NC S863

Allows small businesses to deduct deposits made to capital improvement accounts from North Carolina taxable income, subject to tiered limits based on adjusted gross income levels.

Deduction limits are 5% of adjusted gross income up to $1,000,000, 2% above $1,000,000 up to $2,000,000, and 1% above $2,000,000 up to $3,000,000.

Defines "small business" as any business with cumulative gross receipts not exceeding $10,000,000 for the taxable year.

Restricts capital improvement account deposits to federally insured banking institutions and requires funds be used solely for improvements that add value to real property, extend useful life at least 10 years, or adapt property to new uses.

Requires previously deducted amounts withdrawn and not used for qualifying improvements to be added back to taxable income in the year of withdrawal.

Effective for taxable years beginning on or after January 1, 2024.