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NC Legislative Update: March 17, 2017

March 17, 2017

This Week

The week began Monday evening with Gov. Cooper’s (D) State of the State address to a joint session of the North Carolina General Assembly. In his address Cooper outlined his goals for the direction in which he hopes to steer North Carolina’s policies and economy. The theme he stressed, which is also the unofficial title of his proposed budget, is “common ground”. Cooper said that he believes that there are many areas the he and the GOP led legislature can find common ground. He cited raising teacher pay, job creation, disaster relief, Raise the Age, and fighting the opioid epidemic among areas that he felt he and NCGA can agree. On the issue of the repeal of House Bill 2 however, he stood his ground, calling on the legislature to pass nothing short of full repeal of the law. The entirety of his remarks can be found here, courtesy of WRAL. Senate President Pro-Tem Phil Berger (R) delivered the GOP response to Cooper’s address at the conclusion of the Governor’s remarks. 
Cooper stresses cooperation in State of the State speech – N&O 
Cooper, GOP outline different visions for NC – WRAL 
Berger touts Republican successes, says Cooper ‘squeaked into office’ – N&O

Gov. Cooper issued his first of what will likely be many vetoes over the course of the legislative session, a characteristic of a divided government. House Bill 100, entitled Restore Partisan Elections Sup. & Dist. Court, sponsored by Rep. Justin Burr (R-Stanly), would do just as the short title says, return to the pre-1996 partisan election of judges. The bill would identify the political party of judges running for district and superior court. Under current law, candidates for superior and district court run in nonpartisan primaries and are elected without partisan labels. However, more often than not, local political parties endorse and advertise their preferred candidate and typically include the preferred candidate on a partisan “slate card”. A result of replacing the partisan label would result in the Governor filling vacancies with individuals of the same political party as the judge who vacated the seat, at the recommendation of local party officials. Currently, the Governor has the authority to appoint whomever he or she pleases as long as the individual lives in the geographical district. Many predicted he would veto the legislation, and notably, the bill did not pass the House with a veto-proof majority, passing 65-61. In order to override a veto, both chambers require a three-fifths majority. The Senate passed the bill with a veto-proof majority, however, the House, which has 120 members, needs 72 votes to override. 
NC Gov. vetoes GOP bill to make judicial elections partisan – AP

The Senate passed Senate Bill 75, sponsored by Sen. Tommy Tucker (R-Union), a Constitutional Amendment reducing the maximum State personal income tax rate and corporate tax rate, from 10% to 5.5%. Currently there is a flat State personal income tax rate of 5.499% and a flat corporate tax rate of 3%. If passed, the question to lower the maximum rate in the NC Constitution would go before the voters on the November 2018 ballot. Constitutional Amendments require a three-fifths majority in both chambers. The bill passed largely along party lines, with Sen. Ben Clark (D-Hoke) and Sen. Joel Ford (D-Mecklenburg) voting with Republicans to pass the bill, and Sen. Tamara Barringer (R-Wake) voting against the measure with the rest of the Democrats

Placing the restriction in the State Constitution would prevent future legislatures from raising the tax rates above the proposed rate. The bill now awaits action in the House. 
Income tax cap gets OK from NC Senate, proposal heads to House – N&O

House Minority Leader Rep. Darren Jackson (D-Wake) made what he called a “last best chance” attempt to repeal House Bill 2. His vehicle of choice during the House session on Tuesday was a noncontroversial bill dealing with the makeup of the membership of the NC Banking Commission. His amendment would have repealed HB2 in its entirety, but the amendment was ruled out of order for not being germane to the bill at hand. Rep. Jackson then used a parliamentary procedure to appeal the ruling of the Chair, in which he was allotted five minutes to speak on his motion to appeal. He used the time to touch on the effects HB2 has had on NC, including the loss of NCAA and ACC events. Ruling the amendment out of order is technically the correct and expected course of action for an unrelated amendment, but Rep. Jackson achieved a political goal in getting members voting on the record. The motion failed largely on party lines, with conservative Democrat Rep. Bill Brisson (D-Bladen) voting with Republicans to uphold the Chair’s ruling. Also this week, Rep. Mark Brody (R-Union) introduced House Bill 328, to review whether the NCAA or ACC, which is headquartered in Greensboro, violated their tax-exempt status by engaging in political or legislative activities. 
Democrats try but fail to force HB2 repeal vote. Was it the last chance? – N&O 
Should NC investigate NCAA, ACC for HB2 boycotts? Legislator says he’ll file bill – N&O 
‘It’s a mistake:’ One North Carolina Republican’s effort to repeal the bathroom bill before it’s really too late – Washington Post 

The House Health Committee held a meeting to review House Bill 88, Modernize Nurse Practice Act, sponsored by Rep. Josh Dobson (R-McDowell), for discussion only. The bill has divided nurse advocacy groups and doctor advocacy groups over the scope of practice for nurses, with various organizations and associations speaking in favor and in opposition to the proposal. Among other things the bill would define in statute an Advanced Practice Registered Nurse (APRN) to include: Nurse Practitioners (NP); Certified Nurse Midwives (CNM); Clinical Nurse Specialists (CNS); and Certified Registered Nurse Anesthetists (CRNA). It also defines licensure requirements and outlines the roles and responsibilities for each practice area and its scope of practice. For CRNA’s, it established that the responsibilities of a CRNA shall not constitute the practice of medicine, surgery, or dentistry. It also makes various changes to the authorities of the North Carolina Board of Nursing. 
Doctors, nurses face off over supervision requirement – WRAL

Deadlines are beginning to pass regarding the filing of legislation. In the Senate, local bills were required to be introduced by Wednesday. Senators must submit requests for public bills to bill drafting by 4:00 today and file them by March 30th. The Senate does not have deadlines for Appropriations/Finance bills. In the House, which has a slightly delayed deadline calendar, the deadline to submit requests for local bills to bill drafting has passed and those bills must be filed by March 29th. Non-Appropriation/Finance public bills and resolutions must be submitted to bill drafting by March 30th and filed by April 12th. Public bills that do have an impact on Appropriations or Finance must be submitted to bill drafting by April 6th and filed by April 25th. Crossover is still scheduled for April 27th.

In total 160 bills were filed this week, with 82 in the House and 78 in the Senate, bringing the total number of bills filed so far this session to 721. A link to next week’s announced Committee calendar can be found here. A cumulative list of House and Senate bills filed so far this year, links to each bill, and its current status can be found here.

Legislation in the News: 
Deregulation bill resurrected from last session – N&O 
State seeks to regulate fantasy sports operators – WRAL 
NCGA leader wants voters to approve Cooper’s bond proposal – Carolina Journal 
NC school buses might soon operate like red light cameras – WRAL 
Bill would create prepaid dental plans for state's Medicaid recipients – Winston-Salem Journal 
House panel OKs immigration crackdown – WRAL 
Driving too slow in the left lane? You'd be fined under NC Senate bill – N&O 
N.C. House bill would regulate body piercing businesses – WNCT 
Bill would let NC homeschoolers play sports – WNCN 
House eyes changes to exams, teachers, school grades – WRAL

Competing Tax Proposals

Sen. Berger and Co-Chairs of the Senate Finance Committee held a press conference on Thursday to unveil a new tax proposal, which they touted as $1 Billion in tax relief for the middle class. The plan has not been laid out in legislation yet, but Berger pointed to several highlights the proposal will include, such as reducing the State personal income tax rate from 5.499% to 5.35%. The plan would also raise the standard deduction and remove approximately 94,000 people from income tax liability in the State, increasing the share of the income tax burden towards wealthier individuals, without increasing their taxes. The amount of income in the zero-tax-bracket would increase: from $17,500 to $20,000 by 2018 for married filing jointly; from $14,000 to $15,000 for head of household; and from $8,750 to $10,000 for single filings or married filing separately.

The proposal also includes tax reductions for businesses and corporations. Notably, the State’s corporate income tax rate, which is currently 3%, would drop to 2.75% in 2018 and 2.5% in 2019. The Senate plan would also shift the method of tax collection on some businesses to market-based sourcing. The move benefits North Carolina based businesses by shifting to taxation on a company’s revenues for sales within the State, rather than taxing investments and employment. It also provides a reduction to the franchise tax for S-Corporations.

The House also released a plan in House Bill 356, entitled the Tax Reduction Act of 2017, filed by Rep. John Szoka (R-Cumberland). The House proposal, while still significant, is modest when compared to the Senate plan, excluding further reductions to income taxes. The plan would also raise the standard deduction from $17,500 to $18,500 for married filing jointly; from $14,000 to $14,800 for head of household; and from $8,750 to $9,250 for single filings or married filing separately. The proposal also exempts the sale of mill machinery or parts from the sales and use tax, as well as the sales of various industrial and manufacturing equipment, accessories, attachments, and repair parts. The proposal would also simplify the calculation of the franchise tax by capping the maximum collectable tax to $150,000 at a rate of $1.50 per $1,000, and eliminating other forms of calculation. Notably, neither plan would broaden the sales tax base as has been pushed in recent years, particularly from the Senate. 
NC Senate Republicans unveil new tax plan – NSJ 
NC lawmakers propose more income, corporate tax cuts – WRAL 
Republicans roll out tax plans, led by Senate’s $1B offer – Citizen-Times 
NC House and Senate leaders propose competing tax cut plans – Here’s how they’d affect your taxes – N&O

Sales Tax Collection - Online Sales

In February, Sen. Tommy Tucker (R-Union), filed Senate Bill 81, entitled Sales Tax Economic Nexus For Remote Sales. This legislation, which is currently a placeholder at half of a page in length, has not received a hearing, but is legislation that many will be interested in when it does. The bill clarifies that a retailer who makes a remote sale is engaged in business in this State and is subject to the tax if it meets at least one of two criteria. The criteria are either having gross sales in excess of $100,000 in North Carolina, or more than two-hundred separate transactions in the State. The bill will likely receive a Proposed Committee Substitute (PCS) to substitute more comprehensive language when the bill is heard. 
NC prepping to collect sales tax from online retailers – WRAL

In Other News

On Thursday, the Senate unanimously confirmed two more of Gov. Cooper’s Cabinet Secretaries, Jim Trogdon to lead the Department of Transportation and Erik Hooks to lead the Department of Public Safety.

In a recent interview, former Gov. Pat McCrory (R) left the door open to another gubernatorial run in 2020. The interview focused on the barriers House Bill 2 has created in McCrory’s ability to attain gainful employment in his post-mansion tenure, but also touched on other aspects of his future. 
Pat McCrory says HB2 is making it harder for him to get a job – N&O

In the News

Who represents the state in NC? The governor or General Assembly? – N&O
Text messaging records offer glimpses into how government works – WRAL
Five months after Hurricane Matthew, many still in rebuilding mode – Fayetteville Observer
Power rates may climb, but how far depends on Cooper – NSJ
GOP consultant starting Charlotte PAC focused on business issues – CBJ
Feds taking bids now for NC offshore wind farm development rights – N&O
Non-profit education leader chosen to oversee collection of low-performing schools – N&O
E-filing, more indigent defense among ideas to improve NC courts – WRAL
Energy policy reform set to emerge as legislative priority – NSJ
NC General Assembly police are looking at ways to enhance security – N&O

The Nexsen Pruet Public Policy team provides attorneys and clients with a newsletter summarizing the week's activities and conveying the inner workings of the legislative process and state government in Raleigh. Please feel free to pass this along to your clients or other interested parties, email to be added to the list.