While committees slowed down this week, everything else sped up in Raleigh as the legislature prepared for the opening day of session next Wednesday, May 16. Primary elections were held with some unexpected outcomes and Governor Roy Cooper released his budget for the 2018-2019 fiscal year.

Primary Results

Tuesday’s primary election yielded some surprising results that will make for a very interesting general election this November. North Carolina was the first state to see a Congressional incumbent unseated in the primary this year. A handful of incumbents in both the NC House and the NC Senate lost their bids for reelection. Numerous retirements in the past year as well as the ongoing redistricting battle led to a good deal of open seats up for grabs to political newcomers.

Check out our break down of all the races and what to expect in the general election here.

Revenue Laws Recommendations

The Revenue Laws Study Committee met Wednesday to hear a revision of the state’s economic forecast, an update on the sales tax law case South Dakota v. Wayfair, and proposed revenue law changes to be filed in the 2018 short session.

Forecast Update

The economic forecast has been updated to reflect higher collections than what was projected last May. The state has seen a 1.5% increase in returns over where it was projected the state’s coffers would be. Fiscal reform policies over the last few sessions have generated NC’s fourth consecutive revenue surplus, $356.7 million this year and an expected fifth consecutive revenue surplus of $276.5 million in 2018-2019. There is not much change to the overall economic forecast - growth was not quite as strong as predicted. Staff explained that any time there are major federal tax regulations, like what we saw in January, there is uncertainty, so the state tries to take a cautious approach.

Legislators clarified that although the state is receiving more revenue that predicted, it will go to savings rather than go to the general fund to be appropriated in this session’s budget. The $23.917 billion total spend number for this year’s budget agreed upon by the President Pro Temper Sen. Phil Berger and Speaker of the House Rep. Tim Moore will remain unchanged despite the surplus.

South Dakota v. Wayfair

Staff reviewed the progress made in the sales tax case out of South Dakota regarding the physical presence test required of vendors collecting sales tax. The state of South Dakota and multiple online retailers, including Wayfair, are engaged in litigation surrounding whether or not an online presence meets the federal physical present test - meaning whether or not they have to remit sales tax to the state based on having a physical structure or employees working inside the state.

South Dakota passed a law establishing an economic presence standard, defined as greater than $100,000 in revenue in the state or more than 200 transactions annually in the state. When Wayfair and other online retailers failed to comply and remit sales tax, SD filed suit. Staff explained that this case, regardless of which way the US Supreme Court decides it, will be a game changer to tax law. The legislature is keeping a close eye on the outcome, particularly since Sen. Tommy Tucker (R-Union) filed a similar bill last year.

Proposed Legislation

The committee voted to pass a package of legislative recommendations Wednesday. Among the changes include an Internal Revenue Code update, business tax changes, federal determinations and amended returns, sales and use tax changes, excise tax changes, and other tax changes. It was made clear that this is not a final version of the draft and the bill will likely be heavily tweaked before all is said and done.

Read the bill here and the summary here.

School Safety Recommendations

The Select Committee on School Safety met again Thursday to hear the findings from the Subcommittee on Student Health and the Subcommittee on Physical Safety. The committee also heard recommendations from District Attorney Kim Robb on criminal law changes.

The draft committee report, after some changes and amendments, was voted on and approved by the committee. View the rest of the presentations and the various amendments here.

Governor’s Budget

Governor Cooper released his budget Thursday ahead of next Wednesday’s opening day of the 2018 short session. This budget, his second, included a Stronger and Safer Schools initiative, a NC Job Ready initiative, a Healthier Families and Safer Communities initiative, a Hurricane Matthew Recovery initiative, and numerous other provisions. He also included a provision freezing future tax cuts the legislature has scheduled for businesses in the state. You can read the Governor’s press release here and his budget in its entirety here.

A Look Ahead to Next Week

Wednesday, May 16

12:00 PM Session Convenes (House)

12:00 PM Session Convenes (Senate)