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NC-478 Instructions, Web

income tax, complete the applicable tax credit form to determine the eligible credit

Form NC-478F

Part 2, Line 1.

1st Installment of 2001 Credit

270

to be allocated among the shareholders. The portion of the eligible credit allocated

Part 3.

Eligible Credit Amount

1,350

to nonresident shareholders on whose behalf a composite return is being filed is

Form NC-478

calculated and carried to Form NC-478. The portion of the eligible credit allocated

Part 1, Line 6.

Investing in Business Property

270

to resident shareholders or nonresident shareholders who are not part of a

Part 4, Line 30.

Cost of business property placed in service

composite return will not be reflected on the S-corporation’s Form NC-478.

during 2001 X percentage ownership

Example 1 shows how the tax credit for investing in business property is

($150,000 X 30%)

$ 45,000

calculated, allocated, and reported on NC-478 and NC-478F by an S corporation.

Note:

Shareholders 1 and 2 must complete Form NC-478F, Part 2 and Part 3,

The same principles apply to an S corporation regardless of which credit is being

and Form NC-478 separately to claim the credit that is passed through

claimed.

to the individual shareholders.

Partnerships - Complete the applicable tax credit form to determine the

eligible credit to be allocated among the partners. The portion of the eligible

Example 2

credit allocated to nonresident partners on whose behalf the partnership

A partnership purchases and places in service in North Carolina equipment

pays tax is calculated and carried to Form NC-478. The portion of the eligible

costing $150,000 during tax year 2001. The partnership has three partners.

credit allocated to resident partners or nonresident partners on whose

Partner 1 is a North Carolina resident and owns 70% of the partnership. Partner

behalf the partnership does not pay tax will not be reflected on Form NC-

2 is a nonresident who owns 20% of the partnership. The partnership does not

478. Example 1 also applies to partnerships that are claiming the tax credits

pay tax on behalf of this partner. Partner 3 is also a nonresident, owns 10% of

for creating new jobs, investing in machinery and equipment, research and

the partnership, and the partnership pays tax on behalf of this partner.

development, and low-income housing. Special rules apply to partnerships

Step 1.

Allocating the Investment Among the Partners

if the calculation of the tax credit involves a maximum dollar amount. In those

cases, the credit is calculated on a partner-by-partner basis. Example 2

Partner

shows how the tax credit for investing in business property is calculated,

Percentage Ownership

70%

20%

10%

allocated, and reported on NC-478 and NC-478F by a partnership. The same

Cost of business property

$ 150,000

principles also apply to a partnership claiming the tax credits for worker training,

placed in service

investing in central office or aircraft facility property, and investing in renewable

Amount of Investment

$ 105,000

$ 30,000

$ 15,000

energy property.

Allocated

Trusts and estates - Complete the applicable tax credit form to determine the

Step 2.

Calculation of Eligible Credit Amount for Investing in Business Property

(From NC-478F, Part 1). Complete lines 1 through 5 for each partner

eligible credit to be allocated among the trust or estate and its beneficiaries.

and then enter the totals on NC-478F.

The portion of the eligible credit allocated to the trust or estate is calculated

and carried to Form NC-478. The portion of the eligible credit allocated to the

Partner 1

trust’s or estate’s beneficiaries will not be reflected on Form NC-478. Example

Line 1.

Cost of business property placed in service during 2001

$105,000

1 also applies to trusts and estates.

Line 2.

Multiply Line 1 by 4.5%

4,725

Line 3.

Maximum credit

4,500

Example 1

Line 4.

Eligible credit amount (lesser of line 2 or line 3)

4,500

Line 5.

Amount of each installment (Divide line 4 by the number 5)

$900

An S corporation purchases and places in service in North Carolina

equipment costing $150,000 during tax year 2001. The S corporation

Partner 2

has three shareholders. Shareholder 1 is a North Carolina resident and

Line 1.

Cost of business property placed in service during 2001

$30,000

owns 50% of the corporation. Shareholder 2 is a nonresident who

Line 2.

Multiply Line 1 by 4.5%

1,350

owns 20% of the corporation. This shareholder is not part of the

Line 3.

Maximum credit

4,500

composite return that is filed by the S corporation. Shareholder 3 is also

Line 4.

Eligible credit amount (lesser of line 2 or line 3)

1,350

a nonresident, owns 30% of the corporation, and is part of the composite

Line 5.

Amount of each installment (Divide line 4 by the number 5)

$270

return. The S corporation elects to apply the tax credit against income

tax.

Partner 3

Step 1.

Calculation of Eligible Credit Amount for Investing in Business Property

Line 1.

Cost of business property placed in service during 2001

$15,000

for the Entity (From NC-478F, Part 1)

Multiply Line 1 by 4.5%

675

Line 2.

Line 3.

Maximum credit

4,500

Line 1.

Cost of business property placed in service during 2001

$150,000

Line 4.

Eligible credit amount (lesser of line 2 or line 3)

675

Line 2.

Multiply Line 1 by 4.5%

6,750

Line 5.

Amount of each installment (Divide line 4 by the number 5)

$135

Line 3.

Maximum credit

4,500

Line 4.

Eligible credit amount (lesser of line 2 or line 3)

4,500

Cumulative

Line 5.

Amount of each installment (Divide line 4 by the number 5)

$900

Line 1.

Cost of business property placed in service during 2001

$150,000

Line 2.

Multiply Line 1 by 4.5%

6,750

Step 2.

Allocating the Eligible Credit Amount and the Annual Installment to the

Line 3.

Maximum credit

N/A

Shareholders

Line 4.

Eligible credit amount (lesser of line 2 or line 3)

6,525

Line 5.

Amount of each installment (Divide line 4 by the number 5)

$1,305

Shareholder

Eligible Credit Amount

Step 3.

Completing Parts 2 and 3 of Form NC-478F and Lines 6 and 30 of

of S-corporation

$ 4,500

Form NC-478 for the Partnership

Installment Amount

of S-Corporation

900

Form NC-478F

Percentage Ownership

50%

20%

30%

Part 2, Line 1.

1st Installment of 2001 Credit

$ 135

Eligible Credit

Part 3.

Eligible Credit Amount

$ 675

Amount Allocated

$ 2,250

900

$ 1,350

Amount of Installment

Form NC-478

Allocated

450

180

270

Part 1, Line 6.

Investing in Business Property

$ 135

Non-composite

Cost of business property placed in service

Part 4, Line 30.

Installment Amount

450

180

during 2001 X percentage ownership

Composite

($150,000 X 10%)

$15,000

Installment Amount

270

Note:

Partners 1 and 2 must complete Form NC-478F, Part 2 and Part 3, and

Step 3.

Completing Parts 2 and 3 of Form NC-478F and Lines 6 and 28 of Form

Form NC-478 separately to claim the credit that is passed through to

NC-478 for the entity

the individual partners.

Instructions For Form Nc-478 Series - Summary Of Tax Credit Limited To 50% Of Tax - North Carolina Department Of Revenue Page 4

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