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Bill Summary · SB 882

Summary of North Carolina Senate Bill 882 (2025 Session) – Reenact Earned Income Tax Credit (EITC)

Purpose and intent

  • Reenacts the earned income tax credit (EITC) for individuals filing North Carolina income taxes.
  • Brings back a credit that existed previously but was repealed; the bill specifies reenactment and alignment with the state’s tax code.

Key provisions

Section 1 – Reenactment and calculation of the EITC

  • The reenacted provision mirrors the EITC as it existed immediately before its expiration and is recodified as G.S. 105-153.12.
  • Credit against North Carolina income tax:
    • Eligible taxpayers may claim a credit equal to 10% of the amount of EITC for which the individual qualified under federal Code Section 32 (the federal EITC).
    • For nonresidents or part-year residents who claim the credit, the NC credit must be reduced by multiplying by the appropriate fraction (as determined under G.S. 105-153.4(b) or (c)).
  • Credit percentage details:
    • Taxable year 2013: 4.5%
    • All other taxable years: 5%
  • Nonrefundable vs. refundable treatment:
    • The bill clarifies that the NC EITC is refundable if the credit exceeds the tax due after applying other credits.
    • If refundable excess exists, it is treated as a refund of an overpayment under the state tax code, subject to standard refund procedures.
    • The provision explicitly notes that the Advance Payment of Earned Income Credit (Section 3507 of the Code) does not apply to this NC EITC.
    • When calculating tax with multiple credits, nonrefundable credits are applied before refundable credits.
  • Sunset (historical context in the text):
    • The prior version included a sunset in 2014; this reenactment does not indicate a new sunset, but the explicit sunset reference is part of the historical text. The current bill itself does not set a new sunset date within the text provided.

Section 2 – Effective date

  • The act is effective for taxable years beginning on or after January 1, 2026.

Who/what is affected

  • Individual taxpayers filing North Carolina state income taxes who qualify for the federal EITC (Code Section 32).
  • Nonresidents and part-year residents who claim the NC EITC receive a proportionally reduced credit based on their residency fraction.
  • Taxpayers who receive refundable EITC amounts (i.e., when the credit exceeds tax liability after other credits) are eligible for refunds under standard state refund rules.
  • Taxpayers must follow the order of credits (nonrefundable first, then refundable).

Procedural and timeline considerations

  • Effective for tax years beginning on or after January 1, 2026.
  • Reintroduces the NC EITC at a 10% base of the federal EITC amount, with a modest reduction in the percentage (to 5% for most years) compared to earlier 2013 treatment.
  • Refundability rules and credit ordering align with standard North Carolina tax procedures (nonrefundable credits applied before refundable credits; refunds handled as overpayments).
  • No new sunset date specified in the current text; historical sunset referenced pertains to prior law but not explicitly renewed in this bill’s text.

Practical impact (summary)

  • Eligible NC taxpayers can receive a state EITC equal to 10% of their federal EITC amount, with a residency-based reduction for nonresidents/part-year residents.
  • The credit is refundable, potentially resulting in a state tax refund beyond the federal EITC amount or tax liability.
  • The credit begins affecting tax years starting in 2026.
  • Nonrefundable vs. refundable credit sequencing remains consistent with existing tax code rules.

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

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