May 27, 2021
North Carolina General Assembly Week in Review
After a busy day at the legislature, we are reporting on the week's activities a day early, ahead of the extended holiday weekend. On Monday, Memorial Day, Americans across the country will recognize the brave men and women who gave their lives for our nation. This week, the legislature started to introduce major policy initiatives that will shape the dialogue for the next several weeks as budget talks begin. This included sweeping tax reform, rolling out federal COVID dollars, and a massive move to increase statewide access to broadband.
As of this morning, in the state of North Carolina, there were 849 confirmed cases of the coronavirus, 681 individuals hospitalized, and sadly, 13,055 confirmed deaths. There have been 8,208,453 doses of the vaccine distributed in NC, which is about 53% of the total adult population.
As we all continue to feel the effects of the global pandemic and adjust to a new normal, we want to highlight a few ways our clients across North Carolina have worked to support residents and make this time a little easier for those throughout the state. Read more about what our clients are doing to help by clicking here.
For more information on COVID-19 in North Carolina, click here to visit the Department of Health and Human Services website, and be sure to stay up to date on the latest federal guidelines issued by the Centers for Disease Control and Prevention (CDC) by clicking here.
President Biden signed the American Rescue Plan Act of 2021 into law in March. A major component of the $1.9 trillion package is the “Coronavirus State Fiscal Recovery Fund” providing $220 billion to states. The Act gives states flexibility in how they choose to distribute the funds, with one subsection stating that the Fiscal Recovery Funds may be used “to make necessary investments in water, sewer, or broadband infrastructure.”
Last week, House members presented their ideas for utilizing the federal funds to expand broadband infrastructure in underserved corners of the state. A frequent champion for utility and service projects, Rep. Dean Arp (R-Union), introduced H947: The G.R.E.A.T. Broadband Expansion Act in the House Appropriations Committee meeting last Thursday. The bill would allocate $750 million of the federal aid towards broadband, of which $350 million would go to the state’s Growing Rural Economies with Access to Technology (G.R.E.A.T.) program. The bill would also create the Completing Access to Broadband (C.A.B.) program using $400 million of the funds.
The G.R.E.A.T. program administers grants to private broadband service providers to update internet bandwidth in economically distressed areas. That program is a provider-led partnership, while the new C.A.B. program would be county-led. Counties would initiate a project with a service provider, with the provider contributing up to 30% of a project’s total cost, the county pitching in at least 35%, and the state contributing 35% from the C.A.B. funds.
Arp’s bill came just one day after Gov. Cooper announced his proposal to spend $1.2 billion of the federal aid on broadband expansion, of which $600 million would go towards infrastructure. Cooper suggested $240 million to support low-income and other affordability programs. While debating the bill on the House floor, Rep. Ricky Hurtado (D-Alamance) spoke in support of the bill, but urged his colleagues to “consider the affordability of access.”
The bill passed the House floor Wednesday with no opposition and now sits in the Senate.
Tax Reform and COVID Grants
On Tuesday, Senate Republicans convened a press conference to unveil a broad tax reform proposal. The legislation builds on a House bill that would allow PPP loan recipients to treat the federal and state pandemic-related loan proceeds as business expenses that could be deducted, resulting in reduced tax bills. The amended bill would make sweeping changes to North Carolina’s tax laws and address the revenue losses experienced by businesses with grants.
Sen Paul Newton (R-Cabarrus) introduced the revised bill, H334: JOBS Grants and Tax Relief in Tuesday’s Senate Finance Committee meeting, arguing that the state should not “punish taxpayers just for living in our state.” The measure includes a $1 billion Jobs and Business Saving Grant Program which would provide up to $18,750 to businesses and nonprofits who received either state or federal pandemic-related loans or grants.
The Senate bill would codify an earlier proposal to ease taxes on businesses and individuals. The individual income tax would be reduced from 5.25% to 4.99% and raise the standard deduction from $21,500 to $25,500. The tax policy section also expands eligibility for the child deduction and increases the maximum amount of the child deduction to $6,000, which would be added on top of the standard deduction.
The corporate income tax would be “phased out," according to the bill, beginning in 2024, and eliminated completely by 2028. Additionally, the section takes aim at the franchise tax, and eliminates the two tax bases calculated using property values, reducing the franchise tax liability on corporations possessing significant real property and investments in the state. Sen Newton said he envisioned these two parts creating a “flywheel effect” that encourages job creators to build a home in North Carolina.
Furthermore, there are subsequent tax policy changes to renovation projects, surety bonds, cigars, peer-to-peer vehicle rentals and burial properties. The bill would:
- Extend the sunset by two years filing for tax credits for mill rehabilitation projects
- Expand the qualifications for a tax credit for rehabilitated railroad station projects
- Limit the gross premium tax base for premiums paid to a surety bondsman to the amount paid by the surety bondsman to the insurer of the bail bonds
- Subject remote sales of cigars, which are currently not taxed by the State, to the excise tax, which would not exceed $0.30 cents per cigar
- Implement a sale and use tax on short-term vehicle rentals facilitated by a peer-to-peer vehicle sharing company; a large portion of the revenue collected would be directed to the State’s Highway Fund
- Exempt burial property owned, and vaccines held by private medical facilities, from property taxation
Governor Cooper’s spokesperson, Ford Porter, responded in an interview, saying, “The last thing we need is more sweeping tax breaks for corporations and the wealthiest among us instead of investments in our hard-working families and communities.” The Governor has been forthcoming about his ambition to use the “once-in-a-generation” federal funds to invest in needs across the state.
The Senate bill passed the Senate Finance Committee on Wednesday with no opposition. In the Senate Appropriations Committee this morning, Sen. Brent Jackson (R-Sampson) introduced an amendment to shift an additional $1.4 billion to the state's "Rainy Day Fund." Both the amendment and the bill passed the committee.
Last week, our newsletter highlighted a bill by Sen. Chuck Edwards (R-Henderson) that would address the shortage of employees in the state. H128: An Act to Reemploy NC's Workforce would direct the Division of Employment Security (DES) to use the funds from the Federal Pandemic Unemployment Compensation (FPUC) program to provide one time bonuses to current unemployment claimants. The bill would have authorized $1,500 bonuses to individuals who enter the workforce by June 1 and work for at least 60 days.
On Wednesday, Sen. Edwards spoke about recent conversations he had that led him to believe that the federal Department of Labor would not permit the state to use the federal funds for bonuses. He introduced an amendment to reword the language to urge Congress to approve the program. Realizing that approval could take some time, Edwards’s amendment also adjusted the dates and pushed the June 1 reemployment deadline to September 6.
The amendment and the revised bill were adopted by the Commerce Committee Wednesday, and passed the Senate Rules Committee Thursday. It now awaits a final vote on the Senate Floor.
Upcoming Legislative Meetings
Wednesday, June 2
8:30AM House: Appropriations, Justice and Public Safety
8:30AM House: Appropriations, General Government
8:30AM House: Appropriations, Education
10:00AM House: Appropriations, Agriculture and Natural and Economic Resources
Thursday, June 3
10:00AM House: Appropriations, Agriculture and Natural and Economic Resources