House committee substitute to the 1st edition makes the following changes. Changes the act’s long title and makes conforming changes to refer to counties and municipalities, instead of local governments, throughout the act. Makes technical change to GS 159-34(e). Shifts responsibility for providing notice of warning from the Local Government Commission (LGC) more specifically to the secretary of the Local Government Commission. Amends notice requirements to specify method of delivery as first-class mail and to no longer require posting on the Department of State Treasurer’s website. Enacts new GS 159-34(f) governing appeals of notices of noncompliance under GS 159-34(e). Deletes 45-day deadline for municipality or county to submit a notice of appeal. Sets forth requirements for content of notice of appeal. Requires the LGC to establish guidelines outlining specific criteria that would warrant a successful appeal. Requires the Secretary of Revenue (Secretary) to delay any withholding authorized by GS 159-34 if an appeal is taken before the Secretary takes action to withhold any portion of its sales tax distributions under GS 159-34(g). If an appeal is taken after withholding occurs under GS 159-34(g) the Commission must notify the Secretary to release any withheld funds if the Commission determines that the county or municipality’s failure to submit a copy of their annual audit report is due to the circumstances established by the commission. 

Makes technical, clarifying, and reorganizational changes to withholding provisions of the act, now GS 159-34(g). Amends the provisions concerning the release of funds and the timing of the release of funds, to account for a successful appeal by the county or municipality.

Requires the LGC to establish and make available the appeal guidelines discussed above before the Secretary of the LGC sends out any notice of noncompliance to a county or municipality for failure to provide a copy of its annual audit report. Permits the LGC to establish these guidelines prior to January 1, 2024, but specifies that they may not become effective until on or after that date.

Makes technical changes to the effective date and other organizational changes to account for new subsections GS 159-34(f)-(g) and new sections two and three.