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Bill Summary · SB 795

Summary: Senate Bill 795 (2025 Session) – Modify Taxation of 1031 Exchanges (North Carolina)

Purpose

SB 795 seeks to modify how North Carolina taxes certain gains associated with like-kind exchanges under Section 1031 of the federal Internal Revenue Code. Specifically, it establishes a state-level deduction from NC taxable income for amounts that are included in federal taxable income as non-like-kind property received in a 1031 exchange, limited to the taxpayer’s basis in the property sold.

Key Provisions

  • Amendment to State Deductions from Federal Taxable Income (G.S. 105-130.5(b)):

    • The bill adds a new explicit deduction:
    • Any amount included in federal taxable income as non-like-kind property received in a 1031 exchange, to the extent it does not exceed the taxpayer’s basis in the property sold.
    • This amount is treated as a deduction when calculating North Carolina net income for state tax purposes.

  • Amendment to Other Deductions (G.S. 105-153.5(b)):

    • Similarly, the bill adds a corresponding deduction for NC taxable income calculations:
    • The same limitation applies: the deduction is for amounts included in federal adjusted gross income as non-like-kind property received in a 1031 exchange, to the extent it does not exceed the taxpayer’s basis in the property sold.

  • Effective Date:

    • The measure applies to taxable years beginning on or after January 1, 2026.

Who/What Is Affected

  • Taxpayers with 1031 Exchanges: Individuals or entities that engage in like-kind exchanges and receive non-like-kind property as part of those exchanges may be eligible for the NC deductions described.
  • North Carolina Tax Base: The amendments affect calculations of both NC net income (for corporate/partnership/individuals depending on tax treatment) and NC taxable income (as part of the adjusted gross income framework).

Impact and Rationale

  • Tax Timing and Deferral Alignment: By allowing a state-level deduction equal to the basis in the sold property (but limited to that basis), NC aligns its treatment with the nature of 1031 exchange gains, potentially reducing the tax burden on taxpayers who defer gains via non-like-kind property received in exchanges.
  • Fiscal Considerations: The deduction’s value depends on the taxpayer’s basis and amount of non-like-kind property received; it could affect state revenue for years after 2026 depending on how frequently 1031 transactions occur in NC.

Procedural Timeline

  • Filed: April 21, 2026
  • First Reading: April 22, 2026
  • Committee Referral: Rules and Operations of the Senate (as of the latest action)
  • Effective Date: Taxable years beginning on/after January 1, 2026

Notes

  • Co-sponsors: Senator Jim Burgin (primary) and Senator Woodson Bradley.
  • The bill text references updating two sections of the North Carolina General Statutes to implement parallel deductions for both net income and adjusted gross income calculations.

Compiled from official sources — confirm details with the bill’s official record.

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