§ 105-163.2A. Pension payers must withhold taxes. - North Carolina Statutes

§105‑163.2A.  Pension payers must withhold taxes.

(a)        Definitions. – Thedefinitions provided in section 3405 of the Code apply in this section.

(b)        WithholdingRequired. – A pension payer required to withhold federal taxes under section3405 of the Code on a pension payment to a resident of this State must deductand withhold from the payment the State income taxes payable on the payment.Liability for withholding and paying taxes under this section on a pensionpayment falls on the person who would be liable under section 3405 of the Codefor withholding federal taxes on the payment.

Except as otherwise providedin this section, the provisions of this Article apply to a pension payer'spension payment to a resident of this State as if it were an employer's paymentof wages to an employee. If a pension payer has more than one arrangement underwhich it may make pension payments to a resident of this State, eacharrangement must be treated separately under this section.

(c)        Amount. – In thecase of a periodic payment, the pension payer must withhold the amount thatwould be required to be withheld under this Article if the payment were apayment of wages by an employer to an employee for the appropriate payrollperiod. If the recipient of periodic payments fails to file an exemptioncertificate under G.S. 105‑163.5, the pension payer must compute theamount to be withheld as if the recipient were a married individual claimingthree withholding exemptions.

In the case of a nonperiodicdistribution, the pension payer must withhold taxes equal to four percent (4%)of the nonperiodic distribution.

(d)        Election of NoWithholding. – The recipient may elect not to have taxes withheld under thissection to the extent permitted by section 3405 of the Code. The election mustbe in the form required by the Secretary. In the case of periodic payments, theelection remains in effect until revoked by the recipient. In the case of anonperiodic distribution, the election applies on a distribution‑by‑distributionbasis unless it meets conditions prescribed by the Secretary for it to apply tosubsequent nonperiodic distributions by the pension payer.

A pension payer must notifyeach recipient of the right to elect not to have taxes withheld under thissection. The notice must comply with the requirements of section 3405 of theCode and any additional requirements prescribed by the Secretary.

A recipient's election not tohave taxes withheld under this section is void if the recipient fails tofurnish the recipient's tax identification number to the pension payer, or theSecretary has notified the pension payer that the tax identification numberfurnished by the recipient is incorrect.

(e)        Exemptions. – Thissection does not apply to the following pension payments:

(1)        A pension paymentthat is wages under this Article.

(2)        Any portion of apension payment that meets both of the following conditions:

a.         It is not adistribution or payment from an individual retirement plan as defined insection 7701 of the Code.

b.         The pension payer reasonablybelieves it is not taxable to the recipient under Article 4 of this Chapter.

(3)        A distributiondescribed in section 404(k)(2) of the Code, relating to dividends on corporatesecurities.

(4)        A pension paymentthat consists only of securities of the recipient's employer corporation pluscash not in excess of two hundred dollars ($200.00) in lieu of securities ofthe employer corporation. (1999‑414, s. 3; 2000‑126, s. 3.)