On Friday, March 11th, members of the NC General Assembly brought the longest legislative session in state history to an official close. While the adjournment resolution ending the 2021 long session leaves room for the legislature to reconvene to tie up certain loose ends – like veto overrides, appointment bills, and redistricting litigation – ahead of the planned start of the short session on May 18th, you can bet many lawmakers are heading home to lock in for a heated primary season.
Ahead of last week’s adjournment, both the House and Senate gave overwhelming approval to a Budget Technical Corrections bill, House Bill 243, which clarified and updated provisions impacting previous changes to state law. Relevant to Chamber members, these fixes included a measure enabling North Carolina businesses to take advantage of the federal Employee Retention Tax Credit (ERTC) when determining their state taxable income.
Authorized in early 2020 by the CARES Act to encourage job creators to retain more workers during the pandemic, the ERTC is a refundable payroll tax credit available to eligible employers from March 2020 through Sept. 30, 2021. The credit amount is 50 percent of up to $10,000 in wages for eligible businesses impacted by COVID-19. House Bill 243 allows North Carolina employers who claimed the ERTC in 2020 or 2021 to retroactively take a special deduction, for state tax purposes, equivalent to the same amount by which their federal wages were reduced under the credit.
Members of our Tax Policy Committee elevated the need for language allowing for state tax deductions under the ERTC to our government affairs team, who worked to advocate for this measure in House Bill 243. With this fix on the books, we encourage all eligible Chamber members to discuss the potential benefits of amending your 2020 and 2021 returns with your financial advisors. (Note that any business operating as a pass-through entity, including S-corporations and partnerships, will need to ensure the owners’ tax returns are also amended to take full advantage of the ERTC.)
The NC Chamber applauds legislators from both side of the aisle for finalizing this important change before adjourning for the long session. We look forward to advancing additional tax improvements in the upcoming short session. For questions about our focus on tax competitiveness, contact NC Chamber Director of Government Affairs Mark Coggins.