GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2011

 

 

SESSION LAW 2011-395

HOUSE BILL 344

 

 

AN ACT TO ALLOW AN INDIVIDUAL INCOME TAX CREDIT FOR children with disabilities who require special education AND TO CREATE A FUND FOR SPECIAL EDUCATION AND RELATED SERVICES.

 

The General Assembly of North Carolina enacts:

 

SECTION 1.  Part 2 of Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:

" 105-151.33.  Education expenses credit.

(a)        Credit. - A taxpayer is allowed a credit against the tax imposed by this Part for each of the taxpayer's eligible dependent children who is a resident of this State and who for one or two semesters during the taxable year is enrolled in grades kindergarten through 12 in a nonpublic school or in a public school at which tuition is charged in accordance with G.S. 115C-366.1. As used in this section, the term 'eligible dependent child' means a child who meets all of the following criteria:

(1)        Is a child with a disability as defined by G.S. 115C-106.3(1).

(2)        Was determined to require an individualized education program as defined by G.S. 115C-106.3(8).

(3)        Receives special education or related services on a daily basis.

(4)        Is a child for whom the taxpayer is entitled to deduct a personal exemption under section 151(c) of the Code for the taxable year.

For the initial eligibility for the tax credit, for at least the preceding two semesters, the eligible dependent child shall have been either (i) enrolled in a public school or (ii) receiving special education or related services through the public schools as a preschool child with a disability as defined by G.S. 115C-106.3(17). An eligible dependent child shall be reevaluated every three years by the local educational agency in order to verify that the child continues to be a child with a disability as defined by G.S. 115C-106.3(1).

(b)        Amount. - The credit is equal to the amount the taxpayer paid for tuition and special education and related services expenses, not to exceed three thousand dollars ($3,000) per semester. For home schools, as defined in G.S. 115C-563(a), the credit is equal to the amount the taxpayer paid for special education and related services expenses, not to exceed three thousand dollars ($3,000) per semester.

(c)        Semesters. - For the purposes of this section, there are two semesters during each taxable year. The spring semester is the first six months of the taxable year, and the fall semester is the second six months of the taxable year. An eligible dependent child is enrolled in a school for a semester if the eligible dependent child is enrolled in that school for more than 70 days during that semester.

(d)        Disqualification. - A taxpayer may not qualify for a credit for any semester during which the taxpayer's eligible dependent child for whom the credit would otherwise be claimed met any of the following conditions:

(1)        Was placed in a nonpublic school or facility by a public agency at public expense.

(2)        Spent any time enrolled as a full-time student taking at least 12 hours of academic credit in a postsecondary educational institution.

(3)        Was 22 years or older during the entire semester.

(4)        Graduated from high school prior to the end of the semester.

(e)        Reduction of Credit. - The amount of the credit is reduced for any semester in which the eligible dependent child spent any time enrolled in a public school. The amount of the reduction is a percentage equal to the percentage of the semester that the eligible dependent child spent enrolled in a public school.

(f)         Information. - In order to claim the credit allowed by this section, the taxpayer shall provide, when requested, the following to the Secretary:

(1)        The name, address, and social security number of each eligible dependent child for whom the credit is claimed and the name and address of the school or schools in which the eligible dependent child was enrolled for more than 70 days each semester.

(2)        The taxpayer's certification that the eligible dependent child did not meet any of the disqualifying conditions set out in this section.

(3)        The name of the local school administrative unit in which the eligible dependent child resides.

(4)        The amount of tuition paid to a public school at which tuition is charged in accordance with G.S. 115C-366.1 for each semester the eligible dependent child for whom the credit is claimed was enrolled in the school.

(5)        The eligibility determination that the eligible dependent child is a child with a disability who requires special education and related services.

(6)        A listing of the tuition and special education and related services expenses on which the amount of the credit is based.

(7)        For home schools as defined in G.S. 115C-563(a), a listing of the special education and related services expenses on which the amount of the credit is based.

(g)        Carryforward. - The credit allowed under this section may not exceed the amount of tax imposed by this Part reduced by the sum of all credits allowed against the tax, except payments of tax made by or on behalf of the taxpayer. Any unused portion of the credit may be carried forward for the succeeding three years.

(h)        Transfer. - At the end of each fiscal year, the Secretary shall transfer to the Fund for Special Education and Related Services established under G.S. 115C-472.15 from the net individual income tax collections under G.S. 105-134.2 an amount equal to two thousand dollars ($2,000) multiplied by the number of credits taken under this section during the fiscal year.

(i)         Definitions. - The following definitions apply in this section:

(1)        "Special education" means specially designed instruction to meet the unique needs of a child with a disability. The term includes instruction in physical education and instruction conducted in a classroom, the home, a hospital, or institution, and other settings.

(2)        "Related services" is as defined in The Individuals with Disabilities Education Improvement Act, 20 U.S.C. 1400, et seq., (2004), as amended, and federal regulations adopted under this act."

SECTION 2.  G.S. 105-151.33(a), as enacted by Section 1 of this act, reads as rewritten:

"(a)       Credit. - A taxpayer is allowed a credit against the tax imposed by this Part for each of the taxpayer's eligible dependent children who is a resident of this State and who for one or two semesters during the taxable year, is enrolled in grades kindergarten through 12 in a nonpublic school or in a public school at which tuition is charged in accordance with G.S. 115C-366.1. As used in this section, the term 'eligible dependent child' means a child who meets all of the following criteria:

(1)        Is a child with a disability as defined by G.S. 115C-106.3(1).

(2)        Was determined to require an individualized education program as defined by G.S. 115C-106.3(8).

(3)        Receives special education or related services on a daily basis.

(4)        Is a child for whom the taxpayer is entitled to deduct a personal exemption under section 151(c) of the Code for the taxable year.

For the initial eligibility for the tax credit, for at least the preceding two semesters, semester, the eligible dependent child shall have been either: (i) enrolled in a public school, or (ii) receiving special education or related services through the public schools as a preschool child with a disability as defined by G.S. 115C-106.3(17). An eligible dependent child shall be reevaluated every three years by the local educational agency in order to verify that the child continues to be a child with a disability as defined by G.S. 115C-106.3(1)."

SECTION 3.  Chapter 115C of the General Statutes is amended by adding a new Article to read:

"Article 32D.

"Fund for Special Education and Related Services.

" 115C-472.15.  Fund for Special Education and Related Services.

(a)        The Fund for Special Education and Related Services is established as a special revenue fund under the control and direction of the State Board of Education. Interest and other investment income earned by the Fund accrue to it, and revenue in the Fund does not revert. The Fund consists of money credited to it under G.S. 105-151.33.

(b)        The State Board of Education shall use the revenue in the Fund only for special educational and related services for children with disabilities. In addition, the State Board of Education shall use revenues in the Fund to reimburse local educational agencies for conducting reevaluations for continued eligibility and developing revised individualized education programs pursuant to G.S. 105-151.33(a)(1)."

SECTION 4.  The Department of Revenue shall report to the Revenue Laws Study Committee and the Joint Legislative Education Oversight Committee on the administration of G.S. 105-151.33, as enacted by Section 1 of this act.  The report is due by October 1, 2013, and shall include the following:

(1)        The number and amount of credits taken under G.S. 105-151.33.

(2)        Any concerns relating to the administration of G.S. 105-151.33 or taxpayer compliance with the requirements of that section.

(3)        Any other matter with respect to G.S. 105-151.33 the Department wishes to address.

SECTION 4A.  If House Bill 200, 2011 Regular Session, becomes law, then Section 2.1 of that act reads as rewritten:

"SECTION 2.1. Appropriations from the General Fund of the State for the maintenance of the State departments, institutions, and agencies, and for other purposes as enumerated, are made for the fiscal biennium ending June 30, 2013, according to the following schedule:

 

Current Operations - General Fund                                          2011-2012                2012-2013

 

EDUCATION

 

Community Colleges System Office                                       $      985,000,000     $      985,000,000

 

Department of Public Instruction                                                7,464,492,057          7,450,000,000                                       7,444,122,100

 

University of North Carolina - Board of Governors

      Appalachian State University                                                   145,563,319             145,680,676

      East Carolina University

            Academic Affairs                                                              247,397,807             247,397,807

            Health Affairs                                                                     65,196,439               65,196,439

      Elizabeth City State University                                                   38,226,042               38,398,361

      Fayetteville State University                                                      56,925,951               56,925,951

      NC A&T State University                                                       105,355,805             105,794,754

      NC Central University                                                              94,342,683               94,342,683

      NC State University

            Academic Affairs                                                              434,563,241             434,677,423

            Agricultural Research                                                          59,239,461               59,239,461

            Agricultural Extension                                                         43,539,609               43,539,609

      UNC-Asheville                                                                         42,004,444               42,004,444

      UNC-Chapel Hill

            Academic Affairs                                                              309,481,584             312,843,120

            Health Affairs                                                                   219,507,009             222,570,732

            AHEC                                                                                49,747,851               49,747,851

      UNC-Charlotte                                                                      216,455,073             217,471,216

      UNC-Greensboro                                                                  173,180,926             173,180,926

      UNC-Pembroke                                                                      61,534,005               62,277,254

      UNC-School of the Arts                                                           27,796,473               27,796,473

      UNC-Wilmington                                                                   105,943,181             107,138,757

      Western Carolina University                                                      90,591,556               91,070,460

      Winston-Salem State University                                                76,496,951               76,496,950

      General Administration                                                              38,186,863               27,628,722

            University Institution Programs                                         (375,153,400)           (383,808,914)

      Related Educational Programs                                                   85,679,060             115,272,420

      UNC Financial Aid Private Colleges                                         91,635,664               86,534,065

      NC School of Science & Math                                                 18,937,535               18,937,535

      UNC Hospitals                                                                         18,000,000               18,000,000

Total University of North Carolina -

      Board of Governors                                                       $    2,540,375,132    $    2,551,672,698

 

HEALTH AND HUMAN SERVICES

 

Department of Health and Human Services

      Division of Central Management and Support                  $        50,177,377     $        44,577,987

      Division of Aging and Adult Services                                         37,019,667               37,019,667

      Division of Services for Blind/Deaf/Hard of Hearing                     8,389,110                 8,372,886

      Division of Child Development                                                266,102,933             266,102,933

      Division of Health Service Regulation                                        16,133,031               16,133,031

      Division of Medical Assistance                                             2,958,388,184          2,907,276,302

      Division of Mental Health,

            Developmental Disabilities, and

            Substance Abuse Services                                                665,712,232             710,712,232

      NC Health Choice                                                                    79,452,317               83,717,865

      Division of Public Health                                                         190,443,245             157,538,834

      Division of Social Services                                                      186,183,068             186,183,068

      Division of Vocational Rehabilitation                                          37,125,788               37,528,128

Total Health and Human Services                                         $    4,495,126,952    $    4,455,162,933

 

NATURAL AND ECONOMIC RESOURCES

 

Department of Agriculture and Consumer Services                $        65,460,864     $        62,198,634

 

Department of Commerce

      Commerce                                                                               50,852,340               33,250,463

      Commerce State-Aid                                                                32,851,025               30,151,984

      NC Biotechnology Center                                                         17,551,710               17,551,710

      Rural Economic Development Center                                        25,376,729               25,376,729

 

Department of Environment and Natural Resources                       165,784,887             148,148,105

 

DENR Clean Water Management Trust Fund                                 11,250,000               11,250,000

 

Department of Labor                                                                      15,836,887               15,836,887

 

Wildlife Resources Commission                                                      18,000,000               17,221,179

 

JUSTICE AND PUBLIC SAFETY

 

Department of Correction                                                    $    1,337,816,346    $    1,348,410,793

 

Department of Crime Control and Public Safety                            225,258,795             215,164,518

 

Judicial Department                                                                      438,920,048             435,141,107

Judicial Department - Indigent Defense                                         110,091,526             112,748,733

 

Department of Justice                                                                     80,704,013               80,864,138

 

Department of Juvenile Justice and Delinquency Prevention            135,593,692             131,140,565

 

GENERAL GOVERNMENT

 

Department of Administration                                                 $       63,607,330     $        65,511,460

 

Department of State Auditor                                                           11,857,574               10,676,035

 

Office of State Controller                                                                28,368,957               28,368,957

 

Department of Cultural Resources

      Cultural Resources                                                                    63,524,857               61,697,001

      Roanoke Island Commission                                                       1,805,236                 1,203,491

 

State Board of Elections                                                                   5,186,603                 5,126,603

 

General Assembly                                                                           53,259,495               50,104,208

 

Office of the Governor

      Office of the Governor                                                                4,741,157                 4,741,157

      Office of State Budget and Management                                     5,848,663                 5,848,663

      OSBM - Reserve for Special Appropriations                              1,940,612                    440,612

      Housing Finance Agency                                                             9,673,051                 9,673,051

 

Department of Insurance

      Insurance                                                                                  36,393,921               36,393,921

      Insurance - Volunteer Safety Workers' Compensation                2,294,000                 2,623,654

 

Office of Lieutenant Governor                                                              695,324                    695,324

 

Office of Administrative Hearings                                                      4,983,871                 4,983,871

 

Department of Revenue                                                                  78,199,538               78,199,538

 

Department of Secretary of State                                                    10,654,563               10,654,563

 

Department of State Treasurer

      State Treasurer                                                                           6,657,031                 6,621,750

      State Treasurer -

            Retirement for Fire and Rescue Squad Workers                  17,812,114               17,812,114

 

RESERVES, ADJUSTMENTS, AND DEBT SERVICE

 

Contingency and Emergency Fund                                          $        5,000,000       $        5,000,000

 

State Retirement System Contribution                                           248,100,000             336,000,000

 

Judicial Retirement System Contribution                                            6,800,000                 7,800,000

 

Firemen's & Rescue Squad Workers' Pension Fund                          4,318,042                 5,366,928

 

State Health Plan                                                                              7,119,541             102,151,104

 

Information Technology Fund                                                            4,458,142                 6,158,142

 

Reserve for Job Development Investment Grants (JDIG)                 15,400,000               27,400,000

 

Continuation Review Reserve                                                                          0               35,576,758

 

Comprehensive Review of Compensation Plans                                 2,000,000                               0

 

Compensation Adjustment and Performance Pay Reserve                               0             121,105,840

 

Severance Expenditure Reserve                                                      69,000,000                               0

 

Automated Fraud Detection Development                                         1,000,000                 7,000,000

 

Controller - Fraud Detection Development                                          500,000                    500,000

 

Debt Service

      General Debt Service                                                              688,957,188             759,984,974

      Federal Reimbursement                                                              1,616,380                 1,616,380

 

TOTAL CURRENT OPERATIONS -

      GENERAL FUND                                                       $ 19,678,116,193     $ 19,943,327,275                                       $ 19,937,449,375"

 

SECTION 5.(a)  If House Bill 200, 2011 Regular Session, becomes law, then Section 2.2(a) of that act reads as rewritten:

"SECTION 2.2(a)  The General Fund availability used in developing the 2011-2013 biennial budget is shown below.

                                                                                                  FY 2011-2012          FY 2012-2013

Unappropriated Balance Remaining                                      $                         0     $        13,980,015

Ending Unreserved Fund Balance for FY 2009-2010                    236,902,394                               0

Anticipated Reversions for FY 2010-2011                                    537,740,799                               0

Anticipated Over-collections from FY 2010-2011                        180,800,000                               0

Repayment of Medicaid Receipts in FY 2010-2011                     (125,000,000)                              0

 

Statutory Earmarks:             

      Savings Reserve Account                                                      (185,000,000)(183,650,000)       0

      Repairs and Renovations Reserve Account                            (125,000,000)                              0

 

Beginning Unreserved Fund Balance           $      520,443,193521,793,193      $       13,980,015

 

Revenues Based on Existing Tax Structure                    $ 18,129,800,000     $ 19,181,900,000

 

Nontax Revenues

      Investment Income                                                          $        59,400,000     $        76,700,000

      Judicial Fees                                                                           217,800,000             217,800,000

      Disproportionate Share                                                           100,000,000             100,000,000

      Insurance                                                                                  71,400,000               73,500,000

      Other Nontax Revenues                                                          182,500,000             182,500,000

      Highway Trust Fund/Use Tax Reimbursement Transfer              41,500,000               27,600,000

      Highway Fund Transfer                                                             20,230,000               24,080,000

            Subtotal Nontax Revenues                                   $      692,830,000     $      702,180,000

 

Total General Fund Availability                                        $ 19,343,073,193     $ 19,898,060,015                                 $ 19,344,423,193

 

Adjustments to Availability:  2011 Session

      Loss of Estate Tax                                                          $       (57,100,000)     $      (72,200,000)

      Small Business Tax Relief Package                                        (131,600,000)           (335,600,000)

      Repeal Wildlife Resources Commission Sales Tax

            Earmark                                                                             22,970,000               23,920,000

      Suspend Corporate Income Tax Earmark (Public School

            Construction)                                                                      72,110,000               74,750,000

      Increase in Judicial Fees                                                            61,765,715               61,765,715

      Increase Investment Company Notice Filing Fee                         1,600,000                 1,600,000

      Increase Parking Fees for Visitors                                                  550,000                    550,000

      Loss of Revenue from the Town of Butner                                 (1,213,235)               (1,213,235)

      Transfer from E-Commerce Reserve Fund                                  4,483,526                               0

      Divert Funds from Parks & Recreation Trust Fund                      8,435,000                               0

      Divert Funds from Recreational/Natural Heritage

            Trust Fund                                                                            8,000,000                               0

      Transfer from Highway Fund for State Highway

            Patrol                                                                               196,849,542             188,209,049

      Transfer Additional Funds from Highway Trust Fund                 35,223,642                               0

      Transfer from Mercury Prevention Pollution Fund                           250,000                               0

      Transfer from Commerce - Enterprise Fund                                   500,000                               0

      Divert Funds from Scrap Tire Disposal Account                          2,268,989                               0

      Divert Funds from White Goods Management Account               1,951,465                               0

      Diversion of Golden LEAF Funds                                             17,563,760               17,563,760

      Master Settlement Agreement Funds                                         24,668,720               25,580,772

      Transfer Health and Wellness Trust Funds to Public Health        32,904,411                               0

      Department of Revenue - Accounts Receivable Program           25,000,000               25,000,000

      Medicaid Disproportionate Share Receipts                                15,000,000               15,000,000

      Adjust Transfer from Insurance Regulatory Fund                           (742,348)                  (742,348)

      Adjust Transfer from Treasurer's Office                                     (3,881,172)               (3,916,453)

      Transfer from NC Flex FICA Funds                                           1,000,000                               0

      Proceeds from the Sale of State Assets                                     15,000,000               25,000,000

      Children with Disabilities Tax Credit                                           (1,350,000)               (5,877,900)

            Subtotal Adjustments to Availability:

                  2011 Session                               $       353,558,015352,208,015             $45,267,260                                       39,389,360

 

Revised General Fund Availability                                  $  19,696,631,208    $  19,943,327,275                                       $ 19,937,449,375

 

Less General Fund Appropriations                                 $ (19,682,651,193)   $ (19,943,327,275)                                      $ (19,937,449,375)

 

Unappropriated Balance Remaining                                  $       13,980,015                    $         0"

 

SECTION 5.(b)  If House Bill 200, 2011 Regular Session, becomes law, then Section 2.2(m) of that act reads as rewritten:

"SECTION 2.2.(m)  Notwithstanding G.S. 143C-4-2, the State Controller shall transfer only one hundred eighty-five million dollars ($185,000,000) eighty-three million six hundred fifty thousand dollars ($183,650,000) from the unreserved fund balance to the Savings Reserve Account on June 30, 2011. This is not an 'appropriation made by law,' as that phrase is used in Section 7(1) of Article V of the North Carolina Constitution. This subsection becomes effective June 30, 2011."

SECTION 5A.  If House Bill 200, 2011 Regular Session, becomes law, then that act is amended by adding the following new section to read:

"ADM ADJUSTMENT

"SECTION 7.31. Notwithstanding any other provision of this act, the funds appropriated for the average daily membership (ADM) adjustment for public schools shall be adjusted to provide fifty-five million eight hundred eighty-two thousand six hundred fifty-one dollars ($55,882,651) in the 2011-2012 fiscal year and one hundred thirty-seven million two hundred nine thousand five hundred fourteen dollars ($137,209,514) in the 2012-2013 fiscal year. The funds appropriated for the ADM adjustment shall be distributed to modify allotments to charter schools and local school administrative units, reflecting changes in ADM due to population growth and other changes in State law."

SECTION 6.  Sections 1, 3, 4, and 4A of this act are effective for taxable years beginning on or after January 1, 2011, and apply to semesters for which the credit is claimed beginning on or after July 1, 2011, except that transfers under G.S. 105-151.33(h) shall not be made before the 2012-2013 fiscal year. Section 2 of this act is effective for taxable years beginning on or after January 1, 2016, and applies to semesters for which the credit is claimed beginning on or after July 1, 2016. The remainder of this act is effective when it becomes law.

In the General Assembly read three times and ratified this the 17th day of June, 2011.

 

 

                                                                    s/  Walter H. Dalton

                                                                         President of the Senate

 

 

                                                                    s/  Thom Tillis

                                                                         Speaker of the House of Representatives

 

 

This bill having been presented to the Governor for signature on the 20th day of June, 2011 and the Governor having failed to approve it within the time prescribed by law, the same is hereby declared to have become a law.  This 1st day of July, 2011.

 

 

                                                                    s/  Karen Jenkins

                                                                         Enrolling Clerk