North Carolina sets intercompany transaction VCI - Deadline September 15

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August 2020


The North Carolina Department of Revenue launched on August 1 a “Voluntary Corporate Transfer Pricing Resolution Initiative” designed to expedite the resolution of intercompany pricing issues resulting from adjustments to North Carolina income related to transactions between affiliated group members.  Election to participate in this initiative must be made by September 15.

The takeaway

This initiative marks the most recent salvo in North Carolina’s efforts to address transactions between affiliated entities. State courts have addressed the department’s power to force combination in these instances. Legislation enacted in 2010 set forth parameters for forced combination, and in 2011, Sec. 105-130.5A was adopted to further detail how income can be adjusted when dealing with transactions between related entities.

Taxpayers need to quickly consider participation in the initiative given the September 15 deadline.

Participation may prove beneficial to taxpayers currently under audit considering the initiative offers an expedited process, penalty waivers, and the retention of other administrative remedies if an agreement is not reached. Taxpayers not identified under audit may consider the initiative an opportunity to eliminate any cash reserves attributable to North Carolina.

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Peter Michalowski

State and Local Tax Leader, PwC US

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