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House | May 3, 2016 | Committee Room | Finance Committee

Full MP3 Audio File

[BLANK_AUDIO] [SOUND] Good morning. >> Good morning. >> Welcome to the first finance committee meeting of the legislative short session. I'm Bill Brawly/g I'll be chairing today. I would like to first introduce our Sergeant at Arms, Reggie/g Seals, Marvin Lee, Kerry Mccrow Randy Wall, Will Crocker. And we have two pages assisting us today, Madison Galloway from Rathafut/g county. The sponsor is representative Haiger and Spencer Patin from Randof/g county our sponsor, excuse me, his sponsor. I apologize Apologize is Pat Harley/g I can only see, never mind. >> [LAUGH] >> It's morning, I haven't had my first cup of coffee yet. Men Tyler is our clerk today and- >> Steven Wiley. >> Steven Wiley is new to us I don't know what he did to deserve this punishment, but he has joined us along with chairman Sane. We are staffed today by the usual cast of characters, Trainer Griffin, Jonathan Tart, Greg Ronny, Rodney Basel, Ben Aderholt, miss Canada is not with us, Brian Slivka Sandi Agret does not have her name tag and we have us a new Attorney Nick Giddings. How long of a term were you senates to in the committee sir? We welcome him, at this point lets kick it off. The first bill will be senate bill 726 version two and IRC/g update. Senator Tillman gonna present the bill he was here earlier. >> [INAUDIBLE] >> [LAUGH] >> I'm gonna let staff explain it if that's okay. Will that be Trainor/g? Jonathan Mr. [INAUDIBLE] recognized to explain the bill. >> Okay. Good morning this is the annual internal revenue code update that we do each year, is necessary because North Carolina stores it's tax calculations with federal income. And so this will only update the code reference from from January 1, 2015 to January 1st, 2016. When you update that reference to the code we as staff go through all of the federal changes. And identify the ones that would have a material impact if you conform to them and also any Anyone's ever had administrative issues. If you look at your fiscal note your packet you'll see there an impart there in 15, 16 of about a million and a half. The K is a cross and that's from this is essentially the the same bill that was enacted last year. And so that physical impact is the result of conforming to the deduction for teacher's classroom supplies of up to $250. The bill also decouples from the same odds as last year and those are listed for you in the bulleted list there. And Mr Chairman that pretty much covers it, I'll be glad to answer any questions. >> Mr. Tart I believe there was one difference from the IRC update the previous year, there's a new provision under federal law that allows tax forgiveness or tax exemption for money paid to persons wrongfully Convicted and I believe we did conform to that with the cost being less than $1 million to the state. >> Oh that cost us less than $100,000 and yes sir you're right we did conform to that. >> Okay this is essentially the same bill that we passed last year, are there any questions? All right representative Luebke >> Thank you miss chairman and I appreciate, if we started late, I appreciate that [LAUGH] I [UNKNOWN] did not appreciate me this morning. >> Sorry I have understood that quite a few people were doing that, I do wanna comment on your new appearance, your top hair is shorter and your facial hair is fuller. I'm wondering if your channeling Tom [UNKNOWN] because he's doing the same look now as well. >> I hadn't been aware of it [INAUDIBLE] >> [LAUGH] I'm glad to see you back sir and hope you're health is good. >> Thank you very much. >> I have a question [INAUDIBLE] >> It's for Jonathan? Mr. tart. >> Mr Tart I'm interested and haven't been able to understand the point about income exclusion for discharge of residents indebtedness.

Now I've been told this has to do with benefits that someone might have from a short sale. And I wanna know if that's how it would be in everyday parlance or why did he [INAUDIBLE] >> Yes sir, you're correct. That's typically what it is, is when there's a short sale and [INAUDIBLE] to the bank then the sale is worth. And so there was the provision passed about several years ago during the housing crisis to provide an exemption from income from that forgiveness of debt. And typical tax code has always forgiveness of debt has been considered income. For tax purposes there is an exclusion as a result of the housing crisis. It's been extended a few times and this recent Recent legislation extended it for 2015 and 2016. [COUGH] >> Follow up. >> Yes. So you're saying that the income is excluded, I'm sorry the benefit that's there, the $100,000 house is sold for 80,000 and there is Is a $20,000 discrepancy, is that taxed under this bill or is that not taxed. >> 20,000 would be considered income subject to tax. >> Follow up. >> Yes, thank you. I don't know from whom follow up is maybe again for Mr. Todd/g >> Do you wanna debate it? >> Yes. I do wanna debate. >> Okay. Debate the bill. >> Thank you. Well what strikes me with this and I did read it more than once, and I appreciate Mr. Chairman letting us know the other day that this bill would be on the calendar. It strikes me that we Not do this the federal government does not do this, federal government does not see this as income, and again based on what [INAUDIBLE] said I think what's happened here is that to use the example I've had before you had a house that everybody was worth 100,000 because of the explosion implosion of the housing market now if it was worth 80 you sold it for 80 but you really get anything really because you are just not being able to sell the house for what it was worth according to the bank, so my question Mr Chairman you would be or anyone else who is speaking support of it why would we do this because this isn't really really income it's just a benefit that you had in the light of the short sale and I think Think we recognize that because we went a long with the federal government and then we as state law makers we went a long with that for a number of years and with the logic of it, so why are we now saying that it should be taxable. >> Representative Luebke I may address issues later, I think representative Stam is seeking attention, I believe he would like to address the issue. >> I'd like to speak to that, first of all you don't get taxed if your house sells at loss, it relates to the forgiveness of mortgage debt and And without that as a general principle that would be a huge loophole for wealthy people, understand the reason why forgiveness of debt is generally considered income is because without that I could just lend you a million dollars and then forgive the debt and you have get a million dollars tax free. So as a general rule Representative [INAUDIBLE] would not like that, but because of the severe recession the federal government did it temporarily, we did it for six or seven years and at some point you've got to stop that Because if you can keep it up then it will be away to give rich people more money Representative , tax free.>> [INAUDIBLE] >>Okay, Representative Luebke [INAUDIBLE] >> Okay we'll have a debate here about representative Ludke- >> I just wonder if there's anybody else from one of the senators who wanted to speak to it as well cuz I don't really wanna be really the only one questioning this and even if there's any- >> Okay- >>[CROSSTALK] choose not to Present the bill. Okay representative Jitter is recognized. >> Thank you Mr. Chair.

I don't wanna say I find myself in an uncomfortable position of agreeing with representative Luebke. But I will say that I got a constituent who this has really harmed. But I also understand what [UNKNOWN] just said. And the problem that I find is there's not an easy resolution. Because I think the vast majority of the cases fall more into [UNKNOWN] case example of, than they don't. I know that I have a Constituent that we're working on now that's having that dilemma. And so to that regard I don't think there's an easy solution. But I think we gotta continue with the tax policy we've had in place now for a year. I certainly would support it, I just think that as we move forward there has to be a conversation Of how do we address the issues amongst those that are suffering from this, which is never our intent. And I think that's a conversation we need to have but I don't think we need to change the policy as a result. >> Representative Lewis. Okay further debate representative Collins/g. >> This a big question for one of our staff people. I just wanna make sure I understand what we're saying about the charitable tax thing [INAUDIBLE] I wanna make sure I understand the practical effect of that. If I were over 70 and a half, and wanted to give say $50,000 to a charitable institution out of my All right this year I understand I'm not going to get the immediate exclusion but in effect North Carolina would text at about five and a half for [INAUDIBLE] so lets say 27 and a half [INAUDIBLE] what is that 2750 or something that I'm a little in taxes in effect if I can come up with that amount that That 2750 out of my pocket and I added to the net and still given $50,000 I'm still going to be able to [INAUDIBLE] for the year and provided I could come up with that tax money out of pocket, it really is not going to have any net effect tell me am I understanding that correctly. >> Yes sir you are the only time when that would have an effect I believe is if you had a circumstance was the tax payer He was not itemizing deductions and consequently was not able to take advantage of the deduction. >> Just one quick- >> Follow up. >> Of course if they're given that much, I mean unless they're given a very small amount, they would be able to itemize now that they're giving that much to charity. And then I think the only other thing that would come in mind is perhaps they were so wealthy that their charitable contributions were resources were limited. Okay. >> Follow up. >> Representative Meyer do wish to debate the bill? [BLANK_AUDIO] >> Thank you Chairman Brody, Sir. Going back to the conversation about that forgiveness on a principle residence One point that representative Stam made that I wonder but he said at some point we have to stop doing that so one question I would have is why is that point now. How do we know we are ready for that point and then the second question possibly just for the committee to consider is is there a middle ground between Representative Luebkepoint and representatives Stams point could we determine a threshold of a certain amount that if the debt forgiveness is under say $10,000 to $20,000 that we would still allow for it to be deductible but above a certain amount I would be taxable. The gentleman's rhetorical questions were noted. Representative Zolka. >> Thank you Mr. Chair. I think I can answer your question representative Moore as to the why now. You may know I'm in the mortgage business and I see poor credits all the time of people who are seeking mortgages. The mortgage crisis of 2008 2009 2009, the short sales and the foreclosures from that are almost, I can't say that every one has been resolved by now, but cuz that's in my industry I track it very closely and I would tell you that my personal opinion is that, all those mortgages have been resolved by now before closure is going to happen from sub prime crisis they create a re-finance or they've been fore closed, likewise for the lot of the short sale activity, what I am saying people applying for credit now if they have issues it's not from mortgage crisis it's from decisions in local market conditions wherever they may live that have happened since then. So my personal belief is that when this was put in place it was probably good and I think the time has since passed for that policy to end and I'm in favor of the way this is. And just to reiterate one thing that representative Stam said that representative Luebke said that if you do a short so you didn't really get anything.

Well they did get something they got a loan for it and I totally concur with my representative Stan and his conclusions drawing from that I mean if somebody is loaned $100,000 And the bank only gets or the investor only gets $80,000 back there is a loss of $20,000 but from the person who owns the property and actually is getting the benefit of that short sale like he's getting a gift for $20,000 from the bank it's written off by the bank so if you didn't end that type of behavior sometime it would lead to abuse of the system. And the last thing I'd like to say is would representative Jitters comment, he asked me to talk to that individual as well and that the issue with that is the issue with the bank not in my opinion In my opinion giving that customer the right notice, the right form and I've contacted DLR and they're working with that taxpayer, and with that lender to try and get that resolved and that lender's being rather difficult to work with, but I think they'll finally see the light, and so DLR is not on top of that one. So I would and in conclusion, I know it's been kinda long, but in conclusion I'd say that this is good policy for our state to follow right now. >> Representative Saine? >> Mr Chair I can move for a favorable in this bill. >> Okay, representative Warren is okay. Motion by representative Saine favorable report senate 726 to be reported to the floor and will be voted on today. Representative Luebke. >> Thank you Mr. Chairman. I wanna follow up on some of the comments that were made, first of all that what representative Jitters said is exactly my concern. There are lots of people out there who Are still in a situation to be hurt by this and virtually all of them do not have or haven't thought to call their legislator and in turn their legislator talk to a expert like representative Zolka as representative to representative, so there's plenty of people out there I'm sure, of moderate income, who are in fact heard by this, and there's just one makes the connection like as the two of you had done for that constituent. So I have been thinking along the lines that representative Mayer articulated. Which is if I understand it correctly this goes under the federal law it goes up to 2,000,000 that you can benefit from. Up to two million. So my question is could we not take an amendment that representative Jitters not offer an amendment that caps it at 250,000 or allows just the 250,000 to be exempt if someone gets beyond it. But just simply to To limit it to those people who are really in need. And I, as representative Stam knows, he and I both love giving tax breaks to very wealthy people. We share that. I'm teasing about our joint concern about corporate welfare and all that. But I'd really ask if there's someone who would offer that amendment from the majority party. Cuz I- >> Representative Luebka your hypothetical question is noted. The question before the committee is the approval of Saine's motion to approve senate bill 726 in referral to the floor. So many as favor of the motion say aye. >> aye. >> Oppose no. >> No. >> The motion carries. [BLANK_AUDIO] Put me down. The next bill will be BILL 729 Various Changes to Revenue Laws. I'm gonna ask Ask staff to prepare it I understand there may be some amendments offered with people that are going to offer amendments please bring them to the chair. [BLANK_AUDIO] Greg you're gonna explain this one. >> Yes sir. >> Thank you just before we started, everything in this bill that you are going to hear about are things that were approved by this committee and by the house and then were sent to the senate things that were approved by the senate. Essentially everything in the bill with a minor interest tweak has already been voted on and approved, in both house and senate finance, and the floor of the house in the senate. But unfortunately in different versions of the bills that had additional amendments. So what we're really trying to do here is just get the things that everybody agreed to last year and acted so we can We can fight over the new stuff for the rest of the summer. Mr. [UNKNOWN] >> Yes sir. was the Chair kind of gave you a little bit of the history.

The genesis of this bill is to take the provisions that were common between senates 605 has passed the senate and has to pass the house. And That's what the revenue laws study committee started with. Now in addition to that, the Department of Revenue asked for some very technical stuff that got in there. There have been changes to effective dates, there have been cross references fix, there's sort of been the usual refresh of a bill and As the chair said the major new thing that this bill has that no one has seen before was the interest deduction. The Department of Revenue and Industry had talked to each other and the state had last year very recently, the General Assembly kind of I drew a line in the sand and cut to co-operate interested options to 30% of your income and I think that by this what we were to think about that is that is sort of a line in the sand. That if it's ever 30% it'd make this a tax shelter, whatever it is, your just not going to take it. What industry said all about, if we can trace the Amount of interest that we're paying to a third party lender, we should be allowed to do it. And so, this bill does contain that. It contains a provision, that basically allows an unrelated interest deduction, if you can trace it to unrelated lender. Discussions.The department got industry to agree to drop the cap from 30% to 15% so for a tax payers who are lending to related lenders to other entities within their co-operate chain they're capped at 15 it used to be 30 now the line has moved to 15 but if you can trace it then it's unlimited So that's the major new provision. [BLANK_AUDIO] >> Are there questions for staff. [BLANK_AUDIO] Representative Hager. >> Thank you Mr Chairman you asked some questions for staff on this piece or the whole bill. >> On any part of the bill sir. >> Yes sir I do is Mr. Ronney you gonna take the questions Mr. Chairman. >> If appropriate we'll fill the appropriate staff person. Majority leaders recognised. >> Thank you Mr. Chairman. Let me get to the right spot and I be allowed to apologize. [SOUND] Mr. Chairman, on page two We added on line 43 through I believe 48 49. Can you explain what that does. >> What section. >> Let me do that. >> Do that. >> That's the one. >> Okay. >> Should be allocation appointment of income. It's time for co-operations. >> Okay. >> That would be Jonathan Tart. Mr. Tart's recognized. >> I represent with Hager these this deals with a portion that we talked about before. It's not market base sourced like you said in Revenue Laws but it's just, but it does deal with how you calculate that factor that determines the percentage of a multi state income that ill be taxed. This is just said when you have all these financial swaps that you don't want to include just this cash flow in the denominator or it just inflates the denominator dilutes the apportion of percentage. The next part of that, paragraph F is relating to a piece of income that's not subject to tax. You don't want something not subject to the tax in the denominator of that fraction because it also just dilutes the percentage. >> Thank you, follow Mister chairman? >> Follow up on page six, line 41 just curious, line 40, 41. We changed the definition there of a plate, is there any reason we did that whereas some instances we're having trouble with this issue? [BLANK_AUDIO] The silence golden in this case Mr. Chairman? >> Prepared food. >> I'm trying to catch up while I read it. [BLANK_AUDIO] Page 69, 40, 41. Just curious on why? What does that do? Why did we change that definition. It was an instance where we weren't collecting something or doing something? >> I don't like the department why it doesn't answer that one. It looks like one of their technical requests so it probably is an response to some problem they've had with administering it. >> Mister chairman, department revenue he's speaking of. >> Do we have someone from the department here? >> Might just reading it, it sounds to me like it or just trying

to clarify the difference between when it's prepared food that's subject to a prepared food tax or if it's like grocery store package food. That's why I read it >> Yeah. >> It's just a little weird to me why did that I just want to make sure we aren't missing something on that one so, thank you Mr. Chairman. >> We have a gentleman from the department here, would you please identify yourself. >> Ed Stricklin, Department of Revenue. >> Mr. Stricklin's recognised. Prepared food is part of the um streamline agreement in the definitions that we followed and it just happened to be a situation where there was a determination on the question and streamline and it was a ruling, so we added that in there just to be as a clarifying measure. Thank you Mr. Chairman. I hope you don't mind Mr. Chairman. >> Certainly. >> Thank you. On page seven, line 47, we added another section there person other than the person listen set division 102. Could staff get an example of what that kinda person that would be. >> Page seven line what? >> Line uh. >> 47, 48. >> Okay, let me caught up with you. [BLANK_AUDIO] >> I believe that is the fix for the online ticket services collecting the taxes. >> That's what I taught I just wanted to make sure Mr Chariman. Thank you. I only have a couple more if it's okay Mr. Chairman. Page ten, line 22. It's under fuel, electricity and pipe natural gas also manufacture for use and connection with operation other manufacturing facility Could you explain that we added fuel, electricity, and pipe natural gas from fuel electricity looks like pipe natural gas when in there, could you explain what type of manufacturers that are exempted to certain type of manufactures ad all manufactures? >> The change is trying to make that you actually used it for manufacturing. >> It's just an exclusion to the exemption so that if your only using the fuel for comfort heating or something or trying to make sure that the pipe never gas and the fuel actually when into manufacturing process and we've already done the same thing for electricity and so that's the purpose of the change so that you only get the tax break if you actually used it to manufacture. >> Okay, that makes sense thank you. Last two questions Mr Chairman if you don't mind. >> Certainly. >> Page 14, line to start with line ten, on the aviation fuel you've got an extra exemption there does that kind of redefine or more definite at that exemption or does it expand that exemption? >> This one. There is several exemptions in here I think this is the one about international trouble let me make sure on that point if it's the foreign one we had an exemption in here that when we originally wrote it said inner state travel and slightly at the plane had to go from North Carolina to another state for what if the plaintiff lives in North Carolina or the Bahamas and so this was trying to clarify that it could be interstate or international so that if the plane landed in the Bahamas or in Georgia, it would get the same tax treatment as interstate travel. >> Follow up on that Mr. Chairman. >> Follow up. >> Would then you consider that an expansion of this exemption since it was just interstate last time? >> Technically I think it is an expansion but I think the thought around all this was that when the law passed, they mean to get planes that were leaving the state and that that was who we we're supposed to get the exemption but that if you look that it really really technically, there was this question that maybe interstate wasn't broad enough to include that plane that didn't actually touch another state but actually flew out of the United States so I think that there was some uncertainty Follow up. Thank you Mr. Chairman. I'll move on to the next minute. I don't know if representative Stam has a comment on that- >> [CROSSTALK] A question on that point. >> Representative Stam. Sorry. >> What is the cost to the state of that expansion of that exemption? You can get it to us later if need be. I was just thinking originally when we're saying interstate and in the early days it wasn't the United States it was these United States because each of the states,

it's the same phrase we use for the state of France, for the state of Great Britain and I think we're just having to clarify it for people that don't understand And we have 50 states. >> Mr. Chairman was that in the magna carta? >> [LAUGH] >> I was not present for the signing of the magna carta but I have studied our own founding documents sir, did you representative Higgins recognise to continue his questions. >> Mr. Chairman I think Mr. Basel has an answer for us on that first issue if that's okay with you All right Mr. Basel. >> Ah yes sir thank you Mr. Chairman. The cost of this, there would be no increased cost, because when we did the original estimate we did not make any distinction between interstate and international so. >> Oh Mr. chairman? >> Yes representative Stam. >> That would mean Mean there is an extra cost that might mean that your original estimate was too high, were you able to separate out the correct I mean the difference in the cost between interstate and international? And we can get that later if need be. >> YeaH we can definitely take a look at that At and see if we can determine the difference. >> Okay. >> Mr. Chairman- >> Representative Hager. Next question be on same page um on line 20, it seems like we've expanded that one also, would that be true that we've expanded from just purchased to leased and rented? [BLANK_AUDIO] Let me look at it for a second [BLANK_AUDIO] Now on 3.24 we didn't expand um I think that um on 3.24 when we're talking about the The service contracts that motorsports teams have on the engines, so it's just the service contracts we're talking about. This line we're just clarifying, I think there's general agreement that this doesn't expand it um but the motorsports industry was concerned that the Well as written was not clear enough and that it wasn't absolutely rock solid what their exemption was. And so this is clarifying um but I'm not aware of anybody who thought that they did not have the exemption even under current law. >> Mr. Chairman just to comment on that and I Thank you this one seems to be more evident and I apologize for pushing back on staff a little bit. But in any world I have been in purchases different from lease and are rented. May be I don't understand the NASCAR very issue very well, and I know in real estate is that way I think. I guess I did a little more A bit more clarification on that why those are not different why their purchase means lease standard and also says it seems to me to me to be an expansion, but I need to think about that a little Mr. Chairman. >> Mr. Chairman I got a question>> I think senator Tillman wants to address that issue, he is one the >> Mr. Chairman I got a question behind me on what page I'm on if you don't mind can I let him know that. >> Certainly >> Page 14 line 20, 21. >> Senator Tilman. >> The NASCAR agreement has always been understood to be purchased and. Leased or rented. Many of those teams, nearly all of those teams lease their equipment. And especially when you're talking about transmissions, rear ends and the various parts of that. And they are a huge part of our economy, and this was meant to be clarification of what we're already practicing. So if you change That you would be then limiting the NASCAR people and you would be costing those race teams, many of which are not making it anyway. There's only two out of all the teams that are making any money. So it's a big economic issue but we've always done that. >> Representative Jeter/g >> I will say So this is someone who used to work in the racing industry their is what of a technical difference because. Particularly when it comes to engines and transmissions, so you may have one of the bigger teams lease an engine to a less funded team. The reality thou is an engine last about one or two races and then it is an effect purchased. So While you are returning the whole engine, you've been essence purchase the use of the engine that race. The selling team in this case you gonna have a come back and complete refurbish it .So when I get the porch/g back, the [UNKNOWN] person [UNKNOWN] is technically called rist/g Representative Hager >> Thank you. I guess I'm leaving more confusion representative Ginder/g,may be I need to ask this question. Is there a way to take this engine you're talking about? And get attached on several different time you are releasing to

other team. If you are buying or releasing from the engine builder from one team And then you turn around from that team and lease a pursuit from another team and then you end that person sounds like maybe the movie industry I apologize. It sounds like that they may be a gaming this little bit a pair of leasing and purchase this within inside the team. I'm I wrong on that? >> Mr. Chairman >> Senator Tillman. >> Those engines are. They are practically worthless after one race and they may be sold to somebody else so other than NASCAR teams but that engine is not going to be taken by another team. They don't rebuild those things because they take so much abuse during the race think their is a new engine on every race. They don't use those engines again. If you were thinking about them gaming the system I don't think so. >> Mr. Chairman >> Representative Ginder/g. >> In essence what they do is they take the engine and salvage it for parts. It's not like they are reusing that engine going at senator Tilman's point. That engine is trashed they are now salvaging it for parts. So it's not. But not reselling the engine and you know I think NASCAR will argue they're much different that Hollywood. >> [INAUDIBLE] can you perhaps shed some light on this issue. >> Yes Mr. chairman there has been a long standing policy at the general assembly of this body enacted sometime ago to give sales tax exemption and sales tax refund Refunders choose these types of transmissions, engines, rear-end gears and such for the Nascar industry. Those sales tax exemptions and refunds use the words purchased, leased or rented. When the objective, with the exemption from the service contract was to treat the service contract for those items the same as exemptions and the refunds but when it was put in there the word list oriented failed to be included so for purposes of your exemption that you have in law, your refund that you already have in the law for the items themselves, the word purchase, leased or rented are used, so we're just trying to make the law consistent with the service contracts, the purchase of the items, as well as the refund of the sales tax on items in certain circumstances. >> Follow up. I believe it will be the last follow up. Thank you Mr. Chairman. Just a word of frustration here is, this is a probably $2 or 3 million dollar tax credit. I don't know what the aviation fuel is, I'm looking, trying to find that now. And we seemed and maybe expanding a little bit in the jet fuel, but maybe or maybe not in the NASCAR. And we're considering teacher raises, and we took $177 million from elementary MCO's but we're turning around and giving money. And I apologize, I have no I have no, what's the right word? I don't feel sorry for any folks in the NASCAR business, when I know they live in the biggest houses in our districts. And I doubt these teams are losing much money. It just doesn't seem to be losing a lot of money from the- >> Jerry. >> From the track in Charlotte. So I guess my point is that we've got other issues, but we're turning around giving money away on some of these tax break issues. Mr. Chairman thank you for your patience. >> Thank you sir. Representative Hamilton. >> Thank you Mr. Chairman. Just a quick question probably for staff, at the end of the year is NASCAR cut a check so to speak. Is the check written directly to the company from the site at the end of the year to reimburse them for the sales tax revenues they pay. >> Question. >> [CROSSTALK] >> Can you answer that Grey. >> I'm not sure to answer that they have several exemptions and so we're talking about the one in this bill is about whether you pay sales tax on a service contract. >> Okay I think the part that I might be able to answer that Miss Hamilton I think what happens is the sales tax is not charged on the transaction. Follow up. >> Is that different for the aviation jet fuel credit where they do pay it upfront and then they receive reimbursement at the end of the year? >> I would defer to the Department on that one. I think it used to be they applied for a refund but now I think it's all exempt. Can the Department speak to that and have rules for implementing that? [BLANK_AUDIO] Okay. [BLANK_AUDIO] Would you please identify yourself and the department again sir. >> Ed striklin/g [UNKNOWN] Department of Revenue sales and new tax division. Regarding the aviation gasoline and jet fuel that is a upfront exemption, so they provide the exception certificate regarding the motor fields regarding the motor sports, most of those do have exceptions however their is one refund that still exists for 50%

on some of the items. And I think we report on that on our website so based on what I recall that like 5 or 6 refunds but we can get you the exact amounts. >> Follow up. Further discussion further debate. Representative Warren. >> Thank you Mr. chairman member of staff could explain for me on page 20, the looks like we've taken the data requirements and specified them more secencly/g I just want if they could clarify that for me regarding the wage particular the reference to tier one area. [BLANK_AUDIO] What we're trying to do um is that this is not a change in the law. We had these requirements in a repealed statute so if this bill doesn't pass the law is right now says you have to meet that exact requirement under and it references as a statute that we repealed and so what this does here is everywhere, in the general statutes we had referenced those wage and environmental and employment standards that, to the repealed statute we just go and grab the language from that repealed statute and put it back in so that this is not changing the law is just trying to clean up this mess where we've cross references to a statue we repealed. >> Follow up. >> Yes sir, thank you, on the section regarding the health coverage is that percentage on the premium payment same as the one previously then? >> Yeah Yes. >> Follow up. >> All right. Just one clarification from the chair on the original question from representative Harger this is on page two referring to section ENF, that will be lines 43 through 49, as I understood your explanation the impact of these changes will be to increase the amount of tax collected by the state rather than decrease, more accurately reflect. This is going back to the portion of receipts for financial swaps and receipts from nature of dividends where non taxable amounts were not included in the denominator. >> That's current practice, it's just clarifying it's not changing. >> Okay. All right. Representative Sain is recognized for a motion. >> Thank you Mr. Chairman. I move that we look for a table, set a bill 7.9. >> Where the referral to the house, to the floor. >> Mr. chairman. >> Representative Luke I put the question, I was patient before but the questions being put. >> I ask for further discussion for the debate. >> I understood that you could speak to the question. >> Well Luke, Representative Luke you haven't addressed this bill yet so recognizing that absence that you speak on everything, we will keep the tradition and allow you to speak sir. >> Well, let the record show I did not speak on the last Bill. Bill number 2. I'm just teasing. >> This is BILL number 2. [LAUGH] >> I didn't plan to speak on Bill number 3, I'm sorry. >>[LAUGH] >> Okay. Thank you Mr. Chairman. I just was hoping that all of us, before the bill hit the floor, could get the information that represent Hager asked about. Is there any additional cost on the air fuel issue? Issue. >> I think the answer was there is no additional cost, it's just how much of the cost is associated with domestic versus international. But the original bids or the original forecast was based upon all the fuel that the planes that left North Carolina, that the problem of the clarification of language is not everyone understood interstate to include a state under a foreign flag versus a state under the american flag. >> Can I just ask that I get at least the answer of that question, whether there is any additional cost and the same thing with NASCAR. >> It doesn't need to - >> You can get it today. >> Well the intent was to take this bill to the floor today at 3. We all be able to reply by 3? Okay, we're gonna ask him to do it if you want to- >> I would. >> Raise the issue during debate today. >> And for NASCAR as well, I'll start the same thing. Thank-you sir. All right. The motion before the committee is, [BLANK_AUDIO] do we need a second for? Okay. Representative Martin seconding motion to approve Senate Bill 729 with referral to the floor.

Some of you favor the the motion say aye >> Aye >> Oppose no. Motion carries. We got ten minutes left. [BLANK_AUDIO] I think we can. Representative Howard, can we do the UI bill in ten minutes? >> [BLANK_AUDIO] Move approval. >> [LAUGH] [BLANK_AUDIO] Representative- >> Thank-you Mr. Chairman. This is actually. three sections in this particular Bill 945. Section one simply clarifies the rule on what is called suta, s-u-t-a dumping and that's a state and employment packs act. We found that employers who are paying state an employment tax and the tax are based on rates that go up when employees file an employment insurance claim. So some employers try to get a new pseudo number to pay a lower rate of tax and escape the claims history with past layoffs of employees. North Carolina law prohibits seeking new tax numbers called pseudo dumpings, that's section one. Section two just adds the phrase has the power to make it clear of the board of review can independently select hearing officers in section three. It's just the effective day that the provision and Mr. Chairman I would ask for a favorable report I'll answer any questions. >> Representive Bell is recognised for motion. >> Due for favorable report due for senate BILL 725. Representative Hager Sackens. So many as favor the motion say I. >> I. Those opposed no. >> We are adjured. [SOUND]