GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2011
HOUSE BILL 344
RATIFIED BILL
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.
_____________________________________
Walter H. Dalton
President of the Senate
_____________________________________
Thom Tillis
Speaker of the House of Representatives
_____________________________________
Beverly E. Perdue
Governor
Approved __________.m. this ______________ day of ___________________, 2011