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The North Carolina General Assembly enacted legislation in 2011 to provide guidance to taxpayers as to when the North Carolina Department of Revenue (NCDOR) could either adjust net income for a corporation's transactions with affiliated members or require an affiliated group of corporate taxpayers to file a combined North Carolina income tax return.[1] Under this legislation, North Carolina formally adopted the transfer pricing principles contained in the Section 482 of the Internal Revenue Code.[2]

Beginning Aug. 1, 2020, the NCDOR implemented a Voluntary Corporate Transfer Pricing Resolution Initiative (Initiative) to work with corporate taxpayers to expedite the resolution of any transfer pricing issues related to intercompany transactions. The Initiative focuses on a taxpayer's intercompany transactions that lack economic substance or are not at fair market value. NCDOR's goal in implementing the Initiative is to fairly, consistently and expeditiously resolve any questions about the pricing of a corporate taxpayer's intercompany transactions.

Key Dates
  • Aug. 1, 2020 – Initiative begins.
  • Sept. 15, 2020 – Corporate taxpayers who choose to participate in the Initiative must submit a completed Election to Participate form.
  • Oct. 16, 2020 – Corporate taxpayers must provide all required transfer pricing, tax, financial information and other requested documentation to NCDOR.
  • Nov. 16, 2020 – Latest date for NCDOR to provide participating corporate taxpayers with a written, proposed adjustment to the taxpayer's intercompany transactions.
  • Dec. 1, 2020 – Conclusion of the Initiative.

The taxpayer has 15 days from the date they receive the NCDOR proposal to accept it. The taxpayer can offer modifications or adjustments to the proposal, but the decision on whether to accept the NCDOR proposal must be made within the 15-day window.

Key Considerations and Observations

Below are some key considerations and observations for taxpayers:

  • The Initiative covers tax returns for all open tax years – be it under normal statute of limitations (three years in North Carolina), returns under audit (an ongoing audit or mere notification of audit) or returns undergoing a request for review.
  • The taxpayer is responsible for paying any additional tax due along with interest. Penalties will be waived under the NCDOR's "special circumstances" penalty waiver policy.
  • Upon agreement as to the methodology, NCDOR will waive the ability to assess additional tax, interest or penalties for the returns covered under the Initiative. As a corollary, the taxpayer waives all rights to review or refund of amounts from the returns covered under the Initiative. The only exception for either party would be changes made by the Internal Revenue Service (IRS) that are then reported to North Carolina.
  • A taxpayer can opt-out of the Initiative at any point in the process before accepting the NCDOR's proposal. An opt-out would put the taxpayer on its regular audit schedule, and no penalties will be waived.

Our understanding is that NCDOR will be releasing a series of FAQs to answer some of the more common questions they have received. Once those are released, we will update this alert.

Taxpayers with North Carolina activity and intercompany transactions should assess their current intercompany posture and make a determination as to whether it is prudent to participate in this initiative.

If you would like additional information please contact your  tax advisor or one of the State and Local Tax or Transfer Pricing Team members listed below, or reach out to us at


[1] See N.C. Gen. §105-130.5A and Session Law 2011-390, s. 2 (House Bill 619).

[2] N.C. Gen. Stat. §105-130.5A(h).

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