Enacts GS 126-8.7, requiring the State Human Resources Commission (SHRXC) to adopt a policy providing for paid sabbatical leave (a period of paid leave for health improvement, skill-building, and personal enrichment of between four to six weeks) for long-term employees (career State employees who have been continuously employed in the same position for the immediate three years) that includes seven specified requirements, including: (1) that the long-term employee not have been granted a sabbatical leave in the prior three years; (2) that the employee on sabbatical agree to return to the same position at the end of the leave for a period of one year; (3) the employer must allow the employee to return to the same position at the end of their leave; and (4) that the employer continue to provide the employee benefits an amount equal to 70% of their salary during the leave. Specifies that the sabbatical leave is available without exhaustion of the employee’s sick and vacation leave, has no cash value upon termination from employment, and may not be used for calculating an employee’s retirement benefits. Requires an employee that fails to return to their position after sabbatical to repay one-half of the cost of all salary and benefits received during the leave, unless the employee’s failure to return is due to the employee’s death or disability. Instructs that GS 126-8.7 applies to all State employees, public school employees, and community college employees. Requires all State employers, local boards of education, and local community college boards of trustees to report information requested by SHRC on use of sabbatical leave, as specified. Requires SHRC to submit an annual report to the General Assembly by July 1 on the reported use and measurable outcomes of sabbatical leave, and any recommendations to improve program effectiveness and sustainability. Requires counties and cities to establish policies on sabbatical leave that, at a minimum, align with GS 126-8.7. Requires each local government entity to provide the SHRC any requested information on the use of sabbatical leave. Requires the SHRC to adopt the rules required by the act by no later than June 1, 2026, and for all State agencies, counties, and cities to comply with the requirements of the act by no later than July 1, 2026. Directs SHRC to submit the first report required by GS 126-8.7 by no later than July 1, 2027.

Section 2.

Enacts GS 105-129.20, concerning a tax credit for paid sabbatical leave for employees, as follows. Creates a tax credit for a business that provides paid sabbatical leave for employees during the taxable year to offset its costs in providing paid sabbatical leave for its eligible employees. Specifies that a business provides paid sabbatical leave if that leave meets at least the requirements of the model policy established by the NCWorks Commission as provided in GS 143B-438.14A. Specifies that the credit is equal to a dollar amount per eligible employee provided paid sabbatical leave by the employer of up to 25% of the salary and benefits paid to the employee during the sabbatical, not to exceed $5,000 per employee. Provides a calculation for individuals so that the taxpayer must reduce the credit for individuals who is a nonresident or a part-year resident. Directs taxpayers that are not an individual and required to apportion its multistate business income to this State, to reduce the amount of the credit by multiplying it by the apportionment fraction used to apportion its apportionable income to this State. Effective for taxes imposed for taxable years beginning on or after July 1, 2026.

Enacts GS 143B-438.14, concerning paid sabbatical leave for private sector employees. Defines long-term employee and sabbatical leave. Tasks the NCWorks Commission with four duties, including (1) developing model policies sabbatical leave for private sector employers, in consultation with SHRC that include at a minimum the requirements of GS 126-8.7 and (2) establishing and awarding matching grants of no greater than 50% of the costs of the salary and benefits provided by the employer to an employee for sabbatical leave to State businesses employing fewer than 100 employees to offset the costs of sabbatical leave. Requires State agencies to strongly encourage all non-State entities that the State agency contracts or partners with to implement sabbatical leave policies in accordance with the model policies developed by the NCWorks Commission. Provides for a survey of private sector employers on the use of sabbatical leave, as described. Requires the NCWorks Commission to develop and publish model policies no later than June 1, 2026, and comply with the remaining requirements established by GS 143B-438.14A, by no later than July 1, 2026. Directs the NCWorks Commission to submit the first report required by GS 143B-438.14A, by no later than July 1, 2027.

Section 4.

Appropriates $10 million from the General Fund to the Department of Commerce in recurring funds for 2026-27 to provide funds to State agencies and local governments to offset costs associated with sabbatical leave. Appropriates $10 million from the General Fund to the Department of Commerce in recurring funds for 2026-27 to provide funds for the NCWorks Commission to establish and provide grants to businesses in the State employing 100 or fewer employees that provide sabbatical leave. Effective July 1, 2026.