The first new law of the 2024 legislative session is on the books, and it contains an important Pass-Through Entity Tax provision supported by NCACPA. North Carolina has extended the opportunity for certain partnerships to make the election to pay state taxes at the entity level for tax year 2022.
HOW WE GOT HERE
The state initially placed strict limits on the list of eligible partners of a Taxed Partnership. In 2023, NCACPA convinced lawmakers to retroactively expand the list to include other partnerships, certain trusts, and corporations. However, some partnerships had already filed their 2022 tax return before that change was enacted in Session Law 2023-134.
NCACPA advocated for these partnerships to have another chance to make the election. Legislators included a provision in the 2023 Appropriations Act to allow an election on amended return, which had to be filed by October 15, 2023. Budget negotiations dragged into the fall. By the time the bill became law, only 12 days remained until the deadline.
In the break between the legislative sessions, NCACPA pressed lawmakers to extend the deadline. The measure became part of SB 508, which Governor Roy Cooper signed into law on May 15.
EXTENDED DEADLINE FOR AMENDED RETURNS
Section 11.3 of Session Law 2024-1 extends the deadline for eligible partnerships to make the election to become a Taxed Partnership for Tax Year 2022. The extension applies to partnerships that could not make the election on a timely filed return last year. Partnerships can make the election by filing an amended return by July 1, 2024.
On May 16, the NC Department of Revenue issued a revised version of Directive TA-23-1 to provide additional information about the new law.
If you have questions about this issue or other policy matters, please contact NCACPA Director of Advocacy Robert Broome, CAE.