| 12 | 13 | | A BILL TO BE ENTITLED 1 |
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| 13 | 14 | | AN ACT TO ALLOW SMALL BUSINESSES TO ELIMINATE STATE INCOME TAXES ON 2 |
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| 14 | 15 | | A PORTION OF REVENUE IF USED FOR CAPITAL EXPENDITURES. 3 |
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| 15 | 16 | | The General Assembly of North Carolina enacts: 4 |
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| 16 | 17 | | SECTION 1. G.S. 105-153.5 reads as rewritten: 5 |
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| 17 | 18 | | "§ 105-153.5. Modifications to adjusted gross income. 6 |
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| 18 | 19 | | … 7 |
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| 19 | 20 | | (b) Other Deductions. – In calculating North Carolina taxable income, a taxpayer may 8 |
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| 20 | 21 | | deduct from the taxpayer's adjusted gross income any of the following items that are included in 9 |
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| 21 | 22 | | the taxpayer's adjusted gross income: 10 |
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| 22 | 23 | | … 11 |
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| 23 | 24 | | (7a) The amount deposited during the taxable year by a taxpayer that is a small 12 |
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| 24 | 25 | | business to a capital improvement account. The deduction allowed by this 13 |
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| 25 | 26 | | subdivision is limited to deposit amounts of five percent (5%) of the taxpayer's 14 |
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| 26 | 27 | | adjusted gross income up to one million dollars ($1,000,000), two percent 15 |
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| 27 | 28 | | (2%) of the taxpayer's adjusted gross income above one million dollars 16 |
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| 28 | 29 | | ($1,000,000) up to two million dollars ($2,000,000), and one percent (1%) of 17 |
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| 29 | 30 | | the taxpayer's adjusted gross income above two million dollars ($2,000,000) 18 |
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| 30 | 31 | | up to three million dollars ($3,000,000). For purposes of this subdivision, a 19 |
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| 31 | 32 | | "small business" is a business whose cumulative gross receipts from business 20 |
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| 32 | 33 | | activity for the taxable year do not exceed ten million dollars ($10,000,000), 21 |
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| 33 | 34 | | and a "capital improvement account" is an account at a federally insured 22 |
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| 34 | 35 | | banking institution into which are deposited amounts to be used solely for an 23 |
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| 35 | 36 | | improvement that adds value to real property owned and used exclusively by 24 |
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| 36 | 37 | | the small business, prolongs the useful life of such property at least 10 years, 25 |
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| 37 | 38 | | or adapts such property to new uses for the small business. 26 |
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| 38 | 39 | | … 27 |
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| 39 | 40 | | (c) Additions. – In calculating North Carolina taxable income, a taxpayer must add to the 28 |
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| 40 | 41 | | taxpayer's adjusted gross income any of the following items that are not included in the taxpayer's 29 |
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| 41 | 42 | | adjusted gross income: 30 |
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| 42 | 43 | | … 31 |
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| 43 | 44 | | (8) The amount deducted in a prior taxable year pursuant to subdivision (7a) of 32 |
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| 44 | 45 | | subsection (b) of this section to the extent this amount was withdrawn and not 33 |
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| 45 | 46 | | used to pay for improvements listed in that subdivision. 34 |
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