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Senate | May 28, 2014 | Chamber | Electric Cigarettes and Taxes

Full MP3 Audio File

Senate will come to order. Sergeant at arms close the doors. Members will go to their seats. Members and guests in the gallery please silence all electronic devices. Leading the Senate in prayer is a Reverend Peter Milner, Senate Chaplain. All members and guests in the gallery please stand. [SPEAKER CHANGES] Please pray with me. Lord we're thankful for this day, we're thankful that you've brought us here to listen and you have not left us empty handed. You have filled us up. You're with us in this beautiful and divine project of representative government. You've filled us with many good opportunities. You are qualifying these Senators to serve. You've lavished with us your peace. You've set out a proper course for us and we ask you, Lord, today, to speak to each of us, especially those here that represent the people of North Carolina, focus their minds, give wisdom to their hearts and enjoyment to their work. May they represent us all to the best of their ability and as you remind us in the Hebrew scriptures, you said that he who has fed you today will take care of you tomorrow. It's in Christ's name we pray. Amen. [SPEAKER CHANGES] Senator Berger's recognized for a motion. [SPEAKER CHANGES] Thank you, Mr. President. The journal of Tuesday, May 27th, 2014 has been examined and found to be correct. I move that we dispense with the reading of the journal and that it stand approved as written. [SPEAKER CHANGES] Par objection the journal for May 27th stands approved as written. Senators, we do have a nurse of the day and a doctor of the day with us today. We have Denise Brigham of Greenville, North Carolina and Doctor Wesley Earley of Greenville, North Carolina. Would you all please stand and be recognized, thanks for your service. [APPLAUSE] Senators, upon motion of the Chair, the Chair would like to extend courtesies of the gallery to architects, contractors, and engineers from across North Carolina for legislative day with representing the AIA of North Carolina, Carolina's AGC, Professional Engineers of North Carolina, American Counsel of Engineering companies, if you're with us today please stand and be recognized. Thank you for joining us. [APPLAUSE] Upon the motion of Senator Bill Rabon of Brunswick, Columbus, and Bladen County the chair is happy to extend courtesies of the gallery to Boilings Springs Lakes Town Commissioner Mike Forte, Mike if you're with us please stand and be recognized. Thank you. [APPLAUSE] Upon the motion of Senators Trudy Wade and Gladys Robinson of Guilford County the Chair is happy to extend courtesies of the gallery to the Greensboro Partnership and their delegation and to the Guilford County Firefighters, friends from Guilford County please stand up and be recognized. [APPLAUSE] And upon the motion of Senator Barringer of Wake County the Chair is happy to extend courtesies of the gallery to The Laurel Park Elementary school in Apex. If you're with us today please stand. [APPLAUSE] Ratification of bills, the clerk will read. [SPEAKER CHANGES] Enroll bills. Enrolling clerk reports the following bills duly ratified for presentation to the Governor. Senate Bill 294, an act to allow entities regulated on the phase 2 of ?? pollutant discharged elimination system program to utilize the Department of Transportation best management practice ?? for linear transportation projects. House Bill 688, an act amending the continuing education for requirement for certified well contractors and the following resolution duly ratified, properly enrolled, and presented to the Office of the Secretary of State. House Joint Resolution 1121, a joint resolution honoring a life and memory of Leo Mercer, former member of the General Assembly. [SPEAKER CHANGES] Senator Apodaca is recognized for a motion. [SPEAKER CHANGES] Thank you, Mr. President, members, I'm a

... the senate do now recess until 11:30 subject to receipt and re-referral of messages from the House, and the governor. The introduction, referral, and re-referral of bills and resolutions, the receipt and re-referral of committee reports and ratifications of bills and resolutions. [SPEAKER CHANGES] We have a second. Senator Brown, the motion is the Senate do now stand in recess until 11:30 a.m., subject to the stipulations stated by Senator Apodaca. We'll see you back here at 11:30. [SPEAKER CHANGES] Republicans will caucus in our usual location. [SPEAKER CHANGES] Introduction of bills. Senate Majority Resolution 838, a joint resolution authorizing the 2013 Bill Of Assembly to consider a bill to be entitled enact ?? ?? ?? ?? in our act to raise the state minimum wage and provide automatic adjustments to reflect increases in the cost of living. Sponsors: Senator Parmon, D. Davis, and Bryant. Senate Bill 839, an act providing that parking meters in the city of Winston-Salem may be activated by coins, tokens, cash or any other commercially available means of pre-payment, credit or debit. Sponsors: Senator Parmon, Krawiec ... refer the state and local government. House Bill 838 referrals to rules and operations of the Senate. Senate Bill 840, an act to clarify how public bodies in Winston-Salem may conduct business during meetings involve simultaneous communications. Sponsors: Senators Parmon and Krawiec. I refer to state and local government. Senate Bill 841, an act authorizing the city of Greenville to convey by private negotiation and sale certain real estate property owned by the city that does not meet the minimum lot size requirements prescribed by the city zoning ordinance. Sponsors: Senator D. Davis and Pate. Refer to state and local government. Senate Bill 842, an act to make base budget appropriations for current operations of state department of institutions and agencies and for other purposes. Sponsors: Senator Brown, Harrington and Hunt. Refer to appropriations-based budget. Senate Bill 843, an act to reauthorize the Division of Motor Vehicles to produce North Carolina Master Gardener's special registration plates. Sponsors: Senator Bingham. Refer to finance. Senate Bill 844, an act to amend in the charter of the city of Monroe to remove the present provision to authorize the city manager to have direct supervisory authority over city attorney. Sponsors: Senator Tucker. Refer to state and local government. Message from the House. House Bill 725 ordered held in the Clerk's office. [SPEAKER CHANGES] Members, we're going to extend recess until noon today. Recess is extended until noon. Thank you. Senate will come to order. Sergeant-at-Arms, close the doors, members, go to their seats. Members and guests in the gallery, please silence all electronic devices. Senator Apodaca is recognized for a motion. [SPEAKER CHANGES] Thank you, Mr. ?? move that Senate, well, let's see, let's do this. Senate Bill 734 on the calendar for third reading, regulatory format 2014, be removed from today's calendar and placed on tomorrow's. [SPEAKER CHANGES] An objection. Senator ?? Senators, we move right into the calendar, Public Bills, second reading. Roll Call Bill, House Bill 1050, the Clerk will read. [SPEAKER CHANGES] House Bill 1050. Omnibus Tax Law Changes. [SPEAKER CHANGES] Senator Rabon has ??

recognized. [SPEAKER CHANGES] Thank you, Mr. President, members of the Senate, House Bill ?? 50 is the Omnibus tax law changes for this session. It has several parts. I will go through those. The Revenue Laws Committee met over the last seven months. We met monthly and during that time we set up four or so subcommittees to look in to different parts of this bill. I will go through them quickly and I have asked staff to join us, I don't see them yet, to help with questions and would ask that the, I think we've already suspended the rules on that so that will be fine. We'll start with part 1. Part 1 the deduction of for the state net loss. It replaces the corporate net economic loss deduction with the state net loss deduction. North Carolina is the only state in the U.S. that still does it the old way and this brings us in to conforming with the code and the other 49 states. Excuse me. Part 2 is just other income tax changes. It corrects the dollar amount in the section 159 of the revenue code and it needs to be enacted as soon as possible because it enacts, or it affects the 2013 tax year returns. Some people filing their taxes, because of the error in the law, are filing extensions and others will be filing amended returns. Part 3 is the agricultural exemption certificate and this defines who is actively engaged in agriculture and sets the limits of who the farmers are and what they're incomes have to be to be met. Part 4 is the prepaid meals plan that has to do with our colleges, universities, and some other institutions. Part 5 is admissions and sales tax on various admissions throughout the state and how and when they would be collected. Part 6 deals with the service contracts and this defines who must collect the tax and how to administer the refunds of sales tax paid on service contracts that are later rescinded. Part 7 is a retailer contractors and this defines who the retailer contractors are and that the retailers themselves are the folks that pay those taxes when due. Part 8 has to do with just other tax changes, some are for ?? and need to be brought up today. The most significant of those has to do with rental of one's personal home or cottage for a short period of time. Part 9 is a recommendation from the committee for various changes in alcohol, tobacco, and motor fuel excise taxes at the request of the Department of Revenue. Part 10 has to do with tax law compliance changes and this was a request from the Department of Revenue to the committee to enact tools to ensure better compliance with the department. Part 11 deals with telecommunications equipment and how it is appraised by the Department of Revenue at their request again. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator McKissick, for what purpose do you rise? [SPEAKER CHANGES] Speak on the amendment. [SPEAKER CHANGES] Senator McKissick has the floor to speak to the amendment. [SPEAKER CHANGES] I realize that there are many of us who served in local government before coming here. I know that many of you are from small towns, some of you are from large urban areas. One thing that we know, regardless of what size communities we may served on in the past as being a part of a public body or those that we may represent today, is that they all have a bottom line that they have to look at. If we eliminate these privilege taxes, which is proposed after this coming year, these communities will be put in a very precarious financial position. We know one thing's for sure, just based upon the physical impact, we're talking about 62 million dollars. On over in Durham it's projected to be a 2.2 million dollar impact, the large urban area which I represent, and we need to be exceedingly careful about how we perceive

I hear we’d like to study this further, but I shared these same thoughts and these same concerns as a member of this Revenue Law Study Committee as we proceeded to move forth with these deliberations. Even when it was proposed that it is a hundred dollar level tax, not one based upon a number of employees or other parameters that might be reasonably established, it still would have impacted our cities in this state to a tune of about 40, 45 million dollars. Significant implications, and the only places these communities can go to is to increase their property taxes. To increase their property taxes, for some small towns they’d have to increase their property taxes so high, we’re talking about double digits percentage-wise to make up for this revenue loss. I know there’s been some discussion about limiting the amount of tax increase that cities and counties can level in the future – maybe 8 percent. Well if you’re taking this away, for some communities – some small communities – it can have a devastating impact that, as I say, are double digit impacts. So I really hope and trust that we will consider what’s happening through our small towns and our larger cities as well – our larger of an area such as Durham, Charlotte, Greensboro, Winston-Salem, Asheville, the like – and understand that we might not be able to hold them harmless to make up all that lost income. But moving forward, we need to provide them with more than an idle promise that we’ll do it in the future because unfortunately come of those promises don’t always come to fruition, so I hope that you’ll support this amendment today. Even if we do something after today moving forward, it will at least give us something for the cities to fall back upon. Something that they feel comfortable with. It doesn’t prevent us from going further above and beyond. That we can always do. But the last thing that we should do is just say “We’re pulling the rug from underneath you after next year.” [SPEAKER CHANGES] any further discussion or debate? Senator Tucker, for what purpose do you rise? [SPEAKER CHANGES] Speak to the amendment, Mr. President. [SPEAKER CHANGES] Senator Tucker has the floor to speak to the amendment. [SPEAKER CHANGES] I, like Senator Rabin, thank Senator Ford for bringing this forward, but I could not support the amendment because my ?? company has more than 75 employees. I don’t see the fairness in us having to pay the thousand dollar tax the same as Bank of America or Wells Fargo or any other large corporation, so I couldn’t support that, and in reference to the discussion about the 65 million loss to the cities, Senator McKissick, I submit to you that if there is a loss in revenue, you have another choice besides raising taxes. You could reduce your budget accordingly or not offer incentives for hotels or whatever else they do in Durham or any other city around the state, but they could reduce the size of their budget and still be able to operate. So with that, I will take Senator Rabin’s suggestion that he’ll work on this and try to offset some of the loss with consideration later on, but I could not support this amendment. Thank you. [SPEAKER CHANGES] Any further discussion or debate? Hearing none, the question before the Senate is the passage of Amendment 1. All in favor, vote “Aye”. Opposed, vote “No”. Five seconds will be allowed for the voting and the Clerk will record the vote. Gunn. Gunn, “No”. Woodard. 17 having voted in the affirmative - [SPEAKER CHANGES] Mister President, I need to change my vote. I voted the wrong way. [SPEAKER CHANGES] From…? [SPEAKER CHANGES] I’m sorry, it should be “Nay”. [SPEAKER CHANGES] From “Aye” to “No”. 16 having voted in the affirmative and 32 in the negative, Amendment 1 fails. The bill, un-amended, is back before the body. [SPEAKER CHANGES] Mr. President? [SPEAKER CHANGES] Senator Rucho, for what purpose do you rise? [SPEAKER CHANGES] To send forward an amendment please. [SPEAKER CHANGES] Senator, you can send forward your amendment. [SPEAKER CHANGES] It’s on the dashboard, I believe. [SPEAKER CHANGES] The Clerk will read. [SPEAKER CHANGES] Senator Rucho moves to amend the bill. [SPEAKER CHANGES] Thank you Mr. President, members of the Senate. Part three of the bill tried to, as we were trying to define who a real farmer was and who was actually someone that is deserving of a sales tax exemption because they’re using it in the activity of their business in farming, we set a ten thousand dollar gross receipts average over three years, and that works well, and I think everybody…

was in agreement with that, a problem came up about the new farmer, someone was just starting. So what we were able to come up with, and we checked with members of the House to try to make sure everybody was in line with this, was a conditional exemption for the first year. That person would come in and tell the Department of Revenue, "yes, I need to have a sales tax exemption because I am indeed in the farming business." They'll sign the paper, they'll get the conditional exemption certificate for the year and then second year and third year, even if they didn't reach the $10,000 level, say they were taking their time getting there, as long as they showed a schedule F or something from the Internal Revenue or the IRS tax report, they would be able to get it for two more years and by the end of that period they should be at least $10,000 gross. We felt that it was a way of not hurting the new farmers and allowing them to take advantage of a sales tax exemption which, as a real farmer, they would be eligible for. So I would urge that members were to support this to go along with our, the rest of part 3. [SPEAKER CHANGES] Any further discussion or debate? Any discussion or debate? Hearing none, the question before the Senate is the passage of amendment 2. All in favor vote Aye. Opposed vote no. Five seconds will be allowed for the voting. The clerk will record the vote. Done, aye. 49 having voted in the affirmative and 0 in the negative amendment 2 is adopted. The bill, as adopted, is back before the body. [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Clark, for what purpose do you rise? [SPEAKER CHANGES] Send forth an amendment. [SPEAKER CHANGES] Senator, you can send forward your amendment. The clerk will read. [SPEAKER CHANGES] Senator Clark moves to amend the bill. [SPEAKER CHANGES] Senator Clark is recognized to explain the amendment. [SPEAKER CHANGES] Senators, currently as are constituted the bill before us would impose a tax on cigarettes based upon the content of the e-liquid. As it's written it would be five cents per milliliter of the e-liquid. What the amendment does is it changes that formulation and bases the tax upon the nicotine content contained within the liquid. And I won't bother you about going over the formula so what I've done is I've sent you all an email that contained the Excel spreadsheet. But it would actually perform the calculations so that you could see the impact of that particular formula. So, for instance, if we consider the views product, which we have been briefed so for, given that that has about a nicotine concentration of about 4.8% the excise tax on that particular product would be $0.48 which is equivalent to approximately to what we have today in terms of excise tax on a pack of cigarettes. Excuse me, it would be $0.43. Now, let's say that R.J. Reynolds decided that they wanted to produce a ultralight version or light version of that cigarette, which they will probably do, so if the light version lowered the nicotine content down to about 1.2% versus 4.8% then the excise tax would go down to 10% for the 3 milliliter cartridge, which is less than the 15%, I mean $0.15 that they would pay on their current product. Let's say that R.J. Reynolds decided that they have, wanted to have use ultralight. Okay, well then since the nicotine content would go down to 0.6% of the concentration then the excise tax would only be $0.5 for that 3 milliliter cartridge. So, in essence, what we're trying to do here is we're trying to draw a relationship between the nicotine content of the e-liquid and the excise tax opposed therein. I appreciate your supposed on this amendment. [SPEAKER CHANGES] Do we have any discussion or debate? [SPEAKER CHANGES] Mr. President. [SPEAKER CHANGES] Senator Rabin, for what purpose do you rise? [SPEAKER CHANGES] To discuss the amendment. [SPEAKER CHANGES] Senator Rabin has the floor to discuss the amendment. [SPEAKER CHANGES] Thank you, Mr. President, and thank you, Senator Clark. I'm sure that, again going back to our original bill and to pick particularly this portion of the bill, that this will be, without a pun, a hot item and will be discussed and debated in many ways in the coming, in the near future. I would, however at this point, like to stick with our original bill and go with what we have and then as we tweak and move forward we'll all work together and have time to settle on the proper way to proceed. So I will ask you, please, not to support the amendment. Thank you.

Is there any further discussion or debate? Hearing none, the question before the Senate is the passage of Amendment 3. All in favor will vote aye, opposed will vote no. Five second swill be allowed for the voting. The clerk will record the vote. Twelve having voted in the affirmative and thirty-seven in the negative, Amendment 3 has failed, the bill as amended is back before the body. Senator Robinson what purpose do you rise? [SPEAKER CHANGE] To send forth an amendment. [SPEAKER CHANGE] Senator you can send forward your amendment. The clerk will read. [SPEAKER CHANGE] Senator Robinson moves to amend the bill. [SPEAKER CHANGE] Senator Robinson you’re recognized to speak to the amendment. [SPEAKER CHANGE] Thank you Mr. Chair. I appreciate the fact that in this legislation you have done some exemptions for schools and those others that have to depend on low fundraisers to help them do things like maybe uniforms or school supplies or whatever the kids need, but the other pieces of small nonprofits that really don’t have enough staff to do anything. Maybe one person that almost volunteers and has to depend on small fundraisers to do things like maybe the big brothers and big sisters program that you saw here today where they have to do little things like pay extra fees for kids at school or whatever that, and they raise minimal amounts of money. This amendment, what it does is it exempts those who have gross income or revenue of $50,000 or less and you know that barely pays for a staff person, or raises no more than $5000 in a single event, and those are minimal amounts of money but ??? protect the small nonprofits who really don’t have any revenue of their own and have to raise a little money to support the clients they serve so I ask for your support of this amendment. [SPEAKER CHANGE] Senator Clark could you turn your microphone off there please? Thank you. Is there any further discussion or debate? Senator Rucho what purpose do you rise? [SPEAKER CHANGE] To debate the amendment please. [SPEAKER CHANGE] Senator Rucho has the floor to debate the amendment. [SPEAKER CHANGE] Thank you very much for your amendment and when the revenue laws study commission was there and we had a special group, we were trying to clarify exactly how and who should pay sales tax. We tried to be consistent with our approach. You have a lot of very small businesses that are there, and just in a similar manner as what you’re describing is, we paid specific attention to organizations that had no paid employees and they were exempted from it like a little league team or little league league or that manner, but it was a matter of remaining consistent in how we’re handling the sales tax so that there was clarify. There was a lot of confusion after the last bill and so we wanted to bring it to the point where we were consistent and clear and that’s why we moved in the direction that the bill before you states it and I would urge that we oppose this amendment for the reasons of simplicity and clarify and it will be important for each consumer and each business to understand how to best manage it. [SPEAKER CHANGE] Senator Robinson what purpose do you rise? [SPEAKER CHANGE] To ask Senator Rucho a question. [SPEAKER CHANGE] Senator Rucho do you yield? [SPEAKER CHANGE] Yes, I do. [SPEAKER CHANGE] Thank you. Senator Rucho I’m sure that with your experience you’re familiar with small organizations in your community that start from Mom and Pop shops to help kids in communities and are you aware of any that later decided that that Mom or that Pop would be a part time person so that they could dedicate more time to that organization? [SPEAKER CHANGE] Well it’s a matter of they were in the business of generating revenues however they were doing it, through entertainment and amusements and other things then they would still be required to pay that benefit. [SPEAKER CHANGE] Just to speak again on the amendment. [SPEAKER CHANGE] Senator Robinson you have the floor to speak to the amendment. [SPEAKER CHANGE] Thank you. Ladies and gentlemen my point is that these people are one step removed from being volunteers. Oftentimes they are homemakers at home or oftentimes they are retired people or somebody else who simply volunteers their time. They’ve moved to being a part time person so that they can help some mission of some organization that serves our community.

and it does not look good for us to tax those things in our community where citizens offer their time to make our society better. Often times the things we are not funding. If they get $50,000 it probably doesn't come from the state. It probably comes from a foundation. And then they take their time and they try to raise a little bit of money just to have an event so that they can help to supplement the cost of these children or these individuals, could be elderly people, too. So I don't understand why we could not exempt these small organizations. It does good for our community and it helps us with the causes in our state. [SPEAKER CHANGES] Do I have any further discussion or debate? Hearing none, the question before the Senate is the passage of amendment 4. All in favor will vote Aye, opposed No. Five seconds will be allowed for the voting and the clerk will record the vote. Meredith, no. Berger, Berger, no, Lou, yes, 17 having voted in the affirmative and 32 in the negative amendment amendment 4 has passed. The bill, as amended, is back before the body. I'm sorry the amendment failed. Sorry. Is there any further discussion or debate? Senator McKissick, for what purpose do you rise? [SPEAKER CHANGES] Send forth an amendment. [SPEAKER CHANGES] Senator McKissick you can send forward your amendment. The clerk will read. [SPEAKER CHANGES] Senator McKissick moves to amend the bill. [SPEAKER CHANGES] Senator McKissick is recognized to explain the amendment. [SPEAKER CHANGES] This particular amendment is pretty straightforward. It deals with part seven of the bill, dealing with these retailer contractors. For some of you this is the section of the bill dealing with the way that home improvements are taxed, such as dishwashers, garage doors, the like, that type of thing. There's been a difference of interpretation that the way Lowe's might have done it versus the way Home Depot may have done it. I simply say that to equate you with a particular provision of the bill that this particular amendment would address. What it simply says is this: at this point in time our physical staff cannot estimate what impact the bill, as drafted right now, would have on our revenues, protected revenues. We do know that there's about 26 million dollars a year that come in from these home improvement stores, 26 million. Now we don't know how much we're gonna stop that income stream from coming in by moving forward the bill as the way it is presently drafted. We could obtain that information from retailers such as Lowe's, such as Home Depot, and other similar type of stores if we were to get our Department of Revenue and our physical staff placed in a position we could obtain that information. So this particular bill would allow for a minor tweaking to allow for that type of confidential information to be shared with our physical staff and our Department of Revenue so that we, as legislators, will fully know, understand, and appreciate what it means when we move forward with this type of an amendment. We don't know what it means today. And when I say amendment I'm referring to the change that's anticipated through this bill that's being proposed for our consideration. So what this particular amendment would do is say we're gonna go back. We're gonna determine what percentage of current sales are made at a retail level and how that tax would be generated versus a wholesale level. We'll also look at the average difference between the retail and wholesale prices. What does that really mean? What it means is this: right now carpets installed, it gets taxed a retail level. After this bill is passed it's gonna get taxed at a wholesale level. What does it mean for dishwashers? Right now it's retail level. What's it mean after the bill? Wholesale level. What does it mean for those garage doors today? Retail level. After the bill? Wholesale level. Garage door openers, the like, I could go on with a dozen of these illustrations. We need to know, we need to understand, we need to be able to project what our loss revenues are. When our physical staff tells me they cannot project what our loss revenues are I get to be concerned. Of that 26 million that's coming in today are we gonna get 10 million less? That's 10 million less that we can't use for things like teacher's salaries or things that we might want to do, as a General Assembly, that are important to us to meet the needs of this state in our ongoing operational expenses. So this would basically say

We're going to leave it the way it is right now. But, we are going to go ahead and let this move forward. By, January 1 of 16, we hope to get all this information in, we come back here in January, we can decide what to do. Its a logical, reasonable, analytical, and appropriate way for use to proceed. We don't know how much we're retorting our income stream we're really neglecting our duties. When that question can not be answered by our physical staff we ought to be real careful about walking out here on this pier, because we don't know what we're jumping off into in terms of that sea. We don't know what impact it's having. We've done that to many time. Its the law of unintended consequences. We don't want to come back here fixing six months to a year from now something that we could thoughtfully and more appropriately address if we just waited. Let the Department of Revenue get that information, let our physical staff get that information. Depend upon reliable data, so that we know how much less income we're talking about walking away from. Do we need to fix the problem? Yes. Its a matter of having the appropriate information available and before us, before we do so? I think that its imperative. I hope that you'll support this amendment. [Speaker Change] Senators we have a leave of absence for Senator Wesley Meredith. [Speaker Change] Mr. President. [Speaker Change] Senator Barringer for floor purpose you ask? [Speaker Change] To debate the amendment. [Speaker Change] Senator Barringer has the floor to speak to the amendment. [Speaker Change] This particular amendment was studied very hard, its been studied for several years. Even before this particular session a group of legislators with all stakeholders there over several meetings, discuss this, worked out a good bill, a good way to move forward. We need predictability in our business. Lowe's, and Home Depot, and many others were at the table. These retailer or businesses need to know how to deal with this issue and I encourage you to vote against the amendment, the bill as it stands is good law. [Speaker Change] Mr. President. [Speaker Change] Senator McKissick, for what purpose do you ask? [Speaker Change] I have Senator Barringer here, a question. [Speaker Change] Senator Barringer do you yield? [Speaker Change] Yes, Sir. [Speaker Change] Senator Barringer, do you know the physical impact that this bill will have in terms of the amount of decreased taxes that we will receive, what's projected, what's approximate as a result of ?? as currently situated and drafted? [Speaker Change] What I do know is it gives our businesses predictability and it gives our economy a good stand. That's how we get taxes. [Speaker Change] Mr. President, can I ask a follow up question? [Speaker Change] Senator, do you yield? [Speaker Change] I yield. [Speaker Change] Senator Barringer, are you aware of the fact that there are actually assessments at this time, involving some of these entities. Do you know the extent, the magnitude of the money that's involved, at this time, that's lost money revenues to the State of North Carolina? [Speaker Change] I'm sorry, could you repeat the question? I didn't hear the first part. [Speaker Change] Sure. Are you aware of the fact that there are pending assessment, right now, involving these issues. Funds, which our department of revenue will not receive. Are you aware that that is the case? Are you aware that there will be lost income? That is income that the department of revenue believes that they're entitled to receive. That they will not receive as a result of the passing of this bill the way this provision is currently drafted. [Speaker Change] What I am aware of is there were some businesses being assessed one way and other business being assessed in another, and that is not fair. What we are looking for is not picking winners or losers and not taxing one business in one way, one business another, consumers one way, consumers in another. This is actually a good bill for consumers, it will reduce the tax to consumers, the people who install the refrigerators. When I put, when you put a dishwasher in your home its good for consumers. This is a good bill for consumers and what we're looking for is a fair, and even, and equitable way to tax. That is the purpose of this bill. It is long been needed attention, and I do again urge the vote of no against this amendment. [Speaker Change] Mr. President. [Speaker Change] Mr President, can I ask one final question? [Speaker Change] Senator McKissick, Senator Barringer, do you yield for another question? [Speaker Change] Under the stipulation that this is your final questions, Mr. McKissick. [Speaker Change] It will be my final question to you, Senator Barringer. [Speaker Change] Thank you, Senator. [Speaker Change] You always have to put an answer in there. Senator Barringer, do you not believe it is a matter of good public policy if we're passing tax laws to decrease our revenue stream to our state. That we need to be able to accurately and approximately.

Project how much decreased revenues we will have from a particular source when moving forward with these types of changes since they can have profound and significant implications as it relates to our overall budget. [SPEAKER CHANGE] I think that it is profoundly important for us to do tax efficiently and fairly across the board to both consumers and to our businesses in this state so that they have predictability and they know how taxes will be levied. Thank you sir. [SPEAKER CHANGE] Senator Tillman what purpose do you rise? [SPEAKER CHANGE] Speak on the amendment. [SPEAKER CHANGE] Senator Tillman has the floor to speak to the amendment. [SPEAKER CHANGE] Some of us seem to be worried about how much revenue the state is going to lose, Senator McKissick. Some of you are worried about how much revenue the state is going to lose. Some of us are worried about how much it’s costing taxpayers. [SPEAKER CHANGE] Senators we have Senator Meredith has returned to the chamber. We have leaves of absence for Senator Bryant, Senator Newton, and Senator Curtis. Senator Rucho what purpose do you rise? [SPEAKER CHANGE] Just to provide a little bit more information. If people look fiscal analysis memorandum, the net impact by this entire omnibus bill is zero for 2014-15 and 2015-16. Zero net so there really is no impact to the state. [SPEAKER CHANGE] Senator Stein what purpose do you rise? [SPEAKER CHANGE] To debate the amendment [SPEAKER CHANGE] Senator Stein has the floor to speak to the amendment. [SPEAKER CHANGE] Senator Rucho’s right that it says zero but we asked the fiscal staff how much does this one provision as it relates to treatment of wholesale versus retail when you install it as well as sell it and they said we don’t. It could be a million it could be many millions, we don’t know, we can’t know because the department of revenue cannot share us that information. All Senator McKissick’s amendment does is say let’s know. I agree with you Senator Tillman, I’d rather nobody pay any taxes to the state but the fact of the matter is we’ve got a lot of important business for the state to do so when we make changes to our revenue system it is only the most basic and sound policy that we know what the implications are to the state going forward. We have no idea what this is going to cost us. Are you telling me that if it costs us a billion dollars that this is a good idea? I don’t think it’s going to cost a billion dollars, of course not, but the point is that there’s a price at which this a bad idea. We don’t know what this costs so for you all to put it to us to vote on something that we don’t know what we’re paying for when there are people that have desperate health care needs that are not being paid for by Medicaid or teacher’s not getting a raise? That’s what you’re asking us to do, it is bad governance. Senator McKissick’s idea is a good idea and I encourage you to support it. [SPEAKER CHANGE] Any further discussion or debate? Senator Brown what purpose do you rise? [SPEAKER CHANGE] Speak briefly to the amendment. [SPEAKER CHANGE] Senator Brown has the floor to speak to the amendment. [SPEAKER CHANGE] I think you can argue this point that what you will do here is put more money in people’s pockets of which they spend and generate more revenue. I think you can argue it that way as well. I think the argument that you’re trying to make is that it takes more revenue away from the state. I would argue that it would put more money in people’s pockets who will spend more money to generate more of an economy in the state which will generate more revenue. I guess it’s how you look at it, I just think people with more money in their pocket will find ways to spend it to stimulate the economy and that just creates more revenue for the state in the long run. [SPEAKER CHANGE] Senator Tucker what purpose do you rise? [SPEAKER CHANGE] Speak to the amendment. [SPEAKER CHANGE] Senator Tucker has the floor to speak to the amendment. [SPEAKER CHANGE] Currently right now Senator Stein we sell a heating air condition and we pay the tax on that system and we buy it at wholesale tax and we sell it to the consumer so we don’t add any tax on to it so we fairly remit the wholesale tax to the state. I submit to you that if you were to change all ??? that more products would be classified as wholesale and the state would lose money on that. We don’t charge the consumer any sales tax on the system we put it, we just pay the wholesale tax, that can be tracked. The other thing I’ll say to you is that just looking at this, I know fiscal staff said they didn’t know. I bet the department of revenue couldn’t quantify it for you or for Senator McKissick either and the fact that they wouldn’t know what I charge for that heating and air condition system, you’re dependent upon me to tell you I charge $6000 for it but I only paid $3000 in wholesale tax so it would be a very very difficult task to..

… try to come back to it, and I’ll go back to what Senator Barringer said. It is longstanding that it’s been successful, that businesses are treated fairly and equitably and everybody pays everything across the board, so it would create a lot of confusion now. We’d like to know everything we do here, and we’d like to know that there’s be no unintended consequences, but right now it seems to me the systems working, and it would… in my business, if we had to heighten the tax and pay out more money and charge more to the consumer, I just don’t think that would be a good situation. Thank you, Mr. President. [SPEAKER CHANGES] Is there any further discussion or debate? [SPEAKER CHANGES] Mr. President? [SPEAKER CHANGES] One second, Senator McKissick. Senator McKissick, for what purpose do you rise? [SPEAKER CHANGES] To ask a question of Senator Brown. [SPEAKER CHANGES] Senator Brown, do you yield? [SPEAKER CHANGES] I do. [SPEAKER CHANGES] Senator Brown, I guess in the argument you put forward about taxations, it sounds as if we’d be better off eliminating any taxation at all on any of these types of goods or appliances or services. Is that what you would favor? Because the only thing this bill essentially says is we need to wait a couple of months, get the data in, find out exactly what it is that through our Department of Revenue and physical staff that we are losing as a state, and if we get that information in so that we know how much we’re losing as a state, at least we can make intelligent, informed decisions about the tradeoffs that are involved, so I’m trying to understand - [SPEAKER CHANGES] Mr. President? [SPEAKER CHANGES] Senator McKissick, if you have a question, would you ask Senator Brown the question please? [SPEAKER CHANGES] Yeah, that’s the question. [SPEAKER CHANGES] OK, let’s take the question. [SPEAKER CHANGES] Again, Senator McKissick, according to Senator Barringer, this had been studied for quite a while. We’ve has all the parties at the table to discuss this issue. I think you and I just have a different philosophy. To me, I see it as a way to put more money in people’s pockets, which will stimulate the economy in a different way than maybe you do. I think I could argue that it may generate more revenue for the state. You think it may take revenue away from the state; I just don’t think that’s the case. I just think if we can put more money in people’s pockets, they’ll spend that money in a different way, which will stimulate the economy. [SPEAKER CHANGES] One last follow-up, if I could. [SPEAKER CHANGES] Senator Brown, do you yield for a follow-up question? [SPEAKER CHANGES] I will. [SPEAKER CHANGES] In your opinion, Senator Brown, wouldn’t it be good for us to have these extra funds available. if in fact we get ready to walk away from them now, to use them for things like teacher pay and those types of initiatives that we’re going to have difficulty funding potentially in future years unless there’s significant revenue growth? Would that not be a good thing to think about, look at and consider beyond the immediate impact? [SPEAKER CHANGES] Again, Senator McKissick, this may generate more money to do just those things, so I guess it’s just a difference in philosophy. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Is there any further discussion or debate? Hearing none, the question before the Senate is the passage of Amendment 5. All in favor, vote “Aye”. Opposed, vote “No”. Five seconds will be allowed for the voting; Clerk will record the vote. Tillman, No. 15 having voted in the affirmative and 31 in the negative, Amendment 1 fails. The bill as amended is back before the body. Senator Blue, for what purpose do you rise? [SPEAKER CHANGES] To debate the bill. [SPEAKER CHANGES] Senator Blue has the floor to debate the bill. [SPEAKER CHANGES] Thank you Mr. President and ladies and gentlemen of the Senate. First I commend Senator Rucho and the Revenue Law Study Committee, those who served on it, for I think making some commonsense changes in this bill, but I’m reminded of an expression that even a broke clock is right at least two times a day, and because some of the suggestions that you’ve heard on making this a better bill make sense, even though they may have come from the members on the back row. One that pops out at me, and one that I mention to you because of Senator Tillman’s comments about worrying too much about how much it’s going to cost the state as opposed to the tax payers, is a provision here that we could easily fix in section…

...five. If you want to confuse taxpayers and ?? then we switch the system so the people who are selling tickets, admissions tickets and stuff like that, have to report it earlier than they do now, before an event occurs rather than after an event. I can't for the life of me see why you're unwilling to accommodate these huge businesses in this state - the professional athletic organizations, but also a lot of the non-profit organizations. And so we're more concerned about extracting a dollar from them in front of the process than allowing them to keep that money, as Senator Tillman said, to churn other activity, and to allow them to keep a reasonable set of books without having to create volumes upon volumes as they report these sales, sometimes a year or half a year before the event occurs, not knowing when they're going to have to give refunds for them. So you create a bookkeeping nightmare for them and you're willing to do that because the Revenue Department tells you it's convenient for them, without any thought as to the inconvenience of these taxpayers. And I regret that we do that in this bill, because it's got so many good parts to it. But the other thing that I will emphasize is that this time next year, most of the cities will have their budgets set, just as the counties try to do. And I'm hoping that we get out of here before July 1, but historically that hasn't been the case. And so these cities are going to be heading off this cliff, just one year from now, as they try to finalize their budgets, and this legislator still probably in session, repealing the privilege tax. Again, for the convenience of the taxpayers, we ought to shift the burden. We ought to shift the burden from these local government officials to us, to change the privilege tax. We ought to let them know we're going to change it, but while we dither around here, trying to figure out how to change it, we're not going to adversely, negatively affect you. And you can go ahead and start putting your budgets together knowing that we're going to change this privilege tax. But at least they will have something they can plan toward rather than the absolute obliteration of it. And the last thing that I think we can substantially improve on. Senator Clark came forth with an idea on taxing e-cigarettes. E-cigs, or whatever they're called - since yesterday we just defined them as "not tobacco products," so I guess it's not fair to call them a cigarette. But what we're doing, none of us - I think most of us - do not encourage people to smoke anymore. We don't encourage them to use these alternative forms of getting nicotine, because we know that at the end of the day it has a negative effect on your health. But what we ought to be concerned about is, North Carolina came to the game lately, for good cause, in taxing cigarettes. We were the lowest state in the Union for a long time - us and Virginia - because we manufactured them. But we finally got into the game and we started taxing cigarettes, realistically because of the health challenges that we know they ??. We know that these e-cigarettes hopefully will reduce the consumption of tobacco cigarettes. And as we do that, it erodes the revenue for the state. So if we're going to introduce a tax on a non-desirable product, perfect for people to use it however they want to, we have freedom of choice, and if they want to use e-cigs they're welcome to do it. But we ought to be thinking about how we're aligning a tax system for this thing that's going to replace the cigarette revenue, and have a more realistic approach to what it ought to be. Senator Clark offered you one that measures something other than just an arbitrary five cents. You've studied the data. We charge forty-five cents a pack for cigarettes. One of these instruments, I think, is the equivalent of two cigarette packs. So proportionately, we'd be charging them ninety cents rather than five cents. But at least Senator Clark came forth with a way that you can measure - there are other ways that you can do it. We can treat them as other tobacco products - tax them at 12.5%. But it's looking with some consistency in how we're trying to change this tax code, and how at the same time we're trying to be fair to the taxpayers in this state. And I think...

He had an opportunity to do it. He decided not to do it. I wish he would so that as we do this reform, that it’s truly reformed and we’re adjusting the tax code in ways to benefit the tax payer, not necessarily to benefit the Department of Revenue, and so for that reason, Mister President, as much as I’d hoped to vote for this because of the good provisions in it, I’m going to vote against it. [SPEAKER CHANGES] Any further discussion or debate? Hearing none, the question before the Senate is the passage of Senate Committee Substitute to House Bill 1050, as amended, on its second reading. All in favor, vote “Aye”. Opposed will vote “No”. Five seconds will be allowed for the voting; Clerk will record the vote. Berger. Berger, “Aye”. 37 having voted in the affirmative and 9 in the negative, Senate Committee Substitute to House Bill 1050, as amended, passes its second reading and it will remain on the calendar. Senators, upon the motion of Senator Phil Berger of Rockingham County, the Chair is happy to extend courtesies of the gallery to Michele Duncan, Mrs. District of Columbia, who is here on a visit representing the American Heart Association. Mrs. Duncan, if you’re still in the audience, please stand and be recognized. Thank you so much for being here with us today. [SPEAKER CHANGES] Mr. President? [SPEAKER CHANGES] Senator Apodaca, for what purpose do you rise? [SPEAKER CHANGES] Motion, please. [SPEAKER CHANGES] Senator Apodaca has the floor for a motion. [SPEAKER CHANGES] Mr. President, members, Senate Bill 744, Appropriations Act of 2014, has been referred to the appropriations-based budget. I move that we add a serial referral to the Finance Committee and then after that to Pensions and Retirement. [SPEAKER CHANGES] Objections to order? Senator Tillman, for what purpose do you rise? [SPEAKER CHANGES] Mr. President, send forth the committee report. [SPEAKER CHANGES] Senator, you can send forward your committee report. Clerk will read. [SPEAKER CHANGES] Senator Tillman, for the Education and Higher Education Committee, submits for passage Senate Bill 230, unfavorable as to bill but favorable to senate committee substitute bill new title, an act to clarify provisions of the Read to Achieve Act and school performance grades and expand the testing procedures for one year. I’m sorry, the testing window for one year. [SPEAKER CHANGES] House Bill 230, calendar. Do we have any other notices or announcements? Any notices? Senator Brown, for what purpose do you rise? [SPEAKER CHANGES] An announcement. [SPEAKER CHANGES] Senator Brown has the floor for an announcement. [SPEAKER CHANGES] We’ll be having a base appropriations meeting tomorrow morning at 8:30. You should be getting sometime tonight a copy of the bill, so please bring that with you tomorrow morning to the meeting. Thanks. [SPEAKER CHANGES] Senator Rucho, for what purpose do you rise? [SPEAKER CHANGES] Make an announcement. [SPEAKER CHANGES] Senator Rucho has the floor for an announcement. [SPEAKER CHANGES] There will be a Finance Committee sometime around 1 o’clock tomorrow after the appropriations meeting, so all members of the finance committee are asked to attend. [SPEAKER CHANGES] Any other notices or announcement? Any further business to come before the Senate? If not, the Chair recognizes Senator Berger for a motion. [SPEAKER CHANGES] Thank you, Mr. President. Just a little additional information as far as tomorrow’s concerned: We’re going to adjourn to 8 am in the morning. The 8 o’clock meeting will be a skeletal session. We’ll just come in and then take a recess so that the committees can do their work as the day goes along, and I suspect it will take most of the day. Your budget should be released electronically later today and hard copies should be delivered to your office as well. Committees will meet tomorrow – the Appropriations Committee, Finance Committee and the Pensions Committee as the day goes along – and those announcements will be made. But with that, Mr. President, I move that the Senate do now adjourn, subject to receipt and referral of messages from the House and the Governor, the introductions and referral and re-referral of bills and resolutions, and the receipt and re-referral of committee reports, to reconvene on Thursday May 29th 2014 at 8 am. [SPEAKER CHANGES] The motion is the Senate do now adjourn, subject to the stipulations stated by Senator Berger, to reconvene Thursday May 29th at 8 am, seconded by Senator Krawiec. All in favor say “Aye”. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Opposed, “No”. The ayes have it.

Stands adjourned.