This Week 

Both chambers accelerated pace in an eventful week as several Committees met more than once throughout the week with some even meeting after the day’s floor session.  Senior House Appropriations Chairman Rep. Dollar (R-Wake) announced that that the two chambers are nearing an agreement on the budget, with just a few items left outstanding.  Typically, the perennial “Christmas Tree” bills such as Technical Corrections, Regulatory Reform and more recently, an annual Farm Bill to name a few, and other high-profile issues signal the end of session.  Top budget writers are expected to remain in Raleigh this weekend in an attempt to finalize a Conference Report.

One of the anticipated high-profile pieces of legislation appeared in a PCS to House Bill 161 in the Senate Health Committee, to repeal the State’s Certificate of Need (CON) law effective on January 1st, 2021.  Sen. Hise (R-Mitchell), an adamant CON opponent, presented the bill which is opposed by the NC Hospital Association among a multitude of other providers and provider groups, including Hospice.  Opponents of CON suggest that removing bureaucratic barriers will allow the “free market” to thrive in healthcare.  However, advocates of upholding the current law, contend that a free market for healthcare will never exist as long as the government continues to play such a significant role in regulating and funding healthcare.  They also contend that removing the law would only further harm rural areas by causing already struggling rural hospitals to close.  The bill was presented for discussion only, and has yet to be scheduled for a vote in the Senate Health Committee.  An announcement was made that the issue would be discussed in the Republican Senate Caucus before a determination on the future of the legislation is made.

Lawmakers debate NC control of health care facilities – Citizen-Times

The Senate Finance Committee approved Senate Bill 817 a Constitutional Amendment sponsored by Sen. Rucho (R-Mecklenburg), which would lower the maximum state income tax rate from 10% to 5.5%.  Proponents argue that amending the Constitution would prohibit future legislatures from raising income taxes above 5.5%, limiting the pace at which state government can grow.  Skeptics, including the Treasurer’s office, fear that the State’s long-held AAA bond rating could be downgraded, due to the inability of future legislatures to adapt in tough economic times.  Sen. Rabon (R-Brunswick) argued that past legislatures have raised sales taxes rather than income taxes in such times, primarily due to the fact that an increase in the income tax would take at least a year to collect.  He also pointed to the reserves the General Assembly has set aside in the State’s “rainy day fund” to address the next downturn.  The flat income tax rate in North Carolina is already scheduled to drop from 5.75% to 5.5% on January 1, 2017.  The bill had been calendared for Wednesday, but was later postponed to the calendar of Saturday, January 25th.  Should this measure pass the legislature and be approved by the voters in November, that rate would become the new ceiling and have the same effective date.  Constitutional Amendments require a three-fifths majority of the members in each chamber before it can be placed on the ballot for voter approval.  Constitutional Amendments do not require the Governor’s signature. 

NC Senate considers 5 percent income tax limit in constitution – N&O

The much anticipated “crowdfunding” legislation was unveiled Wednesday in a PCS for Senate Bill 481 in the Senate Finance Committee. The first provision of the bill exempts certain transactions from the North Carolina Securities Act. The new exemption allows crowdfunding transactions where in-state businesses can sell securities to in-state investors, called an intrastate transaction. The amounts of securities that can be sold by NC issuers and bought by NC investors are limited. An offering would be limited to $1 Million for a business without a current audit or review and $2 Million for a business with a current audit or review. Each non-accredited investor would be limited to contributing no more than $5,000 individually. Accredited investors may purchase an unlimited amount, subject to the limit on the offering size. A Second provision would require the Department of Revenue to publish on its website, private letter rulings that give specific guidance to individual taxpayers who request it, within 90 days after the written determination is provided to the taxpayer. The bill must also receive a hearing in the Appropriations Committee before it can go to the floor.

NC crowdfunding bill clears committee hurdle – WRAL TechWire

Proposed legislation would make private tax rulings public – WRAL

The House gave overwhelming approval to House Bill 976, Enhance Oversight of Service Contracts/PED. The bill requires the Department of Administration to develop a business case justification template to be used by State agencies to document the business case for changing the provider of an agency service. The bill would also require the development and implementation of a plan to determine whether services provided by State agencies could be more effectively provided by private providers and would require the operation of a contract management system for State agency service contracts. On a technical point, Rep. Stam (R-Wake) expressed his general opposition to the wording, “Notwithstanding any other provision of law,” often contained in legislation, and removed it from the bill with an amendment. His suggestion for future bills would be to cite the specific laws or to drop the wording from legislation altogether. 

The Senate approved the House’s technical changes to Senate Bill 734, Statewide Standing Order/Opioid Antagonist, sponsored by Sen. Pate (R-Wayne). The bill is designed to help combat overdoses by making it easier for individuals to access an opioid antagonist. The bill would allow anyone to purchase naloxone hydrochloride, which is used to treat overdose from heroin and prescription pain killers, at a pharmacy under a standing order from the NC State Health Director. Expanding access to the drug is seen by many as a way to save countless lives as the rate of deaths caused by overdose in NC has skyrocketed in recent decades. The bill now awaits action from the Governor, who is expected to sign it.

Standing anti-opioid drug order nears final legislative OK – WRAL

House Bill 958, Sheyenne’s Law, sponsored by Rep. Pittman (R-Cabarrus) is heading to the Governor. Currently, the penalty for seriously injuring or killing someone while operating a boat under the influence is a Class 2 misdemeanor. This bill makes it a felony, comparable to penalties for similar offenses on the highways. The bill is in response to the death of Sheyenne Marshall, who was knee boarding and run over by an impaired boater at Lake Norman last year. The bill passed both chambers unanimously and awaits the Governor’s signature.

NC lawmakers create new penalties for impaired boat drivers – WRAL

Legislation in the News:

Lawmakers OK rules allowing online legal documents in NC – WRAL

N.C. lawmakers crack down on lottery winners on food stamps – Charlotte Observer

Year-round school budget provision sparks concern among districts, parents – WRAL

Legislature may lift Mission restrictions early – Citizen-Times

NCDOT: Ripple effect of I-77 toll-lanes bill costly, damaging – CBJ

Senate tentatively approves two tracks for high school math – WRAL

House votes to expand compensation for eugenics victims – N&O

Apodaca wants six Asheville City Council districts – Citizen-Times

Proposal would centralize student residency process to determine UNC tuition – WRAL

NC House votes to limit initial farming of industrial hemp – N&O

Legislators Go Slow on Kratom – NC Health News

More hurdles for NC wind farm operations in Senate bill – N&O 

Tax & Economic Development Modifications

Effective March 1, 2016, the General Assembly made three significant changes in the sales tax: 1) Repealed the sales tax exemption for installation charges in conjunction with the sale of tangible personal property; 2) Expanded the base to include repair, maintenance and installation charges, where the provider also sold tangible personal property; and 3) Expanded the sales tax base to include service contracts on tangible personal property. 

There were a number of problems with the implementation of these new taxes. The legislature is attempting to “clarify” and create equality in these new taxes. In the process of clarification, sales taxes on additional services may be added. 

Thursday, the House Finance Committee unveiled a PCS to House Bill 994, for discussion only. The bill is entitled Sales Tax of RMI Clarified/Other Tax Changes. It differs in some details from the Senate proposal. Among other provisions:

  • Clarifies the expansion of sales and use tax on repair, maintenance, and installation services in an effort to treat similar transactions the same. Current law does not require the collection of sales tax unless the vendor is also a retailer of tangible personal property. This provision generally requires sales tax on those services that were added last year, regardless of whether the vendor also sold tangible personal property. Some services were specifically exempt, including: alterations; landscaping services; House cleaning and janitorial services; Building cleaning and janitorial services; service on roads, parking lots, and sidewalks; removal of waste, trash and grease from real property; home inspections; pest control; car washes; towing services; and storage of a motor vehicle. It also provides a 10-month grace period for those who did not properly collect the tax
  • Provides 25% state tax credit for debt and equity investments in Tier 1 and Tier 2 counties qualifying for the federal New Markets Tax Credit
  • Allows counties an municipalities to exchange tax information for purposes of administering a tax
  • Exempts from sales tax materials used in an “accepted wastewater disposal system” so they are treated the same as materials used in conventional wastewater systems, which are already exempt.

Senate Regulatory Reduction

The Senate passed House Bill 169, the Regulatory Reduction Act of 2016, along party lines with the lone crossover, coming from Sen. Barringer (R-Wake) who voted against it. Among the provisions, the bill:

  • Places additional restrictions on the adoption of administrative rules by State agencies that have excessive financial cost
  • Exempts certain building code classifications from energy efficiency standards
  • Streamlines mortgage notice requirements
  • Allows distilleries to set retail prices for the sale of their products outside of the state excluding ABC markups 
  • Exempts yard waste from requiring a solid waste permit for the transfer, treatment, processing, storage, or disposal in a permitted solid waste management facility
  • Repeals several rules regulating the licensing of hospitals pertaining to physical plant, general requirements, and construction requirements and directs the Medical Care Commission to adopt the recommendations of the American Society of Healthcare Engineers’ Guidelines for Design and Construction of Hospitals and Outpatient Facilities
  • Repeals recycling requirements for discarded computer equipment and televisions
  • Eliminates, consolidates, and amends various reports to the Environmental Review Commission

Upon receiving the bill from the Senate, the House assigned the bill to the Rules Committee rather than giving it an up or down vote on concurrence. The fate of the bill moving forward is uncertain, and if passed, will probably be one of the last pieces of legislation.

House Regulatory Reform

Senate Bill 303, The Regulatory Reform Act of 2016, was scheduled to be heard on the House floor Wednesday following approvals from the House Regulatory Reform and Finance Committees. However, following a number of proposed changes, the bill was returned to the Regulatory Reform Committee following session, for a PCS. The bill passed the House Unanimously Thursday and will be returned to the Senate for concurrence. Among other provisions, the bill:

  • Clarifies that a franchisor is not the employer of a franchisee or employees of a franchisee for employment law claims under state law
  • Requires counties and cities to treat an affirmative vote to amend a zoning ordinance as a simultaneous amendment to the comprehensive plan and the unified development ordinance, if any
  • Provides a 3 year statute of limitations for a unit of local government to institute an action for a violation of a land use statute, ordinance, permit, or other official action concerning land use carrying the effect of law. Makes an exception for conditions that are actually injurious or dangerous to the public health or safety but does prescribe an outside limitation of 6 years from the earlier of the occurrence of any of the following: The violation is apparent from a public right-of-way; the violation is in plain view from a place to which the public is invited.
  • Clarifies requirements for initial licensure as a Professional Engineer
  • Authorizes the Joint Legislative Program Evaluation Oversight Committee to study State law and internal agency policies and procedures for delivery of public services through State grants and contracts to non-profit organizations
  • Clarifies that whenever the Department of Transportation (DOT) requires the relocation of utilities, including cable service located in a right-of-way for which the utility owner contributed to the cost of acquisition, the DOT shall reimburse the utility owner for the cost of moving those utilities
  • Makes amendments to licensure of general contractors 
  • Makes technical, clarifying, and conforming changes to provisions enacted in 2015 to establish life-of-site permits for sanitary landfills and transfer stations
  • Studies the role of the Department of Military & Veterans Affairs in disapproving wind energy projects if the Secretary finds construction or operation of the proposed facility encroaches upon or results in a significant adverse impact on any military installation in the State
  • Eliminates, consolidates, and makes other changes to various reports to the Environmental Review Commission (ERC)

Farm Bill

On Wednesday, the Senate Finance Committee approved a PCS to Senate Bill 770, the NC Farm Act of 2016, sponsored by Sen. Jackson (R-Sampson). Two provisions were removed from the bill in the PCS. One would have decreased the average gross income requirement exemption from sales and use tax for certain tangible personal property, digital property, and services purchased by a qualifying farmer for farming purposes from $10,000 to $5,000. The other was a requirement that local health departments be solely responsible for inspecting water piping and electrical wiring installed between a well and a water tank in a single ditch. The bill, among other provisions:

  • Grants the Department of Agriculture and Consumer Services (DACS) several new powers to enforce the DACS bedding sanitation program
  • Authorizes DACS to appoint and deploy agricultural emergency response teams to respond to agricultural emergencies.
  •  Authorizes employees of the Wildlife Resources Commission and employees of federal agencies whose responsibilities include fisheries and wildlife management, to cull feral swine from an aircraft with the written permission of the landowner
  • Eliminates the rendering plant inspection committee
  • Allow local school boards to develop and implement policies to facilitate and maximize purchases of food grown or raised in North Carolina
  • Extends the sunset for the production credit for commercial facilities for processing renewable fuel from January 1, 2017 to January 1, 2020.
  • Clarifies that a building permit is not required for certain work costing less than $15,000 provided that the work is performed in accordance with the current edition of the North Carolina State Building Code
  • Exempts any activity that constitutes a bona fide farm use, including the production of mulch, ornamental plants, sod, and other horticultural products from the Sedimentation Pollution Control Act
  • Waives or prorate deferred taxes when property under present use valuation (PUV) is transferred for less than its true value to a nonprofit entity for conservation or historical preservation

In Other News

Governor McCrory nominated his lead legislative liaison, former Rep. Fred Steen, to serve a four-year term on the North Carolina Board of Review. The three-member board serves as the final decision maker in appeals regarding unemployment benefit claims. His appointment was confirmed in the House, and now awaits Senate action.

McCrory picks legislative aide to unemployment appeals board – WRAL

It is rumored that North Carolina U.S. Sen. Richard Burr (R) is on the short list of potential picks for Vice President to Donald Trump. Burr, who is also seeking reelection this year, has not been as critical of the presumptive GOP nominee as other establishment Republicans have. Neither campaign would confirm whether or not Burr was being considered.

Richard Burr for vice president? Report says Trump is considering him – N&O

A recount has been filed by Rev. Mark Harris in his attempt to unseat Congressman Pittenger (R-9) in the June 7th special primary held following a court ordered redistricting of the State’s congressional maps. Last week’s election turnout was below 8% statewide. Following canvassing, Rev. Harris was within the 1% margin allowing him to call for a recount, trailing Pittenger by 135 total votes.

Mark Harris formally requests recount, trails by 135 votes in House race – Charlotte Observer