North Carolina Senate Bill 595 (S.L. 2026-31) includes three changes that affect the withholding and reporting obligations of employers and gaming operators. Signed in July 2026, two changes took effect on enactment, and the third takes effect January 1, 2027. A separate law signed in July 2026, Senate Bill 257 (S.L. 2026-41), also schedules reductions in the individual income tax rate that changes the withholding rates for employers and gaming operators.
Scheduled Income Tax Rate Reductions (Section 44.1, S.L. 2026-41)
Effective for tax years beginning with 2027.
Section 44.1 of Session Law 2026-41 replaces a trigger-based income tax rate reduction for tax years 2027 through 2034 with set rates: 3.49% for 2027 through 2029, 3.24% for 2030 through 2032, 2.99% for 2033 and after. Tax year 2026 is unchanged at 3.99%. The rate reduction trigger is reintroduced for tax years 2035 through 2040, with the potential for up to two additional 0.25% reductions until the rate reaches the lowest rate permitted, 2.49%. North Carolina’s withholding rates and calculations are tied to the individual income tax rate.
Gambling Winnings Withholding (Section 16, S.L. 2026-31)
Effective for winnings paid on or after January 1, 2027.
Section 16(a) of Session Law 2026-31 enacts a new withholding requirement for gambling winnings paid on or after January 1, 2027. Interactive sports wagering operators and advance deposit wagering (ADW) licensees, which are licensed to accept pari-mutuel wagers on horse races through advance deposit accounts, must deduct and withhold North Carolina income tax whenever federal withholding is required under IRC Section 3402(q). Federally, that generally means proceeds above $5,000 that are at least 300 times the wager. The withholding rate is the individual income tax rate, which is 3.49% beginning January 1, 2027. Operators must file returns, remit, and report the withheld tax in the same time and manner as wage withholding.
Sports Wagering Reporting (Section 5.4, S.L. 2026-31)
Effective upon Enactment.
Under Section 5.4 of Session Law 2026-31, the Department of Revenue must request, no more than once per calendar year, that interactive sports wagering operators report information on every registered player who received at least $2,000 in winnings in the prior calendar year. The Department may request player identification, wagers placed, wager outcomes, winnings paid, and any other information it considers necessary to determine compliance. Operators must provide the information when requested. The Department has not yet issued guidance on the timing or format of the first request.
Withholding Deposit Changes (Section 1.4, S.L. 2026-31)
Effective upon enactment.
Section 1.4 of Session Law 2026-31 rewrites the semiweekly withholding deposit requirements for employers withholding an average of $2,000 or more per month in North Carolina income tax. Now, the state deadlines mirror the federal deadlines but no longer reference the federal law. Section 1.4 also repeals the automatic State extensions that followed federal extensions, and the State interest and penalty relief that applied when no federal failure-to-deposit penalty would have been assessed. A late or short deposit that would have been forgiven federally can now carry State interest and penalties.
Session Law 2026-41 can be found here.
Session Law 2026-31 can be found here.
