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Read. Follow. Verify.North Carolina Updates Revenue Laws, Imposes Partnership Audit Tax Rules, and Expands Car Rental Taxes
Last action · March 31, 2025: Ref to the Com on Finance, if favorable, Rules, Calendar, and Operations of the House (House action)Sponsors: Julia Howard and 5 others
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What This Bill Would Do
North Carolina House Bill 554 modifies state tax laws by imposing tax at the partnership level for federal partnership audits, updating personal and corporate income tax deductions, adjusting withholding rules for employers, and expanding the alternate highway use tax to include peer-to-peer vehicle rentals starting July 1, 2025, or October 1, 2025, depending on the provision.
The measure directly impacts partnerships undergoing federal audits, businesses handling state tax withholding, remote retailers meeting sales thresholds, and consumers utilizing peer-to-peer car sharing services by altering how taxes are assessed, collected, and reported across the state.
- House Bill 554 was introduced in the North Carolina General Assembly during the 2025-2026 session by Representative Howard. context
- The Bipartisan Budget Act of 2015 created a centralized federal audit regime for partnerships, prompting states to adopt conforming rules for state-level tax adjustments. context
Who It Would Affect
Groups the bill's text would affect if enacted, as described in the record. Being affected is not a position for or against it.
Partnerships
Partnerships are subject to entity-level taxation for federal audit adjustments and must follow new reporting and election procedures.
Peer-to-peer vehicle sharing providers
Providers are included under the alternate highway use tax framework, required to collect and remit gross receipts taxes, and subject to airport fees and regulations.
Employers
Employers must follow updated filing and payment schedules for state income tax withheld from employee wages.
Remote retailers
Retailers exceeding the $100,000 remote sales threshold are subject to state sales tax collection and registration requirements.
Key Facts
- The bill imposes tax at the partnership level for federal partnership adjustments and authorizes refunds for federal changes.
- Personal income tax modifications include adjustments to S Corporation losses and deductions for taxable years beginning on or after January 1, 2025.
- Employers withholding between $250 and $2,000 monthly must file returns and pay withheld taxes on a monthly basis.
- Remote sellers and marketplace facilitators exceeding $100,000 in gross remote sales are engaged in business in North Carolina.
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- The alternate highway use tax is expanded to include peer-to-peer vehicle sharing providers, applying an 8% tax rate to short-term peer-to-peer rentals effective October 1, 2025.
- Counties and cities are authorized to levy gross receipts taxes up to 1.5% on short-term vehicle leases or rentals.
- Regional public transportation authorities may levy a privilege tax up to 5% on short-term rentals and peer-to-peer vehicle sharing.
- Airport operators may charge peer-to-peer vehicle sharing programs reasonable fees, require decals, and designate staging locations.
- The penalty for filing a frivolous tax return is increased from up to $500 to up to $2,000.
- Net tax proceeds from certain vehicle taxes are credited to the Highway Fund.
Frequently Asked Questions
How does the bill affect peer-to-peer car rentals?
What changes are made to partnership tax audits?
What else do you want to know?
News Coverage
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Votes, people, money & the original sourceWhere This Stands
Currently in committee. The next step in the legislative lifecycle is Floor Vote.
Procedural history
3 actions- Mar 31, 2025HouseRef to the Com on Finance, if favorable, Rules, Calendar, and Operations of the House
- Mar 31, 2025HousePassed 1st Reading
- Mar 27, 2025HouseIntroducedFiled
Version history
Only one version on file - nothing to compare yet. As later stages (committee substitute, engrossed, enrolled) are captured, the redline appears here.
View official text →Lobbying Activity
No state lobbying filings in our records match this bill. Federal lobbying reports (LDA) cover Congress, so they are not listed on state bills.
Full breakdown
Who this bill affects and the strongest case for and against it, written only from the bill’s own text.
Sponsors
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Discoveries
Patterns POLISCOPE noticed across the record. These are observations to investigate, not conclusions.
Adoption of Federal Partnership Audit Rules
North Carolina shifts toward conforming its partnership tax auditing mechanisms directly to the federal Bipartisan Budget Act of 2015 framework.
Expansion of Highway Use Tax Base
The state broadens the tax base for vehicle-related revenues by explicitly incorporating peer-to-peer car sharing platforms into the alternate highway use tax structure.
Connected Entities
Sources
www.ncleg.gov
Analysis Score
0–100- Significance85How much this matters to a regular citizen
- Controversy25Intensity of disagreement among stakeholders
- Entertainment5Compellingness for a non-policy-wonk reader
- Buzz30Current news / social attention level
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