Bill
SB 304
Reenacts a refundable state EITC tied to the federal EITC for tax years starting 2025, boosting relief for low- and moderate-income workers.
Status and basic info
- Bill number: SB 304
- Short title: Reenact EITC
- Subject: Individual income tax; tax credits; taxation
- Introduced: February 10, 2025
- Stated status (from provided bill information): Passed 1st Reading
- Effectiveness stated in bill: applies to taxable years beginning on or after January 1, 2025
Purpose and intent
- The bill reenacts the State’s Earned Income Tax Credit (EITC) statute that had previously expired, restoring a state credit tied to the federal EITC. The intent is to provide tax relief and direct financial support to low- and moderate-income working taxpayers who qualify for the federal EITC.
Key provisions
- Reenactment and recodification: The bill reenacts the pre‑expiration EITC statute and recodifies it as G.S. 105‑153.12 (i.e., restores the formerly-expired state EITC statute language to the code).
- Credit formula: The statute ties the state credit to a percentage of the taxpayer’s federal earned income tax credit under IRC §32. The reenacted text specifies the applicable percentages (the statute text as provided lists 4.5% for tax year 2013 and 5% for “all other taxable years”).
- Refundability: The state credit is refundable. If the credit exceeds the taxpayer’s state income tax liability (after other credits are applied in the statutory order), the excess is refunded to the taxpayer.
- Nonresidents / part‑year residents: Taxpayers who are nonresidents or part‑year residents must prorate the credit using the fraction specified in G.S. 105‑153.4(b) or (c), as appropriate (i.e., the credit is reduced to reflect NC-source income).
- Administrative items: The reenacted text preserves the prior ordering rules for multiple credits (nonrefundable credits applied before refundable credits). The bill provides the statutory placement and cross‑references.
Who is affected
- Primary beneficiaries: Low‑ and moderate‑income workers and families who qualify for the federal EITC — including many taxpayers with children and working households with limited incomes.
- Tax administration: Department of Revenue and state tax filing systems will need to accept and process the restored credit for affected tax years.
Timing / procedural notes
- The bill declares an effective date for taxable years beginning on or after January 1, 2025.
- The provided bill text includes historic language references (e.g., a line citing tax year 2013), and the reenacted statute is recodified to a new section number. Review by bill drafters or legislative staff may be needed to confirm the intended percentage to apply going forward.
Fiscal impact
- The documents provided do not include an up‑to‑date fiscal estimate for this reenactment. Restoring a refundable, percentage‑based state EITC will reduce net General Fund revenue and increase state refunds; the magnitude depends on the percentage adopted and taxpayer take‑up (historically, state EITCs of a percentage of the federal credit produce measurable but modest revenue costs relative to overall income tax receipts).
Practical effect for taxpayers
- Eligible taxpayers who claim the federal EITC would be able to claim a state credit equal to the statute’s percentage of their federal EITC (subject to proration for nonresidents/part‑year residents) and would receive refundable payments if the credit exceeds their state tax liability.
Notes and potential issues
- The reenacted text as supplied contains an internal inconsistency (references to multiple percentage figures and a historical 2013 rate). Users should consult the final enrolled bill or the legislative fiscal analysis for confirmation of the operative percentage and the final statutory language.
- Because the credit is refundable, implementation requires appropriate administrative and budgeting consideration by the Department of Revenue.
If you want, I can:
- Draft a short one‑page explainer for taxpayers on how to claim the restored credit; or
- Look up the current legislative status and any fiscal analyses or amendments filed since first reading.
Compiled from official sources — confirm details with the bill’s official record.
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