E. Interest Income on Government Obligations (G.S. 105-130.3 and G.S. 105-130.5)
- North Carolina Obligations (Section .0401)
Net interest income received by a corporation on obligations of the State
of North Carolina and any of its cities, towns or counties is exempt from
income taxes imposed by this State.
- Obligations of Other States (Section .0402)
Net interest income earned by a corporation on its investments
in obligations issued by states and their political subdivisions
other than the State of North Carolina, represents taxable income
and is subject to this State's income tax.
- U.S. Obligations (Section .0403)
Net interest income earned on bonds, notes or other obligations of the United
States or its possessions is exempt from income taxation in this State so
long as interest on obligations of the state of North Carolina and its political
subdivisions is exempt from income taxes imposed by the United States.
Net interest from obligations issued under the borrowing power of a Federal
Land Bank, a Federal Home Loan Bank, a Federal Intermediate Credit Bank, Farm
Home Administration, Export-Import Bank of the U.S., Tennessee Valley Authority,
Banks for Cooperatives, Student Loan Marketing Association, Federal Farm Credit
Bank, Federal Financing Bank, Federal Savings and Loan Insurance Corporation,
Commodity Credit Corporation, Resolution Funding Corporation, Production Credit
Association, and United States Postal Service is considered to be interest
from obligations of the United States and is tax exempt.
- Sales or Exchanges (Section .0404)
- Gain or loss realized on the sale or other disposition of any type of
obligation of the United States or its possessions, the State
of North Carolina (which are not exempted by the specific
obligation), or its political subdivisions, any other state
or its political subdivisions, or of any other government
is a taxable transaction and must be included in the computation
of a corporation's State taxable income.
- Gain or loss realized on the sale or other disposition of obligations
is not included in taxable income if North Carolina law under which the
obligations were issued specifically exempts the gain or interest from
- Interest on bonds, notes debentures or other evidence of the indebtedness
issued under G.S. 131E-28 by the North Carolina Hospital Authorities,
including gain from the sale or exchanges of these obligations.
- Interest and gain derived from obligations issued by the North
Carolina Housing Finance Agency under G.S. 122A-19.
- Interest and gain derived from bonds issued under the Joint Municipal
Electric Power and Energy Act under G.S. 159B-26.
- Obligations of Federal National Mortgage Association (Section .0405)
Interest income or other income realized on obligations of Federal National
Mortgage Association is taxable income.
- Mortgage Backed Certificate Guaranteed by Federal Agencies (Section
Interest paid by the issuer to the holder of a mortgage backed certificate
guaranteed by the Federal Government, corporations formed by the Federal Government
and/or Federal Agencies is not income from an obligation of the United States
Government and is taxable.
- Repurchase Agreements (Section .0407)
Income attributable to or received from repurchase agreements of U.S. government
securities, an agreement to repurchase securities at an agreed price and date,
is not considered income derived directly from federal obligations and is