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Senate | June 1, 2016 | Chamber | Senate Finance

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[BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO]. [BLANK_AUDIO]. Good afternoon the meeting will come to order. Before we start today we'll begin as we always do with a sergeant-at-arms staff Donner Blake at the back. Steve is over here and John, I don't know if [INAUDIBLE], at the back door thank you. Ladies and gentlemen our pages today who may or may not be in attendance some of them are. That's good. I saw Luke over there. Luke have you decided to page this week? Good for you. Welcome. And we have Will Farthing from Heresburg. Sen Apodaca's page, Conrad Ruff for city, Sen Hise. Conrad you're not bigger than Morris from the [INAUDIBLE] last week, he was big as Senator Hise - >> Welcome >> You don't wanna be that big >> Turner Bailey, Wilkesboro, Randleman J. Yietis/g North Wilkesboro, Senator Randleman , John Diggs from Durham join you could be from Lumberton with a name like that, Senator Mckissick, Campell McClawn, Duke waveston/g, Senator [INAUDIBLE] Jack Sein, Riley, Senator Banter, and Mathis, and Mathis I can't read your hand writing but I'm sure you got through the third grade.

From Riley, Senator Smith. Thank you very much. >> [LAUGH] >> Bet your handwriting is better than mine so don't [UNKNOWN] >> [INAUDIBLE] >> [LAUGH] >> Thank you. Very good. I like a page and appreciate a page that will speak up. He's also smarter senator Rayburn. [LAUGH] [BLANK_AUDIO] Members today we are here to discuss and vote out the finance portion of the budget, so Senator Rucho is going to go through it for us and he will give you the ground rules before he starts. I would like to announce that any amendment must follow the rules of engagement that were sent out to all of us and they need to be signed and handed by 1:30. So if you have them please have them prepared and forward, and we will not be accepting any after that time. So with that, Senator Rucho, you may take over. >> Thank you Mr. President. Now what we have before us is the finance portion of the budget. We're gonna go through each of the portions of it, I'll just give a quick overview, let staff explain it in more detail and I may just make a couple of comments regarding that. Mr. Chairman at what point do you wanna ask and respond to questions? >> You have the floor sir, that's up to you. You wanna do it after your section or would you like to do it at the end of the presentation? I would say sir we go through the whole thing then we do the questions at the end of it. >> Very good. Thank you sir. Okay, ladies and gentlemen of the finance committee, we have the first portion which is increasing the standard deduction by $2,000 over two year period of time which is basically the middle class [INAUDIBLE]. The roughly 84% 85%percent of the money that is saved will go directly to the middle class tax payers and married file in jointly that's $80,000 or less and there is a good reason to believe that especially since we had a surplus this year again of about $320 million. That money should go back to the middle class hard working families and the small businesses and we've had time to explain that before, I won't spend any more time describing it. That was just senate bill 818, Mr. Chairman if the staff would explain that a little bit further that would be great. >> Thank you, staff? >> Mr Chairman I don't have anything to add to that, it would increase the standard deduction for [INAUDIBLE] jointly beginning in the 2016 fiscal year and in your packet of information you do have a fiscal impact chart so you can see the fiscal impact of making that standard deduction increase. >> Thank you. >> Okay Mr. chairman then we go on to the second part which includes dealing with the article 5F tax base and it's particularly includes the large parts and repair parts of the ports facilities, the cranes and the like which if I understand correctly went into effect January of assuming July of 2013 apparently didn't include the parts so I believe that's why in this budget if there are any other comments from the staff Mr. chairman, okay to go on to the third portion of it dealing with market based sourcing of multi state income tax apportionment model, we've discussed this at length in finance. This is the next trajectional step as we move from single sales factor which is what we established I think it was a year or so ago, which is very supportive and incentivizes manufacturing businesses that either will remain and or come to North Carolina because there was a great advantage for them since thy have a large capital investment and also employ a lot of folks and new employees, people creating good jobs for North Carolina. That is in place, goes into effect 2018. The market they're sourcing now is the one that will be there to actually attract the service businesses and in a 21st century economy

70% of our GDP is services. And it will incentivise the service businesses, the high tech businesses to come to North Carolina because there is a significant advantage to being here and our only having tax apportionment on what is sold in North Carolina. All the other portions will be tax exempt from our state income tax, state corporate tax. And we feel that the general assembly asked us to take positive action. We took about four meetings in revenue law to review this market base sourcing and feel that we have a very clear pathway for us to move forward and to have this as part of our tax apportionment plan, which again will be very attractive for businesses to locate here and to remain here and invest here. We've had a number of business industries that were very supportive of this plan and going into market based sourcing we worked out this one that I'll discuss after the explanation that seems to be the only one that is opposed to what we've perceived as the way to market based sourcing. But for the moment Mr. Chairman I'd like you to see if staff can add any more to this market based sourcing. >> >> What Senator Rucho stated was pretty accurate. Do you pass [INAUDIBLE] legislation last year to provide an incentive for companies that deal in products. With that incentive it meant that an increase in their jobs and investment in North Carolina would no longer result in an increase in how much of their income we tax. You accomplish that by determining their tax based on how much of their goods are consumed in North Carolina. This does the same for other counties so that they have the same incentive. [BLANK_AUDIO] >> Thank you Mr Darce/g. >> I'd like to just add one more. >> Please. >> To that if I may sir and then we can respond to questions in another little bit. In this case it seems to be only one industry that is not in favor in our direction in marketing based sourcing and that is the broadcasting industry.I think each of you may have received some information from them regarding their comments in view of that presentation the other day. A couple of important points we've not been able to find any other industry treated in this manner as compared to every other corporation in the state of North Carolina. It is based on a private letter ruling that was issued in December of 2012 that in essence and I know they disagree, but the whole purpose is there will be no North Carolina a portion made of income tax corporate income unless the contract is signed in North Carolina, and the very few contract seem to signed in North Carolina so the amount of tax revenue that is received from them is very minimal, some of the facts that I asked staff to look at in this particular case showed that the industry generated in 2014 roughly $200 billion in about six major corporations. Out of that was about $40 billion worth of profit. North Carolina is about the 10th ranked state in the union and if you calculate it based on population and what audience would be it's about $1.2 billion that would have been earned in North Carolina and in that case those six corporations pay a net or aggregate corporate income tax of only $3 million. It is a very good opportunity for this industry to earn money here in North Carolina. I think we can respond to any additional questions as arise. But that $3 million reflects what would be a corporate income tax rate of 0.025, less than a quarter of a percent. Our corporate income tax this year is four, next year will be corporate income tax of three, and I just feel and along with the other chairs that it is a reasonable expectation that if they are in North Carolina earning about $1.2 billion nd rather than just taking money out of the state it would be fair for them to add to what we have as

ongoing expenses and teacher salaries educating our students and the operation of the state of North Carolina so under the circumstances we would be using audience factor which is a very clear way of saying Senator Davis buys Netflix or one of the others and that is the audience, now they'll Tell you that the programming is being sold to a middle person and that's fine when it's a tangible item but this is actually a service that's being sold. And the value that is received is only received by the end user and therefore that's the customer That's a direction we are moving on this issue and we feel that not only is it a simple and fair way of doing it but it also will allow for every corporation to be treated in a similar manner, Mr. chairman that is the End portion of that one and I would like to move on to sales tax. In the sales tax portion of this, last year we passed a broadening of the sales tax base into repairs maintenance and installation. It caused a lot of confusion the Department of Revenue was working on certain assumptions as to what one was a retailer which is something that we needed to clarify and we did in this portion of the budget. Two to explain what repairs maintenance and insulation actually encompasses. I would like to give credit to Miss Evadin/g and the staff on the good job of clarifying what is a complicated Issue and clearly defining what is repair maintenance installation versus capital expenditure, Miss Everde/g is that chart out also in addition to the shows of capital versus the none >> No sir Mr chairman we did not Did not include the chart in today's materials there was the chart in yesterdays materials and the provision in this bill differs from the one we discussed yesterday, I'll be happy to go over it after your comments if you like. >> Very good that would be wonderful, so we are defining a retailer as I'll let her explain that the That the old one is what we are trying to do is very clearly say that a retailer in North Carolina is someone that's in business in the State of North Carolina, that sells goods and or services period. Then once you have all those retailers and if the general assembly decides that, that specific profession Industry in the like is added to the broad and sales tax base as we pursue a consumption based economic model, then that retailer will then be obligated to collect sales tax from the sale of their good and or service. Mr. Chairman I'll stop there for a minute and see if staff can add some additional enlightenment on this subject. >> Yes they will. >> Thank you Mr Chairman. In the committee substitute that you discussed yesterday we talked about how if the item was considered a capital improvement. And there is a test in the bill for determining whether Something is a capital improvement, that it would not be subject to sales tax but would be treated as a real property contract. And when something is a capital improvement is basic when you have installed something that becomes part of your real property. And as you recall yesterday in the bill when we discussed it I pointed out that a substantive provision in there was that A2 which Said statutorily that the installation of cabinets, counter tops, flooring and appliances would not be considered a capital improvement unless it was part of new construction. And what this bill does is that it removes that. So now and I think someone asked the question about a kitchen remodel. under the bill you discussed yesterday, if you had installed new cabinets, appliances and floors in a kitchen it would not have been considered a capital improvement and those installations would have been subject to the sales tax on installation services. In the draft that you have before you that's been removed. Those will be treated just as you would treat any other installation under the test. And almost all instances, the installation of those types of items would be considered a capital/g improvement and therefor not subject sales tax.

And if you will look on your fiscal chart, you'l see that the sales tax expansion in this bill the [INAUDIBLE] before you today a four years impact is about $78 million, and as you recall yesterday the impact was closer to 146. So when you define those installations as capital improvements you do broaden your base but not near as much as the bill that you considered yesterday. [BLANK_AUDIO] >> Thank you Mrs Evelyn. >> The next subject that is in the bill deals with establishing an RMI, repair maintenance installations cap on services provided on boat and aircraft repair. And that is said that the boat and aircraft repair would come in and as they normally pay for the patch and then now the services would come into effect. And we set a cap exclusively on the service portion of $25000 per activity. And that is in place there. And then Mr. Chairman if staff would like to add any additional points to that. >> Thank you, [INAUDIBLE] we're good Senator Rucho if you would like to- >> Okay Mr. Chairman and the last one we're talking about is the repeal of the $17.6 million state contribution that was allocated to all 100 counties as part of the two percent local option sales act revenue. Members of the finance committee, last year during the very end there was a compromise made. There was an estimate of about $67 million that would have been generated in the sales packs expansion. It was necessary for about [BLANK_AUDIO] $84 million of necessary money to keep all the counties whole. The general fund would have back stop the $17.5 million that was necessary and as it turned out the revenue stream that was generated was in excess of $100 million so there was no reason to deep into the $17.5 million back stop and then moving forward as base expansion continues and growth of sales tax revenue increases. It was determined that $17.5 million was no longer necessary and would be returned permanently to the general fund. I think staff can explain that further if they would like to. [BLANK_AUDIO] Good Mr chairman, that is the explanations that we have on all the parts in the budget and I guess we could stand for questions. >> Thank you we have four more minutes on the amendment Senator Heiss? >> Thank you Mr chairman more question for the Senate Rucho bill sponsor. Now these companies you are talking to head 1.2 billion in profits and under this we'd have to pay three million in North Carolina taxes, what would the tax burden be if those companies came and located in North Carolina for that compared to the three million under the current if they came and located North Carolina and then if we change it and they locate North Carolina what's their case. Well I can tell you if we change the law and it would be roughly three percent of the $1.2 billion dollars which is about 33 to 36 million. I don't know Mr Chairman if we did an analysis of what it would be if they were to move to the state. Maybe Staff might be able to help with that? >> I can't give you specific numbers I can tell you that this is whether it preferred in our homes it tends to benefit you where your home and it would not benefit you away, so if it they were to come into North Carolina you would presume that it would be a preferable way of a [INAUDIBLE] compared to a current myth. >> Is the Right now the audience factor technic is being used in a number of states apparently for the to get the most favorable tax treatment and again they would like to get the most favorable tax treatment and again they would like to get the most favorable tax treatment here but it is different than the audience factor in the number of other home states that they are in, so. >> Just follow up. That would most of these companies be located in those states that

did tax them on all their income but only the amount that was a portioned to that state that they are located in. >>I think it's been clear that was previously an hour before them and the home state says in the senate for them to be there. >> Sorry just to comment then. So they got it in their home states so they didn't have to pay taxes but they don't want it North Carolina. Coming in cuz they are not considering coming here any time soon. That's what coming and so my thing is a pretty solid policy that we have in North Carolina that we are gonna work to benefit the business and industries that contribute in our part of the state in North Carolina. And those outside who are taking advantage of our market should be required to make up that difference. >> Well I think that's a fair statement. It's not phantom income what was it? >> [INAUDIBLE] finance council is referred to as no where income is not taxed in any state. > Well the answer to your question their is a way of working the system to get know where income. where someone wouldn't be required to pay it in their home state and wouldn't be required to pay it in their home state and wouldn't be required to pay here, so I'm not sure where they are paying it. >> Thank you senator Ford. >> Thank you Mr. chairman I got a procedure question as it relates to senate bill 870. Does the A bunch of provision as relates to sales tax replace senate bill 870. >> Senator Rucho >> Yes the budget bill includes the 870. >> Follow up >> Certainly >> I had a question yesterday relation to the impact on community colleges as it relates to services And the staff have an opportunity to investigate that to clarify whether or not based upon the service based expansion that community colleges would or would not be responsible for paying sales taxes on services. >> The individual community colleges are not exempt from sales taxes So to the extent that they have a service that is subject to tax cuz individual community colleges would be the system itself at the state level is a state agency it would be exempt. As for what you also specifically mentioned yesterday janitorial services and that is an exemption. So I do not, I mean you would not That service should not be taxable and I could not find any details on the specific school or what was happening at that school. >> Thank you. Mr Chairman last follow up. >> Certainly. >> As it relates to the modification for the redistribution of the sales tax, is there any negative impact on a county in North Carolina? [BLANK_AUDIO] Miss Canada/g >> Danice Canada/g, fiscal research. We don't think that there would be any negative impact on any specific counties because as Senator Rucho mentioned although the bill takes. Let me clarify that the bill takes away 17.6 million dollars that the state had kicked in to the local pot as we call it distributed to locals. And as you mentioned the sales tax base expansion brought in more revenue than what's expected last year. We estimated 67.2 million local revenue for base expansion and now looking back at the way the bill was implemented we think that the local expansion will bring it around $100 million so as you said that offsets that loss of the 17.6. However actually I answered your question incorrectly because technically yes the locals are loosing $17.6 million they will get the Base expansion either way, the additional 27.7 that we underestimated from last year. But the 17.6 is going away. >> Quick follow up >> I could tell there was on coming >> So the net impact, would it have negative or will all counties be made whole. The net impact of our office is projections from last year is positive by approximately, $9, $10 million. >> Mr. Chairman? >> Yes sir. >> So that Senator Ford understands, that was supposed to be a back stop if the revenue wasn't there that we could keep it that way but apparently with $100 million it was more than sufficient revenue to meet those expectations. >> You're correct I'll back you up on that. That was the idea for the getting last year we agreed that we would ensure that no county lost. And we would continue to do that had we not made that difference but we have exceeded far exceeded by our expectation. Senator Cook. >> Thank you sir Senator Rucho thank you for bringing this to us

I think you're so wonderful bill. I'm particularly glad to see this encouragement for our Boating construction and maintenance. Folks, we need to encourage that industry to grow in North Carolina, but I'm not really clear, and I hope you could help me with this. If a boat is brought in to a maintenance facility for a for renovation and maintenance and it's gonna cost say $100,000 say 50,000 of it is labor, how will this bill impact tax wise that 50,000 of labor? >> Chairman? >> Yes sir. >> To answer your question if the industry when we talked to them said that it's roughly 50 50. Product versus labor and in this case, we feel that the first $25000 of the 50, is taxable. and the remaining part is not. >> Follow up please. >> Follow up. >> That's for sales and used tax? >> It's just strictly the sales tax. >> Thank you. >> Senator Blue. >> Just one quick question Mr. Chairman, I was listening to Senator Ruccho's explanation of the market base sourcing, and I also got up early to read an article in the newspaper about the movie industry I guess this hits them certainly what are their reasons for opposing this other than nobody wants to pay money. Well other than not wanting to pay taxes Mr Chairman if I may. >> Certainly. >> Could we have Mr Hannar/g explain that question a little bit may be to your satisfaction. >> Okay would you. >> [INAUDIBLE]. >> Repeat the question again. >> [INAUDIBLE] The question I was asking, I know that nobody wants to pay taxes but there has to be some argument by the industry as to the consistency or non consistency of this [UNKNOWN] applies to them and I'm wondering what that argument is about. And I wasn't here last week so, may be somebody from the industry has [INAUDIBLE] And if so, I apologize. >> We'll discuss within the committee. >> My [INAUDIBLE] finance council, they make several arguments. One of them is that they believe that they can not calculate the audience factor in North Carolina. However, the audience factor is used in eighteen other states including states in which they have a large presence and they appear to have no problem calculating audience factor in those other states. There is a letter that was circulated to the members of this committee and there are other arguments are contained in that letter. One of them that comes to mind is that, they believe that the audience factor does not follow the premises of market based sourcing. There are forced /g to disagree with that. I happen to be one of them that disagrees with that because I think that audience factor does in fact follow market based sourcing because that service, the sale of the programming is gonna be taxed where the viewing takes place. Without the viewing of that programming, the programming licence has no value. >>Thank you. Do you have a follow up Senator Blair? >> I do but I'll pursue it later. [CROSSTALK] If you would go ahead and ask it now we could probably get supper on time. [CROSSTALK] But if you like we'll wait. [LAUGH] >> I'll ask a shortened version of it. It seems, Mark I'm interested in how you make those projections out of the clear blue that you get household ratings, movie attendance, how do you do that? >> Mr. [INAUDIBLE] Why can't the Senate finance council the way Jonathan Tart did the calculations of the estimates for income? But it's my understanding that information came from public records. They were provided online by the industry. [BLANK_AUDIO] >> Thank you. Mr. Tart >> If Jonathan could follow up on that Mr. Chairman. >> Speak on that sir. >> As far as they impart on those copies they would generally do it based on subscribers. They If you don't have that for some reason, they have it in most instances I think if fits for an instance they don't usually fall back to some sort of population type of data. And so as far as the estimate, a rough estimate for them. If you took 3% which is North Carolina's share of the U.S. population you would get sort of a rough estimate of the tax liability. Or the taxable income that would be subject to our taxes. >> [BLANK_AUDIO] Thank you sir. For the questions that have come over here Senator Newton and Senator McCarthy. >> Thank you Mr. Chairman.

Senator McCarthy was trying to jump out of his seat trying to get your attention and I was trying to help him out. [CROSSTALK] And his name was- >> Senator Mcssick. [BLANK_AUDIO] A couple of questions, but first Senator Rachel, in terms of this issue that we've been addressing with the market based sourcing in the [UNKNOWN] industry. It is my understanding that under the audience factor, calculation as proposed in the budget that you're certainly looking at bringing in perhaps I guess about $36 million as opposed to about $3 million today but it's also my understanding that the amount they would be paying would put them in a position where they would be paying North Carolina about the third highest of any state that they do business in and in like wise it was in when I call alternative methodology that would require it in the pace of substantially more than they do today. But that would not reach the point of what it is under this bill we are looking at the audience factor. Was there any thought or consideration given to trying to reach some accommodation because we are, as you indicated, the tenth largest state or so and your calculations of staff is based upon that, in terms of North Carolina's care coming up with this $1.2 billion, it would likewise seem that maybe they would pay something in line with being upbringing in the tenth largest state versus perhaps a tax that's more equivalent to what it would be if they were operating in the third largest state. I'm not sure I have an answer to that question. >> I'm not either but I was listening as well as I could as you went along [UNKNOWN] . I was just thinking this, if you divide 36 million by six, that's $6 million a piece. I would be very interested to know what large corporations do pay in other states but I would doubt they are paying a whole lot less than $6 million of let's do some sweetheart deal similar to the one that they had in North Carolina and I don't blame them at all for trying to get the best The best deal they can get that's what business is all about, but I don't see $6 million out of $1.2 billion or their share of $1.2 billion of being an excessive tax burden. >> It's a personal note that's just doing the math in my head. >> I was just trying to determine I know we discussed it briefing, I've spoken to Mr. Hanner. And I understand that the market, the way we're structuring it is looking at the audience factor. But I guess didn't know what discussions or considerations was given to perhaps doing it some other way other than using the audience factor Well if you are using if you are going to market base sourcing the audience factor according to the MTC the multi state tax commission and other entities that you use the audience factor and in the under market. Market based sourcing, is where the product is actually used. And where is the service used. It's where Senator Davis and I and yourself use that product on our TV screen, or video or what we may be doing. So it's simple that you say that the audience factor is with. The services being used and that's why it goes right to that consumer, the retail consumer. >> Follow up comment and we'll [CROSSTALK] >> Yes Sir >> other additional questions, first I support the idea of going to market, going to this strategy in a market base source and I support that in concept I just don't know if audience This factor is the right factor to use. I'm not gonna profess to be an expert in this but looking at comparative data it looks as if you end up paying the third highest taxes in the country. It may be an alternative methodology that might be more appropriate. But let me ask this question about a different issue maybe you can explain to me why this Either Senate position is different from the House and that's dealing with the article 5F and the Machinery and Equipment sales tax, and what they decided to do there in terms of exempting everything entirely.- >> Well. I mean the- >> The revenue differences there between the House budget and the Senate budget. >> I can- >> That discussion Discussion between the House and Senate will occur in confronts if they choose not to support our budget. But in reality we're still by Senator Tillman, Senator Rabon and myself. That this was one area that we felt was overlooked in regarding the ports parts.

The other areas we didn't feel should be Totally exempted until you exempt every industry. You shouldn't just exempt a certain group. We've always tried not to pick winners and losers in our tax changes, and this is an example of that. >> Okay. And one last follow up and I guess this goes to Miss Avery and this is going to sales tax. Expansion issue on installations. I know yesterday I'd raised the questions about the issue of reconditioning of these kitchen cabinets and I think the way you explained it today, that inequity or oversight or omission that had been made was going to be corrected. I take it the way this is now being characterized underneath capital improvements. It Not only addresses that issue but a variety of other situations as well. Would that be a correct understanding? >> Yes Sir. >> Thank you. >> Thank you. >> Senator Waddell. >> I think basically the question has been answered but still we'll need further Explanation when you talk about new sales tax on maintenance and installation. You talk about dependent up on the classifications the person providing the services. Is there a difference when it comes to whether it's a contractor or whether it's a handy man person that you just hired to do it when it comes to the taxation there [INAUDIBLE] >> Yes [INAUDIBLE] under current law there is a difference based on whether or not it's a real property contractor or a handy man. This bill you eliminate those differences and treat anyone who provides the service the same. >> Senator Waddell the purpose of this bill in addition to clarifying our RMI and clarifying what retailer is, is also to be sure that every business that is providing the same service is actually being treated the same. You can't give one the responsibility of collecting a sales tax on services and one exempted from it. And so what we're doing is we're treating every business the same which was the intent of what our original legislation was last year. >> Okay follow up. That's the level of services provided makes a difference, say if the contractor is doing a job for $10,000 and the handy man is doing a job for 5000 isn't the taxation basis gonna be still the same. >> All it will do is whatever the sales tax of that community where the service is being performed, will be the same tax rate as they would on the products that they were buying so that whatever the handy man or the commercial business was doing. So they are all being treated exactly the same. >> Okay. And the other thing of the question that I have is concerning, you say that a retailer is that someone who sales goods and services for profit. And this came up earlier and I think some corrections were made. So when it comes to like non profit who're selling, when it comes to those who are selling items, charities, are they also tagged and conceived to be what do you say follow the same definition of retail? >> [INAUDIBLE] The exemptions that are in the current law for non-profit organization are there if there is a casual sale they are not considered a retailer now for some reason there is a non-profit and that non-profit is in the business of providing that service they are a retailer but this bill makes no changes in regards to a non-profit and whether or not that non-profit is a retailer, you do I think sometimes you do have say events where the course group at a local high school has a car wash has a fund raiser that is not a taxable service that is they are not engaged in the business of washing cars and is a charitable course. Thank you. >> Thank you. Senator Wells we have one more question. After Senator Wells then we have a statement or two from Senator [UNKNOWN] and then we have an amendment that made the cut and we're gonna be moving forward. Senator Wells. >> Just a comment Mr Chair, I was listening to the conversation about the broadcasters and what it meant in the 36 million dollars and a single like we've got a divide in the committee but I looked at it from mathematically that 36 million dollars if we shifted it there is only one real pot of money in here that it could come out of and that's the reason to standard deduction, so if we help the broadcasters we are going to have to cut the standard deduction from 17 five to 17 150 so do we want the broadcaster to pay the tax or do we want to increase taxes on the working poor and the middle class. >> [INAUDIBLE] [INAUDIBLE

>> I feel like an anchor, I just have one question. Which state most recently adopted the audience factor and when did that state adopt it? >> Push the handle mic on that [INAUDIBLE] >> I do not know the answer to that question, I have to get that for you I only that 18 states do use audience factor. >> And then follow up, well at 18 use it what was the most recent state that adopted it, I mean just when was the most recent adoption. >> I'm sorry I do not know the answer to the question but I'll get that for you. Senator Howell that was the C anchor on either, really good [INAUDIBLE] >> Thank you that didn't need to be on the mat. Senator Rucho would you please [LAUGH] >> Mr. Chairman and member of the committee, there were two other areas out of the education budget that need to be mentioned in finance. And of them reduces the resident tuition to $500 per semester that was part of the access to affordable college education. And that strictly talking about not necessarily the policy but the fact that there is a resident tuition of to $500 per semester. And then again in the access to affordable college education, there was a mandate of a 5% reduction in the fees at all UNC campuses beginning in the fall of 2018 academic year. I think that covers all the areas in finance that was related to the budget. >> Mr chairman. >> I think so Mr Chairman. Chair thank you we are passing out an amendment and when the members have that amendment yes Senator Heiss will the members have that amendment then we will have Senator Buffet present it, I will move forward Senator Heiss rather doing that and I have a question. >> Just for the record purposes and help in human services is a new borne screening fee was raised to $44 which is the actual cost of providing the service, thank you and I believe that that was not an amendment but it is in the appropriation budget that was passed earlier today. Senator Ford. >> Thank you Mr Chairman just a follow up on actual clarification from Senator Ruccho's statement, as relates to the access to affordable college education act is that [BLANK_AUDIO] >> Senator Ruccho do you? >> Yes sir I hear the question maybe a staff might explain [INAUDIBLE] I understand that we were suppose to mention the fact in finance what that is so I think maybe staff can better answer that one since I wasn't at the education reading. [BLANK_AUDIO] >> Okay Mr Banda. >> Mark Banda of Fiscal Research, Senator Ford what that provision does is it reduces tuition to $500 per semester for five institutions, those five institutions are [INAUDIBLE] city state university, [INAUDIBLE] University, UNC Pembroke, [INAUDIBLE] State University, and Western Carolina, And so their tuition for resident students is five or B under this provision will be five hundred dollars per year for in state students I'm sorry $500 per semester and then $22500 per semester out of state students, then there is a subsequent preparation for 2018/9 in that fiscal year when this would come into effect for up to $70 million to cover any revenue losses resulting from that reduction in tuition. Then there's the subsequent 5% across the board reduction in fees at the UNC campuses, and fiscal year 2018/19 using 2016/17 as basis for that reduction. So you take the piece from 2016/17, you reduce them by five percentage. And then after that the fees can only rise by up to tree percent per year. So that results in a, I think a $23.5 million reduction across the system. >> Quick follow Mr. Chairman. >> Yes sir. >> Help procedurally/g with reconciling the effective date of 2018. So what are we doing? >> May Evan from staff, I'll put him on the point there he leaned forward and had an intelligent look. And so I think I want the gentleman behind you could probably answer that question. [BLANK_AUDIO] >> The look changes. >> Yeah his look could change- >> [LAUGH] >> Maybe a chameleon. [LAUGH]

[BLANK_AUDIO] Mr. Chairman Evan Rodwell of fiscal research. As I understand the question, the way this would be handled procedurally is that the budget directs that OSBM including include $70 million in it's base budget that it submits to the general assembly for the long session. >>You may follow up one more time when you get your thoughts together. Senator Tom/g. >> [BLANK_AUDIO] Thank you Mr. Chairman, I'm still trying to figure out. So this is policy and it's not directing any moneys towards this particular act [CROSSTALK] >> I'm not sure it's even an issue for finance but it came before us and so we wanted to make sure that you had a chance to ask a question or anyone else that- >> Thank you for that clarification, cuz that is confusing because you guys run a tight shift here as it relates to monies or appropriations in finance, and it just didn't make sense. That's the reason why [CROSSTALK] was here. >> Thank you Senator Ford I take that personally and I appreciate it. >> Mr. Chairman. >> [INAUDIBLE] >> Senator Ford we just didn't want you the opportunity to say we didn't let you know about it, so. >> [LAUGH] Thank you all very much. We have an amendment before us from Senator Barefoot. Senator Barefoot would you please explain your amendment. >> Thank you Mr. Chairman. In 2009 in the town of Garner the [UNKNOWN] [INAUDIBLE] The supply of the world beef jerky exploded and in 2011, this body granted a Local Property Tax exemption for that site. What this amendment does is, it amends existing law to extend that Local Property Tax exemption. It's supported by the town of Garner and the county of Wake is n favor, and I ask for your support. >> Thank you. Members of the committee are there any questions or comments on the amendment? Senator Brent Jackson. >> Thank you Mr. Chairman. I guess my question would be directed to Senator Barefoot. Why >> Senator Barefoot, why did they need a property tax exemption? >> Yes sir. >> Well I believe that the reason why it was originally created was for the purpose of marketing the property so rather than the town holding the property and thereby using it's not profit status or using it's status as a town to obtain the property tax exemption. They put it into a non-profit. You see that in the session law. They put it into a non-profit for marketing reasons, but the bill would still be on the town to pay for that. And so this just extends it while they are trying to market the site, this is an extension in the sunset is it not is it? >> This is an extension of a sunset, thank you for the clarification. >> If I just follow up Mr. Chairman? >> Follow up. >> Who owns the property now Senator Barefoot. >> The non-profit and the exemption when the property is sold the exemption will no longer exist. >> Thank you Senator Heiss, then Senator Brown. >> Thank you [INAUDIBLE] I think I'm okay with this as coming in but the question I want to ask does Wake County distribute sales tax with any of its other municipalities on the basis of that long value I can answer Wake County is here but I can answer that [INAUDIBLE] >> And Senator Brown. >> Is this one piece of property we are talking about? >> Yes thank you. >> Any other follow up? Senator Mckissick make it short now no follow ups, we've got business to take care of. >> The thing I'm trying to determine is two things, the first is how much is the value of this exempt can in terms what it is that Wake county would not be receiving, or the town of Garner? And then secondly do we have a lot of president for doing this? >> I can answer both of those again the order that you gave them there would be no impact now because they are charging nothing and second I don't know. >> But I guess the question I'm asking is if they were paying taxes I don't have any problem with it I mean I don't mind trying to help out senator barefoot but I would like to know the extent to which we, this is the type of precedence that we are particularly exposing us to and Mini/g County is the one that says they don't have permanent city down/g so. [CROSSTALK] And they were given that exemption,

it's something that we are extending as we've done in other cases. >> I do not know how much it is and part of the reason why I don't is because it doesn't have anything to do with that state. This has to do with between the County of Wake and the County of Garner it just so happens that the way they decided to try to solve this issue was by a piece of state wide legislation and 2011 and so that's how we are extending this in both the county who their legislator [INAUDIBLE] is here would tell you what I'm telling you here is therefore. >> Thank you Senator [INAUDIBLE] but we'll ask Senator Blue to weigh in if we may and then we'll move on. Just briefly Senator Barefoot is right, this Jesse Jones facility exploded. They gave it to the town, and the town wanted to use it for economic development and we went through some stuff with them to do that. They haven't been able to market it as quickly as they thought they would but anyhow, at some point, once they develop it, it'll be degenerating or money generating. It's a great move to give them an opportunity to go ahead and do what everybody agreed they were going to do after this tragedy in 2009. >> Thank you Senator Blue, the members of the committee, the amendment is before you for property tax of inclusion extension. All those in favors, please say aye. >> Aye >> Oppose no, motion [UNKNOWN] Now members, we need a motion favorable with [INAUDIBLE] and referral to pension and retirement and aging for the bill Senator Rucho brought forward. Motion made by Senator Rucho All those in favor of the motion please say aye. >> Aye. >> Opposed, no? Motion carried, will be passed on. Ladies and gentlemen I'd like to thank our staff for the hard work they've done during this budget process, I don't think we thank them enough. This meeting is adjourned. [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO]