§ 105-151.20. Credit or partial refund for tax paid on certain federal retirement benefits. - North Carolina Statutes

§105‑151.20.  Credit or partial refund for tax paid on certain federalretirement benefits.

(a)        Purpose;Definitions. – The purpose of this section is to benefit certain retiredfederal government workers on account of their public service. The following definitionsapply in this section:

(1)        Federal retirementbenefits. – Retirement benefits received from one or more federal governmentretirement plans.

(2)        Net pension tax. –The amount of tax a taxpayer paid under this Part for the 1985, 1986, 1987, and1988 tax years on federal retirement benefits, without interest, less any partof the tax for which the taxpayer received a credit under this section before1997 and any part of the tax refunded to the taxpayer before 1997.

(3)        Tax year. – Thetaxpayer's taxable year beginning on a day in the applicable calendar year.

(b)        Credit. – Ataxpayer who received federal retirement benefits during the 1985, 1986, 1987,or 1988 tax year may claim a credit against the tax imposed by this Part equalto the net pension tax on those benefits. The credit allowed under this sectionshall be taken in equal installments over the taxpayer's first three taxableyears beginning on or after January 1, 1996. The credit allowed under thissection may not exceed the amount of tax imposed by this Part reduced by thesum of all credits allowed against the tax, except payments of tax made by oron behalf of the taxpayer; any unused portion of a credit installment may becarried forward to the 1999 and 2000 tax years.

(c)        Partial RefundAlternative. – If the amount of tax imposed by this Part on the taxpayer forthe taxpayer's 1996 tax year, reduced by the sum of all credits allowed againstthe tax except payments of tax made by or on behalf of the taxpayer, is lessthan five percent (5%) of the taxpayer's net pension tax for which credit isallowed, the taxpayer is eligible to elect a partial refund under thissubsection in lieu of claiming the credit. The partial refund allowed underthis subsection is equal to the lesser of eighty‑five percent (85%) ofthe taxpayer's net pension tax or the reduced amount determined by theSecretary as provided in this subsection. To elect the partial refund, aneligible taxpayer must file with the Secretary on or before April 15, 1997, awritten request for a partial refund of the taxpayer's net pension. TheSecretary shall calculate from these requests eighty‑five percent (85%)of the total amount of net pension tax for which partial refunds have beenclaimed and, if this sum exceeds the amount in the Federal Retiree RefundAccount created in this section, shall allocate the amount in the Account amongthe eligible taxpayers claiming partial refunds by reducing each taxpayer'sclaimed refund in proportion to the size of the claimed refund. The Secretary shallremit these partial refunds before January 1, 1998.

(d)        Substantiation;Deceased Taxpayers. – In order to claim a refund or credit under this section,a taxpayer must provide any information required by the Secretary to establishthe taxpayer's eligibility for tax benefit and the amount of the tax benefit.In the case of a taxpayer who is deceased, the representative of the taxpayer'sestate may claim the refund in the name of the deceased taxpayer and, if thetaxpayer does not qualify for a refund, the surviving spouse may claim thedeceased taxpayer's credit. If there is no surviving spouse, the representativeof the taxpayer's estate may claim the credit in the name of the taxpayer butmay not carry forward any unused portion of the credit to the 1999 or 2000 taxyear.

(e)        Federal RetireeAccounts. – There are created in the Department of Revenue two special accountsto be known as the Federal Retiree Refund Account and the Federal RetireeAdministration Account. Funds in the Federal Retiree Refund Account shall bespent only for partial refunds pursuant to subsection (c) of this section. TheDepartment of Revenue may use funds in the Federal Retiree AdministrationAccount only for the costs of administering this section. Funds in the FederalRetiree Refund Account and the Federal Retiree Administration Account shall notrevert to the General Fund until the Director of the Budget certifies that theDepartment of Revenue has completed all duties necessary to implement thissection, including processing the escheat of refund checks that have not beencashed. (1989 (Reg. Sess., 1990), c. 984, s. 6; 1991, c. 45,s. 11; 1996, 2nd Ex. Sess., c. 19, s. 1; 1997‑499, ss. 1, 2; 1998‑98,s. 69.)