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NCDOR Important Notice: Impact of Recently Enacted Laws on North Carolina Individual and Corporate Income Tax Returns

The North Carolina Department of Revenue (“NCDOR”) issued a notice explaining how recently enacted legislation impacts North Carolina individual and corporate income tax returns.

The notice addresses three primary tax changes:

• Domestic Research and Experimental (R&E) Expenditures: North Carolina has enacted a new “decoupling” adjustment for taxpayers that fully deduct domestic R&E expenses for federal purposes. Depending on the tax year and whether the taxpayer elected the federal treatment, taxpayers may need to add back a portion of the federal R&E deduction and then deduct the add-back over subsequent years.
• Eligible Timber Casualty Losses: A new deduction is available for certain timber casualty losses resulting from Hurricane Helene. The deduction applies to qualifying losses incurred between September 24 and October 31, 2024, subject to specified requirements, and may be claimed for tax years 2023 or 2024.
• Gambling Losses: Individuals may now claim gambling losses as a North Carolina itemized deduction, subject to the federal limitation under IRC § 165(d) and provided the losses were not already deducted in determining federal adjusted gross income. This provision applies to tax years beginning on or after January 1, 2025.

The notice explains that taxpayers whose prior-year returns are affected by these changes may need to file amended returns to reflect the legislative changes. Refer to the section titled “Impact on NC Tax Returns” for information on how to file an amended return.

Guidance regarding the impact of the legislation on the 2026 North Carolina Tax Return will be provided in the 2026 tax return instructions.

For more information, see the published NCDOR notice and watch for a future FAQ document on the NCDOR website.

Young Moore and Henderson lawyers are available to answer questions about how this new legislation affects your business, and they can provide additional North Carolina state and local tax advice. For assistance, please contact Reed Hollander or Marlo Donato Kalb.