On 30 July 2020, the North Carolina Department of Revenue announced that it is implementing a voluntary initiative to expedite the resolution of corporate intercompany pricing issues.

The purpose of this initiative is to fairly and consistently expedite the resolution of corporate Intercompany Pricing Issues subject to N.C. Gen. Stat. § 105-130.5A, provide certainty and uniformity to taxpayers, reduce time in disputes, and form an efficient basis for resolution of this corporate tax issue for all open tax years.

Certain North Carolina corporate taxpayers may engage in transactions between members of an affiliated group (“intercompany transactions”). Intercompany transactions that lack economic substance or are not at fair market value can cause a taxpayer to inaccurately report net income attributable to the State. N.C. Gen. Stat. § 105-130.5A. If the Department determines a taxpayer has an Intercompany Pricing Issue, the Department may redetermine the State net income of the corporation properly attributable to its business carried on in the State. The Department’s initiative provides taxpayers with potential Intercompany Pricing Issues an opportunity to fairly and expeditiously resolve with the Department all tax years within the statute of limitations for which the taxpayer has filed a return.

The initiative applies to all filed corporate income tax returns within the statute of limitations that have intercompany transactions that would be subject to adjustment under N.C. Gen. Stat. § 105- 130.5A. This includes taxpayers in the request for review process, currently under audit, notified of upcoming audit, and unidentified taxpayers with related party intercompany pricing.

By September 15, 2020, taxpayers must agree in writing to participate in the initiative by completing and emailing the Election to Participate form available at the website.

The initiative begins August 1, 2020, and generally concludes by December 1, 2020.