Effective February 1, 2012 the NCDOR will charge $5,000 for most answers to taxpayer’s questions through “expedited” letter rulings, and more taxpayers will be forced to seek private letter rulings, because the DOR officers are generally unwilling to give oral advice. If not “expedited,” the rulings will cost a minimum of $500. The new policy applies to ruling requests mailed after on or February 1, 2012.
The new policy replaces an “old” letter ruling policy that was not that old. The impetus for the current change is the new feature of charging for the rulings, which was allowed by 2011 legislation that authorized variable fees from $100 to $5000. The statute said the fee amount could be based on complexity and other factors, but the speed of the rulings was not a factor listed in the statute. The DOR in implementing the statute chose not to employ any of the listed variables, but to make a distinction between regular ($500) and “expedited” rulings ($5,000).
Actually, the fee structure is more complicated than that. The fee is $500, or $5000, “per tax type, per issue.” Therefore, most corporate rulings will cost at least $1,000, because they will involve both income and franchise tax; and if the taxpayer wants any sort of timeliness in the ruling, the double corporate rulings will cost at least $10,000.
The expedited ruling will be issued within 90 days after the taxpayer submits all of the required information. Ninety days is much longer than rulings have historically required at the DOR. Moreover, the DOR in recent years has tended to make multiple, successive, requests for additional information in audit situations, and one may anticipate the same to be true in ruling situations. Therefore, taxpayers should not plan on receiving a ruling in three months, even if they are willing to pay $5,000 or $10,000, or whatever the bill turns out to be. If the ruling is not issued within the 90 day period the DOR will refund $4,500 and issue the ruling when it can. The policy makes no promises about the timeliness of non-expedited rulings.
Another category of ruling specifically addressed in the policy is rulings available under GS 105-130.5A, as amended in 2011. The corporate taxpayer can ask for an alternate filing methodology under GS 105-130.5A(c) or can make a preemptive strike to head off an audit and request advice whether its intercompany transactions will trigger combined reporting under GS 105-130.5A(m). For the latter the statute requires answers within 120 days, but the policy does not reference this and says that expedited rulings cannot be issued for this category of rulings. Under the ruling policy these rulings cost a flat $5,000. This category of ruling does not include requests for alternate apportionment formulas under GS 105-130.4, for which no fee is charged.
The policy has a number of general conditions that are similar to those imposed by the IRS for rulings. One of particular note is that “the department may use information the taxpayer provides for any purpose permitted by law.” This means that the information submitted will be turned over to the audit staff.