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House | June 19, 2013 | Committee Room | Finance

Full MP3 Audio File

House Finance will please come to order and the Members will please take their seats. We have an extremely long agenda today, so we're going to move as fast as we can. Representative Moffitt, sir, you are recognized to report on the Occupancy Tax Committee. [SPEAKER CHANGES] Thank you, Madam Chair, and good morning. The Occupancy Tax Subcommittee met yesterday and, after a thorough and lengthy meeting, we reported out favorably House Bill 529. [SPEAKER CHANGES] Representative Tolson, if you're available, sir, we're going to hear House Bill 529, Edgecombe County Occupancy Tax Authority. You're recognized, Representative Tolson. [SPEAKER CHANGES] Thank you, Madam Chair. Members of the committee, this Bill is requested by the county and the town of Tarboro. They're both in agreement they're ready to try to establish a traveling tourism authority with the ability to exercise some local tax to help with this. It follows the normal procedure that this Body has set, so if there are any questions, I'll be glad to try to answer. [SPEAKER CHANGES] Representative Carney? [SPEAKER CHANGES] Thank you, Madam Chair, and due to the incredible presenter and the efficiency of our Occupancy Tax Committee, we approved this within four minutes yesterday, so I move for a favorable. [SPEAKER CHANGES] I have a motion for a favorable report. Are there other questions or concerns? Seeing none, all in favor will say aye. All opposed, no. [SPEAKER CHANGES] Thank you, Madam Chair. [SPEAKER CHANGES] Mr. Tolson, I believe you have a unanimous vote there. [SPEAKER CHANGES] Senator Gunn? Is someone prepared to handle Senate Bill 490? Senator Barefoot. Sir, you are recognized. We're trying to move some things up. It should go relatively fast. [SPEAKER CHANGES] Thank you, Madam Chairman. The Bill before you is an exclusion of the custom software on property tax provision. It basically allows third parties to... [SPEAKER CHANGES] Senator Barefoot, let me interrupt you for just a minute. Representative Brawley moves that we have the PCS before us for the purpose of discussion. Is there any debate? Seeing none, Senator, you may proceed. [SPEAKER CHANGES] The current bill basically allows for the customization of certain software that is individual to a certain business, for that customization not to be subject to the tax that customized software is now subject to tax. This just tightens up that definition, and I recommend that you support the bill. [SPEAKER CHANGES] Are there questions? Representative Hager. [SPEAKER CHANGES] Thank you, Madam Chair. This is a very good Bill. We read through it. It actually helps a lot of our software companies, our tech companies, and I move for a favorable at the proper time. [SPEAKER CHANGES] We have a favorable to the PCS and favorable to the original. Are there further questions or debate? [SPEAKER CHANGES] Madam Chair? [SPEAKER CHANGES] Representative Starnes. [SPEAKER CHANGE] Thank you. Senator Barefoot, jog my memory again. Tell me what the problem was with the counties in regards to this issue and the way this software was being taxed. [SPEAKER CHANGES] So, currently, certain computer software is a form of intangible personal property that is subject to tax. The example that I have is if you're a company and you buy an Adobe Acrobat Suite, but then you have to have customizations made, there's the cost of what the product is and then there are customizations that can be made to that product that local governments and North Carolina were deciding to tax as the value. The illogic in that is that if you had to turn around and sell that again, it's only worth what you pay for it. It's not worth what you customize it for, because those customizations are specific to your business. It's really a new tax on services that was never intended by the law. I think only a few county governments are doing it. My understanding is no other county government in the nation does this, and so we're just clarifying the small for them, and we've made it effective so that they can adjust their budgets accordingly. [SPEAKER CHANGES] Senator Barefoot, the Chair might be able to help you a little bit. We did learn, Representative Starnes, that...

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?? expense and also on the application fee for pistol permit more work goes into denying a permit than the issuance of it. This will just actually help them offset some of their costs and that’s the extent of the bill. And I will happy to try and answer any questions. [Speaker Change] Representative Samuelson [Speaker Change] Thank you Madam Chair. I have a technical correction amendment, if staff will explain. [Speaker Change] You are recognized for your amendment. Staff, would you like to explain the amendment please? [Speaker Change] Yes, ma’am. The amendment is going to change the effective date of section two which is the share pistol permit fee. It will just be changed to August 1, and apply to fees collected after that date to give them a little more time do the new fee changes. [Speaker Change] Questions or comments on the amendment, please? Seeing no hands, all in favor of the amendment say aye. All opposed no. I believed that is unanimous. Representative Collins. [Speaker Change] I really just have one question, and it’s really not about this bill. I know we have another bill that has been sent over from the Senate would actually eliminate the pistol permitting process and replace it with the instant background check that we do with all the other weapons besides handguns. So I am just wondering if that bill gets passed looks like it’s going to take out half the help we are giving them in this bill as far as extra revenue goes. [Speaker Change] Representative Collins you are right, and I certainly hope that doesn’t pass. Because I personally would rather see the permitting process go through the Sheriffs’ Association, and I have heard many comments from several Sheriffs in my area and I hope you will speak with your Sheriffs as well. But anyway, you are exactly right. [Speaker Change] On the bill, Representative Samuelson? [Speaker Change] Yes, technical question then. Based on what Representative Collins brought up, do we need to change this ?? We don’t need? [Speaker Change] ?? [Speaker Change] Okay, thank you. [Speaker Change] Representative Starnes. [Speaker Change] Thank you. I want to ask a question on the prescription drugs. I don’t understand exactly how it works when the prisoners are in the jail. Now this is a $10 co-pay. So typically you have the co-pay when you have the insurance, so I am going to assume these prisoners may or may not have insurance so is this a $10 co-pay that is supplied to the county’s insurance policy that they hold against the prisoner? [Speaker Change] Representative Starnes, I don’t, I can’t answer that. There maybe someone on the staff that may be more familiar with that particular point. I know the Sheriffs’ Association came to me to run this, to help them to offset some of their rising costs in drugs, and so I don’t know if there is someone… [Speaker Change] Senator, we have someone on staff. Heather ??, we will defer to Heather [Speaker Change] Representative Starnes, we refer, this is colloquially referred to as a co-pay, because people understand that, but it’s actually just a fee. The Sheriffs are just incurring this cost. This allows them to charge a fee to offset the cost that they are incurring on behalf of these inmates. So it’s not actually a co-pay, it’s more just a fee. [Speaker Change] Thank you. [Speaker Change] Representative Hager [Speaker Change] Thank you Madam Chairwoman. For a motion of ?? on Senate bill 368. [Speaker Change] As amended. [Speaker Change] As amended, thank you. [Speaker Change] We have enrolled into a PCS? [Speaker Change] Enrolled into a PCS. [Speaker Change] Thank you, sir. [Speaker Change] Anything else? [Speaker Change] No sir. [Speaker Change] On the motion are there further questions or discussions? All in favor will say aye. All opposed no. Senator we welcome you to join the Finance Committee anytime. [Speaker Change] Thank you very much ladies and gentlemen of the House. [Speaker Change] That’s enough. [Speaker Change] I appreciate it. [Speaker Change] Who’s going?? ?? Ask ?? to do it. Representative Hager you are up on. I am sorry I made a mistake right here. We are going to bring up one of the other Senate bills. Senate Bill 103 Amend Assessment for Infrastructure Needs, Senator Hartsell. This committee will note that we are being very kind to the Senate…

morning. Senator Hartsell, you have the floor, sir. [SPEAKER CHANGES] Noted. [LAUGHTER] Thank you, Madame Chair and members of the committee. 103 does essentially two things. One, it extends the sunset on special assessment bonding for about two years. There are a couple of projects, I know of one in particular in southern Iredell county that had been initiated but it's just a matter of trying to make sure that we can complete it. The second area is where it clarifies from definitions as to what is a majority of those who participate and how you compute that and, furthermore, what constitutes a two-thirds vote as to the number of the property assessed. So, special assessment bonds are voluntary assessments that are approved by a majority of landowners owning two-thirds of the property that would be assessed. I would commend it to you and be glad to try and answer any questions. [SPEAKER CHANGES] Questions of the committee? Representative Carney? [SPEAKER CHANGES] For a motion, when you're ready. [SPEAKER CHANGES] You're recognized, ma'am. [SPEAKER CHANGES] I move that we give Senate Bill 103 a favorable report. [SPEAKER CHANGES] You've heard the motion. Further discussion or debate? Representative Starnes? [SPEAKER CHANGES] Thank you. How does this comport with some of these local bills that we've passed, primarily in beach communities where they have assessments for canal dredging or something like that. Is this sort of similar to that or is this in addition to that. Or are those just completely separate, because I know they have to pay so much per foot on the canals. [SPEAKER CHANGES] In a sense, it's philosophically related, but it's not the same thing. Special assessment bonds in and of themselves can only be used for certain types of projects. I'm not sure that dredging is one of them, for instance. But it's having to do with...but you still voluntarily agree with the assessment. [SPEAKER CHANGES] Well, under this bill... [SPEAKER CHANGES] Representative Starnes, I believe Sandy Averett might be able to address that concern. [SPEAKER CHANGES] Yes, sir. And Senator Hartsell is correct. Assessments can be levied for the dredging, but the assessments that this bill is addressing are only for projects for which project development financing could be used. And dredging is not one of those purposes. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Further questions or concerns? We have a motion from Representative Carney to give the bill a favorable report and all in favor will say Aye. All opposed No. Senator Hartsell, who would you like to have handle your bill on the floor? [SPEAKER CHANGES] Will you? [SPEAKER CHANGES] I will. [SPEAKER CHANGES] Thank you, I appreciate it. [SPEAKER CHANGES] Members of the committee, House Bill 14 is not ready to be heard so you can pull that one off your agenda for today. Representative Hager, House Bill 476, rewrite underground damage protection act. [SPEAKER CHANGES] Thank you, Madame Chairwoman. Members of the committee, real quick this bill's in front of you for one specific reason because when we have re-looked at the process for underground prevention, we have an association, a board, that we're putting together ... [SPEAKER CHANGES] Representative Hager, if I might interrupt you. Representative Brawley moves that we have the P.C.S. before us for the purpose of discussion. All in favor will say Aye. All opposed no. You may proceed, Representative Hager. [SPEAKER CHANGES] Thank you, Madame Chairwoman. Basically, we had to have an association cost for the board to manage the system and that's why the bill is before you today. [SPEAKER CHANGES] Questions from the committee? Representative Moffitt? [SPEAKER CHANGES] Thank you, Madame Chair. I appreciate the bill's sponsor bringing this bill forward. This has been a bill in development for quite some time. I appreciate all the hard work that's gone into it, and at the appropriate time, I'd like to make a motion for a favorable report. [SPEAKER CHANGES] Representative Moffitt moves for a favorable report to the P.C.S. unfavorable to the original. All in favor will say Aye. All opposed No. I believe that's unanimous, Representative Hager. House Bill 565 I will make a notation, we do not have the physical note because of some illness from Senator ...[AUDIO ENDS]

…staff. For those who are interested that note will be available later today but if you object we will move the bill but without objection we’re going to…I didn’t see it. [SPEAKER CHANGES] Objection. [SPEAKER CHANGES] There you go. We have the exact same situation on senate bill 71, amend irrigation contractors licensing law. Notice not before us. Without objection we will proceed. Senator Tucker. Senate bill 71 [SPEAKER CHANGES] Madam Chair? [SPEAKER CHANGES] Senator Tucker. [SPEAKER CHANGES] Madam Chair? [SPEAKER CHANGES] I’m sorry I can’t, whose…? [SPEAKER CHANGES] Just for clarification was that a serious objection to 565? [SPEAKER CHANGES] We’ll know in a few minutes. Senator Tucker if you’d like to proceed, please sir on senate bill 71. [SPEAKER CHANGES] Thank you Madam Chair on senate bill 71, irrigation contractors licensing law again??. Generally everybody can hear me even the press. [laughter] [SPEAKER CHANGES] Amended irrigation contractors licensing laws senate bill 71 makes clarifying changes to the exemptions and regulations for irrigation contractors that requires continuing ed of ten hours a year. It moves the fee from $100 to $250. It’s pretty much straightforward there. No opposition to the bill and we got someone, the President of Eco Irrigation, to speak if you have any questions about irrigation. I was drilled pretty good in the other house committee that Representative Collins attended so if there are any questions I would be glad to try and answer those for you with staff and the president of Eco Irrigation. Madam Chair. [SPEAKER CHANGES] Representative Collins, you’re recognized sir. [SPEAKER CHANGES] Just like to make a motion at the appropriate time. [SPEAKER CHANGES] Well it’s the appropriate time. [SPEAKER CHANGES] Having heard this in out in detail in government committee and I get my good vote there, I’d like to make a motion for a favorable report on senate bill 71. [SPEAKER CHANGES] Your motion is accepted. Further questions, concerns, debate? Seeing none, Representative Collins moves that we give senate bill 71 a favorable report. All in favor will say aye. [SPEAKER CHANGES] Aye [SPEAKER CHANGES] All opposed no. [SPEAKER CHANGES] Thank you members of committee, Madam Chair. [SPEAKER CHANGES] Madam Chair [SPEAKER CHANGES] Representative Hollo, you’re recognized sir. [SPEAKER CHANGES] After speaking with the bill’s sponsor, I’m going to remove my objection on 565. [SPEAKER CHANGES] Are there any further objections? Seeing none. Representative Szoka you’ll present house bill 565, amend real estate appraisers laws and fees. You’re recognized Representative Szoka. [SPEAKER CHANGES] Thank you Madam Chair. The bill summary gives a very good summary. [SPEAKER CHANGES] Oh it did. [SPEAKER CHANGES] What this bill is about and rather than go through the bill summary section by section, I’m going to divide my discussion into two parts. The first part and the easiest is the sections one through six of the bill. Update North Carolina law to be in compliance with federal law and you’ll see changes in here. For example, an appraiser has to have now a bachelor’s degree instead of an associate’s degree. That’s to be in compliance with federal law. Some other things in terms of the number of years from five years to eight years, everything in sections one through six is only to be in compliance with federal law. The second part of the bill, which is a little more problematic, talks about appraisal management companies and I’m going to have to describe this a little bit and some history. I know that brevity is the topic of today. I’m going to keep as brief as possible but it’s really important that you understand how we got to where we are so that you’ll understand the intent of what this bill is trying to do. North Carolina definition of an appraisal management company is a corporation, partnerships, sole proprietorships, subsidiary unit or other business entity that utilizes an appraisal panel or fee panel and performs directly or indirectly appraisal management services. That’s the definition. So what are we talking about here? Well we’re talking about residential real estate. If you ever bought a house, you know that you have to have an appraisal. One of the perceived contributing factors to the sub-prime crash, which we’re still in the throes of, the aftermath of that was that some lenders, brokers and/or realtors put inappropriate pressure on appraisers to inflate values to make deals work and therefore close more deals. Not what in itself was illegal.

Representative: …make no mistake about that, but as a response to that, the state of NY in 2008, in a settlement with major lenders, required that lenders could not order an appraisal directly from an appraiser. Although appraisal management companies have been around since the 1950’s, this really lead to an explosion in these companies. So a lender would order an appraisal with an appraisal management company. That company would then go to an individual appraiser and get the appraiser. So the lender and the realtor could not talk directly with the appraiser himself. Speaker: Representative Samuleson you are recognized for an amendment. Representative: Thank you I would like to send forth an amendment to make a change to it and staff will explain. Representative: Yes ma’am, Representative Samuelson moves to amend the bill on page 5, line 16-21. what this does is actually remove section 7 of the bill, which allows the payment of fees by electronic means and allows the board to charge a processing fee by electronic payment. So this amendment simply removes that entire section. Speaker: The bill’s sponsor, if you would have any comment on that? Representative: Yes ma’am. I spoke with the board and they have no problem with that amendment and I do not have any problem with it. I would recommend that you vote for it. Speaker: You have the amendment before you. Further discussion or debate on the amendment? All in favor will say aye [aye], all opposed, no, [silence]. I believe that is in place. Representative – Senator, if you could wrap up now. Representative: I certainly will. The fees involved here of the establishment is to make sure an appraisal company is sufficiently capitalizing in doing their job. We have established a bond requirement of $25,000, and also, to protect small appraisers, we have established a recovery fund, which Nancy will have to pay $500 a year and up to a maximum of $400,000. Speaker: Questions? Representative Warren? Representative: To make a motion at the appropriate time. Speaker: It is the appropriate time. I will take your motion, but we will continue the debate. Representative Warren, do you want to make your motion? Representative: Well I see Representative Hager is… Speaker: You can continue. Representative: Alright. I would like to make a motion for favorable report on house bill 565 as amended. Speaker: Thank you. Representative Hager? Representative: Thank you, a question to the bill’s sponsor? Representative, it lays out a requirement to have a Bachelor’s degree in here. What would the Bachelor’s degree be in? Representative: I would need to have the appraisal board answer that. It is in compliance with federal regulation. Speaker: Senator if you would come to the microphone, give us your name and your position. Representative: Don Rodgers, executive director of the appropriate board. The AQB that sets the minimum criteria for appraisals, is in the U.S., has not made it a curriculum specific requirement; that is, it is a four year degree requirement. In the 2008 criteria upgrade, there was a criteria of a 2 year degree, an associates degree, for residential and a four year degree for general appraisers. Now, they are going to a four year degree for both. Looking forward, I would imagine that the 2025 degrees would be specific, but not at this time. Speaker: Representative Hager for follow up? Representative: I guess I am trying to understand a couple things here. How would a degree in nursing be a appraiser? Representative: That argument has been had nation wide. The degree requirement use to be, since 2008, you either had to have a degree or equivalent courses. Now, they have wiped out equivalent courses because it was hard to monitor that. So they just said, okay, everybody needs to meet a four year degree requirement. I know one of the requirements for the associates degree versus the four year degree, for residential, is why is the residential credential any less necessary to have a four year degree as the general

[Speaker changes.]...credential, which is a commercial credential so it was decided that a four year degree for both. [Speaker changes.]Last question, Madame Chairwoman? [Speaker changes.]Yes sir...???? [Speaker changes.]How many folks would this cut out of being an appraiser if you went to this four year degree? [Speaker changes.] Well, certainly it grandfathers in anybody that is already credentialed and we had been planning for this as we knew it was a federal requirement so people that are getting in the system will not be kicked out. It will only be people after 2015 that don't have a degree so it's hard to measure how many people would not apply. [Speaker changes.] Brief statement, Madame Chairwoman. Ya'know, I've generally been opposed to anything that would limit folks getting into the business, that would be a bar...a higher bar for folks being able to get into this type of business, whether...we talked about irrigation...we've talked about ya'know landscape, having to license landscape folks in the past and this, there doesn't seem to be much logical reason to have a degree that's not specified for what you're doing. So I guess what I'm sayin' is I have some concern with raising the bar on this issue. [Speaker changes.] Representative Rodney Moore? [Speaker changes.] Madame Chair, Representative Hager basically articulated some of the questions that I had so I'll pass. [Speaker changes.] Representative Starnes? [Speaker changes.] Thank you. Well, I tell ya', I don't like goin' down this road. We're in a tough economy. In my area, a lot of people have lost their job and they're lookin' for somethin' that they can do to get to go to work and they know that they have to go back to school to get skills...and what you're basically...and they turned to our community colleges as a place to get the skills that they need to get a job. And what you're doin' is basically removin' the community college option from these people who are tryin' to better themselves. Now, they might be able to go to two years to the community college, and we've already found out that because of the UNC failure to implement the articulation agreement, the credits that they take aren't transferring and so basically, you go to the community college for two years, you transfer to the four year school and none of the credits transferred towards your degree. They come in as electives so you're starting all over again so it's not another two years, it's another three years to get a degree and you go to Appalachian, Western Carolina, Carolina...wherever...you're just makin' it cost prohibitive for some of these people to be able to get a job! And this is not good. We don't wanna go to a Bachelor's Degree, we need to allow these people in this economy to go to a community college to get a degree and enable them to get a license so they can get a job. So I'm opposed to this section of the bill and I hope it's fixed. Otherwise, I'll oppose the bill. [Speaker changes.] Mister Rogers??????, would you like to address that concern of Representative Starnes. Representative Starnes, you preparing an amendment. So Representative Rogers???? [Speaker changes.] Yes, sir...Representative Starnes, I understand your concern and we've certainly heard that echoed, not just in North Carolina but nationwide. Right now, as I've said, this has been adopted by the Appraiser's Qualification Board and mandatory on states beginning in 2015. If we were not to pass this, appraisers that did not have the four year degree would not be allowed to be on the National Registry and basically taken out of most residential lending for banks, FDIC supported banks so that would be our concern for not passing it at this time. [Speaker changes.] Representative Samuelson? [Speaker changes.] Thank you, Madame Chair. May I ask him a question for clarification. [Speaker changes.] Yes, ma'am. [Speaker changes.] What I think I just heard you say is that if we don't pass this, in 2015, they won't have a job. [Speaker changes.] Well, they wouldn't be able to do the work. For those type ?????? We could possibly look at...we don't appraisers to be on the registry but we require the level of...in North Carolina, we require...we don't have a split requirement. In other words, we don't have lesser requirements to be on the registry or more requirements to be on the registry than not. The only way we could do this would be to say...we could give you some sort of license but you wouldn't be allowed to be on the registry. [Speaker changes.] Follow up. [Speaker changes.] Yes, ma'am. [Speaker changes.] So if they're not on the registry, there are certain appraisals they'd still be allowed to do but other, I think you said like National Banks and stuff...they would not....

Speaker: … allowed to do. Would they be allowed to do, like, if a community bank or another type of lender? I am hearing someone nodding there, behind me, no but… Representative: The FDIC insured would be eliminated, and that is a lot, so… it is a very….federal oversight of the appraisal business ….we are the only types of occupations that has this type of oversight and so it really does affect that we have to abide by the credential set. Representative: Madame Chair, not only FDIC, but for companies that are nondepository institutions, when they bulk up their loans and sell them, it is on the checklist of the buying institution that this, well there are many things on the checklist, but one of them is that the appraisal satisfactory does not meet their requirements. So, if a large national bank, for example, is buying loans individual or in bulk, and the appraisal does not meet their requirements, they are not going to buy that loan; therefore, the lenders that are making this nondepository are never going to use that lender to begin with. So, I go back to what the gentleman said here, whether we like it or not, and I do not like it either, it is a requirement, so if we change it, in my opinion, even if they have some type of license, they still are not going to be able to get any work. Speaker: Representative Stan? Representative: There are other kinds of appraisals they can do, like in condemnation cases, or things like that. So I would be inclined to vote for Senator Starn’s amendment because, actually, there is more real – because they have to at least have something in economics, finance, the things that relate to appraisal, whereas in the bill, as it states, there can be a Bachelor’s degree in Music. Speaker: Representative Wein? Representative: A question for the gentleman, Madam Chair. He mentioned in response to Representative Hager’s question. Folks who did not have a degree now, by 2015, would be grandfathered in. if they are grandfathered in, would they still be precluded from that one type of classification, FDIC type of appraisals or would they be grandfathered in and allowed to do that full range of type of appraisals, and if so, and we pass the amendment, that would not comply with the federal amendment until 2015, would those folks in between now and then also be grandfathered in and have that same latitude? Speaker: Mr. Rogers? Representative: The way the criteria works is that people that are already certified, whether residential or general, at whatever level they came in, whether by in 1991 with the very minimal requirements or the 2008 criteria that has some college, and the 2015, anybody prior to 2015, with the credential, would have a full credential and they could do whatever is permitted under the national registry. Beginning in 2015, which is the drop dead date, that would no longer be the case: someone could not be on the registry without a four year degree, that got their credential after that. Speaker: Follow up by Senator Warren? Senator Hager? Representative: I just got a question for the gentleman. I keep hearing this is an association requirement and then that it is a federal requirement. Is it a federal government requirement or is it qa national associations requirement? Representative: The and appraisal foundation and appraisal qualification board is allowed by congress to intercept the criteria of appraisals done for federally related transactions is what we have been discussing, so that is who has set this criteria. Representative: Is that your association that is allowed to do that? Say the name of the foundation again, sorry? Representative: It is the appraisal foundation and appraisal qualification board. Our appraisal foundation is set up to do this. Representative: Thank you , just one more question. What this doe sis takes folks, out of Rutherford County, as an example, the closest four year university to Rutherford County is an hour away and I assume a lot of your rural counties are the same way. So my people are either going to have to relocate to an area where they can get this education, or drive an hour, hour and a half, to get this education and go to class to be an appraiser in Rutherford County. Now, I am not

I'm not in agreement to pass a piece of legislation that just doesn't make sense, just because the National Association says it needs to happen. I think we have to go back to the National Association and say this doesn't make sense. Let's fix the thing, let's don't do something that's illogical in North Carolina, or wherever in the United States, and let's just fix it before it gets to this asinine requirement. [SPEAKER CHANGES] Representative Starnes [SPEAKER CHANGES] Thank you. I believe my Amendment is ready. I don't know if they were having copies passed out, but basically the Amendment will just take it back to allowing you to have the two-year degree or the associates degree from the community college, and the reason I would support this Amendment. At least it allows a person to get their two-year degree. They can get into some sort of work, and then if they choose to further their education by pursing a four-year degree, at least they have an opportunity to get some income and some experience in this field while they're working towards that four-year degree. It does no harm to the Bill, and we've still got some time, because I believe, as the gentleman said, the drop-dead date is 2015, and I have a feeling this is not a requirement passed by Congress, it's an Association rule, and rules can change in Associations as well, so let's not handicap our people by this requirement. [SPEAKER CHANGES] Representative Starnes, we're going to ask staff to read the Amendment. [SPEAKER CHANGES] Yes, ma'am. Representative Starnes moves to amend the Bill on Page 1 Line 33 by re-writing the line to read (a) hold an associates degree or higher from an. So, basically, it eliminates the red lining on Line 33 and eliminates the new requirement for a bachelor's degree. [SPEAKER CHANGES] Representative Samuelson. [SPEAKER CHANGES] Thank you, Madam Chair. I just want to ask a question. I agree with you. [SPEAKER CHANGES] On the Amendment, please. [SPEAKER CHANGES] Yes, on the Amendment. I agree with the intent of the Amendment. I want to make sure that the impact--so if we pass this they'll still be able to be licensed in North Carolina, but when they are being selected to do jobs, jobs that are with FDIC institutions they will not be eligible for, but jobs for things like what Representative Stam brought up, they would still be available for, but they would still be able to be licensed. [SPEAKER CHANGES] Right now, just to give you an idea of how this would work is we don't require people to be on the National Registry and therefore be eligible for these jobs as we discussed. It would kind of take the option out of their hands and just say you could not be on the National Registry if you did not meet this minimum criteria. It would put a check that we would have to monitor, but that would be the thing there. I will just say, as far as getting into the profession, to be a trainee in the present profession you do not yet have to have the degree, you can just get it by the time you upgrade. [SPEAKER CHANGES] Representative Stam [SPEAKER CHANGES] A question about the Amendment. Does it restore the structure language on Lines 34 to 36 to require a certain number of hours, and would also apply on Page 2; Lines 26 to 33 were the same issue. [SPEAKER CHANGES] Staff? [SPEAKER CHANGES] Thank you, Representative Stam. It should apply. You are correct. I should go back and correct Lines 34 and 36 on Page 1, but Lines 26 through 33, that is a different issue. That is for general real estate appraisers who already have a bachelor's degree requirement. If you would like an amendment to put their education requirements back in. Right now, this amendment is addressing the certified residential real estate appraisers. There are two categories. [SPEAKER CHANGES] I am going to displace the Amendment until we can get it perfected for just a minute. Representative Jones, are you on the Amendment, sir? [SPEAKER CHANGES] Yes, ma'am, I know you're displacing it, but if I could be recognized just briefly. I had the same concern as Representative Stam, and I would just mention that the entire Section A also carries over to the first four lines of Page 2, and my concern was that the entire section be included, and not just Line 33. [SPEAKER CHANGES] Thank you, sir. Representative Brawley? [SPEAKER CHANGES] Madam Chair, I'm somewhat floored by the whole thing, but essentially what I think we're being told is that some appointed association board, nationally, is coming in and telling the state of North Carolina's elected representatives that we must pass a law to enforce their rules, and to me it seems kind of backwards. I thought it was the elected representatives' duty to set what the laws would be, and I hope the Amendment will help, but I'm wondering if we should just...

No people will ensure that became the manager that all the allegations Madison Square at the I-five association are labour union became a while to the all girl while I am going is what we must pay a flannel that people can be able to handle state-financed by an Editor Alan Downie likely that the delay line acumen of July get a smooth in incline haunt the German from the association's all the staff harder than he would be so kind as to collect the other one, from one's role model for the young players off and Asian people working in this complication NEC has child of the law is upheld by the lives back harmless there is room for one of appraisal for him and employees and an appraisal of the K kids in while some may incline with he is does not rule out the walls making organisation exactly like the powers that be ordered the you are firmly in an executive agency issue role for the one appear that the U.S. car lifted the it review body to the(SPEAKER CHANGES) I arrived walls a the that's the case at the made by Mr. Clive and plant that will have a year for striders would you like your entire life I lead a life that Alan I don't know exactly on one person is this the decline after a lifetime of December was then there's the end of the Carly will also open to the tower hill a conventional values 9011 so QC and then, as the by law $18,000,000 total population of one of the local managers are there to be far better if there were waved away with a the local although there is a on one of the but the rebels subcommittee which will open on the related to the alliance that will combine with the idea by the publications everything so that@work on that the by election challenge the other hand over power enamel has and speak number of them all to question Mr. Rochester farm in advance to correct the although he believes that we are being are regulations which will if wallflower past usually do any work now here we go change your child does that mean that the appraisal association and mortar while a is for Italy useless to the in the are C -of the interaction and one to watch what we have to do is to allow people but now that it is seeking to continue to be on the registry so would be planted access to the registry for the people they don't have a degree requirements and that would be the star when he was manager of down and in a lot we can keep the what the registry I if we have fallen have a simple been already figure out why do we get the hell child in bowling (SPEAKER CHANGES) R until then applauded the old child morning IN and identify the NIN and there are confined to end up with all my imagination lot of July winning margin to child and family, and then there envelope they can have a he had no doubt that he had violent and make it child°don't mind that many to pay and other notion of public or child where the ways in jail than an hour and a mother for the coming from nine hotspur all 5¢ each way value is still ensure the showed me a whole one of the NATO would hold that dollar question firm and one there were no worse than an elementary 1 November sales 1,000,000 the NASDAQ that this is done in and out of the older girl is quite simply 8841 trades on your is only one of Norfolk to IRUU otherwise there was speculation on easily 90 Mr. Nigel Y9521 41 of channel warehousing for a large assembly points and a short duration twice the price of one or other bizarre the bill well they have not ??............

...there's no more room for them to expand. It's the largest port on the east coast and we've all heard Governor McCrory over and over again speak specifically in his messaging about north eastern North Carolina and this Port of Norfolk being critical to the expansion of jobs in this region that so desperately needs it. So that's basically what this does -- is to create an arrangement where we can combine and utilize the port of Norfolk and they can utilize us to further create jobs. Well, further create jobs. I won't use the word further—to create jobs in north eastern North Carolina where they are desperately needed. So, I'll entertain any questions. [SPEAKER CHANGES] Are there questions from the committee, Representative Tine? [SPEAKER CHANGES] Thank you, madam chairman. At the appropriate time, I'd like to make a motion for a favorable report. [SPEAKER CHANGES] I have a motion for a favorable report on House Bill 563. Are there other questions or concerns? Representative Starnes. [SPEAKER CHANGES] You gon' have to jog my memory because I did hear this in commerce, but tell me again what is the definition of a corporate municipal instrumentality. [SPEAKER CHANGES] I'll refer to staff on that for the technical definition. Greg. [SPEAKER CHANGES] Greg Rooney. [SPEAKER CHANGES] Representative Starnes, I'm not sure. That was the language that was [inaudible]?? So, when the bill came to me, I assumed the purpose was to allow municipality across state lines, but I did not participate in how those words were picked. [SPEAKER CHANGES] Representative Steinburg. [SPEAKER CHANGES] Representative Starnes, in creating the language for this bill. These were the essential terms that were needed. They were requested also by the port of Norfolk to make it easier to work with us. They said that this is the language they needed. Those folks in drafting agreed that this was the language that was needed. So, that's the language that is there, but I don't think it anything to be overly concerned about. [SPEAKER CHANGES] Well, follow it up. [SPEAKER CHANGES] Follow-up? [SPEAKER CHANGES] Well, I'm not concerned when you can tell me what is, but when they say they don't know what a corporate municipal instrumentality is that just makes me wonder. [SPEAKER CHANGES] Greg Rooney -- Jay Koen, sir, you're recognized too. [SPEAKER CHANGES] The general definition of a city or an authority would be a municipal corporation. So, corporate municipal instrumentality of one or more state. One state might be the Norfolk Port Authority. Two or more states might be the Port Authority of New York and New Jersey, which is two states or if we had some interstate agreement between North Carolina and Virginia-- [SPEAKER CHANGES] For the bill sponsor, Representative Steinburg. I noticed that you would be exempting tangible property from personal property tax and local property tax. Do you have the agreement of the local municipalities to be giving up this revenue? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Are you looking for state funding for this? [SPEAKER CHANGES] No. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] I have a motion to give the bill a favorable report from Representative Tine. All in favor will say aye. [pause] [SPEAKER CHANGES] Aye. [chorus] [SPEAKER CHANGES] All opposed no. [pause] [silence] [SPEAKER CHANGES] Thank you committee. Thank you madam chairman. [SPEAKER CHANGES] You're welcome. Representative Murray on House Bill 680. I believe we have a technical amendment. Representative Brawley moves that we have the PCS for the purpose of discussion --Representative Moffit is recognized for a technical amendment before we begin. [SPEAKER CHANGES] Thank you madam chair. I'd like to send for that amendment and, if you could, allow Miss Griffin to explain it. [SPEAKER CHANGES] Miss Griffin, would you address the amendment. [SPEAKER CHANGES] Sure. This is a technical amendment related to the effective date. The amendment amends on page 7. You can see there's another effective date in section 4 and this just puts in the words “accepts as otherwise provided” in section 5 to point out that there's...

of active days. [SPEAKER CHANGES] On the amendment. Representative Moffitt moves that we give the amendment a favorable report. All in favor will say aye. All opposed no. I believe you’re ready to start now Representative Murry. [SPEAKER CHANGES] Thank you Madam Chairman. This bill allows the Secretary of State to [SPEAKER CHANGES] I’m gonna have to stop you just a second Representative Murry. Representative ?? [SPEAKER CHANGES] It may be that I’m overlooking it, but I do not see a Bill explanation on 680. It’s on the second one? Thank you. [SPEAKER CHANGES] Third time’s a charm. [SPEAKER CHANGES] Thank you Madame Chairman. The proposed committee substitute for House Bill 680 would allow North Carolina companies to sell $1 million and in some limited cases $2 million of unregistered securities to North Carolina residents. The Secretary of State is authorized a charge a non-refundable filing fee of $150 for filing a notice for this unregistered security. This is limited to North Carolina offerings, for North Carolina individuals, for North Carolina businesses. Congressman McHenry has sponsored federal legislation for this and currently the Securities and Exchange Commission is promulgating rules which is why you see this being, this will expire, this limited exception will expire 2017 I believe. I believe that’s correct. So this is a limited exception so that our small businesses can raise capital from friends and family and small dollars, we’re talking $2000 investments and a $1 million and less in offerings. So this is a way we can get our small businesses capitalized and growing and creating jobs. We got a lot of hurting people out there that are trying to entrepreneurs and this a way they can raise capital and create jobs. I’ll be glad to answer any questions. [SPEAKER CHANGES] Questions from the committee. Representative Brawley. [SPEAKER CHANGES] Yes. Representative Murry there’s currently a law on the books that allows up to $1 million, but has different underwriting criteria. Is that correct? [SPEAKER CHANGES] I’m not familiar with, I know what you’re talking about. What this deals with is entrust state. I think what you’re dealing with may be discussing deals with offerings from out of state offerings. This is limited to entrust state offerings where only North Carolina residents can contribute to this offering, only North Carolina businesses can ask. It’s limited in scope as well, you have to raise the money in a certain time frame. It’s very limited. It’s very limited in scope. [SPEAKER CHANGES] Representative Hall. [SPEAKER CHANGES] Quick question for the bill sponsor’s staff. Do we have anybody from the Secretary of State’s office or the Treasurer’s office? If so, have they provided us an opinion on this. [SPEAKER CHANGES] The Secretary of State’s Office, I’ve worked with the Securities Division Dave Massey in the Securities Division at the Secretary of State’s office heavily on this. Mike Arnold is here and he will attest to the fact that we have been in complete consultation. They’re ready to go to promulgate regs so that this thing can take off and we don’t get bogged down like the federal governments is getting bogged down right now in the federal exemption. I don’t care if Mike wants to speak. He’s here. [SPEAKER CHANGES] I don’t believe it’s necessary. [SPEAKER CHANGES] One quick follow-up though. Is this going to require any additional work or resources from the Secretary of State’s office and have we provided for that budgetarily or otherwise? [SPEAKER CHANGES] That’s the fee. The $150 fee will, the limited, they have the ability to collect this information already. It’s a simple form they’ve got to create, some modest regulations. They’re ready to go. I will publicly say in front of anybody who cares the Secretary of State’s office has really been extremely helpful in developing this legislation, especially the securities division. I’d like to publicly thank Dave Massey and Mark Arnold for their hard work on this. [SPEAKER CHANGES] Representative Waddell. [SPEAKER CHANGES] Thank you Madam Chair. Just a question for the bill’s sponsor. [SPEAKER CHANGES] You’re recognized sir. [SPEAKER CHANGES] Representative Murry it’s just been I appreciate the fact you’re trying to do some things to try to jumpstart some, make some investments in North Carolina. My concern is out of this maybe that the investor bears the whole risk for this adventure that they’re gonna go on. I’m worried about some of our senior citizens in the state of North Carolina taking some of their hard earned dollars and seeing an investment and maybe not understanding the risk involved in all of this. I wondered if you could give me a couple of comments. [SPEAKER CHANGES] [SPEAKER CHANGES] First the risk is limited to $2,000. They can not invest more than one $2,000 investment

[Speaker changes.]...this offering. Secondly, the funds are held in escrow until a certain threshold amount is reached...and so it could..the person that..the entity that's trying to raise this capital can't expend it until they raised a certain threshold. It's kept in escrow until that threshold is hit and, further more, any expenditures based on that capital that they've raised has to be limited in purpose to the business plan that the entity has promulgated in order to get this exemption. So there's a host of hoops that these entities have to apply for essentially for this exemption with the Secretary of State's Office. Other countries have been doing this sort of "crowdfunding" process for many years and they're...generally what happens is...we call this crowdfunding for a reason...because the crowd is monitoring and the crowd has "outed" fraud faster than the government can because they know when their...they see some odd things going on and that helps the government out when they're lookin' at spurious investments...and so, I think this is a good way to use our "grassroots capacity" here in our state to get small dollar investments for our small businesses and I think the...this is just another tool in the toolbox for our small businesses to grow. [Speaker changes.] Representative Moffitt. [Speaker changes.] I thank you, Madame Chair. I'd like to thank the bill's sponsor for bringing this opportunity to our state. Watchin' the bill develop through the process, a tremendous amount of work went into this...to develop this bill in concert with Secretary of State's Office. With that being said, with all the protections built into the bill itself, there are probably more protections than it is for the average person investing in blue chip stocks on the New York Stock Exchange. I would move for a favorable report to the PCS as amended relative to the new committee substitute, unfavorable to the original bill. [Speaker changes.] I accept that motion. Representative Wells? [Speaker changes.] I'd like to thank the sponsor as well. We spent a considerable amount of time around here talking about creating opportunities for people to find jobs. This is an op...I've been through a number of private placements. Those are very exclusive investments. This is an opportunity for the same folks that are struggling to find jobs to make a small investment in the future...and it's a new opportunity. I think this is largely a generational issue, some of those that are my age would probably not quite understand. A lot of this is done on the internet but I know my kids support this kind of thing and we need to be doin' it if we're going to move into the future and we're going to built this economy. (INAUDIBLE) [Speaker changes.] Thank you Representative Wells. [Speaker changes.] Representative Stone? [Speaker changes.] Thank you, Madame Chair...and Representative Murry for your hard work. No doubt you spent a lot of time on this...I have a lot of concern with this bill. I'll give you an example...I've talked to a couple individuals...one individual was communicatin' about a restaurant that had 8% returns a year and he was tryin' to expand. And I encouraged him to..if he had 8% returns, doin' the volume that he was doin', I couldn't foresee why anybody wouldn't give him a loan but...also am concerned about the $2000 mark. This is dramatically goin' to target certain groups ...of course, anyone can invest in it, we know that, but you and I both know rich people aren't gonna do this. The ??????? of $2000 limits the opportunity of how much they can make. This is gonna' target a certain group that's gonna be vulnerable in the same way that you talk about small loans. Where can you only go and get a $2000 loan? So it brings a lot of questions to the mind of who we're targeting. It may be the future. I'm very skeptical of it. As I said before, I have a lot of concerns of what we're tryin' to accomplish but, you know, there's simply no protection in this bill for some of these consumers...so I'm very concerned and I don't know that I could support this bill. [Speaker changes.] Representative Collins. [Speaker changes.] Well, I'm gonna' speak in direct contravention to what my friend just stated. Being a financial person, I was lookin' for the disclaimers on this, especially bein' an unregistered security, and I noticed that it has similar, or perhaps even a little bit stronger, disclaimers than the products I sell which, most of 'em are registered. On the bill's summary, right at the bottom, it says "the issuer shall require each purchaser to certify in writing that the purchaser understands and acknowledges that the securities are a high-risk, speculative business venture that no state or federal governmental authority has reviewed offering, that the securities are illiquid and the purchaser may be subject to tax on shares of the taxable income and losses of the company" whether you sell 'em or not. So that's pretty stron...

on set of disclaimers that a person have to sign before they could put two thousand dollars in this, so that makes me feel pretty good about the fact that the person's going to know what they are in there for. [speaker changes] we have a proper nation before us to give this bill a favorable report and favorable to the original, are there any other.......... merchant Brawley [speaker change] thank you madame sherin, i apologize, i thought you already reconized me, for questions for the bills sponser, and it relates to the eliqulity, what is the exit stradegy for people investing this? how do you ever get your money out if there be no market for these securities. [speaker changes] if the entity does not reach it's goal, then it's held in escorone and returned back to the original investor. and so there are limitaions on the escorone entity legislation and there's limitations on what can be done with the funds up until a certain threshold amount that the company raises. [speaker changes] let me ask my question in another way, do we assume the really successful organizations that the securities convert lighter to a register security to where there would be a market? or we assuming that you just end of owning a piece of the business forever? [speaker changes] sometimes they will convert and sometimes it will just be an undership statement, [speaker changes] Thank you [speaker changes] i would like to say madame sherin, this idea came from a constituate. this is an example of how legislation should work, I've got a constituate who's brought this idea to me that i didn't know what crowd funding was, and constituate brought this idea to me, linked me up with national crowd funding experts that help get the legislation passed in congress, this legislation has passed in kansas and georgia, and i expect other states to follow suit, and i would like to see north carolina on the front end of this and ill appreciate your support. [speaker changes] miss. Samuelson [speaker changes] actually representative collins said much of what i said so im fine thank you [speaker changes] no further hands? have the proper motion before us, all in favor in rule say aye.... [house] aye [speaker changes] all oppose say no... [house] no [speaker changes] i believe the ayes have it, the ayes do have it, the bill passes, ?????????, ?????274, ladies and gentleman this is for the purpose of discussion only. [speaker changes] thank you madame shermin and members of the committee. this is a bill and an idea that has been around a long time, as similar bill to this passed the house back in 1995, with i think ninety three votes. It's been through government but it still has a way to go, and i will say this, there is a task force appointed by representative starn, the majority leader and his infinite wisdom shared by representative stam, so that group will continue to look at this and possibly make some changes as it moves forward. It's really a very simple concept, it restricts the future growth in state spending to physical growth factor which is determined by adding the rate of inflation plus the growth of population, the rate of inflation is the, and population are using the three year adverage under this bill now. the base here for this bill, we have been in some tight physical times. the base year according to this bill will start with the physical year that begins on July first, 2015 so there are still two more physical years to go before that base is more or less locked in under the bill. I guess the gravoman of the bill is that the general assembly and the governor and it's propose budget are locked in to not exceeding for the general fund, that that base plus the physical growth factor. Any ammounts of revenue collected by the state under our tax system will go into a emergency reserve trust fund up to under this bill five percent. Perhaps that figure needs to be somewhat higher and we'll take a look at that, to expend funds out of that emergency fund would require a two-thirds vote of the general assembly. Now it's the intent of that fund to be used, one if there is a shortfall which we've seen in the last few years we had that situation

…the Director of the Budget is empowered to use those funds in that account to meet the State’s General Fund obligations without further vote of the General Assembly. The second use of that fund would be only with a two-thirds vote if there were some sort of emergency such as a Hurricane Fran, some sort of natural disaster, or some emergency. Whether that vote should be two-thirds or not is something this committee will look at. I believe that in the event of some sort of state emergency, or weather event, or maybe terrorist attack, who knows, I don’t think two-thirds would be that high of a threshold to meet. I think a member would be hard-put to overlook the suffering of our citizens. One other thing that we’ll probably take a look at. This draft of the bill came out before the tax reform efforts got really underway in this General Assembly and the draft as it is right now says that any excess collected over the five percent will be returned to the taxpayers. I think we’re looking at giving the taxpayers significant relief now so we may look at changing that to allow the use of funds for something like bolstering the State Retirement Fund. We haven’t really addressed that this General Assembly or the last. The fund, the Retirement looks good if the assumption is made that the treasurer can return 7.25 percent year after year on our current funds, and I think there’s considerable doubt as to whether that can be achieved. We may well have the need for funds to meet our obligations under our pension plan and I don’t think we want to constrict ourselves too much through this if we have some outside need of funds that isn’t anticipated currently in an official capacity. I think that pretty much covers the gravamen of the bill. There is in this bill as there is in a bill Representative Stam has filed separately also the requirement that when the governor prepares his budget he cannot exceed last year’s, the prior year’s actual collections. The committee will look at whether that will run in a separate bill or not. I believe so. That might come out of this bill. This would require a constitutional amendment. If we didn’t put something in the constitution of course, any General Assembly that wants to spend more could simply just repeal the law or ignore the law and move forward. So, this will be put to the people. This bill is looking at the 2014 general election ballot. This is something that the public will be brought in on. I would just say that it’s needed. It doesn’t seem so right now because we’ve had some lean budget years but many of us were here when we had large surpluses. The argument can be made that one reason we’re in these tough budget situations is that we just got used to a billion to a billion-and-a-half extra revenue every year and that raised our base line and once we hit the wall with the financial crisis of 2008 having gotten used to a revenue base that’s growing like this it was hard to get used to one that was flat-lined. So, the idea behind this bill is to keep that from ever happening again. If we keep our growth restrained in the good years, we won’t face the bad years. [SPEAKER CHANGES] Mr. Blust. [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] Thank you, Mr. Blust. Without other business before us we stand adjourned.