Bill Summary for H 89 (2015-2016)

Summary date: 

Feb 12 2015

Bill Information:

View NCGA Bill Details2015-2016 Session
House Bill 89 (Public) Filed Thursday, February 12, 2015
AN ACT TO RESTORE VARIOUS TAX CREDITS AND INCENTIVES FOR ECONOMIC DEVELOPMENT.
Intro. by Hamilton, R. Moore, Hanes.

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Bill summary

Part I. 

Amends the catchline for GS Chapter 143B, Article 10, Part 2G, to Job Development (was, Job Development Investment Grant Program).

Amends GS 143B-437.51, adding and defining the term full-time worker for the purposes of Part 2G, Job Development.

Adds a part name before GS 143B-437.52, "Subpart A. Job Development Investment Grant Program."

Authorizes the Revisor of Statutes to make reference changes. 

Enacts new Subpart B, Job Catalyst Fund, to Part 2G of Article 10 of GS Chapter 143B. Enacts new GS 143B-437.67, Job Catalyst Fund, creating a special, non-reverting account in the Department of Commerce that provides funds to local governmental units for certain projects that result in the creation of jobs. Directs the Secretary of Commerce to adopt guidelines for the administration of the program. Specifies ten provisions that must be included in the guidelines. Examples of the guidelines include that the project be for a business that agrees, for the greater of ten years or the term of the grant plus five years, to create and maintain 500, 800, or 1,200 full-time jobs depending on the corresponding development tier; and that the funds are used to acquire or improve land or infrastructure, for facility development, or for capital investment and used for manufacturing projects. 

Includes a forfeiture and recapture provision which, when a project fails to timely create and maintain the required new jobs, level of investment, or to meet other requirements, requires local governments to provide a means for recapture from the business at a project an amount equal to the amount disbursed from the fund and to reimburse the fund that amount.

Requires businesses located at a project receiving grants to maintain records available for inspection by the Secretary of Commerce. Also requires the Department of Commerce to report annually on or before April 30 of each year on the fund. The report must be submitted to House of Representatives Finance Committee, the Senate Finance Committee, the House of Representatives Appropriations Subcommittee on Natural and Economic Resources, the Senate Appropriations Committee on Natural and Economic Resources, and the Fiscal Research Division. Sets out nine items of information that must be in the report including an update on the status of projects under grants awarded before the preceding calendar year and the number and development tier area of new worker positions to be created by projects with respect to which grants have been awarded.

Requires the Secretary of Commerce to publish on the Department's website proposed guidelines for the fund at least twenty days before the effective date and allow oral and written public comment during the fifteen business days beginning on the first day the notice requirement has been completed.

Adds new language in GS 150B-1 that the secretary is exempt from rulemaking requirements of the APA for the purpose of creating guidelines and the administration of the fund.

Makes conforming and organizational changes necessary for the creation and implementation of the Job Catalyst Fund. Provides that any unencumbered cash balance of the Job Catalyst Fund can be used for the purposes of the Job Catalyst Fund.

Part II.

Adds new Article 3L, “NC New Markets Jobs Act of 2015,” to GS Chapter 105 to provide that an entity that makes a qualified equity investment earns a below-the-line tax reduction that may be applied to the entity’s state premium tax liability on future premium tax reports filed under Article 8B of GS Chapter 105.

Enacts new GS 105-129.101 (definitions). Defines qualified equity investment as an equity investment in, or long-term debt security issued by, a qualified community development entity that meets each of the following requirements: (1) is acquired after the act's effective date at its original issuance solely in exchange for cash, (2) has at least 85 percent of its cash purchase price used by the qualified community development entity to make qualified low-income community investments in qualified active low-income community businesses located in this state by the first anniversary of the initial reduction allowance date, and (3) is designated as a qualified equity investment under this subdivision and certified by the Department of Commerce (Department) as not exceeding the limitation in proposed GS 105-129.102(d)(5). Additionally defines qualified active low-income community business, qualified community development entity, and additional terms as they apply in this act.

Provides details on the tax reduction and directs the Department to certify $208,333,333  in qualified equity investment authority in accordance with two allocations, one for the Rural Reserve and one for the Statewide Reserve, as described in GS 105-129.109(a). Sets out the procedure for a qualified community development entity to apply to the Department, which is to begin accepting applications on July 1, 2015, for an equity investment or long-term debt security to be designated as a qualified equity investment. Allows for disallowing a reduction claimed or to be claimed by a taxpayer under new Article 3L under specified circumstances. Requires that notice of a disallowed tax reduction must be sent in writing to the taxpayer and the Department of Revenue. Prohibits enforcement of the disallowance under this Article until the qualified community development entity has been provided with notice of the noncompliance and allowed six months to cure the noncompliance. Provides that a recaptured reduction and the related qualified equity investment authority reverts to the Department and is to be issued pro rata to other applicants whose allocations were reduced under the provisions of this section and in accordance with the application process. Requires that applicants pay a refundable performance deposit for each application submitted. Sets out conditions under which the deposit is forfeited.

Requires the Secretary of Commerce (Secretary) to issue binding letter rulings in response to applicants requesting an interpretation of the law to a specific set of facts. Sets out requirements for the rulings.

Provides that an entity claiming a reduction for qualified equity investment is not required to pay any additional retaliatory tax as a result of claiming the reduction.

Prohibits a certified qualified equity investment from being decertified unless the requirements of GS 105-129.107 have been met. Sets out conditions for decertification.

Provides that no qualified community development entity is entitled to pay any affiliate of such entity any fees in connection with any activity under this Article prior to decertification of all qualified equity investment issued by the entity. Does not prohibit a qualified community development entity from allocating or distributing income earned by it to the affiliates or paying reasonable interest on amounts lent to the entity by such affiliates.

Allows qualified community development entities to apply for both the Rural Reserve (consisting of $156,250,000) and the Statewide Reserve (consisting of $52,083,333). Sets out requirements for investments made under the Rural Reserve and the Statewide Reserve.

Directs a qualified community development entity issuing qualified equity investments to submit a report to the Department within the first five business days after the first anniversary of the initial reduction allowance that documents the investment of 85 percent of the purchase price in qualified low-income community investments in qualified active low-income community businesses in North Carolina. Specifies the required content of the report. Requires a qualified community development entity to continue to submit annual reports to the Department on or before April 1 of the calendar year during the compliance period.

Provides that this section, proposed Article 3L, applies to qualified equity investments made on or after July 1, 2015.

Part III.

Reenacts Article 3H, Mill Rehabilitation Tax Credits of Subchapter I of GS Chapter 105 as it existed immediately before its repeal (the Article expired for rehabilitation projects for which an application for an eligibility certification was submitted on or after January 1, 2015) and makes the following changes to the Article.

Sets the sunset date of the Article as January 1, 2020.

Applies to rehabilitation projects for which an application for an eligibility certification is submitted on or after the date that the act becomes law.

Part IV. 

Reenacts Article 3D, Historic Rehabilitation Tax Credits of Subchapter I of GS Chapter 105 as it existed immediately before its repeal (the Article expired for qualified rehabilitation expenditures and rehabilitation expenses incurred on or after January 1, 2015) and makes the following changes to the Article.

Amends the definition of rehabilitation expenses to now mean expenses incurred in the certified rehabilitation of a certified historic structure and added to the property’s basis if the expense is incurred for any of the following: (1) the exterior, (2) the interior of a window sash if work is done to the exterior of the sash, (3) structural elements, (4) heating or ventilation systems, (5) electrical or plumbing systems other than fixtures, or (6) insulation (the term was previously defined as expenses incurred in the certified rehabilitation of a certified historic structure and added to the property’s basis). Specifies that the term does not include the cost of any interior repair not specially listed.

Sets the sunset date of the Article as January 1, 2020.

Applies to qualified rehabilitation expenditures and rehabilitation expenses incurred on or after the date that the Part becomes law.

Part V. 

Reenacts GS 105-151.29 (individual income tax credit for qualifying expense of a production company) as it existed immediately before it was repealed (the statute was repealed for qualifying expenses occurring on or after January 1, 2015). Extends the date of the repeal of the statute to January 1, 2020.

Reenacts GS 105-130.47 (corporate income tax credit for qualifying expense of a production company) as it existed immediately before it was repealed (the statute was repealed for qualifying expenses occurring on or after January 1, 2015). Extends the date of the repeal of the statute to January 1, 2020. 

Effective for taxable years beginning on or after January 1, 2015, and applies to qualifying expenses occurring on or after that date.

Part VI.

Reenacts Article 3E, Low-Income Housing Tax Credits, of Subchapter I of GS Chapter 105 as it existed immediately before its repeal (the Article expired for developments to which federal credits were allocated on or after January 1, 2015) and extends the date of the repeal of the statute to January 1, 2020.

Part VII.

Amends GS 105-129.16A (credit for investing in renewable energy property) to extend the date of the repeal of the statute to January 1, 2020 (was, January 1, 2016).

Part VIII.

Reenacts GS 105-130.41 (credit for North Carolina State Ports Authority wharfage, handling, and throughput charges) as it existed immediately before it was repealed (the statute was repealed January 1, 2014). Extends the date of the repeal of the statute to January 1, 2020. Effective for taxable years beginning on or after January 1, 2015.

Part IX.

Reenacts Part 5 of Article 4 of Subchapter I of GS Chapter 105 (Tax Credits for Qualified Business Investments) as it existed immediately before its repeal (the Article expired for investments on or after January 1, 2014). Extends the sunset date of the Part to January 1, 2020. Provides that this Part is effective for taxable years beginning on or after January 1, 2015. 

Part X.

Extends the authority to award Job Development Investment Grants, pursuant to GS Chapter 143B, Article 10, Part 2G, the Job Development Investment Grant Program, until January 1, 2019 (previously, authority is set to expire on January 1, 2016).

Part XI.                  

Amends GS 78-17 to add a new exemption to the list of transactions that are exempt from the registration and filing requirements to include the offer or sale of securities conducted in accordance with proposed GS 78A-17.1, the Invest NC exemption. Effective when bill becomes law, and expires 12 months after the effective date.

Enacts new GS 78A-17.1, Invest NC Exemption, to Article 3 of GS Chapter 78A. Provides that an offer or sale of a security by an issuer is exempt from registration requirements under GS 78-24 and filing requirements under GS 78A-49(d) if the offer or sale is conducted in accordance with the 13 specified requirements. Provides that the caps set for cash and other consideration for all sales of the security in reliance upon the exemption in GS 78A-17.1 must be cumulatively adjusted every fifth year by the Secretary of State (Administrator) to reflect the change in the Consumer Price Index for all Urban Consumers published by the Bureau of Labor Statistics. Requires an issuer of security for which the offer of sale is exempt under this section to submit a free-of-charge quarterly report to the issuer's shareholders until there are no outstanding securities issued under this section. Specifies how an issuer can satisfy the reporting requirement via an internet website if made available in accordance with specified requirements. Requires that an issuer must file each quarterly report with the Administrator. Specifies content required to be in the report. Provides criteria for offers and sales to controlling persons, defined as an officer, director, partner, trustee, or individuals having similar status or performing similar functions as the issuer, or a person owning 10% or more of the outstanding shares of any class or classes of securities of the issuer. Provides for disqualification for the exemption if an issuer or person affiliated with the issuer or offering is subject to any qualifications contained in 18 NCAC 06A. 1207(a)(1) through (a)(6) or contained in Rule 262 as promulgated under the Securities Act of 1933 (17 CFR 230.262).  Authorizes the Administrator to adopt rules to protect investors who purchase securities under this section. Directs the Administrator to charge a nonrefundable filing fee of $150 for filing the exemption notice. Becomes effective 12 months after the effective date of this act and expires on July 1, 2017.

Directs the Secretary (Secretary) of state to adopt rules to implement this act within 12 months of the effective date of this act. Provides for a 15-day notice and comment period and requires the Secretary to hold at least one public hearing on the rules. Provides that the rules become effective on the first day of the month following the date the rules are adopted and sent to the Codifier of Rules for entry into the North Carolina Administrative Code. Becomes effective when this act becomes law and expires on July 1, 2017.

Part XII.

Amends GS 105-164.14A, which allows specified taxpayers an annual economic incentive refund of the sales and use tax paid under Article 5 of GS Chapter 105. Repeals the economic incentive refund for purchases made on or after January 1, 2020 (was, January 1, 2016) for the following taxpayers: (1) passenger air carrier, (2) motorsports team or sanctioning body, and (3) professional motorsports team. Also repeals the economic incentive refund for purchases made on or after January 1, 2020 (was, January 1, 2014) for taxpayers engaged in an analytical services business.

This Part is effective when it becomes law. Provides that for purposes of an analytical services business, this Part applies to purchases made on or after the effective date.

Part XIII.

Reenacts Article 3F, Research and Development, of Subchapter I of GS Chapter 105 as it existed immediately before its repeal.

Amends GS 105-129.51 to provide that Article 3F is repealed for taxable years beginning on or after January 1, 2020 (was, January 1, 2016).

Amends GS 105-129.56, regarding the tax credit for interactive digital media development tax, to repeal this section effective for taxable years beginning on or after January 1, 2020.

Makes this part effective for taxable years beginning on or after January 1, 2015. Provides that the credit in GS 105-129.56, as reenacted by this Part, applies to expenses occurring on or after January 1, 2015.

Part XIV.

Amends GS 105-130.45, which provides a tax credit for manufacturing cigarettes for exportation, to add a subsection (g) to repeal this section effective for cigarettes exported on or after January 1, 2020.

Amends GS 105-130.46, which provides a tax credit for manufacturing cigarettes for exportation while increasing employment and utilizing state ports, to add a subsection (l) to repeal this section effective for cigarettes exported on or after January 1, 2020.

Part XV.

Reenacts GS 105-151.31, regarding the earned income tax credit, as it existed immediately before it expired. Amends this section to amend the percentage used in calculating the amount of the earned income tax credit at 2.5 percent for the 2015 taxable year and 5 percent for all other taxable years. Repeals this section effective for taxable years beginning on or after January 1, 2019 (was, January 1, 2014). Makes this part effective for taxable years beginning on or after January 1, 2015.

Part XVI.

Provides that except as otherwise provided, this act is effective when it becomes law.

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