Additions to Federal Adjusted Gross Income
-Interest Income from Obligations of States Other than North Carolina. Enter the amount of interest received from notes, bonds, and other obligations of states and political subdivisions other than North Carolina if not included in federal adjusted gross income. This includes exempt interest dividends received from regulated investment companies (mutual funds) to the extent such dividends do not represent interest from obligations of North Carolina or its political subdivisions.
-Deferred Gains Reinvested into an Opportunity Fund under IRC Section 1400Z-2. North Carolina did not conform to the temporary deferral of income for certain gains timely invested in a qualified Opportunity Fund under Internal Revenue Code section 1400Z-2. These gains are not deferred for North Carolina tax purposes and must be included in determining your State tax payable. Therefore, an addition to federal adjusted gross income is required for gains reinvested into a qualified Opportunity Fund under IRC section 1400Z-2. If you were required to include a gain in federal adjusted gross income under IRC section 1400Z-2 in tax year 2017, you may deduct the gain to the extent the same income was included in the calculation of N.C. taxable for tax year 2017.
-Adjustment for Bonus Depreciation. North Carolina did not adopt the 50% bonus depreciation provisions in IRC sections 168(k) or 168(n) for property placed in service for tax year 2018. Therefore, you must add 85% of the amount of bonus depreciation deducted on your federal return to your State return. Note: If you are required to addback bonus depreciation in tax year 2018, you may deduct 20% of the amount added back in the first five taxable years beginning with tax year 2019. For further guidance on bonus depreciation, visit the Department’s website.
-Adjustment for IRC Section 179 Expense Deduction. North Carolina did not conform to the increased federal expense deduction or increased investment limitations for tax year 2018. N.C. dollar and investment limitations are $25,000 and $200,000, respectively. Therefore, you must add 85% of the difference between the IRC section 179 expense deduction using federal limitations and the deduction using N.C. limitations to your State return. Note: If you are required to addback IRC section 179 expenses in tax year 2018, you may deduct 20% of the amount added back in the first five taxable years beginning with tax year 2019. For further guidance on IRC section 179, visit the Department’s website.
-Other Additions to Federal Adjusted Gross Income. Enter the total amount of the following other additions. Make sure you attach an explanation or schedule of the item(s) to Form D-400.
(1) The amount by which your basis of property under federal law exceeds your basis of property for State purposes must be added to your adjusted gross income in the year that you dispose of the property.
(2) North Carolina did not conform to the extension of the federal provision which allowed an exclusion from gross income for a qualified charitable distribution from an individual retirement plan by a person who has attained age 70 1/2 under section 408(d)(8) of the Code. Therefore, an addition to federal adjusted gross income is required for the amount excluded from gross income on your federal return. Note: You may deduct the contribution amount added to federal adjusted gross income on Form D-400 Schedule S, Part C, Line 20 if you itemized N.C. deductions.
(3) If you carry over a net operating loss from another year to the 2018 federal return, an addition is required for the amount of net operating loss carried to the 2018 year that is not absorbed and will be carried forward to subsequent years. Example: You incur a net operating loss of $75,000 in 2017. You carry the net operating loss to the 2018 federal return and deduct the entire loss in arriving at federal adjusted gross income. Only $50,000 of the loss is absorbed and $25,000 is carried forward to subsequent years. To determine North Carolina taxable income, you must make an addition to federal adjusted gross income of $25,000.
(4) Effective for taxable years beginning on or after January 1, 2006 and repealed effective for taxable years beginning on or after January 1, 2014, certain contributions made to North Carolina’s National College Savings Program (“N.C. 529”) were deductible for State tax purposes. If you took a State tax deduction for contributions made to the N.C. 529 Plan while the deduction was in effect, and in tax year 2018, you withdrew funds from the Plan, you must add to federal adjusted gross income the amount deducted in the prior tax year to the extent the funds withdrawn were not used for a purpose allowed under IRC section 529.
(5) The amount by which a shareholder’s share of S Corporation income is reduced under section 1366(f)(2) of the Code for the taxable year by the amount of built-in gains tax imposed on the S Corporation under section 1374 of the Code.