On August 4, 2016, the North Carolina Secretary of Revenue confirmed that net General Fund tax collections for fiscal year 2015-2016 exceeded the targeted amount of $20.975 billion. As a result, the North Carolina corporate income tax rate will be reduced from 4% for the 2016 tax year to 3% for tax years beginning or on after January 1, 2017.
This rate decrease must be considered in determining the amount of deferred tax assets/liabilities. For accounting purposes, when it is considered to be more likely than not that the tax rate change will be implemented, the enacted changes in tax laws and rates that become effective for a particular future year(s) are to be considered in determining the tax rate to apply to temporary differences reversing in that year(s). The effect on deferred tax assets and liabilities from an enacted change in tax laws or rates is recognized in income from continuing operations in the period of enactment, which in this case, is the quarter ended September 30, 2016.
For more information, please contact your Elliott Davis Decosimo advisor.