April 16, 2021
The General Assembly returned to Raleigh this week following last week’s spring recess. The Senate bill filing deadline closed on April 6, resulting in a significant number of new bills. The House of Representative’s final filing deadline for non-budget-related bills is May 4, so we expect to see additional proposals filed between now and then.
The Senate has begun work on its budget and is expected to continue its work for the remainder of the month before the House begins its budgetary process. Lawmakers hope to avoid a budget stalemate with Governor Cooper this year following the past two years’ impasse. The state has not passed a new appropriations plan since 2018 due to differences between the executive and legislative branches, including but not limited to a disagreement over Medicaid expansion.
Learn more about what is happening on Jones Street in this week’s update.
Paycheck Protection Program Tax Deduction
This week, the House Finance Committee approved a bill that would change how North Carolina treats federal Paycheck Protection Program (PPP) loans, which helped struggling businesses during the COVID-19 pandemic. Currently, North Carolina allows businesses to exempt forgiven PPP loans from income for tax purposes. However, those businesses cannot deduct business expenses paid for by PPP loans. In late 2020, Congress approved a change to the federal tax policy allowing businesses to deduct those expenses. Currently, North Carolina is one of a few states not conforming to this decision.
This legislation would change the state tax code to mirror the federal code and allow those deductions. The Fiscal Research Division reported in a fiscal note that this move would cost the state roughly $400 million over the next two fiscal years. Opponents of the bill argue that this is a hefty price tag for the state. However, businesses still recovering from COVID-19 counter this argument that they should be allowed the same flexibility allowed by the federal tax code. The bill is expected to by the full House of Representatives next week.
PPP loans are not the only COVID-19 related tax item where North Carolina currently differs from the federal government. For people who received unemployment insurance benefits, the federal government will exempt the first $10,200 from taxable income. North Carolina currently treats all unemployment insurance benefits as taxable income. The North Carolina Department of Revenue (DOR) claims that around 530,000 people who received unemployment benefits opted not to withhold taxes, meaning that they could receive a sizable tax bill. Those who did choose to withhold taxes will be reimbursed for their federal taxes but not their state taxes. There are no plans to change this policy currently, but it could still be discussed in the coming weeks.
In March, the North Carolina Department of Revenue (NC DOR) followed the federal government by moving the tax filing deadline from April 15 to May 17. NC DOR has the authority to waive any penalties for filing after April 15 and make them effective after the new deadline. They do not possess the statutory authority to waive any interest accrued after the April date.
The House unanimously passed a bill this week that would waive any interest in the extension period and move the deadline for requesting a refund to reflect the date change. The Fiscal Research Division estimates that the lost interest revenue will be around $5 million.
The legislation also excludes federal stimulus payments and the State’s Extra Credit grant program payments from income for several needs-based assistance program qualifications. The bill now moves to the Senate for consideration.
North Carolina HealthConnex Bill
This week, the House Health Committee heard a bill that would delay the deadline for healthcare providers to connect to the NC HealthConnex system, commonly known as the Health Information Exchange (HIE).
Under a 2015 Medicaid reform law, providers that see Medicaid or State Health Plan (SHP) patients are required to connect to the HIE to receive payment from the state. The HIE allows the state to see claims data and patient trends.
House Bill 179 extends the deadline to connect from October 2021 to October 2022. While most of the bill has broad support, a provision imposing a civil penalty for not connecting to the HIE has become a point of contention.
Multiple committee members felt that imposing a penalty would discourage small and rural providers from seeing Medicaid and SHP patients. Connecting to the HIE requires an electronic health records system, which can be very costly. It also requires that data be manually entered into the system, which can be expensive as well. Complicating things, during the committee debate, the State Department of Information Technology informed stated that they do not possess the ability to enforce a civil penalty since they do not have access to claims data. Some committee members voiced support for an incentive to connect rather than a penalty.
The committee heard the bill for discussion only but is expected to vote on it next week. We do expect to see amendments related to some of this week’s discussion at that time.
2022 US Senate Candidate List
As we inch closer to the 2022 election, the list of names seeking retiring Senator Richard Burr’s seat grows.
This week, former Governor Pat McCrory announced his candidacy, appealing to voters on his record as governor. McCrory joins former Congressman Mark Walker who announced his intent to run for the seat in December. These are not expected to be the only candidates in the Republican primary, as current Lieutenant Governor Mark Robinson and former President Trump’s daughter-in-law, Laura Trump, are both rumored to be considering throwing their hats in the ring.
The Democratic field currently includes State Senator Jeff Jackson, former State Senator Erica Smith, and former NC Supreme Court Chief Justice Cheri Beasley.
North Carolina High School Athletic Association Investigation
House and Senate leadership launched an investigation into the NC High School Athletic Association (NCHSAA) this week. The newly formed Subcommittee on Interscholastic Athletics cited concerns over the Association’s fund balance and their level of power over athletics in a more than two-hour hearing on Thursday. A board made up of principals and superintendents governs the organization, and legislators say that complaints from parents and coaches have spurred their investigation.
Legislators have also introduced a bill that would require periodic audits of the Association by the Office of the State Auditor.
Lawmakers heard from the Association’s Executive Director, Que Tucker, this week and announced that they expect the Subcommittee on Interscholastic Athletics to become more active as the session goes on.
Bill Action Dates
- March 11: Senate local bill filing deadline
- March 25: House local bill filing deadline
- April 6: Senate public bill filing deadline (does not apply to constitutional amendments, elections bills, or appointments)
- May 4: House filing deadline for non-budget bills
- May 11: House filing deadline for budget bills
- May 13: Crossover deadline for both the House and Senate in which bills must have passed at least one chamber to remain eligible for consideration
List of All Filed Bills: https://www.ncleg.gov/Legislation/Bills/WithAction/2021/10
2020 Summary of Substantive Legislation
The Legislative Analysis Division has published the 2020 Summary of Substantive Legislation, which breaks down new laws by subject matter.
Below is a link to the document: