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Senate | July 21, 2015 | Committee Room | Finance Committee

Full MP3 Audio File

Good afternoon and welcome while we are getting in our places and turning off the recording devices and everything else we will go through the pages and the sergeant at arms staff, we have Mary [xx] from Hot Point, Mary you ain't [xx] [xx] is your father? You're a lot better looking that your father, you're a lucky young lady. Alexandria Riley welcome, [xx] I can't pronounce your last name [xx] welcome and Travis Scott[sp?] from Riley, Travis welcome, glad to have you today, look around the room I see we have a [xx] staff I can recognize, [xx] Louise else do we have here? Brother Jim in the back of the room that's a [xx] knows that so thank you all, first bill today is going to be House Bill 229 Modification Religious Property exemption Representative McNeal, is it a PCS? Or is I'm reading the wrong list thank you, motion to hear the PCA, all those in favor of the motion please say aye oppose, motion cared PCS before, go ahead sir thank you Mr. Chair, committee members for the opportunity represent House Bill 229 to your Religious Property Exemption Bill, let me explain to you what this bill does not do churches and religious institutions are exempt from local property taxes this bill does not change that. all it does is it attempts to close the loop hole that has been used by some local tax departments to circumvent what I believe it was the intention of the original law. If you take your attention to the bill their is no changes on the first page of the bill, on the second page, the sections E and G are just technical changes they were rewritten to make it more conforming. The only change is in section three, and basically, let me explain to you what section three does. Tax Department when they are using the value of a property, takes a snapshot on January the first of every year, and that's where they determine what the value of the property is. If a church is building a new sanctuary and they do not finish by January the first, some local Tax Departments have said you're not occupying this building for religious purposes, even though that is the intention of the church once the building is finished. So some Tax Departments have attempted to tax churches have the opportunity to appeal that to a board of equalization and review, and that has happened in different counties. Some boards have upheld and made the churches pay the taxes some have not so what we have a situation in the hundred counties is that you maybe taxed in some counties you may not be taxed in other counties. This bill attempts to reconcile that and basically change the law so that if a church is building. Representative McNeil. Yes sir. I'm getting a hang from the crowd any questions? Mr. Chair. Sen. Tarte. Yes, sir. First question pertains to 47 on page 2 where we start talking about for the rule driving exemption to allow folks to attend looks like church and my first question is if we're going to define it as worship, does that include Sunday School? Does it include going to room in the end or a youth group and if you're going to church and like I go to David's United Methodist, it's in the middle of downtown and we go to lunch after church, do I get to go to lunch? Do I get to go stay and go to the park after church? Do I get to go shopping and then go home three hours later? Seems kind of loosely defined. I get the intent. A lot of people go to church which is important Mr. Chairman.  Yes sir. Sen. Tarte, I don't know what language you were speaking here but I don't think that has anything to do with this bill. You're a church. You're building a church and you're on the Yes sir, please. That's the next section of the bill, isn't it? That's all that's important in this bill, isn't it? Is whether they are going to list you and make you pay

while you've got this thing under construction. They know it's going to be a church. You know it's going to be a church. It's got a steeple and a sanctuary and a front door and a back door and a pulpit and yet they want to charge you as if you might not be at church, I'm saying there's a heck of a glitch in the law and let's straighten it out. It's a good bill. I studied it all night last night. I've been working with McNeil on this thing and whether we go to lunch till 12 O'clock and 1 O'clock, it might be important to this bill but maybe not. Follow up.  Was this an addition though? This is PCS that clause, that provision, correct? Yes Sir, Senator. This was originally Senate Bill 492 which was presented by Senator Davis, Soucek and Daniel, and they added their bill as a PCS on to mine. So I cannot really explain to you what their intentions were on this bill, Sir. Do I have a motion for a Favorable Report from Senator Tillman? Tillman and several others. Thank you, we have a motion for a Favorable Report Unfavorable to the original Favorable PCS. All those in favor please say Aye. Aye. Opposed No. The motion carries, thank you Representative McNeill. Thank you. House Bill 386 Hope Mills/Spring Lake/Satellite Annexations. Representative Szoka Senator Rayban. With an aye, for the record. I'm the tall one, right? I'm glad you said that yes sir? I've been called in to be chair for a neighbor neither Hope knells nor Spring Lakes department they're talking about is in my district, however this is a local bill where the two towns have decided to collaborate with some annexations. It's all within the general statutes where they exist right now. I ask your support thank you. Thank you, motion for favorable report from senator Apodaca. Any discussion prior to entertaining the motion. Hearing none, all those in favor of the motion please say aye. Opposed no. The motion carried. House Bill 412 Senator Sid don't hold it, you're back Sir. I'm back. Do it again. Alright. House bill 412 is another local bill, deals with the city have done some annexations that's agreed to by all parties concerned. Excuse me. Senator this is a PCS we need a motion to accept a PCS please. Senator Sanderson all those in favor of accepting the PCS please say aye. Aye. Opposed no, OK now you may discuss the motion carries. Alright the city of Dunn is in my district, I know that this is approved by all the stakeholders involved it deals with a small annexation that makes everyone happy, it's a local bill like I said. I ask for your support, thank you. If I could? Also there's a piece in the Onslow County in the town of Holly Ridge is just a very small part. Questions or discussions hearing none on motion from Senator Tillman to accept the PCS as a favorable report on unfavorable to the original, all in favor please say aye. Aye. Opposed no. The motion carries house bill 492, Thank you. Wilford[sp?] you're welcome sir Rutherford County airport authority Senator Heis. Thank you Mr. Chairman members of the committee should be fairly straight forward the airport authority in Redford County is asked to be dissolved and the county commisioners have asked by resolution to be able to take over that airport authority and run it as a public enterprise so all parties are on agreement on this bill and this is the authorization questions that beg, a motion from Senator Brown for a favorable report all those in favor please say aye aye opposed like [xx] representative [xx] house bill 556 okay we [xx] and we have an amendment you have the floor mum. Go ahead. [xx]   I can't hear you I would ask, she will Christine Peng, Senator [xx].  Thank you Mr. Chair. I'd like to move to amend this bill the

amendment should be before the committee if so everyone have it. It's coming round. I Wouldn't call exactly technical amendment, what it does is it changes the word account owner, on page five, line 47. The personal representative because that point the account owner will be deceased, and the personal representative be they the executive administrator of the estate will be the one to him the notice should go. Do members have the copy of the amendment? Any discussion on the amendment Do I've the motion to accept the amendment? From senator Makena, all those in the favor of the please say aye, oppose no. Motion carried. The Bill as amendment is back before the body. Yes, ma'am. Thank you Mr. Chairman and I know the senate loves to move fast. First of all I'd like to recognize representative Meir[sp?] who's a co-sponsor with me on the bill and he's here and quickly this is a bill that would help relieve severe anxieties for parents, caregivers and guardians of people with disabilities. Currently under the restrictions that we have of assets and qualifications for public services, many of our people with disabilities are not allowed to accumulate any significant degree of financial stability. What we would do under this bill 556 is to allow a 529A trust fund. You're familiar with 529 because of the education trust that we set up parents can put away money starting at an early age to help defray the cost of their child's education 18 and 20 years down the road. What 29A does is the same thing for parents, guardians and caregivers of individuals with disability. They will be able to accumulate funding they can take care of not only card expenses that are may be not covered by their copays and things of that nature, but we will also allow them to establish a future funding for the care of the individual when they're no longer available which is one of the most heart breaking concerns in parents with a child with disability and I just want to illustrate one of the other reasons why I became a supporter of this of the lady [xx] office from [xx] Pennsylvania, Mr. Wolf has been a passionate advocate for this at the Congressional level and hes one of the reasons that it did pass Congress and we've the opportunity to do it here North Carolina she works in law office, and she's a volunteer with the local Arc. Many of you here are familiar with North Carolina's Arc and the work that it does with citizens with disabilities. She got over 200, 000 signatures on a petition and just worried Congress to death till they did something, and I know you're thinking. Well, we have a lot of passionate of people like that in Middlehill and everything else, What you don't know about his worth is that she has down syndrome and because of the restrictions that we have with asset accountability and limitations for public services. She cannot money, she'd love to work more and make more money, but she stands to loose any of the funding that she needs from a public park as a threat to being able to produce. We want our citizen's in the state of North Carolina to produce at the maximum level. Our citizens can work many of them and they want to work and we have the opportunity with 59A to 529A through house bill 556 to give them that opportunity. I ask for your support. Thank you, ladies and gentlemen do we have any questions? Comments? Thank you on the motion from senator Floyd we have a motion for a favorable report, unfavorable to the original, favorable to the PCS. That wasn't a PCS, we have favorable report on the bill, all those in favor please say aye oppose no. Motion carried, thank you Representative Havler. Thank you Mr. Chairman and committee members. Senate bill 399 senator Anderson joined agency whilst from authority dropped from exemption, thank you Sir you have the floor. Thank you Mr chairman. This is a PCS.

Okay read the motion to accept the PCS. Senator Floyd, all those in favor of the please say aye. Aye. Opposed no. Motion carries. Sen. Sanderson, PCS. Thank you, Mr. Chairman. Senate Bill 399, it just does the very simple thing. It expands the type of joint agencies that are allowed to receive an annual refund of sale and use tax, and it expands those to bring in agencies of fire, that provide fire, police protection or emergency services. It would just bring that to a place where you have two or three small communities that want to come together and serve all their communities out of one operation instead of each one having their own. Section two of the bill directs the Revenue Law Study Committee to study motor fuels tax exemptions for entities that are comprised of multi-local government unities. And we have one in my district that's comprised of solid waste. They are three counties that have come together, and they want to see if they qualify so we're going to put that in the study bill. Mr. Chair, I'm having trouble finding that bill but it looks like some people have it. Okay do all the members have the bill in their packet or are we deficient? I don't have it either.   Keep looking. The bill has a different name than what's on the. Are you squared away yet on the PCS? Okay. We seem to be squared, Sen. Sanderson. I apologize. Please, go ahead. That's okay. I think all the time we are encouraging local communities to find ways to save money and this saves money for them and also saves money for the state. So I ask for your support. I'd be glad to answer any questions. Okay, questions. Sen. Ford. A quick question for clarification purposes. Is this for the refund of the sales and use tax for local government joint agency for fire, emergency service and police protection? Is this for government agencies that provide this service? local government agencies yes, go ahead  If local government decides to contract out these services to a private company would this piece of legislation still apply? No no  Any further questions on the bill, then the chair will eradicate the motion, the motion  unfavorable to the original favorable to the PCS senator Rabin all those in favor please say aye, Aye  Those opposed nay motion cleared thank you senator Thank you Mr. Chairman Senator Tucker Welcome to finance. Thank you I appreciate that. Senate bill 438 one I've been waiting for all year a licence plate bill, nothing that gives me more satisfaction please take cover. Thank you Mr. Chairman members of the committee, as my good friend from Cabbarus says this is a fairly simple bill technical in nature. All it does is remove the sunset from the existing law that allows for schools which now have prominent plates for buses to transport students. They do not have personal cars at charter schools, so there won't be no prominent plates on cars just on vehicles that transport children, buses, activity buses etc. Any questions, I'll be glad to answer them. Thank you Senator Tucker for the straight forward explanation. Any questions by the committee? Seeing none, I have a motion for a Favorable Report from Senator Ford. All those in favor of the motion please say Aye. Aye. Oppose No. Motion carries, thank you so much Senator Tucker. Thank you, Mr. Chairman. OK Senator Mckissick, you're up again Sir. Senate Bill 541, Regulate Transportation Network Companies, which is an acronym for Uber. So, welcome. Thank you. This is a PCS, we need a motion to accept the PCS please from Senator Apodaca. All those in favor of the motion please say Aye. Aye. Opposed? Our motion carries, we're ready to hear the PCS Senator. Yes sure it's pretty straight forward, PCs has made technical refinements to bill, nothing substantive, this will [xx] just for the feed that's involved $5000 each year by every type of transportation that were accompanying Uba, side lift type [xx] shall be paying it. So it's pretty straight forward, it's $5000 per year, $5000 renewal, all the other portions of the bill dealing with the transportation aspect have already been discussed. Senator Apodaca?

Mr. Chairman I have some concerns about this bill. All those small concerns are like a few points of clarification if I might [xx] Certainly yes sir, you certainly you might and you may have a follow up as needed. Thank you Mr. Chairman, we got session to two, right? OK no, really you'd only want to have Senator McKissick don't panic. Are the airport is oaky with this structure? The airports are okay with it and in fact in a conference called before transportation with airport down in Wilmington, Raleigh, Durham, Charlotte, as well as one additional airport, I forgot which one it was, but everybody is on board with the language it provides him the authority to negotiate what they would like to within regulated authorities specialize to bill with the airports, and protects them from an FCC perspective as well in terms of restrictions they need to impose to adhere [xx] Thank you. Senator McKissick. Follow up Mr. Chairman. Way of the vernacular of a person who did not go to Hollywood is that a yes? Absolutely. OK. Senator Van Duyn and I only care about one particular airport [xx] airport, did you talk with them?  I did not speak edge full specifically, I can't comment further. They have a regional board, but I'm concerned about so I'm going to object the third reading if I might select and call him Mr. Chairman. Certainly as expected Senator. At the appropriate time, and until such time we'll go ahead and proceed today. Thank you. Having suffered that Senator McKissick we have a motion for favorable report to the PCS unfavorable to the original by Sen. Apodaca. All those in favor please say aye. Aye. Opposed no, motion [xx]. Thank you Senator McKissick . Okay, senate bill 605. This is the revenue laws bill. Generally there's quite a bit of discussion on that. We're going to have staff go through it and we will devote as much time as it is necessary if it is question or discussion, and I will assure you that most of these are so simple that we will let Sen. Tillman handle or work the bill with it as necessary.  If it is so simple we ought to be able to pass it without any comment. This is a PCS so we need a motion to hear the PCS we have a motion to hear the PCS by Senator Wade, all those in favor of the motion please say aye, opposed no. Okay, motion carried and Cindy if you would start of please. Thank you, Mr. Chairman Excuse me, Mr. Chairman, I'm having trouble with my papers over here Mr. Chairman it's online It's online then, I've got it right here. Thank you. Mr. Chairman, it's also on email Mr chair? Okay are we ready? Senator if you would please. This bill contains many changes to the revenue most of which was brought to the Chair of the finance committee attention by the Department of Revenue, they're all not technical clear fine some of them make monopolize decision what I thought I would do Mr Chairman, is first go through the provisions that do make policy changes and the first is section 1.1 on line five, and that repeals the annual privilege tax on mutual burial associations. That tax brings in a whole $750 a year, so the department brought this to the Chair's attention. They were having some issues with the administration of the tax, and the Chair chose to recommend that they repealed. Section 1.3 would allow a qualified air freight forwarder to utilise its affiliated airlines revenue ton miles for purposes of apportioning its income. Without this change such a company would have to use the three factor apportionment formula. An example of this type of company would be UPS or FedEx. So this would just allow that company, even if the airlines run a separate entity, to utilize those airline miles for purposes of determining how much of its income is apportioned in the state. Section 1.4 removes from the corporate and franchise income tax pays, provision that appear obsolete and unequated this was in the senate budget as well we've not received many comments on that, it

seemed to the Chairs is a good idea to clean up that corporate income tax for those provisions that appear unequated or obsolete and if they've been out in the public ground for several weeks. Sections 2.1 and 2.2 are provisions that the department brought to the attention of the General Assembly, it will allow certain idomized reduction that are necessary to avoid double taxation, and those are explained in your bill summary. Assertion to change that was not brought to the attention of the department was the Income tax Refund Check off for Charitable Contributions to the North Carolina Education [xx] Fund that was something put in place for the general assembly, I believe last session this would repeal it, the current amount is been dedicated through refunds is just a little over $56, 000 one purview of the finance chair [xx] wasn't the job of the department of revenue to funnel chair deduction this body has considered many in the past, this committee has not approved them so this just cleans up their personal income tax code in that sense. There are several sales tax changes many of these issues were brought to the attention of the general assembly by the department and then decisions were made the first will be on section 3.2 there's question about who is the state agency will that include occupational licensing boards or boards similar to occupational licensing boards such as your North Carolina state bar and your North Carolina state board of certified public accountants these are not entities that receive general fund appropriations as you normally think give a state agency but right now under the definition of state agency they will be entitled to the exemption so what this bl does is to change that definition so that all of this types of occupational licensing boards will be treated the same and they would not be entitled to and exception of the state sales tax. Section 3.7 is something that has been incorporated into the bill since it was distributed to you yesterday and this section resolves several of the provisions in the sales tax  while concerning professional motor sports subsection A codifies the current administrative practice since 2003 the way the department has administered the sales tax application of engines that are leased or rented by this professional motor sport teams differs from what the law requires and the reason is that in 1997 there was revenue ruling that those types of leases were no subject to sales tax. the general assembly changed the definition in 2003 the issue of whether or not that should change the revenue ruling was never affirmatively decided. So the department has been asking for clarity for some time and so what this does is it codifies current [xx] by exempting the lease or rental of these engines from sales tax, but it does put a sunset on it of 2020. Subsection B is purely technical, but subsection C concerns the current refund provisions for professional motor sports teams of 50% of the sales tax that they pay on parts and accessories that go into those cars, as you know that refund provision expires January 1, 2020. These would continue that refund provision for four years, but phase it down. So that by the year 2020 it's going to be completely phased out. The other refund provision for aviation fuel purchase by professional motor sports teams which as far as January 1st, 2016 will be allowed to expire as set in current law. Section 3.9 deals with a conditional contract. These are those types of contracts where you buy a phone for 99 cents so long as you buy a certain phone plan. Right now the statute tells you how that 99 cent phone should be taxed if the underlying contract, telecommunications contract is subject to tax, but not if when it's not subject to tax such as when the contract is for internet service. So this just recognizes that third situation of when part of the contract is taxable and part of it isn't, and that event that piece of tangible personal property would be taxed at the same percentage as what the current law would provide for when the contract is not taxable. A little complicated but it. Section 3.10 is something that has been put in the bill, it was not a recommendation of the Department of Revenue the subsection 3.10 will repeal

the current sales that's exemptions from items sold by non-profit when the receipt of the sale of those items would be directly or indirectly contributed to the state or school. This would cover for example, the museum gift shops. Currently those gift shops do not have to impose sales tax. Although they're open just like a regular retail business, the chair spelt that they should be treated as a regular retail business and that those sales should be subject to sales tax. However, there's a new exemption put into the law for food prepared foods, soft drinks, or other items sold out of school sponsored since the intent is not to begin taxing the [xx] club concessions stands at a football game but it would be that a towel purchased at the Museum Gift Shop will be treated the same, as that same item in a private gift shop. Section 3.15 It is something that was brought to the Department's request. A couple of years ago, The General Assembly began allowing a refund of indirect purchases made by nonprofit organization. So someone purchase something and then start reimbursement by non-profit, that's an indirect purchase. Those items were excluded from the nonprofit sales tax refund these by putting in that they would be allowed, there had been questions about how does that, should that address prepared food or large it is purchased by someone and then start the reimbursement, if that's the state of employee or any other government entity that indirect purchases not subject to sales subject to sales tax it's not reimbursable or exempt. Sub Section A clarifies that that is the intent of the changes that was made by the General Assembly a couple of years ago but then in subsection B it essentially undoes that and provides that going forward beginning in July 1, 2016 only direct purchases by nonprofit will subject to refund, not in direct purchases that are reimbursed. Subsection 3.21 clarifies that model are these will be subject to how we use tax and not subject to sales tax right now their are it's just in conclusive whether or not they are a vehicle or whether they are manufactured home and 3.21 resolves that ambiguity. Part five is all of that is are substance of change that has been requested by the department it's part of the departments objective to prevent or reduce the occurrence of stolen identity these and refund flaws and to also ensure North Carolina business professionals are tax compliance, so this puts in several things that the tax enforcement provision division at the department has requested to help it in that it endure in that lastly in part six of the bill, sections 6.3 is not substantive it quantifying current practice but I mentioned it just because we're repelling a statute in chapter 131E which is for hospitals and that statute is something that has been in there for many years that had a blanket tax provision it referred to inherent gift tax and things such as that no longer even exists so what section 6.3 does is to move to the tax statutes all of the provisions about how public hospitals would be treated and maintains this current status of the laws, it adds deductions for interest from their bonds to the cooperate and personal income tax statutes and it adds them to the entities that are exempt from paying how to fill tax that is how it's currently administered we're just put those provisions in the tax statutes as opposed to chapter 131E the tax statutes already deal with the fact that they're exempt from property tax and are entitled to a sales tax refund and I will be happy to answer any questions and the department is here as well thank you. Thank you, questions from the committee? Those of you who run revenue laws heard most of these those who are not some of it maybe new. Sandra Hutson?  Thank you Mr. Chairman. I'm not sure whether I can ask this question inteligentlly but I'm going to try. Section 3.2B relating to the agency exemption for sale tax. What impact the [xx] would this have on the state agency exemption under the FTC for these licensing boards? Because to designate that they

are not a state agency because we have a major issue out there now with regard to certain licensing boards and whether they're in fact overseeing [xx] as a state agency. In this session it's only about how they're traded for sale tax purposes. It doesn't change the definition in any other part of the general statute. Follow up. But if someone would look, I mean if you exempted all in one area, can somebody else use that exemption as a methodology because of some other potential litigation out there that might have an impact. I know it says only with sales tax, but we're saying they're not a state agency for this purposes, does that mean doesn't have another secondary impact maximum. Other comments or questions? Yes ma'am. Senator [xx] Thank you Mr. Chair, I think I need this for clarity, I think you talked a little bit about schools, there  in Section 3 point 15 when you talked about the sales of and them being exempted what about the other things that schools do sell, tshirts, shirebooks. Will they come under the same provision? Yes mum, Okay, so they're also exempted? And you also mentioned about taxes on things other groups that may be selling for the school, there are groups that go out selling magazines and other items to benefit the schools they may have a booth at various events, are they also exempted? This would be for any items or personal property that are sold not  for profit and the events sponsored by the school and then the proceeds are then given to the school Okay, thank you Senator Blue, The provision in 3.10 sails to [xx] Okay I'm a I don't know how in section 3.10, I don't know how this works on college campuses but does it affect the sale and college stores  or rather this is where. The book store is your question? Book stores and other university stores where they sell and things like that.  And I will hope to be corrected by the department if I may speak I would think that it does not that those items are currently subject to sales tax. Further questions Senator Berger.  Thank you Mr. Chair. I would like to return to the section 3.2 question as a followup to. I don't have before me VB or GS105 164.14C and 105 521 so you mention CPAs and lawyers, but are those statues related to all of these licensing boards, or is it just those two groups because I do share that same concern from that U. S. Supreme Court case it would include all of them 164.14C is the list of entities that are allowed a sales tax refund. And that has put in the law because right now your UNC hospital health they are entitled to a refund non exemptions so in this case we're not saying they're not up state agency but we're saying for purposes of sales tags they would receive the refund as 164.14 C says, not the exemption, and 9, 3 big I just want to some redoes say what the definition is but that does include along all your occupational licensing boards and I'll be happy to work with you on all those if you would like to make any changes to it. Thank you Mr. Chair and thank you. You're welcome, members further questions or comments? Hearing none we have a motion from Senator [xx] favorable to the PCS unfavorable to the original, those in favor please say aye, aye, oppose no [xx] thank you all thank you staff, and Ms. [xx] thank you for showing up today, I appreciate it meeting is adjourned.