Strong state revenue growth has triggered lower business tax rates for 2017. The reductions were part of a tax reform package signed by Governor Pat McCrory on 2013.  

 

Tax revenue collections were $21.3 billion, more than $300 million above the threshold for triggering a reduction in the state’s business tax rate from 4 percent to 3 percent beginning January 1, 2017. This will be less than half the 6.9 percent rate paid by North Carolina businesses in 2013.

 

“Even in an environment of historic tax cuts saving taxpayers more than $4.4 billion over five years, state revenues continue to grow due to our tremendous job growth, economic expansion and responsible fiscal management,” said Governor McCrory. “Today’s news that the state has met the threshold for further tax cuts for businesses will help spur job creation and continue to make North Carolina one of the best states for business.”

 

North Carolina’s business tax rate will now be the lowest in the nation among states with a business income tax. The next lowest state business income tax rate is 4.31 percent in North Dakota.

 

Even when the business tax rate declined to 5 percent in 2015 and 4 percent in 2016, Fiscal Year 2015-16 business income tax revenues were higher than net collections in Fiscal Year 2010-11 when the tax rate was 6.9 percent.

 

In addition to reducing the business income tax rate in 2017, North Carolina will also reduce the personal income tax rate in 2017 from 5.75 percent to 5.499 percent.