North Carolina

In North Carolina, there is a mandatory tax withholding requirement for the sale of real property by nonresident individuals or entities. The withholding rate is 4% of the sales price. The buyer is responsible for filing a return with the Secretary of the State of North Carolina within 15 days of the sale closing. This requirement is outlined in NC Section 105-163.

Here are the key points regarding the real estate tax withholding rules for North Carolina when dealing with nonresident sellers:

1. Form NC-1099NRS: When buying real property in North Carolina from a nonresident seller, the buyer must complete Form NC-1099NRS. This form requires details such as the seller's name, address, social security or federal identification number, the property's location, the closing date, and the gross sales price.
2. Filing Requirements: The buyer must file Form NC-1099NRS with the North Carolina Department of Revenue within 15 days of the sale closing. This can be done electronically via the Department’s eNC3 and Information Reporting Application. If filed electronically, do not mail paper copies.
3. Copy to Seller: The buyer must also furnish a copy of Form NC-1099NRS to the seller.
4. Nonresident Seller's Tax Obligations: Nonresident sellers must report any gain recognized for federal income tax purposes from the sale of North Carolina real property on their North Carolina individual income tax return. This gain is subject to North Carolina income tax.
5. Estimated Income Tax: Nonresident sellers may need to pay estimated income tax if they expect to owe $1,000 or more and their withholding and tax credits are less than 90% of the current year's tax or 100% of the prior year's tax. However, if they were not required to file a North Carolina return for the previous year, they are not required to pay estimated income tax.
6. Opportunity Fund Gains: North Carolina does not conform to the federal deferral of gains invested in a qualified Opportunity Fund under IRC section 1400Z-2. These gains must be included in the nonresident seller’s state tax payable.

For further assistance or to obtain forms and instructions, nonresident sellers can contact the North Carolina Department of Revenue or visit their website.