Sep 9, 2016
NCGA Week in Review
ICYMI Political News
The Office of the State Controller released a report this week that highlights the state’s cash surplus and increased revenue from the 2015-16 fiscal year. According to the report, the state revenues increased by more than $700 million in the 2015-16 fiscal year compared to the previous year, a 3.3% increase. Additionally, the state brought in $22.2 billion during the last fiscal year, but spent $21.2 billion, resulting in a $940 million cash surplus.
Spotlight on Revenue Laws & Economic Development
Connect NC Bond
In the March, North Carolina voters voted in favor of the Connect NC Bond referendum. The referendum allowed the state to borrow a $2 billion bond for infrastructure projects in 76 of the state’s 100 counties. Projects funded by the bond include construction, repair and renovation of buildings at UNC system schools and community college campuses, investments in state and local parks and the state zoo and water infrastructure updates. Furthermore, HB 1030: 2016 Appropriations Act provided funds to support the administration of projects.
The following bills were passed by the House and Senate during the short session and have been signed into law by the Governor.
HB 1137: Treasurer’s 2016 Investment Admin. Changes – AB: Makes numerous changes to the roles of the State Treasurer, including:
- Removes Saturdays from the office hours of the Office of the Treasurer.
- Changes the Treasurer’s authority to invest General Fund, Highway Fund, and Highway Trust Fund funds and funds in various retirement systems and other special funds.
- Expands the Treasurer’s general fiduciary duties.
The legislation goes into effect on January 31, 2017.
SB 481: Fund Sm Business/ DOR Rulings/ City Rt of Way.: Allows small North Carolina companies to raise up to $2 million through crowdfunding efforts. The legislation allows individuals to invest up to $5,000 in small businesses or start-ups without registering the investment as a formal security. The legislation went into effect on July 22, 2016 when it was signed by the Governor.
SB 726: IRC Update: Updates references to the federal Internal Review Code (IRC) to include any provisions of the IRC enacted as of January 1, 2016. SB 726 does not, however, implement all of the federal tax deductions, such as deductions on mortgage insurance premiums and college and university tuition expenses. The legislation also decouples NC’s tax law from certain provisions of the federal Protecting Americans from Tax Hikes Act of 2015. The law went into effect on June 1, 2016 when it was signed by the Governor.
SB 729: Various Changes to the Revenue Laws: Makes numerous changes to the state’s corporate, personal, sales and excise tax laws, among other provisions, the legislation:
- Repeals a provision which established an annual franchise privilege tax on mutual burial associations beginning with taxes due on or after April 1, 2017.
- Clarifies laws concerning the reporting of royalty income.
- Changes the effective date for franchise tax base changes made in the 2015 budget to include franchise taxes reported on 2016 corporate income tax returns.
- Removes a requirement for retailers and wholesale merchants to retain tax liability records for a minimum of three years.
- Provides that wine shippers are required to file excise tax returns on shipments once per year, instead of monthly, which is the current requirement for wholesalers and importers.
SB 729 went into effect on June 1, 2016 when it was signed by the Governor.
SB 803: Rev Laws Technical, Clarifying, & Admin. Chg.: Makes clarifying adjustments to various income, sales, and local tax statutes. The legislation is an effort to clarify the application and exemptions under current tax law. The legislation went into effect on July 11, 2016 when it was signed by the Governor.
Revenue & Economic Development Budget Provisions
HB 1030: 2016 Appropriations Act
- Requires the Department of Commerce to have at least one employee from the Rural Economic Development Division Main Street and Rural Planning Center physically located in each office of the division to assist communities in economic development strategic planning, land-use planning, downtown economic revitalization and technical support.
- Appropriates $3.75 million for the 2015-16 fiscal year to be used for promoting the state’s economic development and job recruitment.
- Creates an International Recruiting Coordination Office under the Department of Commerce responsible for hosting international visitors and delegations who are considering NC as a business destination for economic development investments.
- Appropriates $250,000 to Stokes County to provide broadband internet access to underserved areas in the county.
- Directs the Department of Revenue to adopt rules to implement market-based sourcing if legislation is passed in a future session to enact it. Market-based sourcing was not enacted by the legislature this year; if adopted in the future market-based sourcing will substantially change the state’s approach to calculating how much income is allocated to NC for corporate income tax purposes for multistate companies.
- Provides incentives to encourage inter-tier cooperation for Job Development Investment Grant (JDIG) projects.
- Prohibits state entities from entering into a state-supported financing arrangement with a value of $5 million or more unless the General Assembly has enacted legislation approving the project to be financed and the use of the state-supported financing arrangement.
- Increases the standard deduction for personal income tax from $15,500 to $16,500 for joint filers and from $7,750 to $8,750 for single filers.
- Enacted a grace period for the under collection of sales or use tax as a result of the changes made by the 2015 budget, including repair, maintenance and installation (RMI) services.
- Expands the 1%/ $80 excise tax provision to companies located at port facilities.
HB 3: Omnibus Constitutional Amendments: This legislation would have put three constitutional amendments on November’s ballot, one of which would have limited the personal income tax rates to 5.5%.
HB 1029: Economic Development Changes & Study: Would have created a workgroup tasked with examining the state’s strategy for assisting economically distressed communities.
HB 1082: Eliminate Use of Development Tiers: Would have eliminated the state’s use of development tier designations, replacing it with an ‘economic distress index.’ This index would rated county distressed based on the average rate of unemployment, medium household income, average wage and percentage of adults 25 or older who have not received a high school diploma or equivalent.
SB 826: Prosperity & Econ. Opportunity for All NC Act: Would have increased access to capital and tax credits for entrepreneurs across the state. The bill was directed at assisting Tier 1 and 2 counties, which are the more economically distressed areas of the state.
SB 829: Small Business Tax Incentive: Would have excluded small businesses from the dollar limitations and add-back requirements applied to Section 179 expenses.
SB 846: Change the LOST Adjustment Factor: Would have changed the Local Option Sales Tax (LOST) adjustment factor to one that varies by economic development tiers and would have repealed the state contribution toward the LOST distribution.