Wednesday, July 3, 2013

Passage of H.998

House bill 998, "Tax Reduction Act", was passed by the Senate this morning.  The bill reduces the income tax and will phase out the corporate income tax by 2018.  It also excludes some income that had been included in previous versions of the bill, primarily social security income.  It also give tax deductions for contributions made to charitable organizations.  The bill will now be sent to the House for concurrence.  We'll see what happens next week, but this bill is more in line with the original House version.  There are other pieces of legislation that are in the hopper that will be considered next week.  Keep watch.

Friday, June 28, 2013

Problems on the Home Front

It seems as thought the Republican leadership is wrestling with dissension within the ranks.  The Senate pulled 41 House bills from its calender and sent them back to the clerk thus putting the bills in limbo.  The House, in turn, decided not to hold full sessions during the week of the 4th.  This wrangling is a result of the leadership not being able to reach a consensus on the tax reform plan.  Consequently, the Governor has signed a continuing resolution to keep the state government running for another 30 days at 95 percent of its current funding level.

 House and Senate GOP leaders are working with the governor’s office to find a compromise plan to overhaul the state’s tax system and cut income tax rates.  The two plans have distinct differences and the Governor has his own thoughts as to what the final bill should contain.  The Governor wants a revenue neutral plan, the Senate wants to cut taxes more than the House, so the stand off.

With the House decision not to meet full sessions next week, several other pieces of legislation are "hanging in the wind".  What happens to them remains to be seen.  The Senate wants to end the session quickly but the House has decided it would allow those working on a comprise to do so without a lot of distractions during the week of the 4th.  Hopefully, we see positive developments next week.  Stay tuned.

Read more here: http://www.newsobserver.com/2013/06/27/2994184/impasse-over-competing-tax-plans.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/06/27/2994184/impasse-over-competing-tax-plans.html#emlnl=Politics#storylink=cpy

Wednesday, June 19, 2013

Tax Bill on Senate Calendar

H998 - Tax Simplification and Reduction Act is on the Senate Calender for today.  This will be the third reading.  There have been several amendments tacked on to the bill and I would imagine there will be attempts to attach other during the Senate hearings.  It then will go to conference to iron out any differences with the House.

On the House side H.274 - Taxpayers Bill of Rights will be up for discussion in the Finance Committee. This bill will limit increases in the general fund budget, reform the budget process, establish and emergency reserve trust fund and amend the North Carolina constitution to establish a general fund expenditure limit. Let's watch and see what kind of amendments will be offered during the discussion.

Another bill that deserves watching is S.81- Charlotte Regional Airport Authority.  As you know this bill will transfer the ownership of the airport from the City of Charlotte to a state appointed authority.  I understand that Charlotte is still trying to short circuit this bill.  It bears watching.


Thursday, June 13, 2013

Budget Bill Passes Second Reading

The Senate passed H.998  (click here to read the bill) on second reading this afternoon.  This is the House version of the tax reform bill.  It does not tax any additional services and proposes a flat tax.on income over $15,000.  It lowers the corporate income tax beginning in 2014 to 4%.  In 2016 the corporate income tax will go to 2%.  I was able to listen to some of the Senate floor debate and it was very heated at times. The third reading will be next Tuesday.  I expect the bill will pass the Senate and go to a conference committee.  This bill is much different than the bill proposed by Senator Bob Rucho, who submitted his resignation today as chairman of the Senate Finance Committee.  Senator Rucho is very frustrated that the Senate leadership watered down his proposals.  It is a very interesting time in Raleigh.  Stay tuned for more.

Tuesday, June 4, 2013

Time is Getting Short

The members of the General Assembly want to have a budget in place by the end of June - sooner if possible.  For that to happen a lot of bills must move through both houses and a lot of conference committees must meet.  H.998 was introduced in to the house today and it has several porposals of which you should aware.  It sets the personal income tax rate at a flat 5.9%.  It increases the standard deductions for everyone. It also does away with several other deductions and decouples from federal accelerated depreciation and expensing.

It lowers the corporate income tax to 6.9% beginning in 2014 and further decreased the corporate income tax to 5.4% by 2018.

A privilege tax of 4.75% is applied to all tickets sold for an entertainment event (concert, movie, museum, exhibit, athletic contest, etc.) as well as to service contracts.

If you want to get a feel for the proposal here is the link.  H.998.  I told the Kings Mountain Advisory Council today that things would move very fast in the state legislature.  Buckle your seat belts and hang on.  We are in a race to the finish.  Let's see how it ends.

Monday, May 13, 2013

The Pace Quickens

I have written several times about the speed at which bills were being passed in this session of the General Assembly.  Well, that's about to change.  It's going to get more hectic this week as the General Assembly approaches the crossover date.  What is crossover?  The House and Senate rules say that bills that don’t raise or spend money or propose amendments to the state constitution must pass either the House or Senate by Thursday to be considered during the session.  So hang on to you hats and watch the legislation very closely as this week will be full of fun and games as legislators make sure their pet legislation survives crossover and is heard during this session.

No word on when Senator Berger's tax reform proposals are going to see the light of day in the form of a bill.  The details keep coming out in dribbles so stay alert for additional information.

Here's and interesting bill that has hit the floor.  Rep. Marcus Brandon, a High Point Democrat has introduced H.994, a bill that allows parents to spend taxpayer money on K-12 private school tuition.  As filed, the bill would offer vouchers worth $4,200 a year: however, there have been some revisions that will have 50 percent of the money each year reserved for children from families at 185 percent of the federal poverty level or below. That’s the level at which kids in a family would qualify for free or reduced lunch in public schools.  Anyone making over $45,000 per year would not be eligible.  It is on the calendar of the House Education Committee for Tuesday.

Another bill, H.274 “Taxpayer Bill of Rights,” aka TABOR, which would have voters decide whether to limit government spending in the state Constitution is scheduled to be heard in the Finance committee this week.  The measure would establish a General Fund spending limit based on the previous year’s limit increased by a formula that takes into account inflation and population increases. The governor and General Assembly then could not spend more than that limit without a two-thirds vote of the Legislature.  There is some concern that passage of this bill would hurt the State's credit rating. 

There are a whole hosts of pending legislation that you need to watch.  I'll try to keep you as up to date as possible.  Check everyday for further information.

Read more here: http://www.newsobserver.com/2013/05/12/2888370/dome-jam-packed-week-on-jones.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/12/2888370/dome-jam-packed-week-on-jones.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/12/2888370/dome-jam-packed-week-on-jones.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/12/2888370/dome-jam-packed-week-on-jones.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/12/2888370/dome-jam-packed-week-on-jones.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/12/2888370/dome-jam-packed-week-on-jones.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/12/2888370/dome-jam-packed-week-on-jones.html#emlnl=Politics#storylink=cpy

Tuesday, May 7, 2013

Sales Tax Collections

I have been focusing on  legislation at the state level in the past few weeks but yesterday a bill (S.336) in the U.S. Congress caught my attention.  The Senate passed a bill (Marketplace Fairness Act of 2013) that empowers states to collect sales taxes from Internet purchases.  This has long been a sore spot for local business that compete against large retailers that utilize the internet to for their sales platform. Amazon and Ebay are two of the larger ones.  However, any business that has an on-line store avoids collecting sales tax unless they have a "presence" within the state.

The bill passed 69 to 27 with by-partisan support but faces an uphill battle in the House.  Mnay oppoents in the House see this as a tax increase.  The proponents say it's just collecting taxes that are already owed and provides a method for collecting those taxes.  Many governors - Republicans and Democrats - have been lobbying the federal government for years for the authority to collect sales taxes from online sales. States lost a total of $23 billion last year because they couldn't collect taxes on out-of-state sales, according to a study done for the National Conference of State Legislatures.

Supporters say the bill makes it relatively easy for Internet retailers to comply. States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States must also establish a single entity to receive Internet sales tax revenue, so retailers don't have to send it to individual counties or cities.

Opponents worry the bill would give states too much power to reach across state lines to enforce their tax laws. States could audit out-of-state businesses, impose liens on their property and, ultimately, sue them in state court.

This bill has far reaching consequences.  Watch this one closely.

Read more here: http://www.newsobserver.com/2013/05/06/2874556/senate-bill-lets-states-tax-internet.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/06/2874556/senate-bill-lets-states-tax-internet.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/06/2874556/senate-bill-lets-states-tax-internet.html#emlnl=Politics#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/06/2874556/senate-bill-lets-states-tax-internet.html#emlnl=Politics#storylink=cpy

Monday, April 29, 2013

Rural NC - Taking a Beating

In one of my past posts, I quoted our Legislative Liaison in Raleigh as saying that this session of the General Assembly will boil down to a struggle between rural North Carolina and the metropolitan areas. 

HB298.  If passed this bill would have ended the state’s 6-year-old policy of subsidizing solar farms and other forms of renewable energy and would have placed over 300 Cleveland County jobs in jeopardy.  Schletter, a German firm that recently announced a project in Cleveland County that will create 300 jobs, made the move to North Carolina based upon the incentives offered by
NC Renewable Energy and Efficiency Portfolio Standards.  HB298 would have ended those incentives, thus killing Schletter's project. Our thanks to Rep.Moore for preserving those jobs.

Thursday, April 25, 2013

Updates


The state House passed a bill Wednesday requiring a photo ID at the polls by 2016.  This has been a hotly contested debate but looks like the Republican back bill has enough support to get to the Governor's desk.

 HB298 was defeated in committee yesterday and for all intents and purposes is dead.  The Committee on Public Utilities and Energy voted 18-13 on Wednesday to kill the proposal that would have ended the state’s 6-year-old policy of subsidizing solar farms and other forms of renewable energy.This bill really struck home as Cleveland County is home to several solar farms and just recently announced the creation of 300 jobs by Schletter, a company that makes rack systems for the solar farm industry.  Schletter made their decision to located in North Carolina and in Cleveland County, in part, based upon the tax incentives provided by the NC Renewable Energy and Efficiency Portfolio Standards.  Rep. Hager, who filed the bill, said the bill would end a state policy of subsidies for industries such as wind, solar and other alternative energies.  Those legislators voting against the bill were wary of dismantling a complex state policy, which had taken months to negotiate.


Senate Bill 14: Increase Access to Career/Technical Ed. was signed by Governor McCrory on February 18. This bill takes significant steps to strengthen North Carolina’s talent and workforce development by directing the state Board of Education to develop career and college endorsements for high school diplomas, increases access to career and technical education teachers in public schools, and increases community college enrollment in career and technical education in high need employment areas. Hopefully this will aid the schools and community colleges in meeting the manpower needs of our local industries.  We will see how it will be implemented.

Read more here: http://www.newsobserver.com/2013/04/24/2847114/nc-house-committee-defeats-proposal.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/04/24/2847114/nc-house-committee-defeats-proposal.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/04/24/2847114/nc-house-committee-defeats-proposal.html#storylink=cpy

Wednesday, April 10, 2013

Governor's Budget

The following is an overview of the Governor's budget and a summary of S363 which is  written by James Harrell, Legislative Liaison for Cleveland County.  Mr. Harrell keeps his fingers on the pulse of the General Assembly and will be making periodic reports for the Chamber.  I hope you enjoy his comments.

Cleveland County Chamber Legislative Update
4.02.2013

GOVERNOR’S PROPOSED BUDGET
New Republican Gov. Pat McCrory recently unveiled a $20.6 billion proposed state budget, calling it the first step toward correcting the state’s fiscal condition and addressing several festering operational failures before he embarks in future years on long-term strategic initiatives. McCrory’s budget proposal, which goes to the General Assembly, represents a 2% increase over the $20.2 billion budget for the current fiscal year. The governor’s proposal eliminates the state’s estate tax, valued at $109 million over the next two years, but doesn’t change the state’s income, sales, motor fuel, or corporate taxes. McCrory said separate legislation this year will tackle tax reform (discussed in the following section of this article), and that the changes will be revenue-neutral. Bowing to recent trends, the budget would increase Medicaid spending by $185 million next year and another $390 million the following year, while also setting aside a Medicaid reserve of $180 million to absorb a potential shortfall like those of recent years. It boosts IT spending by about $60 million across several agencies. Teachers and state employees would get a 1% pay raise, and retiree benefits would go up 1%.

McCrory said his top three governing priorities are the state economy, education, and government efficiency. One of his top initiatives is a two-year effort to develop a new state economic-development strategy and a new state branding campaign across several agencies “to promote North Carolina as the best place to live, work and play.” McCrory said expanding the budget more will have to wait until problems are fixed and revenues rise. “We’ve had to make some tough decisions on this budget,” McCrory said at a news conference in the Capitol, flanked by his cabinet. “Our state has a strong foundation, but the foundation has some cracks in it. Our immediate task is to fill in those cracks so we can have an even stronger foundation. … This budget funds our priorities, rebuilds our reserves, and strengthens our foundation for future generations.” McCrory said he has reviewed every line item in the 323-page budget, which he said Budget Director Art Pope developed in consultation with the cabinet, the Office of State Personnel, and top House and Senate budget-writers. Pursuant to state law, the General Assembly will turn McCrory’s budget into a bill of its own – and then resume work on their own version, perhaps using McCrory’s as a starting point. The Senate will go first, with a budget bill expected in May, after the April tax returns are in. Then the House will have a go at it in May or June, with a compromise likely in June. Then McCrory will face the choice of signing the budget, as is expected, or vetoing it. In the unlikely event that he vetoes the legislature’s budget, Republican lawmakers have more than big enough majorities in both chambers to override the veto. But for the next six weeks or so, McCrory’s budget proposal will be the one on the table for debate.

Tax Reform
Last week the Senate Finance Committee met to discuss the first of at least two bills that comprise much awaited proposals to reform the tax code in North Carolina. S363 Business Tax Reduction and Reforms was presented by the primary sponsor Sen. Andrew Brock. Presenting to a full room of reporters, lobbyists and legislators, Senator Brock explained that the bill had essentially two major parts that do the following: 1) repeal state and local privileges taxes, and 2) repeal the franchise tax and replace it with a business privilege tax applicable to all businesses with limited liability. Senator Brock went on the say that S363 is one component of a larger plan to overhaul the state tax system and make it one more conducive to economic growth. He indicated that the other components that have not been introduced yet would address income and sales tax issues.
S363 proposes to repeal both state privilege taxes and local government’s authority to impose local privilege license taxes. The state currently levies privilege taxes on attorneys and other professionals, banks, loan agencies and installment paper dealers. The taxes collected would amount to approximately $27,000,000.00 for fiscal year 2014-15. Local governments have authority now to levy local privilege license taxes on business that are not exempt from such taxes under state law. These taxes have evolved into gross receipts taxes that provide significant revenue for some local governments. This tax has also been controversial. The Retail Merchants Association has advocated for repeal of this tax in the past. Andy Ellen, President of the Association, spoke at the Senate meeting to make that request again and offer an endorsement of the work of the Senate Finance Committee. The net revenue loss to local governments from the repeal of local privilege license taxes would be a total of $75,000,000.00 for fiscal year 2014-15.

The second major part of S363 repeals the franchise tax and replaces it with a business privilege tax applicable to all businesses with limited liability. Currently, C corporations pay a franchise tax at the rate of $1.50 per $1,000 of the largest of three alternative bases. Those bases are:
1. The amount of the capital stock, surplus, and undivided profits (net worth base) apportionable to the State
2. The book value of real and tangible personal property
3. 55% of the appraised value of property in the State subject to local taxation

S363 would replace the franchise tax with a new business privilege tax that would essentially be a simplified version of the business franchise tax. One base calculation would be allowed, and that would be the amount of capital stock, surplus, and undivided profits apportionable to the state. All limited liability companies would have to pay the tax. The minimum tax would be $500 per entity and a maximum of $5,000.00 per LLC with the existing cap on the C corporations remaining in place.

Senate Finance Committee co-chairs, Senators Rucho and Rabon encouraged committee members and members of the public to study the bill and its impact and be prepared to offer further comment when the other parts of the reform package are revealed. Those additional parts of the tax reform package are expected before the new Senate bill introduction deadline of April 4th.

Wednesday, March 20, 2013

Tax System Overhaul

We have heard that one of the top issues with in this legislative session will be the overhaul of the present tax system.  One of the proposals is to apply the current 4.75 percent sales tax to services that up until now were exempt.  This gets such businesses as pet grooming, landscaping, including lawn care, car washes, carpentry, painting, plumbing and other trades, debt counseling, dating services, taxidermy, newspapers, bowling alleys, barber shops and beauty salons, diaper services, health clubs, shoe repair, internet service providers, books, music and movie downloads from the Internet, and professional services offered by attorneys, accountants, veterinarians and physicians.  Lawmakers are considering putting a sales tax on any service that is taxed in at least one other state. The list of nearly 170 types of services is based on a 2007 survey from the Federation of Tax Administrators, an industry professional group.The plan is to eliminate the corporate and personal income taxes.  Lawmakers feel the additional expense incurring by consumers will be offset by the elimination of the personal income tax.

Watch for more proposals to come forth as the discussions heat up.  The governor will unveil his budget today and this may shed some light on the direction tax overhaul will take.  Stay tuned and keep abreast of proposals coming out of Raleigh.

Read more here: http://www.newsobserver.com/2013/03/19/2764680/lawmakers-look-at-adding-taxes.html#emlnl=Business#storylink=cpy

Read more here: http://www.newsobserver.com/2013/03/19/2764680/lawmakers-look-at-adding-taxes.html#emlnl=Business#storylink=cpy

Tuesday, February 26, 2013

Bill to Watch

As the session smooths out and things are not quite as hectic, a few bills that deserve watching are moving through the legislature.  Here are a few to watch.


House Bill 23: Digital Learning Competencies/School Employees -

This bill would direct the State Board of Education to develop and implement digital teaching and learning standards for teachers and school administrators. 


House Bill 44: Transition to Digital Learning in Schools -

This legislation would transition funding from textbooks to digital learning initiatives in K-12 public schools.


Senate Bill 14: Increase Access to Career/Technical Ed. -

This bill was signed by Governor McCrory on Monday, February 18. This bill takes significant steps to strengthen North Carolina’s talent and workforce development by directing the state Board of Education to develop career and college endorsements for high school diplomas, increases access to career and technical education teachers in public schools, and increases community college enrollment in career and technical education in high need employment areas.  


Here are some other bills that may have an impact on your business

House Bill 69: Opportunity Advancement Zones -


This legislation provides important tax credits for job creation and business property investment.  Its a complicated formula and I'm not sure how Cleveland County will stack up.  More on this later.


Senate Bill 51: Workers’ Comp Program Integrity
This bill will help in fraud prevention and in reducing fraud in the worker's compensation system.  No doubt this is needed.  We'll watch it as it moves through the process.


Senate Bill 4: No N.C. Exchange/No Medicaid Expansion -

This legislation clarifies the state’s intent not to operate a state-run health benefit exchange and provides that future Medicaid eligibility determinations will be made by the state, along with rejecting the Affordable Care Act’s optional Medicaid expansion.This will put the state at the mercy of the Federal exchange.  It remains to be seen as to how that will look.  It always concerns me when we look to the federal government to service our need.  The impact of the Affordable Healthcare Act has not been fully comprehended but it does not look positive for business or for job creation.

House Bill 53: NC Right to Work/ Secret Ballot Amendments  - 
This bill strengthens the states commitment to "Right to Work" status.  It also insures the right of employees to exercise their right to a secret ballot in union elections. It also makes  union representation of government employees illegal.

Watch these bills and if you have an issue that is important to you let me know and I'll try to stay on top of it as well.