BLOGS: Keeping Up With Jones Street

Wednesday, August 13, 2014, 2:40 PM

Important Bill For Local Tax and Economic Development Changes is Mired in the Muck

The clock ran out on HB 1224 and we've had our fingers crossed for two weeks hoping that having the House and Senate both in session tomorrow might yield some legislative love and perhaps another look at HB 1224 -- which is somewhat controversial but contains for important provisions we'd like to see passed.

This bill was introduced in the House to make changes to the economic development fund called JMAC (Jobs Maintenance and Capital Development). Typically when the JMAC is amended it is to assist a certain manufacturer with converting its manufacturing process to change its product. For example, Domtar used to make paper in northeastern NC - I think I remember it was for the bags that dog food is sold in. It received JMAC funding to convert that process to make the paper/pulp product that is the absorption in disposable diapers. Anyhow, the latest change was to allow a manufacturing process to become more energy efficient and reduce emissions, slightly lower some employment-related thresholds, and add $10 million to the fund still capping each project award at $6 million annually. We hear it was Evergreen Packaging.

The Senate made this bill a new animal by incorporating local sales tax changes and others in what became a controversial bill. The House rejected the bill and a conference agreement was reached. The Senate adopted the Conference Report but the House referred it to its Rules Committee before it left town, adding more bad feelings to an acrimonious political atmosphere.

The conference report for HB 1224, which did not become law, does the following:
  • limits the local government sales and use tax rate to 2.5%;
  • allows Durham, Orange, Forsyth, Guilford, Wake and Mecklenburg Counties to retain a local sales and use cap of 2.75% if a majority of voters in those counties approve the levy of a 0.25% sales and use tax for public transportation, for public education, for general purposes, or for a combination;
  • directs Revenue Study Laws Committee to study historic rehabilitation incentives;
  • adds "historic rehabilitation incentives" grants;
  • makes various changes to tax and economic development laws;
  • clarifies the confidentiality of unemployment compensation records; and
  • makes technical corrections to the revenue laws.
The politics will continue as both chambers of the General Assembly are working/meeting/fighting/ignoring/adjourning on Thursday. This bill is eligible for consideration tomorrow but we hear the House won't take it up.

Reminder! This bill has not been enacted!

Link the Conference Committee Report here:

Friday, August 8, 2014, 3:13 PM

Business Court Modernization Bill is now Law

This session we've watched SB 853 - Business Court Modernization work through the legislative process and we are impressed by freshman Senator Tamara Barringer's first big effort.

All you lawyers who take on complex business litigation need to be aware of this new law and, importantly, the impact of the implementation dates which I've summarized below:

  • Section 1 of the bill rewrites G.S. 7A-27 regarding appeals of right from the courts of the trial divisions. It applies to actions designated on or after October 1, 2014.
  • Section 2 of the bill rewrites G.S. 7A-45.3 regarding the designation of superior court judges as business court judges to hear complex business cases. It became effective August 7, 2014.
  • Section 3 of the bill rewrites G.S. 7A-45.4 regarding the designation of complex business cases. It applies to actions commenced or petitions filed on or after October 1, 2014.
  • Section 4 of the bill rewrites G.S. 7A-305 to increase the cost of filing a case in the business court. It applies to actions commenced or petitions filed on or after October 1, 2014.
  • Section 5 of the bill rewrites G.S. 7A-343 requires the Director of the Administrative Office of the Courts to prepare and submit a semi annual report on activities of the Business Court. It became effect August 7, 2014.
  • Section 6 of the bill creates a new G.S 55-11-11 which is NC's new way to handle how mergers effect a holding company reorganization, and rewrites G.S. 55-11-06(a) regarding the effect of merger or share exchange. It applies to plans of mergers adopted on or after October 1, 2014.
  • Section 7 of the bill rewrites Rule 8(a)(2). It became law on August 7, 2014 and applies to actions commenced on or after that date.
  • Section 8 creates a legislative committee to study the implementation of this Act and other items it deems worthy of study.
The new law is here:

Thursday, August 7, 2014, 4:26 PM

Legislative Update (Not the) End of Session

Jones Street has the unsettling calm of the realization after a just-fought battle that the victory was not worth the bloodshed, and you can’t remember why you’re fighting.

The North Carolina General Assembly concluded its 2014 Short Session on Saturday, August 2nd. Except that it didn’t. This year the House and Senate, both run by huge Republican majorities, have been at war; they did not agree on when to adjourn, how to adjourn, or what issues they can take up should they return to wrap-up unfinished business. 

Here’s what guidance our Constitution gives us about the Legislature in Article 2, Section 20. “Each house shall be judge of the qualifications and elections of its own members, shall sit upon its own adjournment from day to day, and shall prepare bills to be enacted into laws. The two houses may jointly adjourn to any future day or other place. Either house may, of its own motion, adjourn for a period not in excess of three days.” This week the House will meet on Wednesday and the Senate on Thursday only to meet that constitutional requirement – their calendars are bare. We hear they will both be in session August 14th in case they must consider any veto message from the Governor.

The next interesting constitutional issue here is the veto. When the General Assembly is in session, a ratified bill must be acted upon by the Governor within 10 days after it is presented to him – that’s August 12th. Should the General Assembly adjourn, the Governor would have 30 days from adjournment sine die to act on a bill – that’s September 1st. That longer period for the Governor’s consideration was provided in anticipation of the flurry of last minute legislation. In this case the Governor has until August 12th at the latest, and many bills were presented to him earlier than August 2nd.

Some of the bills we’ve been following for you this session were ratified, but many were just left on the table in school yard bully fashion:

SB 729 – Coal Ash Management Act was sent to a conference committee. Despite the spill in the Dan River being in Senate President Pro Tempore Berger’s neck of the woods, and despite the House and Senate conference leaders both being from Hendersonville, NC, no agreement was reached before the legislators left town.

HB 663 – Define Practice of Law (LegalZoom) never got out of the Senate. Lobbyists for LegalZoom and for the NC Bar worked hard to reach a compromise, the language of which was widely shared on Jones Street and can be found in an earlier “Keeping Up With Jones Street” blog entry, but legislators never rewrote the bill or took it to the full Senate for a vote. Nor was the House convinced to take it up on concurrence.

HB 1101 and HB 1102 dealing with Mechanic’s Liens never received Senate consideration.

SB 38 – Environmental Amendments is stuck in the Senate Clerk’s Office.

SB 493 – Health and Safety Regulatory Reform never received Senate consideration.

SB 734 – Regulatory Reform never received Senate consideration.

HB 1224 – Local Tax Changes and Economic Development which included the controversial local sales tax provision, JDIG, JMAC, Crowd funding and other provisions was sent to conference. The Conference Report was adopted by the Senate and rejected by the House. That Conference Report is here.

SB 3 – House Mini Budget was a slightly snarky attempt by the House to move some big budget items off the table before tackling others. The House used a stripped Senate bill to drop their mini budget contents into, passed it, and sent it to the Senate. The Senate returned it to the House with no action and no message (that being the message). The House sent it to the Senate again. The Senate refused to receive it. Playground.

SB 763 – Revenue Laws Technical Corrections stalled in Senate Rules.  This bill contains the recommendations of a year's study of our tax laws.  Without enactment of this bill the Historic Tax Credits program expires as does the Film Credits program.
A few things we're watching for you fared better:

SB 853 – Business Court Modernization was Ratified. The enacted version is here. The bill includes the threshold provisions for designation to the Business Court as well as the Delaware-style provisions for incorporation. The 2014-15 adopted budget also provides that 2 of the Special Superior Court Judges shall be converted to additional Business Court Judges when they become vacant. Details about where they will locate and how they will be supported were not included.

SB 648 – Patent Trolls was Ratified. The final version of the bill includes several new sections dealing with other matters: creating transparency in contracts between the Attorney General and private attorneys, allowing shareholder assent to exclusive forum, and limit asbestos-related liabilities for certain successor corporations. The ratified bill is here.

We hear the Legislature plans a lame-duck session later this fall on Medicaid Reform and may also tackle coal ash and health insurance coverage for the treatment of autism.

We feel the need to clarify that items left on the table represent countless hours of work by rank and file legislators who are acting on behalf of their constituents, and their frustration is noted.

Thursday, July 24, 2014, 1:03 PM

Womble Legislative Update 7/23/2014

Three and a half weeks into the new state fiscal year we have no newly adjusted budget, and the passage of important bills has slowed to a trickle, but there's a distinct uptick in hostage-taking of bills.

This week the Senate met with the Governor and some lead House budget writers in an attempt to close a deal on the budget. As of today, we hear they may be close; the Medicaid program is the outlier issue.

On teacher pay, it occurs to us that with the House staked out at 6% pay raises for teachers plus preserving the jobs of teacher assistants but the Senate staked out at 11% pay raises for teachers funded in part through eliminating teacher assistants, the logical compromise is to require a certain percentage pay increase for teachers to be determined by local school districts with additional monies dedicated to either further increased pay raises or teacher assistants, but for no other purpose. We hear that idea is floating around and it would be a political win-win for Republicans at this point if political wins are available in late July.

The Senate continues to work on its Medicaid structure and funding bill and that has kept the Legislative Building hopping during this otherwise quiet week. The Senate version of HB 1181 - Medicaid Modernization is here:

House Members have a full calendar today for the first time this week. In fact, today is the 4th House Calendar with votes this July. Most House Members were in Raleigh yesterday to attend the funeral services of Rep. Fulghum who died last week very quickly after a cancer diagnosis. WRAL's Laura Leslie wrote a nice story about him here:

The NC Bar and LegalZoom continue to try to draft a compromise bill at the urging of Senate Leadership. Our blog post from earlier this week includes the language that's floating around the halls. The bill is in Senate Rules. We hear the House won't take it up this session. Check out our earlier blog post here:

The snail's pace of work in Raleigh is causing reporters to see which legislators are collecting per diem while not working in Raleigh ($104/day, 7days/week) and how much it costs to keep the building open and functioning ($50,000/day while in session) during these dog days of summer.

Many legislators and other folks who roam the halls planned family vacations for late in the summer when session adjourned and we had some time to wrap up reports and mail our thank you notes, but we're now going on those vacations (me) and next week many legislators will attend the ALEC legislative conference in Dallas with legislators from all over the country. Here's ALEC's website:


Now just a snapshot of some of the bills we've been watching this session. Consider it to be the photo of the hostage holding a newspaper with today's date:

HB 1224 - Local Taxing Authority and Economic Development is on the Senate Calendar for 3rd reading. It is expected to pass and then the House must vote whether concur or conference. This bill contains economic development funding as well as limits (in some counties)/enhances (in other counties) the ability to raise revenue through additional local sales tax. Many of you have asked about the crowdfunding language; it's in there. The latest version is here.

SB 812 - Repeal Common Core was signed by the Governor this week and is now law.

SB 793 - Charter School Modifications now has a conference report and the Senate has placed it on the calendar. The House has not yet filed its copy. The conference report is here:

SB 38 - Amend Environmental Laws needs Senate concurrence in House changes. The Senate Clerk has held it since June 24th. The bill is here:

SB 729 - Coal Ash is in conference. We hear the conference committee has nearly completed its work but we haven't seen a draft yet.

SB 853 - Business Court Modernization awaits concurrence and sits in the Senate Rules Committee.

HB 1101 and HB 1102 on Mechanics Liens await Senate floor action and sit in the Senate Rules Committee.

SB 493 - Healthcare Regulatory Reform is in the tiny and non-meeting Senate Ways and Means Committee. See the bill here (possibly exclusively):   SB 734 - Regulatory Reform is also there.

LegalZoom or IllegalZoom?

LegalZoom, the online legal documents preparation service, is seeking a toehold in North Carolina by amending the statutory definition of the practice of law in G.S. 84-2.1 over the objections of the North Carolina Bar. The fight has spilled over from the Business Court in the Legislature making two of our three branches of government the battleground.

As we've already reported, the Senate Judiciary Committee produced a PCS for HB 663 that eliminated all language about farm commodity food safety and replaced it with a change to the scope of the practice of law that would allow LegalZoom and others to operate legally in NC. The word in the halls of the legislature was the NC Bar was given a heads up but not ample time to rally the troops to the cause. The bill passed committee and was added to the Senate Calendar for July 1st, and then for July 9th, and then it was sent to the Senate "Parking Lot", or the Rules Committee. But this bill didn't die in Rules; it's still got a pulse.

Senate Leadership has been pushing the NC Bar to work with LegalZoom to reach a compromise which it appears has happened, and today we got a look at the language that we think will be the new bill.

New language for HB 663: 

(2)   The production, distribution or sale of materials, provided that:
(a)     The production of the materials must have occurred entirely before any contact between the provider and the consumer;
(b)    During and after initial contact between the provider and the consumer, the provider’s participation in creating or completing any materials must be limited to typing, writing, or reproducing exactly the information provided by the consumer as dictated by the consumer or deleting content that is visible to the consumer at the instruction of the consumer;
(c)    The provider does not select or assist in the selection of the product for the consumer; provided, however, (i) operating a website that requires the consumer to select the product to be purchased, (ii) publishing descriptions of the products offered, when not done to address the consumer’s particular legal situation and when the products offered and the descriptions published to every consumer are identical, and (iii) publishing general information about the law, when not done  to address the consumer’s particular legal situation and when the general information published to every consumer is identical, does not constitute assistance in selection of the product;
(d)   The provider does not provide any individualized legal advice to or exercise any legal judgment for the consumer; provided, however, that publishing general information about the law and describing the products offered, when not done  to address the consumer’s particular legal situation and when the general information published to every consumer is identical, does not constitute legal advice or the exercise of legal judgment;
(e)    During and after initial contact between the provider and the consumer, the provider may not participate in any way in selecting the content of the finished materials;
(f)     In the case of the sale of materials including information supplied by the consumer through an internet web site or otherwise, the consumer is provided a means to see the blank template or the final, completed product before finalizing a purchase of that product; 
(g)    The provider does not review the consumer’s final product for errors other than notifying the consumer (i) of spelling errors, (ii) that a required field has not been completed, and (iii) that information entered into a form or template by the consumer is factually inconsistent with other information entered into the form or template by the consumer;
(h)    The provider must clearly and conspicuously communicate to the consumer that the materials are not a substitute for the advice or services of an attorney;
(i)      The provider discloses its legal name and physical location and address to the consumer;
(j)      The provider does not disclaim any warranties or liability and does not limit the recovery of damages or other remedies by the consumer; and
(k)    the provider does not require the consumer to agree to jurisdiction or venue in any state other than North Carolina for the resolution of disputes between the provider and the consumer.
For purposes of this subsection, “production” shall mean design, creation, publication or display, including by means of an internet web site; “materials” shall mean legal written materials, books, documents, templates, forms, or computer software; and “provider” shall mean designer, creator, publisher, distributor, displayer or seller.

House Judiciary Chairman Leo Daughtry tells us the House is still pretty cool to the idea. And we're nearing the twilight of the session.

Tuesday, July 22, 2014, 6:41 PM

Vitriol, Asperity and Acrimony

Unease on Jones Street has shifted just a tad for the worse. We prefer to update you on bills and committees but the lack of legislative progress the last three weeks is becoming its own thing.

This morning we learned via the twitter feed of one state senator that the Governor spent some time with the Senate Republican Caucus this morning discussing budget sticking points, and there may be positive developments. Later, in committee, that tweeting senator was invited out for some "hallway hang time" with a member of leadership. (A caucus meeting is private and closed to the public so it's mysterious. A caucus member tweeting about a caucus meeting makes it not). Later the Majority Leader told reporters that the Governor and the caucus had "good dialogue" but did not reach agreement.

The main items the Senate and the Governor disagree on are Medicaid program and funding, teacher pay raises, and teacher assistants. The House and the Governor are generally together on these items; that probably makes it worse.

House members are discouraged but aren't quite ready to throw in the towel on the session or on the budget. (Remember that in 2013 the Legislature enacted a 2-year budget so this year's budget is simply an adjustment to that one. They could leave it on the table, but some important things are addressed during the budgets of even years like planning for increased school population, adjustments to federal programs, and pay raises). We think there is a political risk to leaving town with no new budget and heading into the election with no teacher and state employee pay raises.

And for the third time in two weeks we heard that someone in Senate Leadership will do what he can to keep Thom Tillis from being elected to the US Senate. The longer this legislature is not wrapping things up, not finalizing and budget and not passing some of the bills that are important to Speaker Tillis and the House, the harder we think it will be for him to unseat incumbent US Senator Kay Hagan in November. If you follow that to its logical conclusion does that mean some Senate Republicans are for Kay Hagan???

I've said it before: if Democrats in Raleigh weren't crying, they'd be laughing.

Friday, July 18, 2014, 3:47 PM

Legislative Hostage -Taking / Legislative Update 7/18/2014

This has certainly been the week of legislative hostage-taking, unhappy people and bad feelings.

Although the Senate made a mid-week budget offer to the House that looked promising to us, the House's lack of enthusiasm over it does not bode well for adjournment. Aside from the public meetings of the budget conferees most other conference committee reports are being prepared away from public's eye, and even those of some conferees. A conference committee report on criteria for NC's Adjutant General of the NC National Guard was later rejected by the House; we don't often see a brokered agreement fail on a floor vote.

Many bills which have received considerable debate and input during the session have now been yanked from floor calendars to wait it out in Rules Committees, or even Ways and Means. But we're not exactly sure what they're waiting for to spring these bills loose. The House Rules Committee currently has about 130 bills parked and the Senate Rules Committee has roughly double that number.

A new adjournment resolution ending the  2014 session was introduced with adjournment set for next Friday, July 26th but it's the third session-ending bill we've seen this summer.

Congress is preparing for its August Recess but Speaker Tillis, Republican candidate for US Senate in the country's "Senate race to watch" against incumbent US Senator Kay Hagan is tethered to Raleigh. The outcome of this election may tip the balance of power in Washington, yet legislative Republicans aren't making his job any easier.

Jones Street was shocked to see Phil Berger Jr., candidate for US House from the 6th District, popular District Attorney, and son of powerful Senate President Pro Tempore Phil Berger lose his primary election runoff. In a lopsided election, Mr. Berger, who led the crowded Republican field in the May Primary Election lost every county to his opponent, Mark Walker, who will face Democrat Laura Fjeld in November.

If Democrats in Raleigh weren't so unhappy they would be happy.

A few examples of the week's big ticket legislative controversies are below:


On Wednesday the Senate rolled out a new PCS for HB 1224 - Economic Development Changes that added what local government groups were expecting to be additional authority over local taxes but was instead a limitation of those powers.

In additional to making changes to NC's JMAC economic development funding tool, NC counties were expecting additional local sales tax flexibility and instead were presented a new bill section which contained a provision allowing counties to increase local sales tax in increments of 1/4 %, by referendum, to fund education OR local transportation projects, but not both at the same time. The total local sales tax in a jurisdiction must not exceed 2.5%, and the funds cannot be shared with municipalities. This provision proved to be very controversial and the bill was returned to committee for further consideration. We understand that two counties already collect 2.5% local sales tax and so their ability to levy even a voter-approved tax increase would be curtailed.

View HB 1224 here:


The Senate budget position including reducing their proposed trimming of the Medicaid rolls and leaving only $30 million between House and Senate funding levels. Then Senators Hise and Pate rolled out a new plan for the structure and operation of Medicaid and the machine has screeched to a halt - and the screeching you hear is doctors and hospitals objecting to the introduction of managed care providers running our Medicaid system.

Under the proposal provider-led accountable care organizations or managed care organizations would run the state's Medicaid system and pay a flat per patient amount for all care for that patient. A spokesperson representing physicians testified that the additional administrative paperwork related to this approach, should it be enacted, would certainly hurt access to medical care for the poor. Currently nearly 90% of primary care physicians in NC take Medicaid. Florida, which uses this managed care approach have a much lower participation rate.

The House and the Governor have already voiced their opposition to the plan. And we don't need to remind you that this brand new proposal was unveiled two weeks after the Legislature should have adjourned for the year.

Have a look at the Senate's plan here:


Still no white smoke. And negotiations seem to now be in the hands of a few until the big items like Medicaid, teacher raises, teacher assistants and state employee pay raises are resolved.
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