Last Week 

The 2016 “Short Session” of the North Carolina General Assembly, which reconvened on Monday, April 25th, began with rallies both in opposition and in favor of the Public Facilities Privacy & Security Act, otherwise known as House bill 2. Negative reactions from many sources calling for the law to be overturned, along with many voices showing support for the law, has some members suggesting the possibility of allowing the voters to decide with a referendum. However, a legislative proposal has not been introduced at this point. 

54 arrested in HB2 protests as lawmakers return to Raleig – WRAL

146 new bills have been filed so far, and with the filing deadlines quickly approaching, legislators will be scrambling to get the rest of their bills filed in the coming weeks. The Senate heard bills to update the revenue code, make several tax changes, and update the State’s unemployment insurance law. Both bodies also reviewed candidates for various appointments being made by the Governor. Confirmations included members of the State’s Industrial Commission, as well as several special Superior Court Judges, the Board of Agriculture, the new director of the State Bureau of Investigation, and the State Controller. 

Combs confirmed as N.C. state controller – News & Record 

North Carolina SBI director nominee gets House support – WRAL 

NC Senate confirms appointments – Jones & Blount

A rare joint caucus of House and Senate Republicans was held earlier in the week concerning the potential ousting of NCGOP party Chairman Hasan Harnett. The Executive Committee of the NCGOP met Saturday and ultimately voted on his removal as Chairman. Party leaders selected former Chairman, Robin Hayes, to serve through the end of the year as Chairman of the North Carolina Republican Party. 

NCGOP removes Harnett as chairman – WRAL 

Legislation in the News: 

GOP senator wants to tweak sales tax on auto repairs – N&O 

NC House of Representatives to consider dueling proposals to stop I-77 tolls – WBTV 

House Bill 2 repeal legislation sent to Senate committee that never meets – N&O 

Environmental groups oppose bill – Winston-Salem Journal 

New NC bill gives hope to medical marijuana faithful – ABC 11  

Bill restores some funding for youth tobacco prevention – Winston-Salem Journal 

Fayetteville lawmaker seeks discrimination protection for service members, vets – WRAL 

Governor's Budget

The full House and Senate Appropriations Committees met jointly on Wednesday to review the Governor’s 2016-17 Budget Proposal, and then began meeting in joint Subcommittees Thursday to continue review. With a projected $237 Million surplus, Andrew Heath, Gov. McCrory’s budget director presented the $22.3 Billion proposal, which is a 2.8% increase over the current 2015-16 fiscal year which ends on June 30th. A few highlights of the Governor’s budgetary priorities include:

  • Increasing teacher pay an average of 5% with the goal of raising the average salary for teachers in North Carolina to $50,000 
  • Allocating additional $300 Million to the State’s reserve account, bringing the total to $1.4 Billion, roughly 7% of the State’s total budget 
  • Allocating $30 Million toward implementing recommendations from the Governor’s Task Force on Mental Health & Substance Abuse 
  • Providing an additional $27.5 Million for road maintenance and $30 Million more for new road construction 

A more detailed review of the budget proposal can be found here. Appropriations Subcommittees are scheduled to continue to meet jointly this week for further review. 

McCrory's budget calls for 2.8% spending increase in 2016-2017 – CBJ 

McCrory wants raises for most teachers – Shelby Star 

McCrory seeks extra lottery profits for new initiatives – WRAL 

Bigger budget surplus gives NC lawmakers wiggle room – N&O 

Lawmakers criticize lack of state employee raises in governor's budget – WRAL

Tax Changes

Senate Bill 729, Various Changes to the Revenue Laws, passed the Senate Thursday after it was filed earlier in the week. The bill contains the provisions from a 2015 bill passed by both chambers in Senate Bill 605. However, S605 failed to become law last year and the provisions are now included in S729. Among clarifying provisions and technical changes, the bill would also:

  • Makes the definition of deductible interest expense paid between parent and subsidiary corporations consistent for in-State and out-of-State companies 
  • Reduces the qualified interest expense deduction for interest paid to a related corporation to 15% (from 30%) of a corporate taxpayer's adjusted taxable income and allows an unlimited qualified interest expense deduction if the corporate taxpayer can trace the interest expense to a unrelated lender 
  • Changes the term "conditional service contract" to "conditional contract" so that the transactions in the statutory section will not be confused with a service contract 
  • Provides that the sales tax exemption for items purchased by a contractor apply to items purchased for the holder of a conditional farmer exemption certificate as well as the holder of a qualifying farmer exemption certificate 
  • Clarifies that a park model RV is a recreational vehicle and is subject to the highway use tax 
  • Clarifies that the exemption for aviation gasoline and jet fuel applies to commercial aircraft in interstate or foreign commerce 
  • Conforms the bonding requirements for entities that must pay excise tax on cigarettes and tobacco products 
  • Exempts interest income from bond obligations from corporate and individual income tax and exempts motor fuel purchased by a hospital authority 

The House Finance committee is expected to hear the bill Tuesday.

New Members

The NCGA greeted several new members this week to serve in the State legislature. Local parties filled the seats of Sen. Soucek (R-Watauga) and Sen. Stein (D-Wake) to serve out the remainder of their terms. Both Senators were not seeking reelection, Stein because he is running for Attorney General, and both resigned their seats in the earlier part of this year. In both situations, local parties selected the two winners of their respective primaries to serve the remainder of the unexpired terms. Sen. Deanna Ballard (R-Watauga), the Republican nominee in Senate district 45, will serve the remainder of Sen. Soucek’s term and Sen. Jay Chaudhuri (D-Wake), the Democratic nominee in Senate district 16, will serve the reminder of Sen. Stein’s term. Both are expected to retain the seats in November. 

Ballard selected to serve in N.C. State Senate – Caldwell Journal 

In the House, Rep. Sgro (D-Guilford), was selected to fill the remainder of former Rep. Ralph Johnson’s (D-Guilford) term, who passed away last month. Rep. Sgro will only serve in the 2016 short session as he will not be on the ballot in November. Rep. Schaeffer (R-Mecklenburg), who was also not seeking reelection, resigned her seat last Friday. Scott Stone, the Republican nominee to succeed her in November, has asked party activists to appoint him to serve the remainder of the term. 

Rep. Schaeffer resigns, Chaudhuri appointed in Senate – WRAL 

At the NC legislature, who’s coming and who’s going – N&O

In Other News

A Federal judge upheld the 2013 Voter ID law, marking a big win for leadership in the General Assembly and the Governor. The law requires individuals to show appropriate photo identification in order to vote. However, the after passing the 2013 law, the NCGA adding a reasonable impediment provision allowing individuals who did not have a photo ID to cast a provisional ballot. That provision was cited in the ruling, which plaintiffs have appealed. The 4th Circuit has already granted an expedited appeal. 

Federal judge upholds North Carolina photo ID mandate – AP 

NC elections law ruling to be appealed – N&O