On May 4, 2020, Governor Roy Cooper signed into law two pieces of legislation designed to provide relief to schools, hospitals, local governments and businesses dealing with the ongoing COVID-19 outbreak.  In addition to providing funding for critical healthcare functions such as contact tracing, vaccine research, and personal protective equipment (“PPE”) procurement, the bills  provide certain tax relief to North Carolina employers and makes changes to North Carolina’s unemployment benefits statutes.

Changes to Unemployment Benefits and Tax Credits for Unemployment Insurance Payments

SB 704 amends Chapter 96 of the North Carolina General Statutes to make clear that unemployment benefits are payable to employees where (1) an employer temporarily ceases operations due to the coronavirus, preventing the employee from going to work; (2) an employer reduces the hours of employments due to coronavirus; (3) an individual has a current diagnosis of the coronavirus; and (4) an individual is quarantined at the instruction of a health care provider or a local, state, or federal official.  The new law also codifies many of the changes to unemployment benefits that were enacted in Governor Cooper’s previous executive order, Order No. 118, including waiving the one-week waiting period, easing the requirements that an individual be searching for work when they are eligible for benefits because of the above reasons, and ordering that employers’ accounts not be charged for benefits because of the above reasons.

The new law also makes changes to the State Unemployment Tax Act (“SUTA”) that provides funding for the unemployment benefits program. Among these changes is a SUTA tax credit for employers equal to the amount of the unemployment insurance contributions payable on the SUTA report due on April 30, 2020. If the employer has already remitted the contributions shown on the report, the credit is applied against the contribution on due with the report due on July 31, 2020, and any excess credit will be refunded to the employer. An employer must file a return to receive the credit.

Waiver of Interest on Income Tax Payments 

While North Carolina had previously extended its income tax payment deadline from April 15, 2020 to July 15, 2020 to align with the federal government’s extension of the deadline to file taxes, state law had previously required that interest would be charged on owed income taxes.  The new law waives the accrual of interest from April 15, 2020 to July 15, 2020 for franchise, corporate income, or individual income tax returns and applies to individuals, corporations, partnerships, estates and trusts.

Extended Deadline for 2016 Refund Claims

The new law also extends the dates for filing certain refund claims. Any claim for a refund of income or franchise taxes, which, under the statute of limitations, would otherwise be due between April 15, 2020 and July 15, 2020, will be considered timely if filed by July 15, 2020. Refund claims are generally required to be filed within three years from the date the return was due.

Extended Deadlines for Tax Appeals

Senate Bill 704 also extends the deadlines for taking certain actions in connection with tax appeal proceedings. The actions covered are: (i) Requests for Department of Revenue (“DOR”) review of proposed assessments or proposed refund denials, (ii) contested case petitions before the Office of Administrative Hearings (OAH) challenging a notice of final determination and (iii) requests for judicial review of OAH decisions. Any of these filings otherwise required to be made on or after April 1, 2020 and before July 15, 2020 are considered timely if filed by July 15, 2020. These extensions apply to contests involving any tax subject to the uniform tax appeal procedures and not just to income and franchise taxes.

These changes will assist both businesses and individuals as they continue to navigate the COVID-19 outbreak.

Should you have any questions about these changes or other parts of the new legislation, please contact Mike Wenig  at mwenig@tuggleduggins.com or (336) 271-5216, Vaughn Ramsey at vramsey@tuggleduggins.com or (336) 271-5234, Denis Jacobson at djacobson@tuggleduggins.com or (336) 271-5242, or Daniel Stratton at dstratton@tuggleduggins.com or (336) 271-5240. Please also follow our Twitter account @TuggleDuggins at https://twitter.com/TuggleDuggins  for continuing, up-to-date information related to navigating the law during the COVID-19 outbreak.

© 2020 Tuggle Duggins P.A. All Rights Reserved. The purpose of this bulletin is to provide a general summary of significant legal developments. It is not intended to constitute legal advice or a recommended course of action in any given situation. It is not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature. Moreover, information contained in this bulletin may have changed subsequent to its publication. This bulletin does not create an attorney-client relationship between Tuggle Duggins P.A. and the recipient. Therefore, please consult legal counsel before making any decisions or taking any action concerning the issues discussed herein.