Between
legislative sessions the Joint Legislation Commission on Revenue Laws meets to
determine how to handle tax and finance issues including repeals,
clarifications and new proposals. We expect the following bills to be
introduced:
·
An Act to
address the imposition of the sales tax on admission charges to entertainment
activity. This bill intends to clarify that similar
entertainment events be treated similarly for sales tax purposes but
acknowledges the administrative burden of imposing, collecting and remitting
sales tax for smaller nonprofits. The bill eliminates the current sales
tax exemptions for agricultural fairs, youth athletic contests, nonprofit
events and state attractions. Events sponsored and held at elementary and
secondary schools retain their current sales tax exemption. Nonprofits
who meet the following criteria are exempt from State income tax: 1) The
entire proceeds of the activity are used for the nonprofit’s nonprofit
purposes; 2) The entity does not declare dividends, receive profits, or pay
salary or other compensation to any members or employees; 3) The entity does
not compensate any person for participating in the event, performing in the
event, placing in the event, or producing the event.
·
An Act to
increase the compensation of License Plate Agents contracting with the Division
of Motor Vehicles. Increases the compensation
of the agents to reflect that property tax is now collected with license plate
fees and registration.
·
An Act to
make various changes to the administration of tobacco excise taxes, alcohol
excise taxes, and motor fuel excise taxes.
Allows a wholesaler or importer of malt beverages and wine to provide a letter
of credit as an alternative to a bond. Allows a dealer of tobacco
products to use a manufacturer’s tax affidavit rather than a notarized tax
affidavit as supporting documentation for a tax refund for taxes paid on stale
or unsold tobacco. Amends secrecy provisions to allow the Department of
Revenue to share information with the provider of a surety bond or other
instrument on behalf of a taxpayer if that taxpayer does not comply with tax
laws. Adds state tax to all biodiesel fuel even though it is not subject
to federal tax. Gives the Secretary flexibility to waive or reduce some
civil penalties imposed under the motor fuels tax statutes. Requires that
all vessels transporting motor fuel must keep permanent records.
·
An Act to
address the sales tax certificate of exemption for qualifying purchases for use
by a farmer. Clarifies the implementation of the gross income
requirements and establishes a $10,000 threshold. There are currently
49,437 agricultural exemption certificates outstanding in North Carolina.
USDA estimates NC has 52,000 farms.
·
An Act to
replace the corporate income tax deduction for net economic loss with a
deduction for state net loss.
Effective for tax years beginning
January 1, 2015 this bill would do the following things: 1) Replace the
net economic loss calculation with a State net loss calculation that is more
comparable to the federal net operating loss calculation; 2) Remove the
requirement that net income loss carried forward must first be offset by
nontaxable income; 3) Instruct the Secretary of Revenue to apply the
standards under sections 381 and 382 of the Code when determining to what extent
a loss survives a merger or acquisition. (*This removes applicability of
North Carolina case law that governs to what extent a net economic loss
survives a merger or acquisition). This bill does not reduce the 15 year
carry forward period but changes the calculation. The cost to the State
of administering this tax change is estimated at $5 million per year.
·
An Act to
address the sales tax on prepaid meal plans. This
bill imposes the sales tax on the gross receipts derived from a prepaid meal
plan at a dining room of a regularly operated educational institution.
The tax is imposed on purchases made with food dollars at the time of the
purchases.
·
An Act to
repeal the antiquated, inconsistent, and unfair system of local privilege
license taxation and replace it with a flat local business tax that applies to
all businesses equally. This bill repeals the current authority for cities and
counties to levy a privilege tax. Cities would be authorized to levy a
business tax of up to $100 per business location within that city. All
prior caps and restrictions are removed excepting certain utilities for which
cities receive a share of the tax revenue. Many NC cities stand to lose
substantial income under this proposal: Raleigh ($3.3 million), Hickory
($751,000), Durham ($294,263), Fayetteville ($1 million), Greensboro
($717,902), High Point ($1 million), Hendersonville ($359,616), Pineville
($472,333), Winston-Salem ($1 million), Charlotte ($8.5 million), Wilmington
($699,873), Jacksonville ($318,397), Lumberton ($1 million), Cary ($303,666),
Morrisville ($656,492) and Monroe ($317,506). The bill would become
effective July 1, 2015.
·
An Act to
address the applicability of the sales tax laws to retailer-contractors. Clarifies
that a retailer-contractor is liable for the tax on tangible personal property
used in a real property improvement contract with a customer. The
tangible personal property becomes part of the real property as a result of the
real property improvement contract.
·
An Act to
address the imposition of the sales tax on service contracts. This
bill deals with administrative issues related to implementation of the sales
tax on service contracts beginning January 1, 2015 as a result of Session Law
2013-316.
·
An Act to
require tax compliance for ABC Permit and to increase the amount authorized for
taxpayer locater services from the collection assistance account. The
bill requires holders of ABC Permits to pay all State taxes and file all
returns. The bill requires the same for retailers of the NC Lottery
games. The bill also allows the Department of Revenue to increase its use
of the collection assistance fee to contract for taxpayer locater services from
$150,000 to $500,000.