GENERAL ASSEMBLY OF NORTH CAROLINA
SENATE BILL 338
Short Title: Economic Development/Tax Modifications.
Senators Berger, Brown, Tillman (Primary Sponsors); Apodaca, Barefoot, Bingham, Brock, Curtis, Daniel, J. Davis, Gunn, Harrington, Hise, B. Jackson, Krawiec, Lee, McInnis, Meredith, Pate, Rabin, Rabon, Randleman, Sanderson, Tucker, Wade, and Wells.
Rules and Operations of the Senate.
March 19, 2015
A BILL TO BE ENTITLED
AN ACT to make modifications to existing law for economic development purposes.
The General Assembly of North Carolina enacts:
PART I. ELIMINATE CORPORATE TAXATION ON NORTH CAROLINA EMPLOYMENT AND CAPITAL INVESTMENT
SECTION 1.(a) G.S. 105‑130.4(i) reads as rewritten:
"(i) All apportionable income of corporations
than public utilities, excluded corporations, and qualified capital intensive
corporations shall be apportioned to this State by multiplying the income
by the sales factor as determined under subsection (l) of this section. a
fraction, the numerator of which is the property factor plus the payroll factor
plus twice the sales factor, and the denominator of which is four. If the sales
factor does not exist, the denominator of the fraction is the number of
existing factors and if the sales factor exists but the payroll factor or the
property factor does not exist, the denominator of the fraction is the number
of existing factors plus one."
SECTION 1.(b) G.S. 105‑130.4(a)(4), (r), and (s1) are repealed.
SECTION 1.(c) This section is effective for taxable years beginning on or after January 1, 2016.
PART II. CORPORATE INCOME TAX MODIFICATIONS
SECTION 2.(a) Effective for taxable years beginning on or after January 1, 2016, G.S. 105‑130.3 reads as rewritten:
"§ 105‑130.3. Corporations.
A tax is imposed on the State net income of every C
Corporation doing business in this State at the rate of
five percent (5%).four
percent (4%). An S Corporation is not subject to the tax levied in this
SECTION 2.(b) Effective for taxable years beginning on or after January 1, 2017, G.S. 105‑130.3, as rewritten by subsection (a) of this section, reads as rewritten:
"§ 105‑130.3. Corporations.
A tax is imposed on the State net income of every C
Corporation doing business in this State at the rate of
four percent (4%).three
percent (3%). An S Corporation is not subject to the tax levied in this
SECTION 2.(c) G.S. 105‑130.3C is repealed.
SECTION 2.(d) Except as otherwise provided, this Part is effective for taxable years beginning on or after January 1, 2015.
PART III. JDIG MODIFICATIONS
SECTION 3.(a) G.S. 143B‑437.51 is amended by adding new subdivisions to read:
"§ 143B‑437.51. Definitions.
The following definitions apply in this Part:
(1) Agreement. A community economic development agreement under G.S. 143B‑437.57.
(2) Base period. The period of time set by the Committee during which new employees are to be hired for the positions on which the grant is based.
(3) Business. A corporation, sole proprietorship, cooperative association, partnership, S corporation, limited liability company, nonprofit corporation, or other form of business organization, located either within or outside this State.
(4) Committee. The Economic Investment Committee established pursuant to G.S. 143B‑437.54.
(4a) Development tier. The classification assigned to an area pursuant to G.S. 143B‑437.08.
(5) Eligible position. A position created by a business and filled by a new full‑time employee in this State during the base period.
(6) Full‑time employee. A person who is employed for consideration for at least 35 hours a week, whose wages are subject to withholding under Article 4A of Chapter 105 of the General Statutes, and who is determined by the Committee to be employed in a permanent position according to criteria it develops in consultation with the Attorney General. The term does not include any person who works as an independent contractor or on a consulting basis for the business.
(6a) High‑yield project. A project for which the agreement requires that a business invest at least one billion dollars ($1,000,000,000) in private funds and create at least 2,500 eligible positions.
(6k) Major market community. A county in which the average weekly wage for all insured private employers in the county is one of the three highest in the State.
(7) New employee. A full‑time employee who represents a net increase in the number of the business's employees statewide.
(8) Overdue tax debt. Defined in G.S. 105‑243.1.
(9) Related member. Defined in G.S. 105‑130.7A.
(10) Withholdings. The amount withheld by a business from the wages of employees in eligible positions under Article 4A of Chapter 105 of the General Statutes."
SECTION 3.(b) G.S. 143B‑437.52 reads as rewritten:
"§ 143B‑437.52. Job Development Investment Grant Program.
(a) Program. There is established the Job Development Investment Grant Program to be administered by the Economic Investment Committee. In order to foster job creation and investment in the economy of this State, the Committee may enter into agreements with businesses to provide grants in accordance with the provisions of this Part. The Committee, in consultation with the Attorney General, shall develop criteria to be used in determining whether the conditions of this section are satisfied and whether the project described in the application is otherwise consistent with the purposes of this Part. Before entering into an agreement, the Committee must find that all the following conditions are met:
(1) The project proposed by the business will create, during the term of the agreement, a net increase in employment in this State by the business.
(2) The project will benefit the people of this State by increasing opportunities for employment and by strengthening this State's economy by, for example, providing worker training opportunities, constructing and enhancing critical infrastructure, increasing development in strategically important industries, or increasing the State and local tax base.
(3) The project is consistent with economic development goals for the State and for the area where it will be located.
(4) A grant under this Part is necessary for the completion of the project in this State.
(5) The total benefits of the project to the State outweigh its costs and render the grant appropriate for the project.
(b) Priority. In selecting between applicants, a project that is located in an Eco‑Industrial Park certified under G.S. 143B‑437.08 has priority over a comparable project that is not located in a certified Eco‑Industrial Park.
Awards. Award Limitations. The
following limitations apply to grants awarded under this Part:
(1) Maximum liability. The maximum
amount of total annual liability for grants awarded in any single calendar year
under this Part, including amounts transferred to the Utility Account pursuant
to G.S. 143B‑437.61, is fifteen million dollars
for a year in which no grants are awarded for a high‑yield project and is
thirty million dollars ($30,000,000) for a year in which a grant is awarded for
a high‑yield project. No agreement may be entered into that, when
considered together with other existing agreements governing grants awarded
during a single calendar year, could cause the State's potential total annual
liability for grants awarded in a single calendar year to exceed this the
applicable amount. The Department shall make every effort to ensure that
the average percentage of withholdings of eligible positions for grants awarded
under this Part does not exceed the average of the range provided in G.S. 143B‑437.56(a).
(2) Quarterly commitment limitations. Of the amount authorized in subdivision (1) of this subsection, no more than twenty‑five percent (25%), excluding roll‑over amounts, may be awarded in any single calendar quarter. A roll‑over amount is any amount from a previous quarter in the same calendar year that was not awarded as a grant. The limitation of this subdivision does not apply to a grant awarded to a high‑yield project.
(3) Major market community. The maximum percentage of the amount authorized in this subsection for grants awarded in a major market community is equal to two times the population of that county as a percentage, rounded to the nearest percent, of the total population of the State. State and county populations shall be determined at the beginning of each calendar year using the most recent population data used by the Secretary for purposes of G.S. 143B‑437.08. The limitation of this subdivision does not apply to a high‑yield project located in a major market community.
(d) Measuring Employment. For the purposes of subdivision (a)(1) of this section and G.S. 143B‑437.51(5), 143B‑437.51(7), and 143B‑437.57(a)(11), the Committee may designate that the increase or maintenance of employment is measured at the level of a division or another operating unit of a business, rather than at the business level, if both of the following conditions are met:
(1) The Committee makes an explicit finding that the designation is necessary to secure the project in this State.
(2) The agreement contains terms to ensure that the business does not create eligible positions by transferring or shifting to the project existing positions from another project of the business or a related member of the business."
SECTION 3.(c) G.S. 143B‑437.53 reads as rewritten:
"§ 143B‑437.53. Eligible projects.
(a) Minimum Number of Eligible Positions. A business
may apply to the Committee for a grant for any project that creates the minimum
number of eligible positions satisfying the wage standard as set out in
the table below. If the project will be located in more than one
tier area,area designation, the location with the highest development
tier area designation determines the minimum number of eligible positions
that must be created.created and the applicable wage standard. The
wage standard is met if the business pays an average weekly wage for all
eligible positions that is equal to or greater than the percentage provided
below of the average wage for all insured private employers in the county. Development Tier Area Designation Number
of Eligible Positions Wage Standard
Development Tier One
Development Tier Two
Development Tier Three
Major Market Community 250 125%
SECTION 3.(d) G.S. 143B‑437.56(a) reads as rewritten:
"(a) Subject to the
of subsection subsections (a1) and (d) of this section, the
amount of the grant awarded in each case shall be a percentage of the
withholdings of eligible positions. The percentage shall be no less than ten
percent (10%) and no more than seventy‑five percent (75%) of the
withholdings of the eligible positions for a period of years.years.
The percentage shall be no more than eighty percent (80%) for a development
tier one area, no more than seventy percent (70%) for a development tier two
area, no more than sixty percent (60%) for a development tier three area, and
no more than fifty percent (50%) for a major market community. If the project
will be located in more than one area designation, the location with the
highest area designation determines the maximum percentage to be used. The
percentage used to determine the amount of the grant shall be based on criteria
developed by the Committee, in consultation with the Attorney General, after
considering at least the following:
(1) The number of eligible positions to be created.
(2) The expected duration of those positions.
(3) The type of contribution the business can make to the long‑term growth of the State's economy.
(4) The amount of other financial assistance the project will receive from the State or local governments.
(5) The total dollar investment the business is making in the project.
(6) Whether the project utilizes existing infrastructure and resources in the community.
(7) Whether the project is located in a development zone.
(8) The number of eligible positions that would be filled by residents of a development zone.
(9) The extent to which the project will mitigate unemployment in the State and locality.
(a1) Notwithstanding the percentage specified by subsection (a) of this section, if the project is a high‑yield project, the business has met the investment and job creation requirements, and, for three consecutive years, the business has met all terms of the agreement, the amount of the grant awarded shall be no more than one hundred percent (100%) of the withholdings of eligible positions for each consecutive year the business maintains the minimum job creation requirement and meets all terms of the agreement. A business receiving an enhanced percentage of the withholdings of eligible positions under this subsection that fails to maintain the minimum job creation requirement or meet all terms of the agreement will be disqualified from receiving the enhanced percentage and will have the applicable percentage set forth in subsection (a) of this section applied in the year in which the failure occurs and all remaining years of the grant term.
(b) The term of the grant shall not exceed
starting with the first year a grant payment is made. the duration
listed in this subsection. The first grant payment must be made within six
years after the date on which the grant was awarded. The number of years in the
base period for which grant payments may be made shall not exceed five years.
(1) For high‑yield projects in which the business receives the enhanced percentage pursuant to subsection (a1) of this section, 20 years starting with the first year a grant payment is made. If a business is disqualified from the enhanced percentage in one of the first 12 years, the term of the grant shall not exceed 12 years starting with the first year a grant payment is made. If a business is disqualified from receiving the enhanced percentage after the first 12 years, the term of the grant ends in the year the disqualification occurs.
(2) For all other projects, 12 years starting with the first year a grant payment is made.
(c) The grant may be based only on eligible positions created during the base period.
(d) For any eligible position that is located in a development tier three area, seventy‑five percent (75%) of the annual grant approved for disbursement shall be payable to the business, and twenty‑five percent (25%) shall be payable to the Utility Account pursuant to G.S. 143B‑437.61. For any eligible position that is located in a development tier two area, eighty‑five percent (85%) of the annual grant approved for disbursement shall be payable to the business, and fifteen percent (15%) shall be payable to the Utility Account pursuant to G.S. 143B‑437.61. A position is located in the development tier area that has been assigned to the county in which the project is located at the time the application is filed with the Committee. This subsection does not apply to a high‑yield project in years in which the business receives the enhanced percentage pursuant to subsection (a1) of this section.
(e) A business that is receiving any other grant by operation of State law may not receive an amount as a grant pursuant to this Part that, when combined with any other grants, exceeds seventy‑five percent (75%) of the withholdings of the business, unless the Committee makes an explicit finding that the additional grant is necessary to secure the project.
(f) The amount of a grant associated with any specific eligible position, including any amount transferred to the Utility Account pursuant to G.S. 143B‑437.61, may not exceed six thousand five hundred dollars ($6,500) in any year."
SECTION 3.(e) G.S. 143B‑437.62 reads as rewritten:
"§ 143B‑437.62. Expiration.
The authority of the Committee to award new grants expires
SECTION 3.(f) This section is effective when it becomes law and applies to awards made under Part 2G of Article 10 of Chapter 143B of the General Statutes on or after that date.
PART IV. EFFECTIVE DATE
SECTION 4. Except as otherwise provided, this act is effective when it becomes law.