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Senate | April 22, 2015 | Committee Room | Senate: Finance

Full MP3 Audio File

finance committee come to order. Senator Bob Ruccio[sp?] chairing today. That'd be me. First thing-s first, let's talk and recognize our pages SB mary dolson from cambral senator Bushay where are you. There we go. Thank you for being here. Alec Johnson from [xx] Thank you. And then Elena Roberson from Swansboro Senator Brown. Good thanks for being here we appreciate it we hope that it is proving to be a very educational and actually some fun being here in the general assembly. Our sergeant at arms who helped make this meeting run on time and properly so as Steve MccAig, Ed Kessler and Andison Metos[sp?]. Thank you, we appreciate it very much. OK ladies and gentlemen and I know we have a few more folks filtering in, in finance, but today's meeting is designed to be on explaining exactly what the three bills that we have before us dealing with incentives and economic growth and the like. We have had a number of educational programs explaining the types of incentives the pros and the cons their effectiveness, and it's been done systematically so that we can methodologically so that we can go ahead you have the background. Now we're going to listen to from our staff a description of what each of the bills do, bring forward and the bills that we'll be discussing today will be House Bill 117 and see complete to act. Senate bill 526 Job Creation Tax Relief Act of 2015 and senate bill 338, Economic Development Tax Modifications. All of those bills have some overlap, some of them treat JD differently than others and the purpose of today's meeting is for you to understand what is before you. It doesn't limit us as we move forward in coming forward with the senate version of the economic development type package that we have. And what we'll do is we'll hold our questions until after the presentation. Is that OK? Let's do that and then we'll answer questions and then subsequent finance committee meetings we will put together a package that will allow us to move North Carolina forward in what our goal has always been and that's economic growth and job creation. That being said, I'm going to turn it over to Miss Eveled and we'll ask the staff to explain it. They have an order that they would like to proceed and I'll let them explain that as we move forward Miss Eveled. Thank your Mr Chairman. In your packet of information, you have all three bills and you have a summary of those bills and fiscal information at the back of it you will find some comparison charts. And that's what we'll be speaking from today, and what we'll do first is go over the Jd-e-g comparisons, because all three bills have that component shared in them. The two senate bills are identical in that respect. So as the staff talks about the senate changes just know that in both senate bill 526 and senate bill 338, they are there and they are identical, so so Dan, Eddifer and [xx] will go over those JDEG provisions. Alright just give a quick recap of the Jdeg program. Jdeg is a discretionary grant program for businesses that create jobs in the state. The grant is equal to between 10% and 75 of the generated tax withholding of the created eligible positions. A jaded agreement can be for a term of up to 12 years and the statutory jaded commitment cap is $15 million per calender year. The authority to enter into new JDig agreements expires as a 1116 under current law. The primary focus of house bill 117 is increasing JDig commitment availability, so it increases the JDig commitment for the current period by changing the current period to incorporate the second half of

this calender year, into the current period and making the $7.5 for that period immediately available for commitment It also adds $15 million of additional capacity that maybe committed during the current period and collectively these changes increase the cap for the current period from $23.5 to $45. It extends the authority to enter into new JD commitments until 1120, it increases the minimum number of jobs this business must create in a tire three area in order to participate in J Dig from 20 jobs to 50 jobs in It increases the diversion from JDig to the utility account for two or three projects from 25% to 30% it makes a number of other changes I can review those more in detail as we get through if you are interested, but turning to the senate provisions, I will say that it focuses primarily too forward. It modifies [xx] structure for some of your mega site projects, and it also modifies [xx] in order to address certain distributions concerns with the xx program. So, regarding the xx it does modify the program to create a structure for high yield projects which are projects where a company is investing at least $1 billion, and creating at least 2, 500 jobs high yield projects raise the annual cap for commitments and that year from $15 million to $30 million. If a high yield project company needs the investment and job creation requirements, and then they need our performance matrix in the agreement for three consecutive years. The [xx] award is augmented in the free primary lease. First, the basis for calculating the word goes from a maximum of 75% of the generated with holdings to 100% of the withholdings, associate with to create eligible positions. Second up to eight years can be added to the twelve year term limitation, and xx] the diversion of money from the business to the utility account is eliminated. If the high yield project fails to meet performance metrics after receiving this augmented award in any year, the [xx] and the company cannot there after regain those benefits. Regarding the distributional concerns our first explicit to single year basis for the commitment cap in the calendar quarters with fresh commitment availability coming online in each of the amount of $3.75 million. Within the calendar year amounts not utilized in a quarter role to the next quarter. And this limitation would not apply to an award made to a high yield project. Third, addresses concerns the geographic distribution of JDEG awards in four ways. It categorizes the three counties with the highest average weekly wage for insured private employers in the county has major market communities and majors limits JDEG awards for those counties to know more that twice their population percentage of the state. This limitation also does not apply to a high yield project. The basis for calculating the award goes form a flat 75% of the withholdings associated with the created eligible positions to a tiered percentage equal to 80% for tier 1, 70% for tier 2, 60% for tier 3 and 50% from major markets communities. The bill would also number of jobs creation requirements for Jaydeck projects across the board. The 10 job requirement for 201 is increased to 25 jobs. The 20 job requirement for 202 is increased to 50 jobs. The 20 job requirements for 203 is increased to 200 jobs for most 203 counties and 250 jobs at the county as a major market community. The bill also adds a wage standard of requirement for Jaydeck participating businesses must pay an average weekly wage equal to or greater than a percentage of the average wage for all private insured employers in the county and that depends on the TIA status of the county. The [xx] percentages is 100% for TIA 1, 110% for TIA 2, 115% for TIA 3 and 125% for major market communities. And finally on the senate side the bill will extend the authority to make new Jaydeck commitments through 1118. Afternoon, my name is [xx] with Fiscal Research. I would like direct your attention to a chat in your packet as well, titled, Job Development investment grant, liability and comparison, it's a landscapes document. If you look lines 24 through 30 of that document, you will see H177, cost projected, at a maximum

liability of $900 million that takes into account the increase to the existing program authority by $15 million over 12 years, and the extension by four years of the program as well, that's $180 million over those five years. If you look a little bit further down, lines 35 through 37, indicate the projected impact for senate bill 338 and senate bill 526 which is an extension of the program by two years. That projected total, maximum liability would be [xx] $60 million, I would note that exact fiscal impacts for the additional program modifications are unknown, and are therefore not reflected here, so for example, the high yield project impact, could be significant, but that is not modeled because of the unknowns associated with the particulars of what that contract would look like, and when the 100% withholding allowance would trigger. I think that's all I have to offer in terms of fiscal impact at this time. that covers the J. J provisions of those three bills. Now there is another comparison chart at the back of your folder that compares the tax law change provisions in each bill. The first set of changes are only found in House Bill 117 and they are changes to the sales tax laws. As many of you know there is currently a sells tax refund allowed for passenger air carriers and that refund is scheduled to expire January 1 of 2016. House bill 117 would extend that refund provision for four years. There's also currently in the statute, a sells tax exception for eligible data centres. The centres must meet certain requirements. The primary requirement in the current statute is the investment, and it's about $250 million. In your summary you'll see more details on the different from sales tax preferences -that are given for eligible internet data centres. They are eligible to have the 1%, $80 cap for some of their machinery and equipment purchases. They are also eligible to have an exemption for the sales tax on the electricity and also some of the business personal property. But for the most part though, the investments under the current law is $250 million or more What house bill 117 does is to create another entity called a data qualifying data center and the primary difference between the qualifying data center and the eligible data center that is under current law is that investment criteria but for the purposes of house bill 117 the dollar investment amount is 75 million not the much large amount under current law, and if the center meets that qualification the exception that is allowed to have a business personal property and capital property is a little bit broader than what is available under the current law. Neither senate bill 338 nor senate bill 526 makes any of those sales tax changes. All three bills makes a change to the approach mart formulae house bill 117 just explains who qualifies as a qualified [xx] tense of corporation. That is a pretty limited provision because you have to invest at least a billion dollars to be there but that bill does relax some of the other standards so that perhaps other companies could qualify in particular removes the requirement that the project has to be located in tier one or tier two area. Senate bill 338 actually adopts single sales factors for corporate tax purposes I said it for the 2006 [xx] for year, Senate Bill 526 faces in, the single sales factor. It increases the way that the sales factor from twice the sales factor to four times in 2016, and then fully implement single sales factor 2017. Next item is market based sourcing services. This market base sourcing is a description of how you determine the numerator of the sales under for service providing top companies this is not a dress of house bill

117 or senate bill 338 senate bill 526 doesn't adopt just a market based sourcing [xx] that can go from there on. Both of the senate bills make some changes when your cooperating some other changes in your cooperate income tax charges and the first one is of the reduction of the cooperate income tax rate as you know the cooperate rate was 6.9%b and sessional or 2013-316 the tercially format that rate was reduced from 6.9%-6% and then to 5% there was a trigger that is in the current law that would allow the rate to go be ready as further to 4 and 3% if certainly general fund revenue tax revenue targets are met, it appears that those targets will not be met in either year so both Senate bill 338 and senate bill 526 to remove that trigger language since it's not going to happen. Here's the difference between the two bills. Under Senate bill 338, the rate would be reduced from 5% to 4% for 2016 and from 4% to 3% for 2017. In Senate bill 526, the rate is also reduced to over two years but it is reduced from the current 5% to 4%. It goes from five, to 4.5 and then to 4%. So both of the Senate bills, in one way in looking at economic development, is to lower the corporate rate for all businesses. Senate bill 526 takes it a step further then 338 bill and that is it does some modifications and simplifications to the actual cooperate income tax base by eliminating various deductions some of those deductions appear absolute such as the one for relief you received from hurricane [xx], from the tobacco settlement which is being repealed but there are also some other deductions that are currently allowed under State law that give a company greater depreciation allowances for State purposes and for federal purposes for things such as reinforced stations, energy equipment that was put into place prior to 1955 execetra there are several so this was an opportunity to simplify the statute by removing those adaptions and seeing if there are people out there that currently benefit from those deductions so the fiscal impact is very small. The bill though does two major things that requires it repeals those limit on tax liability that applies to banks for expense attribution related to non-tax income right now co-operations are required to attribute a portion of their interest expense to non-tax income, there is a provision in the cooperate world that provides for banks holding companies that cannot increase your tax ability by more than 11 million dollars, this will repeal that 11 million dollar (xx) it also would would expand the loyalty reporting option to include interest expense so that companies that have interest expense with subsidiaries would have the option of either reporting it or having the other company report it, but for o-whatever reason it will have to be reported as income in North Carolina. Senate bill 526 includes franchise tax changes. The other two bills do not. Senate bill 526 reduces the franchise tax rate from MacDonald and 50 cent per 1, 000 to $ 1 and 35 cents per 1000. It also increases the minimum tax from $35 to $200, and adjust the maximum tax on holding companies from 75, 000 to 150, 000. Finally it simplifies the calculation of the tax to make it conform more closely with a generally accepted accounting principles. And the last tax law change we'll discuss is in senate bill 526. It is not in either of the other two bills and it it pertains to the personal income tax schedule and it does two things. One, it substitutes a zero bracket in place of the standard deduction. The purpose of course of the standard deduction is to ensure that there's a certain amount of income that is not subject to income tax. And senate bill 526 propose to do that but in a different way. Instead of a standard deduction for non items there would be a %0 bracket, and in doing that, it makes the limit a little higher and there is a chart that I included in your bill summary but just to briefly go over it and

I will just use married file and jointly as the example of a standard deduction amount North Carolina for 2015 is $15, 000. For 2016 under this bill, the zero bracket would be up to 17 bar so that's a $2500 increase and income that will not subjected to tax that zero bracket for 2017 tax year and there after will be up to $20, 000 for jointly for it would all the bill also low reduces the personal income tax rate. The tax rate for 2015 is 5.75% and this bill would reduce it to 5.5% over a two year period, and Mr Chairman would be happy to answer any questions or however. Let me say just before the, I think the problem the only new part of what was described prior to any other previous meetings is a clear understanding of this zero bracket. Am I correct in saying that the zero bracket means if it's 175 or 20, 000, the first $17, 500 of income e. G incoming North Carolina tax free? For those who are not and [xx] Good and then if it goes up to 20000, that's the first $20000 of AGI incoming North Carolina was tax free? Yes sir for non itemized so if a person chooses to itemize they would pay tax on the first dollar, this is in place for the standard deduction. OK, alright, members with the committee, we are going to go from and we'll go through as presented piece by piece, when you just ask questions and we are going to do the J thing first. Would you please be kind enough to identify the bills specifically on the question? is that you are addressing so that staff can focus on that or if it's a question of comparing and contrasting please explain that alright, any questions on j thing for the moment. seeing none, OKay. I'm sorry. Alright, senator Brian you were hoping that no one would ask a question senator, tell me is that what you're saying? Alright senator Brian you have the floor for a question I'm OK yes, Senator [xx] on the [xx] portion. This is on 338 on page 4 under eligible projects. We're to start there to one who'd 10 job number of minimum eligible nurse is 25 and 100% of wage. It's to my understanding and talking with the [xx] that that doesn't support in rural North Carolina lower income jobs for unskilled workers and that's just is there any provision we're going to able to make for that, in example, my county of Richmond, it takes at 100% of the average weekly wage is a little over $16 an hour and as very difficult for us to do we can do 10/11/12 dollar an hour job potentially, but a $16 an hour job is on a new job is difficult to understated we are trying to get people employed and seems to maybe a road block forced. Alright should we give a comment on that specific one and if not, we'll note and take on his consideration and address it to in what will be future deliberation in the finance committee. Any comment staff?  No it's correct that of the average of the created eligible positions does not equal the average wage of the county then the business will not be able to participate. OKay senator Mginiss that is noted by staff and will consider that in future bill coming forward. OKay senator Brown. Mr Chairman. I know we had a limit on the number of jobs created in the different tiers, and I think commerce said created their own number. Can you get into. Like we went form 10-25 and then I can't remember the other numbers wrapped up my head, but can you maybe discuss why commerce or how commerce created these other numbers that really wasn't

in statute when they started to look at how JDEG dollars were allocated? Staff can we help with senator Brown's question? I know there was an inconsistency that was trying to be addressed this Bill and I think that's exactly what we're moving to. Senator Brown, that's true that the statute calls for a minimum of 10 jobs to be created in Tier 1 20 in Tiers 2 and 3, and I think from Commerce, what we've understood is that those numbers, that in terms of trying to maximize the positive impact of JDIG, they needed higher numbers on that. I believe that the numbers they have been using for Tier 1 is 100 for TIA 2 is 100, for TIA 3 is 150 and internally for the 3 largest, the counties that get the most Jaydeck Mecklenburg, Wake and Durm they've been using at 200. So in respect to TIA 3 and your MMCs the bill tries to not only bring it up to those numbers but to push a little past those numbers in order to address the concerns about . At this proportional amount of Jaydeck going to those three counties. In terms of development TIAs 1 and 2, I think the idea was to raise them to a certain extent but not to raise them in a way that would in any way discourage the distribution of Jaydeck dollars in these counties. Does that answer your question? Follow up Senator Brown Yes, Mr. Chairman. I'm just curious why commerce will just ignore state law, and determine it's own criteria. I believe that the statute speaks in terms of minimum number, so they are not technically ignoring the law in that way, they are just raising the number, the minimum, but I don't know if we have any data showing that anything has been disallowed because of their intrametrix[sp?] versus the statute Senator Brown, do anyone promise you can answer the question of why there is a discrepancy? Please come forward  and identify yourself please. Hi, I'm Susan Fleetwood kind of part of commerce one point of clarification the economic investment committee is the committee that makes the decision about job that members and so that committee has determined that because there is a cap on the amount every of [xx] liability every year, that they like to see those funds used as effectively if possible for the projects that have the greatest impacts on different parts of the state and understanding there is a different between the different years, they established this kind of minimum criteria in policy so that this would give people an account development partnership and understanding of the types of project that would be good candidates for a JDEG project it doesn't mean that those projects have jobs left less than that would not be considered given those certain circumstances but it sort of gives kind of a rule of thumb for the sale team if you will to have when they are out helping companies understand what might be possible in North Carolina. Senator Brown Just a follow up on that, then I guess I did ignore the law and I guess you could argue in a whole county, a 20, 30, 40, job grant is just as important as a 250 to 500 job grant in urban county, and so I think that they did ignore the law and that might be why there is so much money going to certain areas and not others. Yes, I mean I think the economic investment committee certainly can consider those projects, in a community or a project that has 20 jobs or so often, a [xx] grant is just as impactful because the time frame is less that you received those dollars compared to a and so we use whatever tool we think we can use to be able to have that project locate North Carolina, so both tools are very important in all projects . OK, I've got Senator Brian, founder question. Mr. Chair and maybe this is the stuff I'm looking at. It's on the charts, the [xx] chart. I was trying to read, and that's why I was kind of stumbling beginning, I wanted to make sure, maybe I missed something. I'm interested in the money for the high yield projects in our senate bill 338 and so I'm wondering where on the chart is the money for the high yield is that shown somewhere I am [xx] misunderstanding the chart, I might need help with that yes ma'am, the high yield project is

not reflected on this statute does allow or rather the bill draft allows for the cap to be raised to $30, 000, 000 in the event a high yield project is awarded. However, it also affords that high yield project to be given greater allotment of its personal withholdings after 3 years of maintenance of metrics on the $1, 000, 000 investment as well as the 2500 jobs and that numbers ultimately unknown what that yield back to the company so that has not been fore casted and it's rare enough a high yield project, it has never occurred in North North Carolina that there was not a basis on which to project that estimate.  Follow up Follow up And this helped me understand because I was trying to look at how apples will compare to apples if we had that and I think we want to act that we might one I don't know how feasible it is to project that but I was wondering should we not create a category of where the ceak could be raised or maybe financially would it need to be raised for maybe $1000 yield job 1500 yield project, versus 2500 or with the current amount of money to cover that The only situation in which the cup could be raised has been established in this bill draft as those metris suggested the 2500 jobs and the one billion it will be a policy decision if there would be another threshold okay so one more follow up  Mr Chair    lets follow up I was wondering how you thought about it is you designed this about that $1000 the $2500 and I'm sure you know more about it more than I do Mr Chair do you feel that that range is covered well enough or not? Senator Brian we're going to have an opportunity to discuss the policy changes within the committees and then the senate floor so that opportunity will be there for you senator [xx]  that was my question is are we discussing the tax provision or we're going to do that later? We're going to it right notice that brand that live in the powedin I just wanted people to come in on somebody's small job in North Carolina how the impact on those could be and some sense more important than maybe a 200 job project here in Wake and Necroberg county. Well, I think that a job any county would be of value, but Mr Lyn, you have a comment on that question? senator Brown hat sounds like a very important question to ask in the ongoing deliberations, certainly the math is pretty straight forward, we have counties in this state where one or two jobs that have an economic impact equal to a hundred jobs in some of our other counties, so when you're looking at not only the number of jobs being created I think it's reasonable to also look at what their economic significance is in the location in which they occur. Okay I've got Senator mackesik and perhaps I'll ask a follow up as well. Based upon the proposals you see here, what adversities in terms of the adverse impact you see up on the urban job markets? particularly one side to Wake county, [xx] county, Mecklenburgh, because I got rule county and I got the Riven one in my district, and one of those [xx]. This is been one of the primary beneficiary. So, what impact do you see it having overall from your perspective in terms of adverse impacts or urban areas. Senator Mckenzie are you referring to the specific proposed changes here in senate bills?  Yes. I don't know that it'll inherently will limit the amount of projects going to the urban areas. I think the intend it to increase the number that also go to some of our T1 rural areas. I will point out though that if you look at income, this state is not divided in the rural and urban in terms of our income performance. We're doing bad everywhere. In fact our natural areas and non-natural areas are showing the same week income growth of 3.1% over the last 10 years. So it's an economic challenge, it's a state wide issue, rather one than one that should be divided into a rural Vs urban. It's certainly the changes that I [xx] ER, not so much designed, or I don't believe intended to reduce

what goes to the oven, but to make sure that any increase funding there is rule in North Carolina as well. Thank you, and in appropriate time I do have a question about taxation issues. We'll when we get onto that subject on JDEG senator Ford? Thank you Mr. Chairman. Staff, are you aware or maybe the department of commerce can comment on this as it relates to the companies that are applying for JDEG and where they're applying to relocate or to have that investment go is there any data on that?  Any staff member have a question to that question? so in terms of the applications, we would not have data on that, we only have data on the awards. We have requested that Commerce start tracking denied application for JDEG or those that are reallocated to award under the One NC program, but that has just has begun and a preliminary report is not anticipated until the end of the calender year. Follow up?  Follow up Senator Ford. Mr. Chairman, secretary came in a couple of week ago, and he made reference to, that the market speaks, and  Speaks! The market is speaking in terms of where it wants to go. I think it's important for us to have some of that data in terms of what the market is telling us, versus some of us legislators trying to cherry-pick where we wanted to go. I understand and it's a good point, and after that discussion, I did ask staff to approach Commerce, because there were some serious concern as to whether any other counties withing the sate of North Carolina submitted a JDIG request and was it rejected and if it was rejected why was it rejected? Unfortunately commas had never trucked that issue and so now they do and so we wait for the data to see if indeed that is a concern fair enough? OK I think that Senator Brown. I just got to comment [xx] I couldn't agree more Senator Ford I think that is an important piece, but also a piece of that is commerce has got to get out of Riley and see where opportunity that there are in the rest of the state, out of Riley and Mecklenburg because you are exactly right a lot of business who want to come to those particular place and you can sit here and you can get all the apps you want ad try to comb through them and see which ones make sense but I think part of these problems were to spare this across the state when they were created. And so most of my opinion to get out across the state and see where those opportunities are available all across the state not just a few areas Okay, I've got Senator Tart. Yes Miss Chydig Yes, Chydig. Question, and if I may direct this to Professor Laine as well now get to us doing his last visit around JDIG if our two primary goals in any economic, incentive program is the one create net new jobs for North Carolinians and secondarily you increase the per capita income of those individuals. If you look at this from an opportunity call either structural things we can do to improve JDIG and if not are there better alternative programs to accomplish those goals? Senator Carp that's an excellent question and I'm sure Mr. Laine has had opportunity to pro pound that question and I'm sure he will give you a great answer today. I think you just had a discussion here when Senator Brown brought up an important issue, sometimes it's the tools that need twiking and sometimes it's how  we use them that are more important to address. I think the tools of JDIG are going through a natural revolution that are appropriate. I'm less satisfied with how well we're using these fine tools if you provided to our economic developers and I think the issue that senator Brown brought up is one making sure that the tools are not only well designed, but they are used proactively to have the greatest impact where the greatest need is. Okay, does that answer you question? If, not we will have an opportunity to discuss that further absolutely, alright have we finished with JDIG? Very good let's go on to the tax changes, please be sure when you ask a question on tax changes you identify some specifics for them to do what they can to focus on that. Members of the committee questions on tax changes. [xx] time. Thank you Mr. Chairman, first step just to make sure I understand the physical on Senate bill 526, am I right the cost of this to the general fund is $7 billion over five years?

  Representative Stein is close to that, I came over 6.974 You follow up? Yes question for Senator Brown. How does that feel? Again. Go through the Chair please. What is your question? Is an appropriations Chair, the fact that we've had $5 billion and a decreased revenue over the last over the five year period, first five years is the last tax plan taken another one and 3/4 being now in 1718, is that practical? I guess the answer to that is the argument is you won't have this revenue anyway if didn't recruit these businesses. So it's not revenue particularly lost because it's new revenue and then the revenue that you'll generate through employment because you try these businesses does grow the revenue base to the state overall. Anyone answer? OK here is your answer and it's simple we had tax cut in 14 and 15, sorry I was going to speak loud we had a tax cut in 14 and 15 and this year our estimated income and new revenue was $780 million there have been a lot of critics, criticizing the fact from the beginning that we were 271 and then it dropped to 138 and then to 94, do you think it's bad where the tax cut that you nearly 780 million dollars more money to be able to spend than you did the previous year senator [xx] I'd love to have 781 million dollars I don't have that and my concern is about who has that and whether that money is being redeployed effectively under the economy and then simultaneously what is the implication to our ability to find hiher education with our ability to pay teachers wants our ability to pay for court system that we all recognize that States desperately needs so that gets to the core of the issue. Well the fact of the matter is you have someone had 180 million dollars more from the projection than you have the previous year and if everything is the way it's supposed to be which it appears it will be, we will have that revenue streamed to handle the party suspending as need be okay, questions more on tax. Specifically let's talk on the tax law changes any comments about the first two on the incentives dealing with passage of air or data centers. That was on the chart dealing with taxes the first two lines, Any questions comments about those two subjects? Senator Brown. Just a comment on the past air piece I know that is a sticky one is pretty much for one airline in particular and is my understanding that that particular has moved some training centers out of North Carolina they got some flights out of North Carolina and you start asked the question if you want the tax break then are in the tax break and in this particular play our situation I'm not sure if that's happening and I think that's the legitimate debate and I think that you need to, it needs to work both ways and I think that needs to be debated fully. Senator Brown makes a good point and Senator [xx] I agree with Senator Brown on that point. Is there any way currently the, cause I understand the cells tax refund for passenger carriers is not an all two jobs the way [xx] did the jobs, is there a way Mr. Chair where we could tie an extension of the sales tax refund two job performance instead. Am glad you answered that question simply  senator [xx] they could easily be considered performance [xx] and ladies and gentlemen minutes of the finance committee, whenever you put one of these credits within the tax structure, nobody ever seize them until they come due, meaning until they are up there for a sunsetting. It's much better to put it in an appropriation so you can actually receive in a yearly basis and determine the questions that both of you all brought forward. There is nothing wrong with us putting forward a performance grant of the number of seats that are delivered within North Carolina as far as available flight seats, the other part of it is simple. That bill was put forward at a time that the airline industry specifically for North Carolina was in financial trouble and we stepped forward and in that area to help them. Are they in the same conditions today

when we have to renew or potentially renew this issue and that's a good question that will be up for debate. Senator Ford you have some enlightening remark to bring forward? Not on that subject sir Okay. Alright let's talk about data centers. I'm sorry, senator Blok[sp?] led into my question or led into my comment on data centers that we have. As we move forward tax reformation of moving it from based on the 1930 system to 21st century we must look at how we treated our economic engines of the past and manufacturing and how the tax provisions be given to them but as we move into 21st Century with more enough system we must have to recognize I. T system data centers must be treated the same way we used to treat some our mails and everything else without provisions especially in be and I just want to keep that mind as we keep preventing our tax code and making it into a more efficient system that we keep our how we handle our present automs[sp?] Senator Bryant on days date centers. Yes my question was on data centers I think contrary to the air land things, I think they're located throughout the state I believe, but I wanted to ask a staff just to I needed to have a cease of the dollar amounts on these exemptions and how many jobs are involved, do we even have that data? Miss Cannon can you help us with that? And maybe counties, how many counties are impacted if you know. Denis Cannon from [xx]. We can hear you now. Denis Canada from the school research division, Senator Bryant I don't have any data immediately access of all, how many counties are affected but I can get that for you. In terms of  the cost I can't tell you that, we have a similar provision currently in law and that cost is approximately $13.5 million a year. That provision that's currently in law has a much higher spending threshold this would drop at somewhat or this is not a half an estimate of the cost of dropping the threshold. We might, we think there's likely to be a cost, but we don't' know because we're uncertain how many additional data centers will locate here at the lower threshold but I'll get the county data for you or I have to. Thank you, is any sense of the number of jobs involved in the centers taking advantage of this will need to get that information for you and the entire committee, Mr. Kenneth, OK? Alright, I've got senator Daniel. Thank you Mr. Chairman maybe if the staff could help me clarify this my understanding is that with this data center-piece there's already a permanent data center provision that companies like google qualify for maybe because they are more internet based, and that this is really a disparity in the industry between one segment of the industry that already has a permanent tax provision and then these different types of data centers that have one that's sun-setting and we're talking about extending the sunset, so I guess my question is, is that true, is there a disparity between sort of a couple similarly situated industries, and we're treating one kind of data center different from other data center. Mrs. Harvard do you have someone that can answer that question as far as I think explaining what the sunset of the data centers actually means is initially probably a good answer, and then the expansion isother question? Senator Daniel, I can't say that is clear to take advantage of the current so is tax preferences, there has to be a much higher investment threshold for the data center, that currently the only data center such as is Google have been willing to make, a $250 million plus investment. House bill 117 reduces that to $75 million investment threshold. I don't know what other type of data centers may exist that will come because of the lower investment threshold, and Dan may have something to that. The only thing that I might want add to that is that the original data center benefit, so it's geared towards a single person, like Google doing it, and the proposed legislation would sort of allow aggregating of different companies who all have  data center needs to invest collectively. Senator Daniel, there is probably nothing wrong with expecting certain capital investment and or job requirements under these circumstances, but you rarely get a chance to see it until the sunset comes forward. So again, I reiterate, it's very good to keep it within an appropriation, so that it can be measured on an annual basis and determine if indeed that is doing what you expected it to do.

Okay. Excuse me. Senator Wales, [xx] Thank you Mr. Chair just to comment. I'd like to see us look at data centers as part of the bigger whole. A data center is just a manufacturing facility. It is a highly re bottle[sp?] sized facility and we get complaints that there are not enough jobs. The people there are serving the machine but are four minutes looking at the furniture video over the weekend were the same thing that was going on inside the furniture factory. Machines rebuilding the frames, machines were working with the wood. That what's coming, so we are looking ahead at the manufacturing operation that will be in our state in 5 years or 10 years is (xx) as manufacturing that is under just a part of that. But it causes me a little heart burn when I see tearing, manufacturing, and giving money to the big boys and ignoring the smaller more diverse manufacturers and next that's something we've been doing, and there is something we need to take a look at while we are reviewing these bills.  Alright I've got (xx) statement Mr. Chairman if I might. Please. Here again we are talking about who gets what a Dartson gets this an airline gets Our lights ceased to go don here, and for bad tax [xx] for all business. You did away with my right for 50, 000 last year. I literally paid a lot more taxes last week done I did the year before. And it was appreciated. It was, and I appreciate you. I definitely consider myself rich, but that's another story. But I think we need to be careful here, getting in the same trap we're trying to clean up from before without the tax credit and such going across. I think we don't need to forget what we're headed for, and we want to get a lower rate on personal and corporate income taxes. You make a wonderful point, because that's the direction that we've tried to move. It's proven up to this point to be successful, and we'll continue hopefully have the support of the general assembly, to continue down the path that you described. Senator Brown. If I could just follow up on that Mr. Chairman? Yes sir. I think I will argue that existing business in this state will create more jobs in the next five or 10 years and any time we can ever recruit, and sometimes I think we forget that, and that we've got fortunate this time we've got a lot of good businesses that are doing good things, and pulling a lot people all across the state, and sometimes we take those for granted. I think most of the time We take it for granted to be quite honest, and they're good citizens, they mean a whole lot to everyone of our communities and yet they do not have a hand out looking for dollars, they just go to work everyday and do what they are supposed to do, and I think we forget about them we take them for granted sometimes I think you got to be careful with some of this incentive staff that we don't forget them. Senator Brown you make a perfect example of this primarily because if there are 450, 000 small business in this state in North Carolina, 10% of them because the changes in tax policies and the like create one job, that is 45, 000 new jobs without an incentive and that is called organically growing them and that's what senator [xx] is talking about also, alright senator Ford. Thank you Mr. Chairman looking at this three different pieces of legislation, it reminds me a little bit of trying to make the cocktail, you get a lot of different mixes and you try to get it so that it tastes right, I got a question for you Mr. Chairman. Yes sir Is part of your goal I know you got a lot of them but is part of your goal is to have a revenue neutral budget? We will you are asking the question that senator Brown would better answer than I, but my intention would be to make sure we have the resources to fulfill our obligations for the priorities of this general assembly bills as necessary. Follow up. Thank you senator [xx] that was not an answer, I just want to go on a record to make sure we say that because in all seriousness, if it's not, if it's not referred, not going to have revenue in neutral budget, we need to prepare the people that stay in North Carolina that we're going to have a smaller budget and whats that is going to reflect. Well indeed the point you make is and that and would be saying that why do you get 780 million more dollars than you did the previous year by cutting taxes? And all I'll say to you is results show that that is something that works and we can all share in the opportunity and the prosperity. We're going to call today's meeting to the end because of our senate session, we will

continue this discussion the next time and then we will pick up some bills because of crossover, so expect to work hard in the next bill week so we can fulfill our obligation. Thanks very much for your attention and thank you staff for an excellent presentation, meeting adjourned.