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Bill Summary · SB 924

Summary of North Carolina Senate Bill 924 (Session 2025)

Title

Reenact the Earned Income Tax Credit

Purpose

To reenact and restore the North Carolina earned income tax credit (EITC) by redefining its creation, calculation, and refundability parameters, aligning the state credit with previously enacted guidelines and procedures.

Key Provisions

  • ** reenactment and codification**

    • G.S. 105-151.31 is reenacted as it existed immediately before expiration.
    • Recode: The reenacted section is recodified as G.S. 105-153.12.

  • EITC calculation (Section 105-153.12(a))

    • Individuals who claim the federal earned income tax credit (IRC Section 32) for the taxable year may claim a North Carolina EITC against the state income tax.
    • The NC EITC equals 5% of the amount of the federal EITC the individual qualified for under Section 32.
    • Nonresidents or part-year residents must adjust the NC credit by the applicable nonresident computation (fraction) per related NC statutes (G.S. 105-134.5(b)/(c) or G.S. 105-153.4(b)/(c)).
    • The baseline percentage for most years is 5%; for taxable year 2013, the rate was 4.5%.

  • Refundability (Section 105-153.12(b))

    • The NC EITC credit is refundable: if the credit exceeds the taxpayer’s NC tax after nonrefundable credits, the excess is refunded.
    • The refund process follows the same procedures as a refund of an overpayment of NC tax.
    • The Advance Payment of EITC (Section 3507 of the Code) does not apply to the NC EITC.
    • In computing the tax, nonrefundable credits are applied before refundable credits.

  • Sunset (Section 105-153.12(c))

    • The NC EITC credit is repealed for taxable years beginning on or after January 1, 2014.2029.
    • [Note: The text appears to contain a typographical/formatting inconsistency with the sunset year; it is written as “2014.2029.” This should be clarified in the final enacted version.]

  • Effective date (Section 2)

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

Affected Parties

  • Individual taxpayers who qualify for the federal EITC (IRC Section 32) and file NC income tax returns.
  • Nonresident or part-year resident taxpayers must adjust the NC EITC using the applicable statutory fraction.
  • NC Department of Revenue will administer and process refunds if the NC EITC exceeds liabilities, consistent with other tax refunds.

Procedural and Timeline Aspects

  • Effective date: Taxable years beginning on or after January 1, 2026.
  • Tax year applicability: Reenacts and applies the NC EITC method for calculating and refunding the credit as described.
  • Sunset issue: The bill includes a sunset provision repealing the credit for taxable years beginning after January 1, 2014 (with potential drafting confusion around “2014.2029” that should be resolved in final language).

Summary Notes

  • The bill is described as a reenactment of the NC EITC, returning to a framework consistent with the former law, including a 5% credit of the federal EITC amount for eligible NC taxpayers.
  • It establishes refundability, ensuring eligible taxpayers can receive a cash refund if the credit exceeds NC tax liability after other credits.
  • The bill’s effective date is 2026, with a sunset provision that may require clarification due to a possible drafting error in the text.
  • For nonresidents/part-year residents, the credit is prorated using standard NC allocation fractions.

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

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