website, do not send any confidential information. Information sent to us in response to this website will not be treated as confidential and does not constitute an attorney-client relationship. Our professional obligations require us to perform a conflicts check before undertaking any legal representation of you. No attorney-client relationship exists or should be assumed as a result of this communication. By submitting this form, you are opting into our mailing list (your information will not be shared with anyone else).

  • This field is for validation purposes and should be left unchanged.

Disclaimer

McCormick Law, PC d/b/a McCormick Law & Consulting is a boutique business and real estate law firm located in Norfolk, Virginia & Raleigh, North Carolina, that seamlessly serves clients throughout Virginia and North Carolina. Whether you are a new or existing client of the firm, McCormick Law, PC, cannot represent you on any new matter until the firm has made a determination that there is no conflict of interest and that it is willing to accept the new engagement. The testimonials on this website reflect the real-life experiences and opinions of our clients. However, the experiences are personal to those particular clients, and may not necessarily be representative of all clients. We do not claim, and you should not assume, that all clients will have the same experience. Your outcome may vary.

© McCormick Law & Consulting