TAX NEWS - June 2010

Wednesday at the NC General Assembly

HEADLINES:
- NC tax tussle questions what's fair for companies

- Economic incentives bill in NC House designed to attract more films, recruit manufacturers

- NC legislation would keep home foreclosure help running, expand program to help more borrowers

- Mailing in annual vehicle registration would cost $1 less in House motor vehicle bill

THE BRIEF:
TAX AVOIDANCE: State Revenue Secretary Kenneth Lay said North Carolina could lose hundreds of millions of dollars if a bill is approved that would take away the threat of some big penalties against tax-avoiding companies. Lay said legislation being negotiated would block his agency from slapping the penalties on multistate companies viewed as trying to move profits around the country to avoid paying taxes. A legislative proposal would block penalties of 25 percent for a large tax underpayment and 10 percent for negligence. But Sen. Dan Clodfelter, D-Mecklenburg, said companies now can be surprised by the penalties they didn't know could come, and the power tax collectors now wield is unfair. The Senate Finance Committee delayed discussion of the bill Wednesday.

TAX INCENTIVES: The House Commerce Committee approved an economic incentives bill its supporters say will help North Carolina bring high-quality jobs to the state and restore ailing local tax bases. The measure expands tax breaks for film productions and computer data centers while renewing several current tax advantages set to expire. Part of the bill is similar to a Senate bill designed to encourage computer data centers, an energy turbine manufacturer and a paper plant to expand in the state and could generate at least 1,200 jobs. But the measure also would extend for three more years through 2013 some business tax credits first approved in the 1990s that give tax breaks for companies for each job they created in a handful of industries, and if they bought machinery. A center associated with the University of North Carolina at Chapel Hill business school recommended those business credits be eliminated because they're no longer effective.

FORECLOSURE PREVENTION: The Senate Finance Committee recommended a bill that extended the life of a foreclosure prevention program from October to May 2013, when lawmakers believe the worst will be over. Mortgage servicers have been required since 2008 to warn homeowners with subprime loans 45 days before pursuing a foreclosure in court. The state banking commissioner is also notified and that office encourages homeowners to get help from a nonprofit housing counselor. The bill would assess mortgage servicers a $75 fee that the banking commissioner could use to support counseling and nonprofit legal services.

A DOLLAR OFF: An extra dollar that owners of nearly a million cars must pay annually to renew their annual vehicle registration by mail would be eliminated in legislation approved by the House Finance Committee. The provision is contained in an omnibus motor vehicle law bill that also seeks to restrict use of special license plates car dealers and garages use to transport vehicles. The Division of Motor Vehicles processed more than 975,000 registrations by mail during the last fiscal year. The extra dollar is a postage and handling fee. DMV lobbyist Johanna Reese said the agency never sought the fee. Legislative researchers say DMV returns 72,000 renewal payments annually to the vehicle owner because the $1 isn't included, creating more paperwork. Customers can also renew on the Internet or at DMV offices. Changes to the transporter plate law are designed to reduce abuses in which vehicles use an otherwise temporary plate. The bill now heads to the floor.

WEDNESDAY'S SCORECARD:
In the House:

- H1829, to extend or expand a series of tax credits. One provision extends by three years to 2014 a credit for preserving and rehabilitating old mill buildings. Another provision reduces the number of retailers that must prepay a portion of the next month's sales taxes to the Revenue Department by raising the threshold from $10,000 to $20,000 in monthly collections. A third provision expands a tax break for investing in renewable energy property. Final House approval 108-6. Next: To the Senate.

In the Senate:

- S567, to create a legal challenge for people suspected of child abuse to defend themselves before they're added to the state's "Responsible Individuals List," in response to a state Court of Appeals ruling earlier this year. Motion not to concur approved 50-0. Next: To conference committee.

In committees:

- H1691, to direct the North Carolina 911 Board to change the formula that determines how much money local public safety offices that answer 911 calls receive from a monthly 70-cent fee tacked on to all phone bills in North Carolina, and to change qualifying expenses those office can spend with the money. Recommended for approval, House Public Utilities Committee. Next: To the House Finance Committee.

AROUND THE STATEHOUSE:
Lobbyists for the state chapter of the March of Dimes, the Covenant with North Carolina's Children and other groups held advocacy events at the Legislative Building in support of programs they say will reduce North Carolina's high infant mortality rates compared to other states. The advocates urged budget negotiators to include more than $900,000 in the final spending plan for next year for four programs. Two-thirds of the money would go to support state campaigns to increase folic acid use by low-income women of childbearing age and reduce sudden infant death syndrome.

ON THE AGENDA:
Lt. Gov. Walter Dalton will discuss Thursday with the Joint Legislative Education Oversight Committee the interim findings of a commission that he leads that is looking at how North Carolina's early college high schools can teach and train students so that they'll be more prepared to land jobs that are in high demand in their region. Dalton has held several meeting Joining Our Businesses and Schools (JOBS) Commission.