Bill Summary for S 605 (2015-2016)

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Summary date: 

Sep 23 2015

Bill Information:

View NCGA Bill Details2015-2016 Session
Senate Bill 605 (Public) Filed Thursday, March 26, 2015
Intro. by Rucho, Rabon, Tillman.

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Bill summary

House committee substitute makes the following changes to the 4th edition. 

Part I. Business Tax Changes

Deletes the repeal of certain deductions and adjustments from federal taxable income when determining state net income under GS 105-130.5(b). 

Retains provisions in GS 105-122(b) for the determination of capital base by corporations subject to the franchise or privilege tax. 

Deletes the amendment to GS 105-122(d) refining the definition of the term total actual investment in tangible property. Reinstates the provision concerning computing the total actual investment in tangible personal property. 

Amends GS 105-228.5(b)(4) to make the tax base for health self-insurers dependent on the self-insurer's payroll as determined under Article 36 of GS Chapter 58, the North Carolina Rate Bureau (was, the now repealed Article 2 of Chapter 97, the Compensation Rating and Inspection Bureau). 

Adds a sentence in GS 105-130.7A(a) clarifying that exercising the income tax royalty reporting option of that statute does not prevent a taxpayer from having taxable nexus in the state and does not permit the recipient of the income to exclude royalty payments from its sales tax calculations. 

Part II. Personal Tax Changes

Replaces the amendment to GS 105-153.5(a), which added to the items that can be included when calculating the itemized deduction. The 4th edition allowed itemizing the amount claimed under section 67(b)(9) of the Internal Revenue Code (Code) related to when a taxpayer restores a substantial amount held under claim of right, less the limitation produced under 67(a) of the Code minus all other items deductible under section 67(b) of the Code, not to exceed the limitation in section 67(a). The new amendment to GS 105-153.5(a) allows taxpayers to itemize repayment in the current taxable year of an amount included in adjusted gross income in an earlier taxable year because it appeared that the taxpayer had an unrestricted right to such item. 

Retains GS 105-269.7, Contribution of income tax refund or payment to the North Carolina Education Endowment Fund, which was repealed in the previous edition. 

Part III. Sales Tax Changes

Removes the proposed definition of operator from GS 105-164.3. 

Deletes the proposed exemptions in GS 105-164.13 and GS 105-164.4I from sales and use taxes the sale and service contracts of engines and other items provided to a professional motorsports racing team. Deletes the amendment to GS 105-164.14A, concerning sales and use tax refunds for tangible personal property that comprises any part of a professional motorsports vehicle.  

Adds new wording to the amendment to GS 105-164.12B (tangible personal property sold below cost with conditional service contract). The amendment makes sales tax due at the time of the transfer of tangible personal property as part of the conditional contract, on the percentage of the presumed sales price that is equal to the percentage of the service in the contract that is not taxable at the combined general rate, if any part of the service in the contract is not taxable at the combined general rate. The new language states that any part of the presumed sales price the consumer pays if the service in the contract is taxable at the combined general rate is also taxable. Makes a technical change to this section. 

Removes the exemption from sales tax in GS 105-164.13(57) fuel or piped natural gas used solely for comfort heating at a manufacturing facility where there is no use of fuel or piped natural gas in a manufacturing process. Includes a new exemption for fuel, piped natural gas, and electricity sold to a secondary metals recycler.   

Removes the provision that an interstate passenger air carrier is allowed a refund of the sales and use tax paid by it on fuel in excess of $1.25 million for the period beginning July 1, 2015, and ending December 31, 2015.

Retains language in GS 105-164.14(b), removed by the 4th edition, stating that the sales and use tax liability indirectly incurred by a nonprofit through reimbursement to an authorized person of the entity for the purchase of tangible personal property and services for use in carrying on the work of the nonprofit is considered a direct purchase by the entity. Adds that a refund allowed to a nonprofit of sales tax does not apply to purchases of prepared food or accommodation rentals unless the purchase is made directly by the nonprofit.

Amends GS 105-164.42I(b) to allow the Streamlined Sales Tax Governing Board, and not just the Secretary of Revenue (Secretary), to set the amount of a bond, letter of credit, or certificate of deposit required of a certified service provider entering into contract for collection and remittance of sales and use taxes. 

Adjusts the definition of recreational vehicle in GS 105-187.1 to exclude manufactured homes as defined in GS 143-143.9. 

Removes the amendment to GS 105-187.6, which provided that a maximum $150 tax would apply when a certificate of title is issued for a motor vehicle that has been titled in the name of the owner of the vehicle in another state for at least 90 days before the date of the application for a certificate of title in this state (was, vehicle is and has been titled in another state for at least 90 days).

Includes a statement that a retailer is not liable for an over-collection or under-collection of sales tax or highway use tax on a park model RV if the retailer made a good-faith effort to comply with the law. Applies to sales of park model RVs made before January 1, 2016.

Removes from the amendment to GS 105-164.29A(a) the state government sales tax exemption and sales tax refund of local taxes paid on indirect purchases, an exception for certain government entities listed in GS 105-521.2. 

Amends GS 105-164.4G(b) to require tax on gross receipts from admission charges to an entertainment activity to be reported after the entertainment activity occurs (was, monthly or quarterly). This amendment becomes effective January 1, 2016. 

Amends GS 105-187.51B to impose an excise tax of 1% of the sales price, with an $80 cap, on repair or replacement parts for a ready-mix concrete mill, regardless of whether the equipment is freestanding or affixed to a motor vehicle, and on equipment purchased by a company primarily engaged in secondary metals recycling as defined in GS 66-420. The excise tax for concrete mills becomes effective on January 1, 2016. The changes for secondary metals recyclers is retroactive to 2010, and the committee substitute provides an expedited refund application period for that category of taxpayers who paid a sales and use tax, rather than the excise tax; those requests must be made by January 1, 2016. 

Amends GS 105-465 to no longer require the special election on whether to levy a 1% sales tax to be held under the rules applicable to the election of General Assembly members.

The committee substitute directs the Revenue Laws Study Committee to study the application or exemption from sales tax on admission charges for certain entertainment, including haunted houses and hay rides, and report to the 2016 General Assembly. 

Expands the privilege tax on a company at a ports facility for waterborne commerce that purchases qualified equipment in GS 105-187.51B(a)(5) to include in the definition of qualified equipment (1) machinery and equipment used at the facility to unload or process bulk cargo and (2) parts, accessories, and attachments used to maintain and repair machinery and equipment. 

Part IV. Excise Tax Changes

Removes the changes to the formula in GS 105-113.86 for bonds required of wine and malt beverage wholesalers and importers.

Amends GS 105-113.84 to allow wine shippers to file reports with the Secretary annually (was, monthly). 

Makes conforming changes to GS 105-449.39, the credit for payment of motor fuel tax, and GS 105-449.107, refunds for off-highway use and use by certain vehicles with power attachments based on changes made by earlier acts. 

Old Part V. Tax Compliance and Tax Fraud Prevention

Deletes the prior Part V in its entirety, including changes to the requirements in GS 105-163.7 and GS Chapter 105, Article 4A, concerning employer withholding. Also retains the discretion of the Secretary to require additional information in certain employer reports. Deletes amendments bringing additional parties under this reporting requirement and providing penalties for failure to file. 

Deletes the amendment to GS 105-237 to provide the Secretary with discretion to reduce or waive any interest on taxes imposed prior to or during a period for which a taxpayer has declared bankruptcy. 

Deletes the addition of a new GS 105-251.2 requiring franchisors, certain licensing boards, and alcohol vendors to give to the Secretary certain information necessary to determine compliance with the tax law.

New Part V. Other Tax Changes

Includes the following additional provisions in the renumbered Part V.

Amends GS 18B-900(c) to limit the tax compliance requirements for Alcoholic Beverage Control permit applicants or holders to the actual applicant or holder and not other individuals. This section applies retroactively to ABC permits issued or renewed on or after May 1, 2015.

Amends GS 147-86.42(8) to include securities held through index funds in the definition of indirect holdings, which are excluded from the Sudan Investment Act. Makes conforming changes. 

Amends SL 2011-373 to remove a 2016 sunset from provisions encouraging state agencies to identify surplus real property.

Amends GS 147-69.1(c)(3) to allow the state Treasurer to invest state funds in short-term money market repurchase agreements executed by a registered broker-dealer subject to the rules and regulations of the US Securities and Exchange Commission and a member in good standing of the Financial Industry Regulatory Authority. 

Amends GS 143B-437.01(a) to require that funds from the Industrial Development Fund Utility Account (Account) be used in the most economically distressed counties of North Carolina to retain as well as expand the existing job base (previously, only required the funds to be provided to create jobs in the distressed counties). Makes conforming changes to the rules for the program funds reflecting the need to use funds to expand the job base and retain existing jobs. 

Amends the catch line of GS 105-187.51B  to read: Tax imposed on machinery, equipment, and other tangible personal property used by certain companies. (was, Tax imposed on certain recyclers, research, and development companies, industrial machinery refurbishing companies, and companies located at ports facilities.) Amends GS 105-187.51B(a)(6) to provide that a privilege tax is also imposed on a company with annual gross receipts of at least $8 million, including the gross receipts of all related persons as defined in GS 105-163.010. Expands the equipment purchase requirements that a company must meet to include that the equipment or attachment or repair part for the equipment may be used by the company to establish the fabrication or manufacture of metal products or use by the company to create equipment for the fabrication or manufacture of metal products. Provides that a company would not be required to be primarily engaged in the fabrication of metal products to meet the requirements for the privilege tax. This section becomes effective January 1, 2016. 

Directs the Revenue Laws Study Committee to study the scope and application of the privilege tax at the rate of 1% with an $80 cap for purchases of mill machinery and other equipment and report its findings, along with any legislative recommendations, to the 2016 Regular Session of the 2015 General Assembly. 

Amends GS 58-36-75(a) to adjust the cost thresholds that distinguish accidents in the Safe Driver Incentive Plan for Car Insurance. Under the proposed thresholds, a "major accident" is an at-fault accident resulting in property damage of $3,085 (was, $3,000) or more; an "intermediate accident" is one that results in damage between $1,850 (was, $1,800) and $3,085; a "minor accident" is one with damage of $1,850 or less. This section becomes effective March 1, 2016. 

Amends Section 29.34A(c) of SL 2015-241 to provide that the changes to GS 105-187.3 and  GS 105-187.6 concerning the adjustment of the maximum highway use tax imposed for certain motor vehicles applies to a certificate of title issued on or after January 1, 2016, or for the purposes of GS 105-187.5, a lease or rental agreement entered into on or after January 1, 2016.

Makes a technical change to GS 105-164.3(38b), defining service contract. Effective March 1, 2016.

Amends GS 105-524, enacted by SL 2015-241, to do the following. Amends the statute (concerning the distribution of additional sales tax revenue for economic development, public education, and community colleges) to require that the distribution amount be deducted in equal installments, proportionately from the collections to be allocated each month for distribution under GS Chapter 105 Articles 39 (First One-Cent Local Government Sales and Use Tax), 40 (First One-Half Cent Local Government Sales and Use Tax), and 42 (Second One-Half Cent Local Government Sales and Use Tax), excluding the revenue allocated under GS 105-469 (collection and administration of a tax levied by a county pursuant to Article 39). Prohibits the deduction from Articles 30, 40, and 42 from being included in the calculations made under GS 105-469, GS 105-522, and GS 105-523. Makes conforming changes to GS 105-469, GS 105-522, and GS 105-523. Adds that if, after applying the allocation percentages under the statute, the total of the amounts allocated is greater or less than the net proceeds to be distributed, then the amount allocated to each county must be proportionally adjusted to eliminate the excess or shortage. These provisions are effective July 1, 2016, and apply to local option sales taxes collected on or after that date and distributed to counties and cities on or after September 1, 2016.

Part VI. Local Option Sales Tax for Counties

Enacts new Article 43A, County Sales and Use Tax for Public Education in GS Chapter 105, the intent of which is to give counties the chance to obtain an additional source of revenue with which to finance public education needs.

Allows a board of county commissioners, by resolution after 10 days' public notice, to levy a local sales and use tax of a maximum rate of 1/2% if the following conditions are met: (1) the tax is in an increment of 1/4%; (2) the tax is approved by a majority of those voting in a referendum; (3) no other ballot question on the levy of a local sales and use tax is presented in the same referendum; and (4) if levied, the tax would not result in a total local sales and use tax rate in the county in excess of 2 1/2%. Sets out requirements for the referendum and the ballot question. Allows a county’s local sales and use tax to exceed 2 1/2% if the county is authorized to levy a tax at the rate of 1/2% under GS Chapter 105, Article 43 (Local Government Sales and Use Taxes for Public Transportation); prohibits the local sales and use tax rate in a county from exceeding 2 3/4%. Requires the additional taxes to be adopted, levied, collected, administered, and repealed in accordance with GS Chapter 105, Article 39 (First One-Cent Local Government Sales and Use Tax). Provides that taxes under this new Article do not apply to the price of food that is exempt from tax or to the price of a bundled transaction taxable under GS 105-467(a)(5a). Prohibits the Secretary from dividing the amount allocated to counties between the county and municipalities within the county.

Limits a county’s use of the proceeds from the tax levied under the new Article to: (1) public school capital outlay purposes or to retire related indebtedness; (2) salaries of classroom teachers and classroom teacher assistants, and supplements of classroom teacher salaries (as classroom teacher and teacher assistant are defined in the act); and (3) financial support of community colleges.

Amends GS 115C-429, concerning school budgets to provide that for allocations by the board of county commissioners for the purpose of or for a function related to instructional services, the board may direct the amount of funds to be used for salaries of classroom teachers and teacher assistants, and supplements of classroom teacher salaries; defines classroom teacher and teacher assistants.

Amends GS 115C-433 to require if the board of county commissioners allocates its appropriations under GS 115C-429(b), the board of education must get approval from the board of county commissioners for an amendment to the budget that decreases the amount of funds allocated for salaries of classroom teachers and teacher assistants, and teacher salary supplements.

Amends GS 115D-55, concerning community college budgets, to add that the local tax-levying authority may direct the use of funds appropriated to an institution derived from a tax levied under new GS Chapter 105, Article 43A.

Amends GS 115D-58 to require if the local tax-levying authority allocates its appropriations under GS 115D-55, the board of trustees must get approval from the authority for an amendment to the budget that decreases the amount of the appropriation directed by the authority for a specific use from funds appropriated to the institution derived from a tax levied under new GS Chapter 105, Article 43A.

Amends GS Chapter 105, Article 43 (Local Government Sales and Use Taxes for Public Transportation), Part 6, which applies to all counties except Durham, Forsyth, Guilford, Mecklenburg, Orange, or Wake counties, as follows. Requires the levy of the tax be made only by resolution after 10 days’ public notice. Expands on the conditions that must be met in order to levy the tax, so that in addition to requiring that the county, or at least one unit of local government in the county, operates a public transportation system, also requires that: (1) the tax be approved by a majority of those voting in a referendum; (2) no other ballot question on the levy of a local sales and use tax under Articles 45 or 46 (One-Quarter Cent County Sales and Use Tax) be presented on the same ballot; and (3) if levied, the tax would not result in a total local sales and use tax rate in the county in excess of 2 1/2%. Makes conforming changes.

Amends GS Chapter 105, Article 46 (One-Quarter Cent County Sales and Use Tax) to change the tax rate from 1/4% to a maximum of 1/2%. Expands on the conditions that must be met to levy the tax to require that: (1) the tax be in increments of 1/4%; (2) the tax is approved by a majority of those voting in a referendum; (3) no other ballot question concerning the levy of a local sales and use tax authorized under Article 43 (Local Government Sales and Use Taxes for Public Transportation) or new Article 43A are presented in the same referendum; and (4) if levied, the tax would not result in a total local sales and use tax rate in the county in excess of 2 1/2%. Makes conforming changes. Allows the local sales and use tax rate in a county to exceed 2 1/2% if the county is authorized to levy a tax at the rate of 1/2% under Article 43; prohibits the local sales and use tax in a county from exceeding 2 3/4%.

Amends GS 105-164.3 to define the combined general rate as the sum of (1) the state’s general rate of tax; (2) the sum of the rates of the local sales and use taxes authorized for every county by GS Chapter 105, Articles 39 (or SL 1967-1096), 40, and 42; and (3) one-half of the maximum rate of tax authorized by GS Chapter 105, Article 46.

Part VIII. Amend Laws Pertaining to NC Medical Board

Amends GS 90-2(b) concerning the NC Medical Board (Board), providing that no member can serve more than two complete consecutive three-year terms in a lifetime (previously did not limit it to a lifetime). Amends GS 90-3(b), adding language that provides that you cannot have served more than 72 months as a member of the Board as criteria for serving on the Board. Amends GS 90-3(c), making technical changes.

Adds new subsections to GS 90-3, concerning the Review Panel, recommending certain Board members, providing that the Board can provide the Review Panel with confidential and nonpublic licensing and investigative information it possesses. Provides that the information the Review Panel receives or gathers is not a public record but rather is privileged, confidential, and not subject to discovery or other legal means of compulsory release. Requires the Review Panel to publish specified information concerning the nominees to the Board. Establishes that the Review Panel is a public body within the meaning of GS Chapter 143, Article 33C, authorized to conduct business as specified.

Amends GS 90-5.2 concerning the collecting and publishing of data collected by the Board, making technical and clarifying changes. 

Amends GS 90-8.1, concerning the rules for licensure, providing that the Board cannot deny an application for licensure based solely on the applicant's failure to become board-certified. Makes technical changes. 

Amends GS 90-13.1(a), changing the application fee to be licensed to practice medicine and surgery in North Carolina to $400 (was, $350).

Amends GS 90-13.2, concerning specified registration fees, requiring all individuals licensed to practice medicine in North Carolina to register with the Board and pay a $250 registration fee (was, $175). Provides that those that have a retired limited volunteer license, pursuant to GS 90-12.1B, are not required to pay an annual registration fee (previously, were required to pay a $25 fee). Deletes language which provided that inactive physicians in North Carolina could direct the Board to place their licenses on inactive status. Makes technical and conforming changes. 

Amends GS 90-14(n) concerning disciplinary proceedings, making technical and clarifying changes, deleting language which only allowed service of process to both the licensee and counsel if the licensee retained counsel before the Board made a nonpublic determination to initiate disciplinary proceedings. 

Enacts new GS 90-14.2(c) concerning discovery in disciplinary hearings, providing that the parties can engage in discovery once charges have been issued. Further provides that the Board must provide the respondent or counsel, upon request, with information obtained during an investigation, except for (1) information subject to attorney-client privilege or that is attorney work product; (2) information that would identify an anonymous complainant; and (3) information that will not be offered into evidence and is related to advice, opinions, or recommendations of the Board staff, consultants, or agents, or deliberations by the Board and its committees during an investigation.

Amends GS 90-14.13(a1)(1), deleting language which provided an exception to the prohibition on hospitals reporting the suspension or limitation of a physician's privileges for failure to timely complete medical records.

Amends GS 90-21.22, renaming the statute as Health program for medical professionals (was, Peer review agreements). Amends subsection (a) of GS 90-21.22 to provide that the North Carolina Medical Board (Board) may enter into agreements with the North Carolina Medical Society (Society), the North Carolina Academy of Physician Assistants (Academy), and the North Carolina Physicians Health Program (Program) to identify, review, and evaluate the ability of persons licensed by the Board and referred to the Program to function in their professional capacity and to coordinate regimens for treatment and rehabilitation. Deletes provisions specifying peer review activities to be covered by this type of agreement. Requires the agreement to include guidelines for (1) the assessment, referral, monitoring, support, and education of licensees of the Board by reason of a physical or mental illness, a substance use disorder, or professional sexual misconduct; (2) procedures for the Board to refer licensees to the Program; (3) criteria for the Program to report licensees to the Board; (4) a procedure for licensees to obtain review of recommendations by the Program regarding assessment or treatment; (5) periodic reporting of statistical information by the Program to the Board, the Society, and the Academy; and (6) maintaining the confidentiality of nonpublic information. Describes the Program as an independent organization for medical professionals that provides screening, referral, monitoring, educational, and support services. Provides that the Board, Society, and Academy may provide funds for the administration of the Program. Requires the Program to report immediately to the Board detailed information about any licensee of the Board who meets specified criteria including: constitutes an imminent danger to patient care (was, to the public or him- or herself) by reason of mental or physical illness, substance use disorder, professional sexual misconduct (was, sexual boundary violations) or any other reason. Sets out provisions concerning when copies of written assessments must be given to a licensee.

Repeals GS 90-16(d) (concerning the access of specified information to a licensee).

All of this Part is effective January 1, 2016.

Makes other technical changes and conforming changes.