The North Carolina Department of Revenue (NCDOR) has issued an Important Notice addressing how recent federal tax law changes will affect 2025 North Carolina income tax filings. North Carolina has not yet conformed to federal tax legislation enacted after January 1, 2023, many taxpayers may face uncertainty when preparing their 2025 state returns.
Why This Matters
North Carolina currently follows the Internal Revenue Code (IRC) as of January 1, 2023. This means that federal changes enacted after that date, including, but not limited to, those in H.R. 1, also known as the One Big Beautiful Bill Act, (e.g., bonus depreciation, 163(j) and R&E capitalization) and the Federal Disaster Tax Relief Act of 2023, must be excluded when calculating North Carolina taxable income for 2025.
Given that the General Assembly is not scheduled to reconvene until April 21, 2026, taxpayers are left in a challenging position, as state filing deadlines will occur before conformity legislation can be considered.
Filing Options for 2025
Taxpayers affected by federal changes have two choices:
- File an Extension
This allows taxpayers to wait for North Carolina legislative action so their return can be completed accurately.
Note: An extension to file is not an extension to pay—tax due must be paid by the original deadline. - File Now Using a Recalculated Federal Taxable Income
This involves recalculating federal taxable income as if post2023 federal law changes did not apply and attaching a reconciliation statement. Taxpayers using this method will almost certainly need to amend their return once North Carolina passes conformity legislation.
Recommendation
Given the uncertainty, BRC recommends extending 2025 North Carolina returns for most clients affected by H.R. 1 or other post2023 federal changes. Deferring filing until the North Carolina General Assembly convenes, allows time to file a complete and accurate return and will avoid the need to file an amended return once North Carolina legislation passes their conformity laws.
While it is possible to file a 2025 tax return without the need to extend by using the required reconciliation to the January 1, 2023, Internal Revenue Code referenced above, this approach provides little practical benefit, as it will almost certainly result in the need to file an amended return following legislative action. Also, including the required reconciliation is expected to significantly increase preparation time for the North Carolina return. Accordingly, filing prior to conformity should generally be considered only in limited or special circumstances where specific facts warrant the added time, complexity, and administrative effort.
We will work with each client to evaluate whether any such circumstances apply and to determine the most appropriate filing strategy based on their individual situation.
BRC is actively monitoring legislative developments and will provide updates as changes occur to ensure you have the most up-to-date guidance when making decisions about your 2025 North Carolina income tax return.
Please feel free to reach out to your trusted BRC tax advisor if you have any questions as to the impact this will have on your current tax return filings.
The information contained in this article is for informative purposes only and should not be relied on when making any business, legal, or other decisions. This information may be updated without notice and/or may not contain the most current information that is available related to this topic.