NORTH CAROLINA GENERAL ASSEMBLY

1975 SESSION

CHAPTER 236

SENATE BILL 328

AN ACT TO ALLOW INCOME TAX DEDUCTIONS FOR EXPENSES ACTUALLY INCURRED FOR THE CARE OF DEPENDENTS NECESSARY FOR GAINFUL EMPLOYMENT.

The General Assembly of North Carolina enacts:

Section 1.  Article 4 of Subchapter I, Chapter 105 of the General Statutes, is hereby amended by adding a new subsection (26) at the end of G.S. 105-147, to read as follows:

"(26)a.  In the case of an individual who maintains a household which includes as a member one or more qualifying individuals, there shall be allowed as a miscellaneous deduction an amount for employment-related expenses as defined in subsection b.2. not to exceed four hundred dollars ($400.00) during any one month.

In the case of such expenses for services outside the taxpayer's household incurred for the care of a qualifying individual described in b.l.(a) below, the amount allowed during any one month shall not exceed one hundred dollars ($100.00) per qualifying individual, subject, however, to the four hundred dollar ($400.00) limitation set out above.

b.         For the purposes of this subsection:

1.         The term 'qualifying individual' means:

(a)        a dependent of the taxpayer who is under the age of 15 and with respect to whom the taxpayer is entitled to a deduction under G.S. 105-149(5);

(b)        a dependent of the taxpayer who is physically or mentally incapable of caring for himself; or

(c)        the spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for himself or herself.

2.         The term 'employment-related expenses' means amounts paid for expenses for household service and for the care of a qualifying individual, but only if such expenses are incurred to enable the taxpayer to be gainfully employed.

3.         (a)        For the purposes of this subsection, an individual shall be treated as maintaining a household for any period only if over half of the cost of maintaining the household during such period is furnished by such individual.

(b)        In the case of a married person living with his or her spouse and such spouse is maintaining the household, the deduction provided for herein shall be allowed for employment-related expenses in connection with any qualifying individuals, except as limited herein, of the spouse not maintaining the household.

c.         Income Limitation. If the adjusted gross income of the taxpayer exceeds eighteen thousand dollars ($18,000) for the taxable year during which the expenses are incurred, the amount of the employment-related expenses incurred during any month of such year which may be taken into account under this section shall (after the application of subsections d.3.) be further reduced by that portion of one-half of the excess of the adjusted gross income over eighteen thousand dollars ($18,000) which is properly allocable to such month. For purposes of the preceding sentence, if the taxpayer is married during any period of the taxable year, there shall be taken into account the combined adjusted gross incomes of the taxpayer and his spouse for such period.

d.         1.         If the taxpayer is married and living with his spouse for any period during the taxable year, there shall be taken into account employment‑related expenses incurred during any month of such period only if:

(a)        both spouses are gainfully employed on a substantially full time basis, or

(b)        the spouse is a qualifying individual described in subsection (b)(l)c.

2.         No deduction shall be allowed under this subsection for any amount paid by the taxpayer to an individual bearing a relationship to the taxpayer described in G.S. 105-149(5) (relating to definition of 'dependent'), if that individual resides in the taxpayer's household when the service is performed or is a spouse of the taxpayer.

3.         In the case of employment-related expenses incurred during any taxable year solely with respect to a qualifying individual (other than an individual who is also described in subsection (26)b.l.(a)), the amount of such expenses which may be taken into account for purposes of this section shall be reduced:

(a)        if such individual is described in subsection (26)b.l.(b), by the amount by which the sum of:

(i)         such individual's adjusted gross income for such taxable year, and

(ii)        the disability payments received by such individual during such year, exceeds one thousand dollars ($1000), or

(b)        in the case of a qualifying individual described in subsection(26)b.l.(c), by the amount of disability payments received by such individual during the taxable year.

For purposes of this paragraph, the term 'disability payment' means a payment (other than a gift) which is made on account of the physical or mental condition of an individual and which is not included in gross income.

e.         If a husband and wife are living together at the end of the taxable year, no deduction under this subsection shall be allowed unless they file a combined return for the year.

f.          No deduction shall be allowed under this subsection unless the taxpayer completes and attaches to his return the necessary form or forms as may be required by the Secretary of Revenue, nor shall any deduction be allowed under G.S. 105-147(11) for amounts claimed under this subsection."

Sec. 2.  G.S. 105-148 is amended by repealing subsection (5) thereof in its entirety.

Sec. 3.  This act shall become effective with respect to taxable years beginning on or after January 1, 1975.

In the General Assembly read three times and ratified, this the 7th day of May, 1975.