North Carolina’s late tax payment penalty will be cut in half thanks to a deal brokered by NCACPA and approved by the General Assembly on June 16.
One week earlier, the NC Department of Revenue had informed lawmakers and NCACPA that efforts to implement a graduated late payment penalty had hit a technology roadblock. The graduated penalty of 2% per month (up to an aggregate 10% cap) is a policy priority of NCACPA that was signed into law as part of the state budget last November. The new law was supposed to replace the current 10% flat-rate penalty on July 1, 2022.
Despite the NCDOR’s best efforts to program the change into its antiquated software system, repeated testing of the mainframe found that thousands of taxpayers would be over-assessed if their system went live with the change next month.
After several conversations with senior leadership at the department, NCACPA proposed a three-part solution to state lawmakers:
- Delay the effective date of the graduated penalty until July 1, 2024. This provision will allow the department time to either identify a solution on the current platform or find a new software system that can accommodate the calculations.
- Reduce the 10% flat-rate penalty to 5%, effective January 1, 2023. This provision brings North Carolina in line with most of the other states that have a flat-rate penalty. The NCDOR assures lawmakers it can implement the change by the deadline.
- Require the NCDOR to provide updates on its progress toward implementing the graduated penalty. The department provides a monthly progress report to the General Assembly on various IT projects, and this provision adds the graduated penalty to the list.
NCACPA’s recommendation was added as a conference committee report to HB 83, which had been rewritten earlier in the session to make various technical, clarifying, and administrative changes to revenue laws. You can read a rundown of the bill’s other provisions here.
The report was adopted unanimously by the House and Senate on June 16. The House is scheduled to hold a final procedural vote on the measure on June 21. HB 83 will then be sent to Governor Cooper to be signed into law.
If you have questions about this issue or other policy matters, please contact NCACPA Director of Advocacy Robert Broome, CAE.