§ 105-114.1. Limited liability companies. - North Carolina Statutes

§ 105‑114.1.  Limitedliability companies.

(a)        Definitions. – Thefollowing definitions apply in this section:

(1)        Affiliated group. – Definedin section 1504 of the Code.

(2)        Capital interest. – Theright under a limited liability company's governing law to receive a percentageof the company's assets upon dissolution after payments to creditors.

(3)        Entity. – A personthat is not a human being.

(4)        Governing law. – Alimited liability company's governing law is determined under G.S. 57C‑6‑05or G.S. 57C‑7‑01, as applicable.

(5)        (Effective fortaxable years beginning before January 1, 2009) Noncorporate limitedliability company. – A limited liability company that does not elect to betaxed as a C Corporation under the Code.

(5)        (Effective fortaxable years beginning on or after January 1, 2009) Noncorporate limitedliability company. – A limited liability company that does not elect to betaxed as a corporation under the Code.

(b)        ControlledCompanies. – If a corporation or an affiliated group of corporations owns morethan fifty percent (50%) of the capital interests in a noncorporate limitedliability company, the corporation or group of corporations must include in itsthree tax bases pursuant to G.S. 105‑122 the same percentage of (i) thenoncorporate limited liability company's capital stock, surplus, and undividedprofits; (ii) fifty‑five percent (55%) of the noncorporate limitedliability company's appraised ad valorem tax value of property; and (iii) thenoncorporate limited liability company's actual investment in tangible propertyin this State, as appropriate.

(c)        ConstructiveOwnership. – Ownership of the capital interests in a noncorporate limitedliability company is determined by reference to the constructive ownershiprules for partnerships, estates, and trusts in section 318(a)(2)(A) and (B) ofthe Code with the following modifications:

(1)        The term"capital interest" is substituted for "stock" each place itappears.

(2)        A noncorporatelimited liability company and any noncorporate entity other than a partnership,estate, or trust is treated as a partnership.

(3)        The operating ruleof section 318(a)(5) of the Code applies without regard to section318(a)(5)(C).

(d)        No DoubleInclusion. – If a corporation is required to include a percentage of a noncorporatelimited liability company's assets in its tax bases under this Article pursuantto subsection (b) of this section, its investment in the noncorporate limitedliability company is not included in its computation of capital stock baseunder G.S. 105‑122(b).

(e)        Affiliated Group. –If the owner of the capital interests in a noncorporate limited liabilitycompany is an affiliated group of corporations, the percentage to be includedpursuant to subsection (b) of this section by each group member that is doingbusiness in this State is determined by multiplying the capital interests inthe noncorporate limited liability company owned by the affiliated group by afraction. The numerator of the fraction is the capital interests in thenoncorporate limited liability company owned by the group member, and thedenominator of the fraction is the capital interests in the noncorporatelimited liability company owned by all group members that are doing business inthis State.

(f)         Exemption. – Thissection does not apply to assets owned by a noncorporate limited liabilitycompany if the total book value of the noncorporate limited liability company'sassets never exceeded one hundred fifty thousand dollars ($150,000) during itstaxable year.

(g)        Timing. – Ownershipof the capital interests in a noncorporate limited liability company isdetermined as of the last day of its taxable year. The adjustments pursuant tosubsections (b) and (d) of this section must be made to the owner's nextfollowing return filed under this Article. If a noncorporate limited liabilitycompany and a corporation or an affiliated group of corporations have engagedin a pattern of transferring assets between them with the result that each didnot own the capital interests on the last day of its taxable year, theownership of the capital interests in the noncorporate limited liabilitycompany must be determined as of the last day of the corporation or group ofcorporations' taxable year.

(h)        Penalty. – Ataxpayer who, because of fraud with intent to evade tax, underpays the taxunder this Article on assets attributable to it under this section is guilty ofa Class H felony in accordance with G.S. 105‑236(7).  (2002‑126, s.30G.2(b); 2004‑74, ss. 1, 2; 2004‑170, s. 8.1; 2006‑66, s.24A.2(b); 2008‑107, s. 28.7(b).)