HB 303, titled "Make Corporations Pay What They Owe," would repeal a planned phaseout of North Carolina's corporate income tax. Specifically, it reverses Section 42.2 of S.L. 2021-180, which had scheduled a gradual reduction in the corporate tax rate. This bill directly affects corporations subject to North Carolina's corporate income tax by preventing the tax rate from decreasing as previously scheduled. The legislation is procedural in nature, focusing on reversing a specific tax policy change rather than creating new tax rates or mechanisms.
HB 11 would allow North Carolina taxpayers to deduct overtime pay, up to $2,500 in bonus pay (defined as cash awards for workplace dedication), and reported tips from their taxable income. It applies to individuals and married couples filing jointly, with each spouse eligible for separate deductions. The bill specifically defines "bonus pay" to exclude tips and requires taxpayers to provide documentation to claim the deduction. This policy change would take effect for tax returns filed in 2025.
This bill reinstates North Carolina's Earned Income Tax Credit (EITC) program, which provides a state tax credit to low-income workers who qualify for the federal EITC. It sets the state credit at 5% of the federal credit amount (down from 4.5% in 2013), making it refundable so eligible taxpayers receive cash even if they owe no state tax. The credit applies to tax years beginning January 1, 2025, and continues a program that expired after 2013. The bill does not change eligibility rules or create new benefits - it simply reenacts the prior policy structure.
HB 459 modifies North Carolina's income tax rate reduction trigger to lower the revenue threshold that could lead to future tax cuts. It adjusts the required General Fund revenue levels (e.g., $34.76 billion for FY 2027-2028) that would trigger a tax rate decrease below 4.25% starting in 2029. This change affects all individual taxpayers in North Carolina by making it easier for tax rates to decrease if state revenue meets the new lower thresholds. The bill does not change current tax rates but alters the conditions under which future reductions might occur. The modification follows the state's recovery needs after major hurricanes, though the summary focuses solely on the policy mechanism.
SB 455, the Main Street Resilience Act, provides North Carolina small businesses with a new income tax deduction starting in 2026. It allows eligible small businesses to deduct up to $75,000 of their net business income from taxable income each year, with married couples filing jointly able to deduct up to $150,000 total. To qualify, a business must have fewer than 50 total employees (including related entities) and annual revenue under $5 million, excluding passive income. This deduction directly reduces tax liability for qualifying small businesses operating in North Carolina.
SB 456, "Healthy Start NC," creates a program providing cash assistance to reduce maternal mortality and childhood poverty. It allocates $161.6 million annually from TANF funds and $146.3 million from the General Fund for the 2025-2027 biennium to give expecting mothers a one-time $1,500 prenatal allowance and $500 monthly for the first year after birth for infant needs like food, diapers, and childcare. Eligibility uses a means-based test tied to federal poverty levels, with funds administered through nonprofit partners to avoid affecting other benefits. To offset costs, the bill gradually reduces the corporate income tax rate from 2.25% (2025) to 0% (2029). The program becomes effective July 1, 2025, with tax changes starting January 1, 2025.
SB 437, the "Middle Class Momentum Act," increases North Carolina's standard income tax deduction for individual filers starting in 2026. It raises the standard deduction to $26,000 for married couples filing jointly (from $25,500), $19,500 for heads of household (from $19,125), and $13,000 for single filers (from $12,750). This change directly affects most North Carolina individual taxpayers who claim the standard deduction instead of itemizing deductions. The bill takes effect for taxable years beginning January 1, 2026.
SB 478 allows banks in North Carolina to deduct income tax on interest, fees, and penalties from loans secured by agricultural land, as defined by state law. This tax deduction applies to loans specifically backed by farmland, directly benefiting banks that provide such financing. The policy change takes effect for tax years beginning on or after January 1, 2025. The bill does not directly affect farmers or landowners but alters tax treatment for financial institutions offering agricultural loans.
SB 627 allows North Carolina small businesses with annual gross receipts under $10 million to reduce their state income tax by deducting funds deposited into a special capital improvement account. Businesses can deduct up to 5% of their adjusted gross income (capped at $1 million), 2% (up to $2 million), or 1% (up to $3 million) for qualifying property improvements like upgrades that add value, extend property life by 10+ years, or adapt property for new business uses. Funds must be deposited into a federally insured bank account and used solely for these improvements; unused funds must be added back to taxable income. The bill takes effect for tax years beginning January 1, 2025, and directly affects small businesses making eligible capital investments.
SB 632 ("Homes for Heroes") creates a homebuyers' assistance program for North Carolina public servants (including teachers, firefighters, law enforcement, and emergency medical personnel) who are first-time homebuyers. It provides up to $25,000 or 10% of a home's purchase price - covering down payments, mortgage insurance, and closing costs - using $200 million in state funds, with mortgage assistance limited to 60 months. Separately, it establishes a tax credit for volunteer firefighters and rescue workers who incur unreimbursed work expenses, capping the credit at $5,000 or the taxpayer's annual income tax liability, requiring 36 hours of annual training. The program begins July 1, 2025, and the tax credit applies to taxable years starting January 1, 2025.
