Bill Summary for H 920 (2015-2016)

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Summary date: 

Apr 20 2015

Bill Information:

View NCGA Bill Details2015-2016 Session
House Bill 920 (Public) Filed Thursday, April 16, 2015
AN ACT TO RESTORE VARIOUS TAX CREDITS AND INCENTIVES FOR ECONOMIC DEVELOPMENT.
Intro. by Saine, Hamilton, R. Moore, Jeter.

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Bill summary

Part I.

Requires $20 million of the funds appropriated to the Department of Commerce for 2014-15 be transferred to the Site Infrastructure Development Fund for uses consistent with GS 143B-437.02. Requires the unencumbered balance of the Job Catalyst Fund be transferred to the Site Infrastructure Development 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 businessqualified 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 revert to the Department and are 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 Part II, proposed Article 3L, applies to qualified equity investments made on or after July 1, 2015.

Part III.

Enacts new GS Chapter 105, Article 3L, Historic Rehabilitation Tax Credits Investment Program, providing for tax credits for a taxpayer allowed a federal income tax credit for making qualified rehabilitation expenditures for a certified income-producing historic structure in the amount of 15 percent for rehabilitation expenditures that range from $0 to $10 million, and 10 percent for expenditures that range form $10 million to $20 million. Further provides for development tier bonuses and targeted investment bonuses. Includes provisions in regards to pass-through entities that qualify for a tax credit and how the credit can be allocated. Includes definitions for the new article, including certified historic structure, eligibility certificationpass-through entity, and targeted investment. Establishes a tax credit ceiling, providing that no tax credit for an income-producing certified historic structure can exceed $4.5 million. Effective January 1, 2015, applying to qualified rehabilitation expenditures and expenses incurred on or after that date.

Establishes a tax credit for a taxpayer not allowed a federal income tax credit for making qualified rehabilitation expenditures for a certified non-income-producing historic structure that has rehabilitation expenses of at least $10,000, providing that the credit is equal to 15 percent of the rehabilitation expenses. Provides a tax credit ceiling of $22,500 per discrete property parcel. Provides certain limitations and allowances for the credit. Provides definitions for use in the section, including discrete property parcelplaced in service, and rehabilitation expenses. Authorizes the NC Historical Commission (Commission), in consultation with the State Historic Preservation Officer, to adopt rules necessary to administer the certification process of Article 3L and allows the adoption of a fee schedule for providing such certifications, with specified limitations. Effective January 1, 2015, applying to qualified rehabilitation expenditures and expenses incurred on or after that date.

Enacts provisions that outline how and against what tax liability the credits can be claimed as well as specified caps and forfeiture provisions. Enacts language which requires substantiation of certain information in order to claim a credit, including copies of certifications, a copy of an eligibility certification, and other specified records that can be required by the Secretary of Revenue. Provides that if a credit is issued pursuant to Article 3L, no other tax credit can be claimed from Articles 3D or 3H under GS Chapter 105 for the same activity. Effective January 1, 2015, applying to qualified rehabilitation expenditures and expenses incurred on or after that date.

Provides reporting and tracking requirements, directing the Department of Revenue to include specified information in the economic incentives report, including the number of taxpayers that took the credits allowed, total cost to the General Fund of the credits taken, and the total amount of tax credits carried forward, by type of tax. Provides that new Article 3L expires for rehabilitation expenditures and rehabilitation expenses on January 1, 2021. Effective January 1, 2015, applying to qualified rehabilitation expenditures and expenses incurred on or after that date. 

Amends GS 105-129.75, the sunset provision for mill rehabilitation tax credits, providing that the eligibility certifications under GS Chapter 105, Article 3H, expire on January 1, 2023.

Part IV.  

Amends GS 143B-437.02A to amend the requirements for grants from the Film and Entertainment Grant Fund (Fund) to require a production company have qualifying expenses of at least $100,000 for academic linked material and at least $250,000 for any other production (was, $5 million for a feature length film and $250,000 per episode of a video or television series). Limits grant amounts to 15% plus any percentages given for return-on-investment inventive bonuses, or an amount more than $20 million for a feature length film. No longer prohibits using funds for a production that is harmful to minors. Amends the conditions under which a return on investment incentive bonus may be awarded and sets the bonus amount at 2%. Adds and defines the term academic linked material, deletes the term employee, and amends the term production to add academic linked material and to also include video or tv series or a commercial for theater or tv viewing which includes access through cable tv, broadcast tv, dvd, and online sources. Also provides that for video and tv series, a production is each episode (was, all of the episodes) of the series produced for a single season. Adds a deadline and other requirements for response to a grant application. Provides that funds may be disbursed from the Fund only in accordance to an agreement between the state and the production company. Sets the maximum amount of total annual grant liability at $60 million. Adds a clawback provision for when a production company awarded a grant fails to meet or comply with any condition or requirement in the agreement. Requires the Commerce Department to conduct a study to determine the minimum funding needed to successfully implement the Fund. Requires a report to the specified legislative finance and appropriations committees and the Fiscal Research Division by April 1 of each year.

Applies to awards from the Fund made on or after the date the Part becomes law.

Part V. 

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. Amends GS 105-129.42 to give the credit to a taxpayer who is allocated a federal low-income housing tax credit to construct or substantially rehabilitate a qualified North Carolina low-income housing development that is located in a development tier one or two area, an urban progress zone, or an agrarian growth zone. 

Part VI. 

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 VII. 

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 VIII. 

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 IX.

Amends Section 15.19(a1) of SL 2013-360, concerning the Job Development Investment Grant Program (Program). Provides that regardless of the provisions of subsection (c) of GS 143B-437.52, for July 1, 2013, through December 31, 2015, the maximum total amount for grants awarded under the Program, including the amounts transferred to the Utility Account under GS 143B-437.61, is $45 million.

Changes the title of Part 2G of Article 10 of GS Chapter 143B to Job Growth Reimbursement Opportunities-People Program (was, Job Development Investment Grant Program). Directs the Revisor of Statutes to make the necessary conforming changes to reflect the renaming of the Program as provided in this section.

Amends GS 143B-437.52(a) to add to the conditions that must be met before entering into agreements with businesses to provide grants under JDIG that for projects in development tier three areas, the affected local governments must have participated in recruitment and offered incentives in a manner that is appropriate to the project.

Repeals GS 143B-437.52(b), which gave priority in selecting between applicants for grants under the Program to a project located in an Eco-Industrial Park (Park) certified under GS 143B-437.08 over a comparable project not located in a certified Park.

Amends GS 143B-437.53 to increase the required number of eligible positions when applying for a grant from 20 to 50 for projects in development tier three areas. Amends GS 143B-437.53 (c) to provide that for the purposes of this subsection (Health Insurance), a business provides health insurance for employees if it pays at least 50% of the premiums for health care coverage for its employees.

Amends GS 143B-437.56 to require that 70% (was, 75%) of the annual grant be payable to the business when an eligible position is located in a development tier three area.

Amends GS 143B-437.57(a) to require that each community economic development agreement must include a requirement that the business maintain employment levels in North Carolina at whichever is greater: (1) the level of employment on the date of the application or (2) the level of employment on the date of the award, and that the agreement include a provision requiring the recapture of an appropriate portion of the grant (was, allowed recapture of all or part of the grant) if the business does not remain at the site for the required term. 

Amends GS 143B-437.62 to provide that the authority of the Committee to award new grants expires January 1, 2020 (was, January 1, 2016).

Requires the Department of Commerce to study the factors that have contributed to the termination of grants awarded pursuant to Part 2G of Article 10 of GS Chapter 143B. Requires a report to the House of Representatives Finance Committee, the Senate Finance Committee, the House Committee on Agriculture and Natural and Economic Resources, the Senate Appropriations Committee on Natural and Economic Resources, and the Fiscal Research Division by March 1, 2016.

Part X. 

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 the 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 of State (Secretary) 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 July 1, 2017.

Part XI.

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 XII.

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 XIII. 

Requires the employees of the Department of Commerce in each Collaboration for Prosperity Zone to examine each annual update of the plan and collate all information relevant to the zone, county, region, and other unit of local government in the zone and provide a copy of the collated information to each unit of local government within the zone, including any additional regional assets not contained in the annual update. Requires the employees to work with each unit of local government in the zone to educate and assist each unit of local government in maximizing its economic potential and coordinating recruitment of industry to increase utilization of assets for economic development opportunities.

Part XIV.

Amends GS 105-164.13 to provide that the sales of electricity for use at a qualifying datacenter and datacenter support equipment that is to be located and used at the qualifying datacenter are exempt from the tax imposed by GS Chapter 105, Article 5, Sales and Use Tax. Specifies what types of capitalized property is considered to be "datacenter-support equipment" for tax purposes.

Amends GS 105-164.3, the definitions section for the the sales and use tax article, adding language to define qualifying datacenter as a datacenter that (1) meets the wage standard and health insurance requirements of GS 143B-437.08A and (2) has been certified by the Secretary of Commerce, by way of written determination, that at least $75 million in private funds has or will be invested in the datacenter by the owners, users, or tenants within five years of the date the same make the first real or tangible property investment in the datacenter  on or after January 1, 2012. Makes conforming technical changes to the statute. 

Sets out in GS 105-164.13(55a) when the tax exemption can be forfeited, including: the level of investment specified above is not timely, investment is timely but specific datacenter support equipment is not located or used at the qualifying datacenter, or portions of the electricity are not used at the datacenter. Specifies that a taxpayer that forfeits such an exemption is liable for all past taxes avoided as a result of the exemption, computed from the date the taxes would have been due if the exemption was not allowed, plus interest established pursuant to GS 105-241.21. Sets out formula for calculating the interest due depending on the way in which the forfeiture was triggered. 

Effective July 1, 2015, applying to sales made on or after that date. 

Part XVI.

Unless otherwise indicated, effective when the act becomes law.