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North Carolina Legislative Newsletter - June 17, 2016

June 17, 2016

LEGISLATIVE ACTIVITY

Transportation

I-77 Managed Lanes

  • On June 2, the House voted 81-27 to approve HB 954, which would terminate the contract between NCDOT and I-77 Mobility Partners for the I-77 managed lanes project north of Charlotte.  The bill has been referred to the Senate Transportation Committee.
  • In a June 9 letter to Senate Transportation Committee Chairs, which became public this week, Transportation Secretary Nick Tennyson said it would cost $800 million for the state to cancel the contract and build the I-77 managed lanes project on its own.

WFAE: DOT Chief Says I-77 Bill Would Cost $800M For Penalties, Construction

Finance/Tax

Constitutional Limitation on Income Tax Rates

  • On Tuesday, the Senate Finance Committee approved SB 817, which would put a proposed constitutional amendment before the voters that would cap personal and corporate income tax rates at a maximum of 5.5 percent.  If approved, the measure could be on the November 2016 ballot.
  • The North Carolina Constitution currently places a limit of 10 percent on personal and corporate income tax rates. 
  • Neither the current constitutional provision nor the amendment allow for the legislature to override these limits. 
  • Currently, the state personal income tax rate is 5.75 percent (set to drop to 5.499 percent effective January 1, 2017) and the state corporate income tax rate is 4 percent (expected to drop to 3 percent effective January 1, 2017). 

Raleigh News & Observer: NC Senate considers 5.5 percent income tax limit in constitution

Private Letter Rulings

  • On Wednesday, the Senate approved SB 481, which would require the Department of Revenue to publish on its website redacted versions of written determinations responding to taxpayer questions ("private letter rulings") within 90 days after being issued.
  • It also requires the Department to publish redacted versions of private letter rulings issued on or after January 1, 2010, within 120 days of the enactment of the bill. 
  • Private letter rulings provide specific written advice from the Department to a taxpayer with respect to the taxpayer's own tax liability based on a specific set of facts provided by the taxpayer.  A taxpayer that receives a private letter ruling is able to rely upon the advice given in the ruling.  The advice given in a private letter ruling applies only to the specific taxpayer that receives the ruling and may not generally be relied upon by other taxpayers.
  • Under current law, these rulings are subject to general provisions regarding the secrecy of tax information.
  • The bill would give all taxpayers access to the advice given in private letter rulings, but these rulings would still apply only to the specific taxpayer who requested it.

Associated Press: NC Senate delays floor debate over lower income tax cap

Sales Tax on Repairs, Maintenance, and Installation

  • On Thursday, the House Finance Committee discussed, but took no vote on, a proposal to change the application of the sales and use tax to repair, maintenance, and installation services. 
  • The measure is similar to one approved by the Senate in its budget bill.  Both proposals seek to more clearly define and consistently apply the tax, which was approved last year and took effect March 1, 2016.
  • Fewer categories of services would be taxed under the House proposal than under the Senate proposal, with building cleaning services, car washes, alteration services, and pest control services being exempt.

New Markets Tax Credits

  • On Thursday, the House Finance Committee discussed but took no vote on a proposal that would create New Market Tax Credits.  This state tax credit would be "piggy-backed" on the federal New Market Tax Credit program. 
  • The proposal would allow a tax credit against the gross premiums tax (a tax paid by insurance companies in lieu of the income and franchise taxes) equal to 25 percent of the amount invested through federal-recognized development entities in small businesses. 
    • Total investments statewide eligible for a credit could not exceed $100 million annually with a maximum investment in any one business not to exceed $5 million. 
    • The credit would be taken in the second year of a seven-year credit cycle. 
  • The federal credit is equal to 39 percent of the amount invested and is taken in installments over the seven-year period.  Thus, 64 percent of the original investment could be covered by the federal and state credits over a seven-year period. 

Education

Math Standard Course of Study Revisions

  • This week the Senate approved a bill that would allow students to choose between two high school math routes, one based in a "traditional" curriculum and the other a new "integrated" course of study.

Raleigh News & Observer: NC Senate approves math changes

Various Charter School Law Changes

  • This week the Senate approved legislation that would change the grading scale for charter school performance.  It has been sent to the House for consideration.
  • Under the bill, the State Board of Education would identify a "low performing school" as a school that has received a grade of D or F in two of the last three years.
  • The bill also would prevent the State Board of Education from rescinding the school's charter based on the school's performance record if the school is meeting growth expectations.

OTHER HEADLINES

  • WRAL: Key differences between House, Senate budgets
  • Associated Press: NC House and Senate advance annual regulatory and farm bills
  • Charlotte Business Journal: Even after HB 2, N.C. Economic Development Partnership leaders pleased with progress
  • The Insider: TV broadcasters call NC customers to fight tax proposal
  • Raleigh News & Observer: 'Gun rights' constitutional amendment won't get vote, NC House leader says
  • Associated Press: Challenger says US Rep. Pittenger's race headed for recount