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House | September 23, 2015 | Committee Room | Finance Committee

Full MP3 Audio File

Hey good morning, I'm chairman Saine welcome to finance, or finance putting the fun back in finance. Glad to have you here this morning, I won't breathe deep we're not on any time schedule I know we got session coming up, but we will take proper time to vet this bill. We'll come back at 2 o'clock so we will recess prior to session. I give everyone time to properly vet this wonderful bill that we have before us, somebody called it a Christmas tree, I reject that notion, Christmas is a happy time. Sometimes there's drinking, that might happen in here anyway but nevertheless we will plod through this one and get through the bill. I appreciate your indulgence. The House Sergeant-at-Arms today are Reggie[sp?] Seals, Terry McCraw, Young May[sp?] and David Lightening. Chairman Brawley moves that the PCS be before us for senate bill 605, so we have that motion all in favor say aye, aye those opposed [xx]. Chairman Brawley. Thank you Mr Chair I'm an old movie buff and occasionally theaters will show the old black and white movies from the 30s and 40s, one of my favorite is Casablanca. You got to see it on the big screen, there's a scene in Casablanca where Humphrey Bogart playing Rick receives the letter as he stands on the train station next to the last train out of Paris, behind him you see the multitude trying to get aboard with the last train out, today we take out the last train from Paris with senate bill 605, this is turned into an omnibus bill and it is so well crafted and I'm going to ask staff to explain it. There in nothing staff. And this is a group effort and we've got a variety of us to go through the highlights other substantive provisions of this bill and I think Johnson, are you going to start us off? Yeah, I 'll start. So I'm going to speak from this, the summary. Looks like this, hope we have it, to move to the second page of that summary there's a chart that lists the section number and it has the brief summary within the box, everybody has that? See it? Okay in session 1.1 repeals an annual franchise of prelude tax on mutual burials associations. Not much money coming in from that, about $750 in the last year so that's repealed in this bill, moving to 1.3 Resolves an issue that has been in conflict between the department of revenue and a couple of tax payers concerning the a portion percentage that should be used in this situation. These companies have argued that they were an air transportation and she's specialized [xx] on those companies which is based on the miles flown in the State versus without. They have an affiliated company that was like a logistics company and they argued that they should still be able to use in spite of that company and still be able to use this specialized formula for air and transportation companies and so this would allow them to do that. Turning over to the next page, to the personal income tax changes. Most of these are really just preventing double taxation for example in 2.1 this is where someone received income in a year like a contigent commission or something like that and then in the subsequent year, they had to relinquish that income so it just restores the deduction to a made sure they don't pay tax twice, and so I think all these are within the personal tax section or of a similar nature, then I'll move it on to trainer perhaps or send you the look of the sales tax changes in part three. I'm over on this side of the room, Cindy Everett with the research division, and I'll go over briefly the sales tax changes. Most of these have been in the bill for quite sometimes and have not had any questions about them. They are technical changes. I will point out the ones that are more substantive in nature. Section 3.9 is a policy decision. This would repeal the sales tax exemption for items sold by a non-profit organization when receipts from the sales of those items

would be directly or indirectly contributed to the state or a school. So an example of this type of entity might be the gift shop. Currently if you purchase something there, you would not have to pay sales tax. If this bill becomes law then effective January 1st 2006, you would pay sales tax to make sure that this does not impact your public schools. That it creates a new exemption for items that are sold to public schools through fundraisers and such that will be used for the school. On page five of your summary, the next substantive change would be section 3.22. This would say that for purposes of the sales tax exemption, occupational licensing boards are not state government agencies for purposes of the sales tax exemption. 3.23 would later reminisce sales tax collected on the gross receipt from her mission charged to an entertainment activity currently they are remitted monthly a quarterly once the retailer used to tax revenue, but under this section it would move to win the event occurs. 3.24 begins to some of your 1%, 80 items, as you know if something is taxed under article 5F it is exempt from the state and local Sales tax. And in lieu of that, it is subject to 1% Excess tax with an 80% CAP. And what section 3.24 would do would be to provide that the repair or replacement parts for ready mix concrete mill, are exempt from sales tax and are subject to the 1%, 80 tax. Currently, if it's new machinery it's in the production industry it would be at the 1%, but once that mill is attached to the vehicle it becomes tangible personal property and if that mill needs to be repaired once is on that vehicle it is subject to the full state and local tax. Section 3.26 would allow machinery and equipment used by secondary metal recyclers to be exempt from Sales Tax and likewise subject to that 1% tax with an $80 CAP. Section 3.28. Currently there is equipment that is used at the state porous facility that is subject to the 1%, $80 Excise tax rate, and this just gives clarification as to what that equipment is and I believe Heather will go over the excise tax changes with you. Thank you Heather resource division I'm going to start going over the excise taxes which start on page six on your summary. Sections 4.1 and 4.4 can form the bonding requirements for certain excise tax conforms the bond requirements for cigarettes, tobacco products and the severance taxes. These bonds will now we have a minimum amount of $2000 and  maximum amount of $2 million and the secretary will set the amount proportionately to  the amount of tax the taxpayer owes. Section 4.5 changes the disclosure ability of the department regarding certain confidential taxpayer information. The first change to the NSA is simply a technical change to clarify that the General Assembly made last year to allow the disclosure of certain information regarding sales by non-participating factors, the next two changes are new. The first allows the department to provide the list of entities licensed under the product tax, the third change allows the department to disclose tax information regarding the fuel tax compliance for other eftor which is the international fuel tax agreement, both the first and second Their changes are discloses to allow help other state in the state in administration of their taxes. The last change 4.9 is new but it is conforming. This makes  forming changes to the changes in the fuel tax that was made on session that's on 2015 that's true This makes no changes to the calculation mater field tax but it does add Vakian language that was involuntary deleted in that bill that allows the department to calculate sales tax on motor fuel that is exempt from the motors fuel tax. And Mr. Chair I will explain some of the things that are in part five, if you'll see part five against There are changes some of which are not tax related and I will point some of those out to you. Section 5.5 is something that was added in the senate. It removes a duplicative notice requirement as required to be made by service of a home loan that right now borrowers actually get the statement of disclosure from two different sources, and it causes confusion so this just removes one of those disclosure requirements Sections 5.7 and 5.9 are two provisions that were requested by the state treasurers office, section 5.8 removes the sunset

on a bill that this body passed in 2011, and that bill general assembly saw to create a senate for state agencies to voluntarily identify the surplus property and one of the [xx] was to let those agencies retain a portion of it that those provision sunset and this will remove the sunset from it. Section 5.10 robs the to which money and the utility account can be used. Under current law, it can only be used to create jobs, but with this change it will also be permissible to use it to retain jobs and expand th existing job base. Section 5.11 contains House bill 81 which is a bill this body passed in April which will expand the 1% $80 excise tax to metal fabricators, and 5.14 is has change that was requested by the department if insurance. It means the cost threshold for damages resulting from an accidents that are used in certain points, and this is because of the change made in the budget bill to include those tax on re-payers and labor. Money tenors is a certain threshold that which point insurance points will begin to accrue, is probably not the right word to accrue, but you get insurance point and we just want to make sure that the dollars from the sales tax do not count towards that insurance limit. And Mr. Chairman Trina Griffin with research, I'll explain part six and seven of the bill, part six should look somehow familiar, it's a local option sales tax provision for counties it's similar to provision that floated last year but with a little bit of a tweak, it would create a New article 43 A Tax for Education, which could be up to 1/2%, and the new local option  sales tax could be levied an increment of a quarter, so could be a quarter or a half cent, it does the same thing with the current article 46 General Purpose tax it would allow up to a half cents, and with regard it maintains the current cups that are in place, so for those six counties,  that are currently authorized to Levi two and three quarter local sales tax rate., it would preserve that cup and for the other 94 counties that can currently Levi up to 2.5% it keeps that cup for them, so basicly counties will be able to sort of mix and march these options you've got the education tax, the transportation tax it doesn't actually make any it changes to that, the counties that have the half  cent can keep the half cent,   the counties that have the quater cen an keep the quater cent and then again it increases the articall 46 general purpose bill except to a half cents. It contains in the educational purposes of the same that was in the bill from last year, so it can be used for school capital, for salaries of classroom teachers, teacher assistance and supplements, as well as financial support for community colleges. It contains a provision with respect to it limits state funds it says that no state funds may be used for light real projects in Wake county. If Wake county authorizes the levy of a house then under article 43 which is that transportation tax and that was a provision that was put in in the Senate last go around part seven of the bill is a new local option sales tax that would be for cities, and it would authorize cities to levy a quarter cent local option sales tax without a referendum city would have to adopt a resolution and give 10 days notice of that, and the tax could be used for any public purpose currently there are no city's levy on local option sales tax. Part eight of the bill contains the contents of House Bill 543 which passed the house back in April and is sitting in senate rules and that bill is amend laws pertaining to the NC Medical Board, and I won't go through all of it but you can see there on page 11 of your summary the substance of it hasn't changed and it makes a number of changes to the medical board including a couple of fee increases and I think that actually, and Jonathan has something to add. One more piece, meaning if you move back to page three of the summary, something that is substantive that I should also mention in the bottom of session 2.1A, there's a provision that restores the automise reduction for the gambling losses which are allowed to the extent under Federal Law. So the Wagering Law losses can be deducted to

the extent of winnings, and that's restored back in this bill. Thank you staff for the presentation, Representative Brownley any comments.   Pasts that? I will move on directly to some amendments and I think given the chairs discretion I think some will satisfy, some burning questions you may have Representative Bradford do you have a motion? I do Mr Chair. Thank you Mr Chairman I would like to bring forth and amendment please. Recognize you for that purpose. Okay thank you Mr Chairman, thank you Representative Brownley for taking us through that staff my amendment strikes to remove all of section seven there's really not a lot to say other than the fact that this will allow cities with a resolution without referendum to levy a quarter sales tax option, and that is not anything that I'm supportive of and therefore I'm running this amendment and I appreciate your support. Thank you Representative Bradford. Representative Stam. I would like to support the amendment it's one thing to broaden the for sales tax but to jack the rate up is very contrary to our tax reform policies and if you are going to have three different levels of government tax in the same thing it's going to be jerked up. This is a tax that it's regressive not only that it's none deductible for 98% of your itemizes under federal law, so it's not a good idea and third administratively it would be horrendous it's one thing for a counties where you can tell where stores  are but every time a city  would annex some property it might who's paying tax in it? So I don't know where this idea came from but I think it should be immediately right on the dustbin of history. Thank you Representative Stam. Representative Brownley. I support the adoption of the amendment. Profound Sir. Representative Bishop. Thank you Mr chairman I'll just note that in Mecklenburg county voters rejected a quote on sales tax increase by referendum in 2014 and I don't think to allow city council to do it without a reference it would be an appropriate response for that I was wondering if there's, I'd like to ask whether the staff by any chance has an estimate of what an addition quote of sales tax would raise in the city of Charlin[sp?] Mr. Camen[sp?] physical research we did not have estimates on the city like option sales taxes because there's currently, there are no city sales taxes therefore we just don't have data which based projection for that, thank you. [xx] there's going to be a lot, Senator Alexander. Thank you Mr. Chairman [xx] the subject to redistribution to be adopted I think Representative Browley could probably answer that It would not the current plans regarding local option sales tax were only applicable to portions of section 39, section 40 and section 42. This is a new section it's not covered by that and were this incredibly damn idea to be enacted it'll have been retained locally Representative Williams make sure you're not a fan of the portion of the bill. Are any others wishing to speak on the amendment? Representative Lukey. I agree, Representative Lukey. I don't think you are properly expressing yourself, we are here for you. Seeing no one else questioning to speak, all those in favor of the amendment, by representative Bradford, those in favor say aye, aye, those oppose like son, the amendment does pass. Representative Luebke that should take care of some of the amendments that you had offered, so we will bypass that next amendment. Representative Stam, I believe you have a motion. Yes, and I think this one has been passed out to for deduction for gambling losses, in fact. I explain it? You make sir. First of all, I understand the logic in federal law in allowing gambling losses to be deducted against winnings, but my objection to this amendment would be true, even if I was a gambler myself and in favor of I would

oppose this amendment because, that we are going to allow the range and by doing that finance that by eliminating a lot of [xx] and deductions. Well I understand why, if you don't limit [xx], people can't tell [xx], and I understand why we don't particular one, nobody forces somebody to go gamble, and what we've done even this year is reduce their overall rate another quarter set after reducing it a lot a year ago, and two years ago. So, it's just costing us money. Serendipitously, the amount we would save by this is almost identical to the amount need to correct a serioius oversight in the budget, which I brought to the attention of many of you. That is that we funded enrollment increases it to prekay, K12 community college, UNC, even opportunity scholarships are funded with enrollment increases, but we failed to fund increases for special needs scholarships, mostly artistic children and there's a 500 student waiting list and this will be approximately the amount of money that we will need especially in the second year to take care of that. So, for the tax policy reasons and the money reasons I would ask you to adopt this amendment. Anyone else wishing to speak on the amendment may speak forth? Seeing none, we'll move to vote. All those in favor of the amendment by Rep. Stans for the purpose say aye. "Aye" Those opposed like sign. Opinion of the Chair the ayes have it, the ayes do have it and the amendment is agreed to, Any questions about the bill or any other amendments before us? some questions Representative Sam[sp?] and also two amendments that have just been handed up, do you want to do those first? We can, can I ask the question first, I think it's part seven or six that was mentioned that this was last year's bill, are we talking about last year's bill 12 the infamous 1224]   The other other Christmas tree? Yes, last year's Christmas tree I think so Representative Stan[sp?] okay well I would like to offer [xx] first of all 6.5 have been handed up has that been handed out? Is that amendment ready? Mr. Chairman [xx] we don't have copies but we can explain it or Representative Tank can explain it sparely straight forward. Would you like to explain Representative [xx].  Yes, I remember. Like all of us get this last night and you've got to read fast and whatever but section 6.5 was directed against white county and I'm not fan of the light rail project for Wake county, but I don't want to pass a bill that takes away that option for Wake County which is already in the law. And I'm going to try to help defeat it in a referendum and whatever, but I don't think that the General Assembly should micro manage that. Next question, the amendments any questions for Representative Stan? About this amendment and others wishing to speak? Representative Martin then Representative Szoka.  Thank you Mr. Chariman, I just have a question for [xx] and staff, and I worked on this language for the local option sales tax and I looked at with staff[sp?] 1224 the option that we passed out of the house on Representative Godmans' bill that we added 10 counties and then senate budget to see what was the best combination of language, some of the push back on 1224 last time, form the Irvin Counties I think was that it limited them to 2.5 instead allowing them upto what they're currently authorized at 2.75 and there was a push that well we don't have that now but we don't want to be limited and based on other changes that we made in the budget, I thought we shouldn't limit them so this provides the most flexibility to the counties without authorizing any additional taxes that they're not authorized for but they can just choose what to use it for and not limiting anyone.

I do not have have any answer for why this provision on Wake is in there so we can ask our staff whether this is current law or why it needs to be spelt out. Representative Stam. To speak a second time on it. Like many of you, maybe everybody, I was surprised to see in the budget bill the end of the Durham Orange train I was glad to see it because I thought it was a waste of money, but it really wasn't my issue but the budget bill designed in Wake county, like real which has been percolating for decades, and I don't think we should say no state funds maybe used for light rail projects if they offer, if Wake County levies this tax to help pay for it why? Why would you say that? One thing good about this, at least we get to vote on this separately whereas we didn't on the budget. It was just a shock apparently to all 120 members of the House, well maybe 118 members of the House, when it appeared for dormant orange but there's just no reason to say this is a reason not to allocate state funds in the future if they adopt the tax to help pay for it. Mr. Chairman. To say about it. We have Representative Szoka next. I want to ask Representative Stam a question if he will yield. You may sir. Proceed. Thank you, Mr. Chairman Representative Stam, does that provision forbidding Wake County alone from using the sales tax for that purpose, would that violate the local laws in the constitution? Well it doesn't actually say that, it doesn't say that Wake county can't use that locally impose that, that what it says if Wake County does have the locally imposed sales tax then there can't be no state funds for it. Follow up Mr Chairman.  Representative Bishop follow up. The conditional which is predicated is no state funds may be used for light rail projects. If Wake County authorizes the levy isn't that forbidding a local provision concerning transportation? Representative Stam. Representative Bishop I wish it were it's bad policy, but it's not actually in the list of prohibited subjects article two section 24. Thank you Mr Chair. Thank you Representative Brawley. Just a little background. for this one of the hats that I also wear is North Carolina Virginia High Speed Rail Contact and so I have become more for conversant about railway projects than I ever wanted to know. The transportation compact for Durham, Orange, and White counties is predicated on all three counties passing a half sent transit tax. Durham and Orange have done so, wake has only quarter sent transit tax at such time as their transit tax goes to a half cent they would then become part of that light rail compass and the train that you mentioned earlier that could go from Durham from Orange county would then proceed through Orange county in to Wake and sir, Orange to Durham, okay but.  Mr Chairman inquiry in the care. Representative Jitter, as I'm looking at the clock as I understand the rules we are going to have to be out of here in two minutes. based on the number of hands, I don't see us voting on this amendment in two minutes. I don't either, when we started the meeting, I announced that we will recess, and come back at two o'clock. So we'll keep thatunder consideration. So we're just going to talk it out till we go to session and will come back. Representative Alexander. Thank you Mr Chairman I simply think that anything that would be a [xx] issue against we moving forward is a bad idea and it's interesting that Representative Stan arrives at a similar conclusion to the one that I arrived at and we are arriving it from two opposite directions because I think light rail and what not as a good idea he obviously thinks it's not, but we both I believe concurred putting this into this bill is bad policy. [xx] speak on the amendment. Mr chairman, Yes representative Stam

Suggestion, Representative Brawley, I'd like to withdraw amendment cause I worked on something else for this afternoon Okay thank you, any other amendments before us so we can take up in the next couple of seconds one more, Okay, Representative Stain, Section 5.10 I think the chair has it, yes. Mr. Chairman these rights to the industrial development clan utility account to say can use it not just to create jobs but also to retain our existing job base. Well just seems to me if you're extending water and sewer, a question of fine item out of money. If money was unlimited, let's use it for everything, but let's just take good years as example. We spend a lot of money on good year to keep people there. We spend 30 million on Bridgestone/Firestone, actually they had already made their plant, they had already spent their 30 million when gave them 30 million. That was sort of humorous. But since its a finite amount of money, let's not expend it to a category that is infinite, that is that could apply everywhere to everybody. Thank you Representative Stam, Representative Martin. Thank you Mr chairman members this is a provision that we voted on an amendment on the original house bill 117, when it passed the house it was offered by Representative Tine to do more for our tier one and tier two counties. That the discussion was that some of them have infrastructure and they need to do replacement, and upgrades in order to just retain jobs in the real tier one counties. So the utility fund is limited to the T01 and T02 counties and is funded when the jdig award goes into a T03 county that's the only way that it's funded we do have about $5 million that's sitting in that account. We have not been using all the money that's in that account so we're just trying to open it up to tier one and tier two economic development for more uses because we don't have a back-load of people applying for it, there was other discussion, and these bodies were pretty strongly that they wanted it for infrastructure, utility, and these the way to further help those counties and we did post it on the floor, but it did not make into the conference report. So I'd appreciate you leaving it and they're not accepting this amendment. Thank you Representative Martin. Any others wishing to speak on the amendment? Seeing none, time is 9:16, so we have up until 9:20 all those in favor of the amendment signify by saying aye, Aye! Those oppose [xx] No! Chair is unable to determine if you're for the amendment raise your hand please? Please hold them up as we count We have 11 four, those oppose 12.12 the amendment is defeated at this time we will recess until 2 PM we'll see you then thank you.